Small Cap Value Report (2 Dec 2014) - TYR, GHH, MCLS, PKG, PLA

Good morning. I am catching up with a late report, due to jet-lag earlier this week, so apologies for the delay.

TyraTech Inc (LON:TYR)

This £7m market cap company is developing & selling natural remedies for things like head lice. I've been keeping half an eye on it, as it sounded potentially interesting.

Trading update - this looks like a bad miss to me. Turnover is expected to be $4.8m (against forecast of $6.0m), but the net loss of $4.8m is hugely adrift of the $0.2m loss forecast by broker(s) for calendar 2014.

Forecast cash of $2.6m at the year end looks very tight to me, although the company says it is confident this is enough for its plans in 2015, but personally I'd be very sceptical about that. There's not enough headroom there for any disappointments, in my view, which could trigger another fundraising.

That said, the announcement is also full of details of retailers now stocking the company's products, including WalMart, Tesco, and SuperDrug. Although I wonder what margins are being made?

It looks too high risk for me, but potentially high reward too, if they can move into profit in 2015.

Gooch & Housego (LON:GHH)

Results for the year ended 30 Sep 2014 look sound. Adjusted EPS has come in a whisker ahead of broker forecast, at 35.6p, so at 685p the shares are on a PER of 19.2, which looks a fairly rich valuation to me, so it's not something that interests me.

The outlook statement sounds moderately upbeat.

As with so many small to mid cap shares at the moment, it's difficult to see where the upside is, for anyone buying at the current valuation?

McColl's Retail (LON:MCLS)

Trading update - says that results for the year ended 30 Nov 2014 will be "broadly in line with expectations" - i.e. a bit below expectations.

My opinion - the 5.6% divi yield (rising to 6.0% next year) looks attractive, but I'm not convinced by this company's business model of convenience stores & post offices. There's so much competition, and it only ekes out a wafer thin profit margin, so is there a long-term future for it? I'm not sure, so wouldn't risk it personally.

Park (LON:PKG)

This is a prepaid vouchers & gift card company. I don't invest in this type of company, as there's usually something questionable about the ethics of how they operate - making money through some sort of hidden charges, or unfair terms & conditions. I heard a Radio 4 programme about this sector, and it's just not the type of thing I would go near.

Interim results show a slightly smaller loss compared with last year, but note that it is a heavily H2 weighted seasonal business. The outlook statement sounds upbeat.

A PER of 12 and dividend yield of 4.2% look reasonable, if you are comfortable with the sector and the business model.

I don't like the Balance Sheet, which has net liabilities, so that rules it out for me. Note also the large provisions figure of £45.6m within current liabilities - presumably that is something to do with recipients of vouchers who don't redeem them?

It's not for me.

Plastics Capital (LON:PLA)

Interim results seem lacklustre, with basic EPS of only 1.2p for the six months to 30 Sep 2014. Although the adjusted EPS figure is massaged up to 4.6p, so to repeat my previous concerns, the gap between adjusted and statutory EPS always seems very large with this company, which makes me nervous.

A better H2 is expected.

A recent £5m Placing and acquisition were completed, and looked a sensible deal.

In my view the shares are probably high enough for the time being, given soft trading in H1.

Note that the divis have been rising strongly so it's becoming interesting as an income stock.

Regards, Paul.

(of the companies mentioned today, Paul has no long or short positions.

A fund management company with which Paul is associated my hold positions in companies mentioned)