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

Thursday, Jul 16 2015 by

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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Dart Group PLC is a leisure travel and distribution, and logistics company. The Company is engaged in the provision of air travel organizer licensing (ATOL) licensed package holidays by its tour operator, Jet2holidays Limited, and scheduled leisure flights by its airline, Limited ( It distributes temperature-controlled and ambient products on behalf of retailers, processors, growers and importers in the United Kingdom. It operates through two segments: Leisure Travel, and Distribution & Logistics. The Leisure Travel business focuses on scheduled leisure flights by to holiday destinations in the Mediterranean, the Canary Islands and to European Leisure Cities. The Distribution & Logistics business includes the operations of Fowler Welch-Coolchain Limited, a distribution and logistics services provider. Its temperature-controlled operations are in Spalding in Lincolnshire, Teynham and Paddock Wood in Kent, and Hilsea near Portsmouth. more »

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Safestyle UK plc is a United Kingdom-based company engaged in the sale, manufacture and installation of replacement un-plasticized poly vinyl chloride (PVCu) windows and doors for the United Kingdom homeowner market. The Company's segment includes the sale, design, manufacture, installation and maintenance of domestic, double-glazed, replacement windows and doors. The Company has over 30 sales branches and approximately 10 distribution depots located throughout the United Kingdom. Its product range includes EcoDiamond WINDOWS, EcoDiamond UPVC DOORS, EcoDiamond BI-FOLD DOORS, EcoDiamond REPLACEMENT CONSERVATORIES, GuardDoor, Pavilion and Inspire. It has manufactured over 279,000 frames and carried out approximately 60,000 installations. The Company's subsidiaries include Style Group Holdings Limited, Style Group Limited and HPAS Limited. more »

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Finsbury Food Group Plc is a United Kingdom-based bakery manufacturer. The Company is engaged in producing a range of cakes, bread and bakery snack products for retailers and the foodservice channel. The Company's segments include UK bakery, Overseas and Group Operations. The Company's UK Bakery segment manufactures and sells bakery products to the United Kingdom's multiple grocers and foodservice sectors. The UK bakery segment primarily includes the operations of Memory Lane Cakes Ltd, Lightbody Group Ltd, Campbells Cake Company Ltd, Johnstone's Food Service Ltd, Fletchers Bakeries Ltd and Nicholas & Harris Ltd. The Overseas segment is engaged in the distribution of the Company's product manufactured in the United Kingdom along with the sale of third party products primarily to Europe. Kara is the Company's foodservice brand. Its licensed brands include Disney, Thorntons, Weight Watchers, Vogel's, Village Bakery and Cranks. more »

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17 Comments on this Article show/hide all

FREng 16th Jul '15 1 of 17


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.

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Cisk 16th Jul '15 2 of 17

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).

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MrContrarian 16th Jul '15 3 of 17

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.

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BrusselsLad 16th Jul '15 4 of 17

In reply to post #103060

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.

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herbie47 16th Jul '15 5 of 17

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.

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Jardine 16th Jul '15 6 of 17

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.

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fek47 16th Jul '15 7 of 17

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.


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herbie47 16th Jul '15 8 of 17

In reply to post #103076

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?

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mrwhits 16th Jul '15 9 of 17

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?

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kenobi 16th Jul '15 10 of 17

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 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

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herbie47 16th Jul '15 11 of 17

In reply to post #103084

Its EPWN but maybe they supply Safestyle as well?

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Dieselhead2 16th Jul '15 12 of 17

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?

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mrwhits 16th Jul '15 13 of 17


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

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Dieselhead2 16th Jul '15 14 of 17

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

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cafcash49 16th Jul '15 15 of 17

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

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herbie47 16th Jul '15 16 of 17

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.

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LancashireLad 16th Jul '15 17 of 17


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.

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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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