Small Cap Value Report (14 Nov 2016) - JPR, TPOP, DWHT, DWHA, CARR, CTP

14th Nov '16 by Paul Scott

8 comments 14036 reads

Good evening,

A late report today, my apologies.

Probably like most people, I'm still struggling to take in all the changes that are possible or likely in the new Trump era which is beginning soon. The Dow Jones Index has just hit a new all-time high. So why were we all so worried about a Trump victory? It's not looking more like a fear of the unknown, and a large degree of group-think. Why would a business-friendly new President, with a stated intention of drastically reducing corporate taxes & red tape, be a bad thing for shares?

Bond yields seem to have been an even bigger mover than equities, rising strongly. I spoke to one UK company CEO last week, who told me that their pension deficit had shrunk by a quarter in just one month (October). So if we are now coming to the end of this bizarre era of ultra-low interest rates, then companies with big pension deficits could see a decent revival in their share prices perhaps?

Johnston Press (LON:JPR)

Share price: 15.5p (up 18.1% today)
No. shares: 105.9m
Market cap: £16.4m

(at the time of writing, I hold a long position in this share)

Response to press speculation - this follows a Sunday Times article which got wind of an imminent disposal of JPR titles in East Anglia;

The Board of Johnston Press plc (the "Company" or "Group") notes the recent media speculation and confirms it is in late stage discussions with Iliffe Media surrounding the potential disposal of certain titles.

The Company has previously announced that as part of its portfolio review, a number of brands had been identified that were not part of its long-term future and a process has been initiated to explore the potential sale of these assets to identified parties.

This disposal process is ongoing and a further announcement will be made when appropriate. Shareholders are advised that there can be no certainty that the disposal process will lead to any definitive agreements concerning any possible disposals or as to the timing or terms of any such agreements.

The last paragraph is just a generic one, Of more interest, is that the first paragraph both names the buyer (which is apparently backed by one of Britain's richest families) , and indicates that it is in late stage discussions - so hopefully this deal will…

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JohnEustace

14th Nov '16

Is it too soon to start buying some of those companies that have been marked down for their pension deficits?

Aislabie

15th Nov '16

I am still struggling to understand how the two Dewhursts (DWHT and DWHA) , get to have such differing share price movements. DWHT has been generally moving up while DWHA has been flat to down, with radically different yields resulting. Where is the sense in this? Can minority voting rights make any difference? Surely not?
As an additional comment there is (per Stockopedia's excellent new data) a pension deficit of £54mm to take into account

Paul Scott

Hi Aislabie,

With Dewhurst (LON:DWHT) and Dewhurst (LON:DWHA) I suppose the market prices are just set by supply & demand for each class of share. To my mind the A shares look much better value, as having voting rights with the other, Ordinary shares, is pointless anyway - because the family holds more than 50% of them - so they can do whatever they want already, irrespective of how other shareholders vote.

I did mention the pension deficit in the main report, but maybe you missed it? So I've bolded it, to make it more prominent. The pension deficit is £13m in the most recent accounts. Not sure where your £54m figure is coming from, but it looks wrong.

Looking at the last (2015) Annual Report, the figures are given as below. It's not clear whether they are the accounting, or the actuarial figures. The % gap between scheme assets & liabilities is large, although the £ amount isn't too bad. Although it looks like the type of gap that, even if favourable assumptions occur on things like bond yields, etc, it will still need over-payments of roughly the existing size, which are quite a significant drain on the company's resources.

Brookeda

Hi Paul

I would like to hear your thoughts on castings (CGS) recent results announcement and the post drop/then recovery of the stock price.
Thanks

My apologies, I should have noted that the pension deficit brings Dewhurst's gearing to 54%, it is not the pound amount.
Your logic on which share (if either) to buy seems correct, but the problem is that over the past year the voting shares have significantly outperformed the A shares. I will dig deeper

Tortoise investor

For further context I have been a People's Operator (LON:TPOP) customer but recently switched to Talk mobile. In my opinion the draw with People's Operator (LON:TPOP) as a customer was that they had cheaper tariffs than virtually every other mobile phone operator. However, they have hiked up their prices which while still competitive are beaten by other operators. They have a policy of spending no money on marketing either. I think the business is doomed.

FREng

Carr's (LON:CARR) seems an odd company - a large international supplier of agricultural supplies coupled to a much smaller engineering specialist in robotics and precision handling equipment for the nuclear industry and similar high hazard industries.

The latter is where the excitement lies. IMO, they should sell it or get it a separate listing.

Deegee Eff

Hi Paul, Re.:JPR I seem to remember that they did until recently have a large pension deficit but that it was magicked away- I wonder if there is a way to compare pension deficits objectively? . I presume pension deficits depend on the presumptions. Secondly, the debt at market value will obviously increase as they buy in their debt.

Small Cap Value Report (14 Nov 2016) - JPR, TPOP, DWHT, DWHA, CARR, CTP

Johnston Press (LON:JPR)

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Paul Scott

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