Small Cap Value Report (17 Jun) - OPM, IDH, SRT, KCO, RGO

Monday, Jun 17 2013 by

Good morning. 1pm (LON:OPM) announces a £1.5m equity investment from Henderson, 1 billion new shares, at 0.015p a share. There's clearly a need to consolidate the shares, this is 21st century Britain, not Weimar Germany!

It's a good deal though for this small asset financing lender, which is operating in a lucrative niche largely abandoned by the major Banks. They also announce that results for the year ended 31 May 2013 will show good organic growth, with profits ahead of market expectations, at £750k. It looks an interesting situation, although below my usual £10m market cap cut-off.



There are not many results today, and generally it's set to be a fairly quiet week, although there are lots of AGMs, so therefore likely to be plenty of trading statements for me to interpret.

Immunodiagnostic Systems Holdings (LON:IDH) is a share that has been mentioned here before, and is difficult to value - because it's a former high growth share (which was rated very highly) which hit hard times after competitive pressures increased, stifling their growth. I rarely pay high earnings multiples for growth companies, because they are just an accident waiting to happen.

Investors often over-pay for growth, and the trouble is that when growth disappoints, then you are hit by a double whammy of lower earnings estimates, and a much lower earnings multiple. Combine the two, and it can be carnage.

IDH peaked at 1200p in July 2011, then collapsed to lows of around 250p a year later, after warning on profits. However, they have perked up more recently, rising strongly to 453p in recent months. That gives a market cap of £126.8m, and the company itself has net cash of £19.6m, so has a very solid Balance Sheet.

They state in the narrative to today's results (for the year ended 31 Mat 2013) that revenues and profits are in line with expectations, but according to my figures their EPS of 27.2p is slightly down on broker consensus of 29.7p. The share price of 453p prices the company at a multiple of 16.7 times earnings just announced. Even allowing for their net cash being a healthy 15% of the market cap, that still doesn't strike me as much of a bargain for a company whose turnover & profits are actually down on…

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1pm plc is a holding company. The Company provides financial services to the United Kingdom businesses. The Company finances a range of business assets to small and medium sized enterprises (SMEs). The Company offers small business loans, lease finance and hire purchase. The Company's leasing portfolio consists of a mixture of sectors and assets, such as garages, cleaners, fish and chip shops, and beauty salons. The Company offers equipment finance and hire purchase finance for various assets, such as Beauty equipment; Cleaning equipment; Manufacturing equipment; Medical equipment; Gym equipment; Catering/kitchen equipment; Restaurant/cafe/pub equipment; Copiers, faxes, scanners, projectors and printers; Security systems; Construction equipment; Furniture; Computers/Servers and hardware, and Telecoms equipment. The 1pm SME loan product is available to various businesses. The money borrowed can be used for various purposes, such as Audit fees, cash flow and Website design. more »

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Immunodiagnostic Systems Holdings PLC is a specialist in vitro diagnostic solution provider to the clinical laboratory market. The Company develops, manufactures and markets immunoassays and automated immunoanalyser technologies. It operates through three business segments: Automated IVD, Manual IVD, and Licensing & Technology. The automated IVD business consists of 25-OH Vitamin D, specialties and instrument sales. The automated IVD business also consists of the sale or placement of its IDS-iSYS instrument, in addition to selling automated assays and consumables for use in these instruments. The Manual IVD business sells manual assays, radio immunoassays (RIA) and ELISA kits (EIA) to labs. Its assay development is focused in the clinical areas, such as calcium metabolism, bone metabolism, chronic kidney disease, hypertension, fertility and growth. Its subsidiaries include Immunodiagnostic Systems Limited, Immunodiagnostic Systems Nordic A/S and Immunodiagnostic Systems France SAS. more »

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SRT Marine Systems plc, formerly Software Radio Technology plc, is engaged in the marine technology business. The Company's principal activity includes development and supply of automatic identification system (AIS)-based maritime domain awareness technologies, and derivative product and system solutions for use in a range of maritime applications from safety and security to fishery management and environment protection. AIS is a mesh network radio communications system technology specifically designed for the marine domain, and it uses a combination of global positioning system (GPS) and high frequency radio to enable real time, simultaneous data communication between multiple, independent entities providing information, such as identity, GPS position, speed and other customized data. It offers a range of AIS products and maritime domain monitoring system solutions, which also fuse other maritime sensor technologies, such as radar, closed-circuit television and communications. more »

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

5 Comments on this Article show/hide all

fek47 17th Jun '13 1 of 5

Hi Paul

Any thoughts on City of London Investment (LON:CLIG) 's results this morning? Over 10% dividend yield at today's share price looks tempting, and RNS suggests this should be sustainable.


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doverbeach 17th Jun '13 2 of 5

FWIW SRT held on Open Day at their AGM last year - I was unable to make that but am hoping to go this year

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Paul Scott 17th Jun '13 3 of 5

In reply to post #74326

Hi Francis,

I had a very quick look at City of London Investment (LON:CLIG) but as it's a fund manager, it's outside my sector scope.
Although I see that they are an emerging markets fund manager, so there could be worries about EMs selling off & funds being withdrawn.

I would say that dividends are inherently uncertain at any fund manager, as the the business is only as good as their current performance. If performance is poor, then funds haemorrage out. Hence not a sector that interests me at all, as arguably profits & hence dividends are unsustainable.

Cheers, Paul.

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cig 17th Jun '13 4 of 5

Keycom's own website says 6.8M shares in issue which gives a market cap of about 1.1 millions, which is within reason.

I presume stockopedia buys their data from someone whose data entry clerk had their cat walk on the keyboard while they were processing this company.

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Paul Scott 17th Jun '13 5 of 5

In reply to post #74339


I did check the number of shares to Keycom's own announcement today, and sure enough in note 2 to today's announcement, Keycom themself show the current number of shares in issue as 761,576,712.

Have done a bit more digging, and this announcement seems to be the key - a 10,000 for 1 share consolidation & then some further jiggery-pokery. Apologies, I hadn't spotted that earlier! It happened post 31 Mar 2013 reporting end, hence why the figure of shares in issue that I got from the accounts was now too high.

Mystery solved! So the market cap is not anywhere near as high as I thought before. Apologies for getting that wrong. Looks a messy situation anyway, so not of interest.

Cheers, Paul.

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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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