Small Cap Value Report (17 Dec 2014) - XAR, NWF, TRB

Wednesday, Dec 17 2014 by

Good morning!

As I'm sure most of us have, I've been following the crisis in Russia with great interest. It looks as if a full-blown currency crisis is now happening, with the Ruble crashing against other currencies, despite a huge hike in interest rates to 17%. Surely capital controls are now inevitable, to stop bank runs & capital flight?

It's unpleasant for the Russian people, but I can't help feeling a degree of schadenfreude towards Putin - who overplayed his hand, and has lost. Mind you, it does mean there's a much higher risk of some military crisis occurring - after all, when backed into a corner, Soviet-era dictators can be unpredictable - what better way to drive up the price of oil again, than to trigger some sort of military action in an oil-producing area? Or he could turn off the gas supplies to Europe, and then demand negotiations/help?

So these could be dangerous times. I'm looking at oil services companies, and like the look of some of them at these depressed levels. Plexus Holdings (LON:POS) and Pressure Technologies (LON:PRES) are on my do-more-research list over Xmas, both being companies that I have previously liked, but got too expensive. Now they look more sensibly priced again. Although who knows what the impact on earnings will be, from this much lower oil price?

Xaar (LON:XAR)

Share price: 299p (up 13% today)
No. shares: 76.5m
Market Cap: £228.7m

This was one of my worst stock ideas for 2014. I jumped in too early, only to be clobbered by two more profit warnings. With Chinese demand for its tile printheads in sharp decline, I did wonder if it had another profit warning in it.

However, the trading update today is a little better than feared. So it seems that things are stabilising at any rate. Here are the main points (I am having to copy them here as pictures at the moment, as the software is playing up, and won't let me copy paste the text & highlight bits, as I used to);


So it seems as if sales have stabilised around a run rate of £100m p.a., at which level the company is still decently profitable (helped by recently laying off 20% of its workforce).

My opinion - having…

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Xaar plc is engaged in the development of digital inkjet technology and manufacture of piezoelectric drop-on-demand industrial inkjet printheads. The Company's segments are product sales, commissions and fees, and royalties. It offers a range of industrial inkjet printheads and printhead systems, which are designed and produced to meet the customer-driven requirements of a range of manufacturing applications. Its primary markets include wide-format graphics, ceramic tiles, labels, packaging, coding and marking, three-dimensional (3D) printing, advanced manufacturing and decorative laminates. The Company sells its technology in component form (the printhead) to original equipment manufacturers (OEMs) producing and selling the complete digital printing solution to the end market. It partners and co-develops with fluid suppliers, hardware and software integrators, and substrate suppliers to deliver a total solution to the end user. more »

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NWF Group plc is engaged in the manufacture and sale of animal feeds, the sale and distribution of fuel oils, and the warehousing and distribution of ambient groceries. The Company operates through three segments: Feeds, Food and Fuels. The Feeds segment is engaged in the manufacture and sale of animal feeds and other agricultural products. The Food segment is engaged in warehousing and distribution of clients' ambient grocery and other products to supermarket and other retail distribution centers. The Fuels segment is engaged in the sale and distribution of domestic heating, industrial and road fuels. The Company's subsidiary, Boughey Distribution Limited, is engaged in warehousing and food distribution. Its subsidiaries, NWF Agriculture Limited, S.C. Feeds Limited, New Breed (UK) Limited and Jim Peet (Agriculture) Limited, are engaged in animal feedstuffs and seeds supply. Its subsidiaries, NWF Fuels Limited and Staffordshire Fuels Limited, are engaged in fuel distribution. more »

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Tribal Group plc is a United Kingdom-based company, which provides software and services for education management. The Company's segments include Product Development and Customer Services (PD&CS), Implementation Services (IS), Professional and Business Solutions (PBS) and Quality Assurance Solutions (QAS). The PD&CS segment represents the delivery of software and subsequent maintenance and support services. The IS segment represents the activities through which it deploys and configures software for its customers. The PBS segment represents a portfolio of performance improvement tools and services, including analytics, benchmarking and transformation services, and the QAS segment represents inspection and review services, which support the assessment of educational delivery. Its products and services include license and development, implementation, maintenance, professional and business solutions, quality assurance solutions and other systems related. more »

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  Is LON:XAR fundamentally strong or weak? Find out More »

31 Comments on this Article show/hide all

OsullivanB 17th Dec '14 12 of 31

In reply to post #88952

Thanks, Paul.


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bobo 17th Dec '14 13 of 31

Paul, I guess there are two issues for Putin's people. Most of the restrictions affecting his people were imposed by Putin and blamed on the West. Access to credit for his banks is what is hurting the Ruble now as capital flight ruins the value.

My question would be, what should the west do today to ensure we get a Russia we want in the future? I doubt it is sit back and do nothing. Much as my heart is with your statement, my brain says, give them a helping hand.

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shipoffrogs 17th Dec '14 14 of 31

In reply to post #88946


P.S. I should add that EFH deals are appalling, but they don't in any way affect the value of the company itself!

Maybe so, but they tell you a hell of a lot about the people entering into them. I wouldn't knowingly go near a company where EFH has been involved.

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Cisk 17th Dec '14 15 of 31

Paul, you're right that in a perfect world the EFH deals have no impact on a company's value. However it's all about perception, and as Ram has pointed out, this year has been one where directors seem to be getting away with murder at the expense of shareholders. This has got to stop - until it does I'm out of any company whose greedy ceo undertakes such arrangements.

If anyone has any good ideas to stop this nonsense it would be great to hear them.

Regarding Putin, a drop in my oilers is a price I'm happy to pay if it means that Putin will be ejected from power. I wouldn't be at all surprised that the massive drop in oil was somehow orchestrated to impact Russia and force Putin out. After all, I can't imagine many voting for him if the economy is going to contract by 4% next year.

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shipoffrogs 17th Dec '14 16 of 31

In reply to post #88964

"If anyone has any good ideas to stop this nonsense it would be great to hear them."

How about - regulators getting out of bed in the morning and regulating.

It is simply wrong of the government to put attractive tax breaks on AIM and leaving it unregulated. It is not what people expect.

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Ramridge 17th Dec '14 17 of 31

In reply to post #88964

Hi Cisk -
I am beginning to warm to the notion that there is political collusion in keeping the price of oil down so as to bring Putin down. Saudi Arabia is a close ally of the US and between them they account for over 20% of world oil production. If they collude to keep the price down to say $60 next year, then this combined with the impact of sanctions will almost certainly put unbearable pressure on the Russian economy and in particular Putin.
Russia needs the price of oil to be at least $117 to balance its budget. A $60 price implies a drop of around 4% in GDP. Experts believe that they (unlike Saudi Arabia and the US) haven't sufficient reserves to bridge the gap. So there is possibly a game of chicken being played out.
Personally the sooner Putin goes the better the world will be.
Regards, Ram

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Bonitabeach 17th Dec '14 18 of 31

In reply to post #88968

"Personally the sooner Putin goes the better the world will be."

Many said the same about Saddam Hussein. The West has demonstrated its inability to "manage" the situations that arose in Iraq or Afghanistan brought about by regime change: Ukraine and Syria are going the same way.

Most oil producers are dependent on it to feed their populations and $60 oil means they will pump harder than ever. Saudi Arabia feeds the 84 million Egyptians and can no longer control the price. The marginal producers in the West will drop out due to market forces and bring some stability but the pressures on the OPEC producers grow every year, with their populations.


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Beginner 17th Dec '14 19 of 31

I have had minor dealings with Tribal (LON:TRB) . In my opinion they rely on an aggressive sales force rather than any distinct or unique selling point in their products. They do not provide a particularly cheap or efficient service either. I do not undertsand how the share price has risen this high in the first place. I have posted similar messages here before.

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herbie47 17th Dec '14 20 of 31

In reply to post #88946

I was looking at OPAY this morning and saw the fall so managed to buy some around 280, so nice gain already. Notice quite a few large sales going through after market close so not sure how these will open tomorrow.

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herbie47 17th Dec '14 21 of 31

The problem if Putin goes who will take over?

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Paul Scott 17th Dec '14 22 of 31

In reply to post #88984

Hi Herbie,

Yes, so far so good with Optimal Payments (LON:OPAY) I'm also up nicely on the day!

As regards large, late reported trades - these are usually big orders that are being worked throughout the day. So if an Institution or other big shareholder has a large order, they leave it with a Market Maker, good for the day, and then the total amount of shares bought or sold by them is reported in a single print at the end of the day.

So it's not a separate transaction after the close, it's actually just reporting the cumulative trades that have already happened from that one large buyer or seller during the day. These large, late reported trades can often give a clue to why the share price action earlier in the day seemed unusual - i.e. there were big orders in the background that were being worked throughout the day.

Bottom line is this - if the price is going up, then buyers are out-gunning sellers, and vice versa!

Regards, Paul.

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herbie47 17th Dec '14 23 of 31

In reply to post #88988

Hi Paul,
Thanks for info. about late trades showing, yes I do understand them now. One thing that I have noticed a lot lately is incorrectly stated trades, many sells are actually buys and vice versa, I have found this to be very misleading on some shares, ie when you see a sea of red. I really think someone should do something about it.

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herbie47 17th Dec '14 24 of 31

Oh on OPAY do you have any target sp in mind at which point to sell?

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Paul Scott 17th Dec '14 25 of 31

In reply to post #88994

Hi herbie47,

Well by definition, all share transactions are both a buy & a sell.
So it's meaningless trying to categorise trades as buys or sells, as each trade will have both a buyer and a seller. Otherwise it couldn't be a trade!

Regards, Paul.

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herbie47 17th Dec '14 26 of 31

Hi Paul, Yes I take your point but Im referring to the trade screens, so if I sell say OPAY 200 @ 320 if will show up as a red trade or should do. Some days all the trades can be sales or buys in some shares?
If some large sales go through then you can expect the sp to fall, like OPAY this morning.

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Richard Goodwin 17th Dec '14 27 of 31

I have no position in OPAY but out of curiosity I Googled the new CFO. He was previously Group FD of Telecity. From the fact that his pay off included an amount to settle any statutory claims he may have had against Telecity and coverage of his legal fees I presume that he was effectively thrown out. I know that sometimes people's faces simply don't fit any more but it's interesting anyway. I noticed that he won an D of the Year award in 2012 and was lefted by Telecity in 2013. He aso stayed on to help handover to his successor.

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m_uller 18th Dec '14 28 of 31

HI Paul, NWF has a very high stock rank - how do you reconcile that with your analysis?

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janebolacha 18th Dec '14 29 of 31

In reply to post #88994

I think it's because the system simply and rather stupidly allocates a trade as a "buy" or a "sell" according to whether it is closer to the "headline" quoted prices, that is the prices in the yellow bar on L2, above the details of orders waiting to be executed. I had this very situation the other day on AVAP where, from memory, the "headline" prices on L2 were sell 145, buy 150. I bought at 147.25 but it showed up in the trades as a "sell" because my buy price was closer to the "headline" sell price than to the "headline" buy price.

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herbie47 18th Dec '14 30 of 31

In reply to post #89012

Jane, thanks I understand why it happens. Yes some of mine are shown as sales when I have bought. I find getting a quote usually finds out the buy or sell price.

Re OPAY I baled out at 341, 20% rise seems reasonable.

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cig 19th Dec '14 31 of 31

In reply to post #89000

Buy/sells indicators are typically just made from a trivial algorithm like "if price > mid then green else red". So if you trade with limit orders and get hit on the favourable side of the spread, your trade will show as the opposite of what you did. The information content of that indicator is very low.

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 Are LON:XAR's fundamentals sound as an investment? Find out More »

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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