Small Cap Value Report (16 Jul 2015) - DTG, SFE, FIF, BJU

16th Jul '15 by Paul Scott

17 comments 20817 reads

Good morning!

For anyone interested, I recorded a 17-minute video last night, to run through 5 company results or trading updates, mainly Begbies Traynor (LON:BEG) but also some comments on Manx Telecom (LON:MANX) , ISG (LON:ISG) , Next Fifteen Communications (LON:NFC) , and very briefly NetDimensions Holdings (LON:NETD) . When there's a backlog, and I'm too tired to type up a great spiel, it's sometimes easier to catch up by talking it through on a video, illustrated with the Stockopedia figures on each company. Hence why they are only occasional.

I'm pleased to see that the Greek Parliament has approved the latest bail-out deal, so that removes a significant political & economic uncertainty that has been hanging over the markets. For now. I imagine that what Greece has been through in recent months might well make other Eurozone countries think twice before electing so-called anti-austerity Governments. Arguably the Eurozone had to be harsh with Greece, to prevent more serious contagion from e.g. Spain, Portugal, or Italy.

I hope a mini Marshall Plan is agreed for Greece, to get its economy back on its feet, and repair some of the damage there. A Telegraph article today shows how many Greeks are now seeking work abroad, which of course will only make the demographics in Greece even worse (ageing population, but not enough tax revenues to support them). I will definitely be holidaying in Greece next year, to do my bit to help boost production at the Mythos factory!

Lots of trading updates today, so let's crack on.

Dart (LON:DTG)

Share price: 435p (up 4.5% today)
No. shares: 147.1m
Market cap: £639.9m

Results y/e 31 Mar 2015 - it's well above my usual market cap level, but it's a share that I've followed (and intermittently owned) for quite a few years. The market has reacted positively today to what seem to be good results, and positive outlook comments.

Underlying profit before tax is up 36% to £57.2m, with underlying EPS up 29% to 31.72p, so that's a PER of 13.7, which sounds reasonable.

Dividends - are very poor, with only 3p total divis for the year, yielding a paltry…

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FREng

16th Jul '15

Paul

I don't agree that the uncertainty over Greece is reduced. The debts cannot be repaid, and the increased austerity imposed by Eurozone members will make the economy even worse, which means that serious and continued political unrest in Greece seems inevitable. Meanwhile, the EU has shown itself incapable of acting as a Union. In my opinion, there is an increased risk of break up of the Eurozone and even or the EU itself, because the European ideal of "ever closer union" seems to have been abandoned and a currency union without a political and fiscal union isn't sustainable in the long term.

Cisk

Morning Paul, hope the dentist visit wasn't too painful.

Very interesting to see your comments on top slicing. An old broker once recommended to me to 'sell-half-on-a-double'. Assuming not everything doubles, what about if you're 25% / 50% / 75% ahead etc?

Do you follow any rules of thumb when you top slice?

Taking profits is perhaps even harder than removing losses (something I've tackled lately by the removal of all junior E&Ps / miners, working under the assumption that managing your losses is the key to long-term growth).

MrContrarian

Dart "We believe the continued expansion of our package holiday product, together with the development of our directly contracted sun and city hotel portfolio differentiates our Leisure Travel business"

So they have differentiated from the cut-throat low-cost airline business by expanding into the cut-throat package holiday business.
No thanks.

BrusselsLad

I agree that the risk has not yet been reduced. There must be a strong risk that the IMF refuse to play ball and that undermines the whole German position. Increasingly, this is putting fundamental pressures on the EU with stronger lines of difference opening up between Northern and southern europe thinking. I think there should have been far more carrot to go with the stick. It is clear that somehow Greece had to coerced (forced?) to implement changes which have been promised but not delivered. But along with that should be some form of Marshall plan as you suggest to create some growth and ease the social pressures which is now the real contagion risk rather than that of default.
To bring it back to investment, I have long admired Dart as a company but have never had the courage to purchase because the price has always seemed up with or ahead of events. I did not avail myself of the opportunity last year when I should have done. Maybe I should put aside the reservations and just buy - or is it too late? Hmmm.

ps: do not pay any attention to my moniker, I live in Brussels but have no special inside knowledge.

Rusty2

Interesting that market had contracted by 10%, that is considerable in a year? I have looked at Safestyle before, I don't like their sales tactics, cold calling (sometimes everyday), sitting in peoples houses for hours, deals on the day, I'm sure you know the scenerio. Maybe good for profits but I won't be investing. Think these tactics should be banned.

Jardine

Regarding your comment on the valuation of Safestyle UK (LON:SFE) with PE of 10-12 being about right. I've compared Safestyle UK (LON:SFE) to Howden Joinery (LON:HWDN) which operates in a similar sector (ie home improvements) and the later is on a PE of 19x. Howdens are larger, with a longer track record and with higher margins, but Safestyle does offer a much better dividend. You may consider Howdens to be over valued but if not it might suggest the future for Safestyle could be at a similar multiple as their business develops? With continued growth in sales, consequent improvement in margins and a PE multiple improvement the prospects could be very bright.

fek47

I suspect there's probably more read-across from Safestyle UK (LON:SFE) to Epwin (LON:EPWN) than there is to Entu (UK) (LON:ENTU). However, I hold shares in all three (albeit larger positions in SFE and EPWN than ENTU), so will be also interested in the results coming out next week.

Francis

Yes in same sector but Howdens is mostly kitchens for the trade, I think, Safestyle is double glazingetc. I think Entu is probably closer to Safestyle?

mrwhits

Isn't SFE a customer of ENTU or is it EPWN? cant remember, so if orders are good at SFE then it should be good for the supplier?

kenobi

I agree that Greece have been treated very harshly precisely because of the danger that Spain, Portugal etc might elect podemos and equivelents and come looking for the same deal that Greece got.

I remain of the view that too much austerity in Greece has been the problem, the gdp has fallen 25% over a few years. As paul suggests some kind of mini marshall plan is needed to get them into a position where they can service the debts. I read and interesting article suggesting that Greece could service the debts because they had been given incredibly low rates (lower than germany). Of course this was before the current disaster that won't have done anything for confidence or business http://www.socialeurope.eu/wp-content/uploads/2015/01/OP6.pdf Perhaps an interest and repayment free period for the money lend from the ecb might be a good idea so see if they could grow the economy and at least start turning the ship around. Interesting how the IMF has proposed that there should be debt relief, I doubt they want to provide any from their funds, only from other debts !! K

Its EPWN but maybe they supply Safestyle as well?

Dieselhead2

Hi Paul et al, I reckon what with the new pension rules and freedom to withdraw funds, that there will be quite a few people looking to use some of those funds to purchase products from Safestyle etc. This all bodes well for them and other companies in that industry and will keep the market buoyant. This probably won't be in their figures yet. Any thoughts anyone?

@Diesel,

I read yesterday that the average pension cash drawdown was about £15K, so new windows and a car might be on the shopping list!

who knows

mrwhits, I couldn't agree more.......

cafcash49

hi Paul, Interested in your comments on Safestyle. I have just sold my holding and it is the second time I have taken a profit from them. I had a 21% upside in just a few months and felt they were now overvalued. I will watch them for another fall back and hopefully buy back in at a lower price. A good company I think.
Still loving your daily blog, keep up the good work it is much appreciated.
KR Charles

Re Greece, if more work abroad instead of being unemployed in Greece and sending money home then that will improve the Greek economy? I know countries where this happens, without people working abroad they would be far worse off.

LancashireLad

Paul

Just like to say how informative your video was last night and your videos in general. Generally, I like to speed-read through reports as it's faster and I avoid the slick videos in the financial world as they often take a long time to get to the point and sometimes there is no point. But your videos are informative and interesting to see how you scan info to come to a conclusion. Hope you keep producing them.

Small Cap Value Report (16 Jul 2015) - DTG, SFE, FIF, BJU

Dart (LON:DTG)

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Paul Scott

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