Small Cap Value Report (16 Jan 2014) - PGB, THT, CAMB, GAW, SGI, BON, TRB

Thursday, Jan 16 2014 by

Good morning! A former favourite of mine, Israeli niche software company (for the broadcast industry) Pilat Media Global (LON:PGB) has announced a recommended takeover bid at 95p per share, from an existing major shareholder (22.7%), Sintec Media. As it's recommended, and because of the large shareholders being in agreement, it's a done deal. It's a good deal too, at a 28.8% premium to last night's closing price.

Readers here will be familiar with this share, as I mentioned it a lot last year, and first flagged it up as "remarkably good value" at 37p on 16 Apr 2013. So a nice success to chalk up there, although personally I sold too early, as usual, but was more than happy to bank a gain of almost 100%, and recycle the money into something else (things which have also gone up since, so there is no net loss from selling early, providing you put the money into something good).

There are quite a lot of trading updates today, so it's going to take me until lunch time to plough through them all, so please keep updating this report in your browser throughout the morning - I publish updates about 30-40 minutes apart typically.

Thorntons (LON:THT) has issued its Q2 trading update, covering the crucial Christmas period. It's looks reasonably good, with LFL retail sales up 3.5%, and the important FMCG division growing sales by an impressive 17.1%. The most important measure of course is profitability, and they confirm that,

Our current outlook for the financial year remains in line with market expectations.

Looking at valuation, broker consensus forecast (which they have just confirmed they are in line with) is for 8.0p EPS this year, so at 142p the shares are on a very warm rating of 17.8. When you take into account a very poor Balance Sheet with considerable net debt, and a pension deficit, this rating is even more unfathomable.

Bulls have bought into the turnaround here, which has been impressive - they have cut back the ailing retail estate, and strongly grown FMCG sales - i.e. selling to supermarkets, etc. - but bulls have also apparently ignored the considerable risk from a very weak Balance Sheet, and problem levels of debt. There is no dividend either, although a small dividend is expected…

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Cambria Automobiles plc is a motor dealer, which is engaged in the sale and servicing of motor vehicles. The Company is engaged in the provision of car vehicle sales, vehicle servicing and related services. It is a retailer of new and used cars, commercial vehicles and motorbikes. It operates on a dealership-by-dealership basis. It operates from approximately 30 sites with a total of over 50 dealer franchises. It operates dealerships across England, from the North West through the Midlands, down to Kent in the Southeast and across Exeter in the South West, trading under local brand names, such as Dees, Doves, Grange, Invicta, Motorparks and Pure Triumph. Its brand portfolio comprises Abarth, Alfa Romeo, Aston Martin, Dacia, Ford, Fiat, Honda, Jaguar, Jeep, Land Rover, Mazda, Nissan, Renault, Seat, Triumph, Vauxhall and Volvo. It also provides ancillary services. It offers finance and insurance for the execution of the transaction along with service plans to maintain the vehicle. more »

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14 Comments on this Article show/hide all

PhilH 16th Jan '14 1 of 14

Good results from Sprue Aegis (OFEX:SPRP), beating revenue expectations (record sales,  up 30%) and meeting profit expectations. They also announce a move to the AIM market from ISDX.

They are one of my largest holdings! So happy with the update. 


Professional Services: Sunflower Counselling
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Paul Scott 16th Jan '14 2 of 14

In reply to post #80608

Hi Phil,

I've also held Sprue Aegis (OFEX:SPRP) from below a quid, and am very pleased with it so far. I can't remember ever holding an ISDX share before, but the value here was so good, and the company such good quality, that it was a no-brainer.

The move to AIM is very positive, and should lead to the shares re-rating again in my view, if they hit forecasts, and resolve the curious situation with regard to the US company they licence some products from.

Regards, Paul.

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iwright7 16th Jan '14 3 of 14

I know you have been positive on Bloomsbury in the past and I hold a few shares. Could you take a look at the Bloomsbury Publishing (LON:BMY) trading update today which looks particularly positive to me. Broker forecast +7% annual sales increase, but H1 sales were up 13% and in the 4M to end Dec up +20%. It's a H2 weighted business so the latest update must surely bode well as a value share with substantial EPS gain and attractive PE?
Would appreciate your comments if you get time? Ian

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grumpy5 16th Jan '14 4 of 14

I have met the CAMB management (and indeed that of several of their competitors) and fully endorse your views on their shrewdness. Happy holder.

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Gostevie 16th Jan '14 5 of 14

Hi Paul,

Just had a look at Cambria Automobiles (LON:CAMB) 's latest Report and Accounts and see that the Profit Before Tax for the year was £4.026m and the total Director Remuneration was £1.028m of which the Chief Exec got £680k. Maybe not too excessive given the given the increase in SP during that time but thought I'd flag it up.


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MrContrarian 16th Jan '14 6 of 14

It's ironic that the aquisition that nearly killed Peacocks, Bonmarche, is now listed, shiny and bright whilst Peacocks is long gone into bankruptcy.

I did really well on Peacocks as it recovered from the acquisition but my form on retailers has been a disaster in the last 3 years: HMV, Game Group, shorting M&S as it went up.

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Monevator 16th Jan '14 7 of 14

Regarding Games Workshop, management has a policy of paying out excess cash as dividends. In other words it doesn't set a fixed dividend, rather it pays out what it feels is appropriate from period to period. Obviously it feels zero is appropriate right now! :-)

I rather like the policy personally, but obviously comes with a downside when things are not going well! It should help prevent empire building with access cash etc, and I can think of several small caps that would have benefited from such a policy over the years. :-)

Blog: Monevator
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MrContrarian 16th Jan '14 8 of 14

Peel Hunt on GAW H1 "Reduction in forecasts. We are reducing our FY numbers from PBT of £22.5m to £17.0m (EPS 38.8p from 49.8p) and 2015E from £24.0m to £20.0m (EPS 45.6p from 53.3p). We are taking a cautious view on H2 sales (-5%) to take account of potential disruption from the move to the new structure. Net cash was £9.3m at the end of H1 and we are forecasting £10.1m at the year end, including the cash spend on exceptionals. As a result we do not expect a dividend payment in the current year as this is based on ‘truly surplus capital’. ? Recommendation. We move to a Hold recommendation as we want to see the impact of the restructuring on the sales performance. The cost base is continuing to fall, which means that an improvement in sales would make a considerable difference to profitability, however it is too early to have clarity on a sales improvement. Our target price is based on 15x PE to May 2015E and 6% yield."

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Paul Scott 16th Jan '14 9 of 14

Excellent comments today chaps, thank you very much indeed - all adding useful extra information, which is exactly what's needed. Thank you.

Regards, Paul.

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lightningtiger 16th Jan '14 10 of 14

Hi Paul, another superb write up thank you. Seeing Machines SEE holders since November have the right to purchase additional shares at 5p. They are currently at around 8p to sell, and 8.5 to buy. I have checked with my broker that you are able to sell all your holdings and apply again for shares @ 5p. Minimum investment 50,000 shares or £2,500. This makes 3p a share profit on however many shares you own, & if you want to purchase more, assuming no change in the share price.
I feel that the share price will not drop below 5p to sell in the next couple of months, could be wrong of course. So a guarantee of a good discount of around 3p a share to purchase more shares, looks an excellent buying opportunity to me! What is your view on this Paul?
Cheers from Lightningtiger

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djpreston 16th Jan '14 11 of 14

In reply to post #80620

Hmmph - how very dare you!! ;-)

On the other hand, the slightly odd customers that these shops attract are probably very loyal, as they are locked into that nerdy lifestyle, and probably won't be getting married any time soon - my local shop usually has an assortment of Goths, Big Bang Theory nerds, Dungeons & Dragons types in it.

Odd as it may seem, there are a few of us aging D&D/Big Bang types that somehow manage to get hitched.... Even worse, some of us even manage to have kids who in turn turn out to be Big Bang/D&D types as well thereby perpetuating GAW's customer base !!

D - father of four of the aforementioned nerds....

PS - Have to agree that the GAW: price is overvalued at present. One to look to buy when it has one of its occassional tumbles and then spit out once its recovered.

Fund Management: European Wealth
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kevanp 16th Jan '14 12 of 14

In reply to post #80622


Before you embark on that course of action you should bear in mind that there are probably far fewer 5p shares on offer than can meet the likely demand, so any application for new shares is going to be scaled back — possibly quite substantially. They are offering just 20 million new shares, representing about 4% of the total share capital before the recent capital-raising exercise.

Why not apply for the new shares without selling what you already have? Or at least wait until you know how many you've been allocated.


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kenobi 16th Jan '14 13 of 14

Odd as it may seem, there are a few of us aging D&D/Big Bang types that somehow manage to get hitched....

>> I think vast consumption of beer explains the above !!! O
{well at least in my case, shouldn't coment on others !}

Even worse, some of us even manage to have kids who in turn turn out to be Big Bang/D&D types as well thereby perpetuating GAW's customer base !! D - father of four of the aforementioned nerds....

>> yes I'm the same though I only have 2 !
PS - Have to agree that the GAW: price is overvalued at present. One to look to buy when it has one of its occassional tumbles and then spit out once its recovered.

>> I think the lord of the rings films and now the hobbits have helped, how will they fare after the third hobbit film ? they need to reinvent themselves in video games much like lego did with lego starwars, followed by lego everything else.
otherwise hard to imagine what they're going to do to keep interest in middle earth, and role playing going forward. Surely not expecting kids to read the books ?

cheers K

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lightningtiger 16th Jan '14 14 of 14


Thanks for reply but it is too late done deal, just have to wait & see what happens on the allocation. I was aware of the scaling back. The way it stands now, I am out with a profit. If it is a small allocation there is the possibly that I could land up with less shares than I originally held, fine, it should be at a discount. If it is a larger allocation, also fine by me. If you don't try you don't get, that's the theory.
Regarding not selling, the possible discount of 3p a share far outweighs the dealing cost of the sale. It is not quite buy one get one free, but all the little 3p's that help!
CAMB is still on my hit list and I am holding Thorntons happily.
Cheers from Lightningtiger

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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