Small Cap Value Report (20 Jun) - SID, HHR, PURI, GTC, CRX

Thursday, Jun 20 2013 by
8

Good morning! It looks like a fairly nasty open is in the offing, with the FTSE 100 futures indicating a 100 point drop to 6,252, on the back of some comments made by Ben Bernanke in the USA last night, about tapering QE later this year.

Silverdell (LON:SID) has issued a positive-sounding contracts win announcement. They go on to say that, "of the £12.1m of contract wins, at least £2m is scheduled to fall in the current financial year". All well and good, but in the context of £136m forecast turnover for this year (ending 30 Sep 2013) that's not material, so I suspect this announcement contains a strong element of getting some positive PR out there, to re-build investor confidence after the damage done by an ill-conceived Edison research note a little while ago.

 

 

I'm also intrigued by the announcement today from Helphire (LON:HHR) which states that the Court has approved their capital restructuring, designed to allow them to resume the payment of dividends. A special dividend of 0.165p per share has been declared, which is just under a 4.9% one-off yield.

They also include positive news on a further reduction in debtor days (which is the bane of companies in this sector, supplying car hire to insurers) to 127 days. It's not a company I've been following, but on a closer look Helphire has pulled off a remarkable resurgence. They have wiped out almost all of their debt, through the issue of new shares at 2.5p, and amazingly the Banks doing a debt for equity swap, and writing off almost all of the remaining debt. So it now looks financially strong, and is profitable again.

I suspect there could be good upside on the current share price, although I loathe this sector with a passion, having lost around £250k on Accident Exchange shares a few years ago. For that reason I won't be tempted back into this sector by anything, no matter how good it looks on paper. Although one has to admire the skill of management at Helphire having so comprehensively turned around an apparently doomed company. On that basis alone they are possibly worth backing.

Management have a target of £7.5m operating profit for year ending 30 Jun 2013, so at a market cap of £53m, with net…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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Redde plc is a holding company. The Company is engaged in providing non-fault accident management assistance and related services, fleet management and legal services. The Company offers a range of motor claims accident management services, including vehicle replacement and repair management together with full claims-handling assistance, as well as legal and other personalized services. The Company manages its own fleet of approximately 7,000 vehicles and has access to over 50,000 vehicles through selected rental partnerships. It also provides specialized large fleet accident and incident management services through the FMG group of companies with over 300,000 fleet vehicles under management. It provides accident management services from operational call center sites in Peterlee, County Durham, Huddersfield and Croydon, as well as solicitors' services through Principia Law Limited from Northwich and NewLaw Legal Limited from Bristol, Cardiff and an associated office in Glasgow. more »

LSE Price
112p
Change
-1.4%
Mkt Cap (£m)
348.4
P/E (fwd)
8.3
Yield (fwd)
10.8

Realm Therapeutics plc, formerly PuriCore plc, is a biopharmaceutical company. The Company is focused on leveraging its immunomodulatory technology to protect and improve the health of adults and children. The Company has initiated drug development programs based on its hypochlorous acid technology. The Company is engaged in the development of small molecule therapies with potential application for the treatment of diseases in a number of therapeutic areas, and an initial focus in dermatology and ophthalmology. The Company has developed proprietary formulations of its technology, with anti-inflammatory and immunomodulatory benefits. Its pipeline of products include PR013 and PR022, which are in Phase I. PR013 is indicated for allergic conjunctivitis and PR022 is indicated for atopic dermatitis. Realm Therapeutics, Inc. is a subsidiary of the Company. more »

LSE Price
9.58p
Change
-4.2%
Mkt Cap (£m)
11.7
P/E (fwd)
n/a
Yield (fwd)
n/a



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


17 Comments on this Article show/hide all

mathewawood 20th Jun '13 1 of 17
1

Paul,

Much, much, much more exciting then Silverdell contract win is Puricores (PURI). This company is taking off. This is the second RNS annoucement in the last 2 months about a big new contract win. It really deserves a very close look as it is now certain to go into profit this year.

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Boros10 20th Jun '13 2 of 17
3

I met the Helphire management team a few months back and was very impressed. Very different in both style and substance from the guys at QPP. They pulled off a real coup in getting the banks to write-off a massive chunk of debt without wiping out shareholders.

This is very much a turnaround play; stronger cash management, better cost control, a more conservative approach when accepting new business and the potential upside from an Autofocus settlement. Significant tax losses and lower interest charges will mean EBIT largely dropping straight through to EPS.

I'm not a great fan of the sector because it consumes cash and takes on more debt as the business expands. So the risks grow the more business you sign up. However, given the quality of management and the modest valuation there is significant upside to be had here.

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Monty9 20th Jun '13 3 of 17
2

Helphire have improved around 6 fold since their lows in Sept 12 and just about achieved profitability. I suspect there may be some profit taking before the effect of even brilliant management re-asserts itself in the share price. Would be a good punt at 2p though.

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Paul Scott 20th Jun '13 4 of 17
1

In reply to post #74408

Monty,

Whilst it is true that Helphire (LON:HHR) has 7-bagged from its lows 6 months ago, most of the shares in issue were issued this year at 2.5p in the refinancing. So at 3.5p the increase in price has not been particularly great for the bulk of the (new) shares.
Also the huge debt write-off added considerable value, so the shares should be a lot higher than they were. I tend to ignore all that, and just look at the value of the company now, and compare it with their profits & their balance sheet. HHR still seems good value on that basis.

Cheers, Paul.

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Paul Scott 20th Jun '13 5 of 17
1

In reply to post #74406

Hi mathewawood,

I have just written about PuriCore (LON:PURI) in the latest version of this morning's report.
I agree it looks potentially interesting, indeed I hold a few personally.

Cheers, Paul.

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steamy001 20th Jun '13 6 of 17
1

Paul,

Being a shareholder in Helphire (LON:HHR), its pleasing to finally see reward for the faithful, do you see them as a takeover target as they now have very little debt and very strong cash flows, with an potential one off gain from the autofocus settlement.

May be Quindell Portfolio (LON:QPP) will buy them!!! ;)

Regards
Steamy

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it_trader 20th Jun '13 7 of 17

An absolutely ridiculous spread on PuriCore (LON:PURI) with this added volume, I don't know how they get away with it, and surely holding it back.

It's been around 400bps for months.

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Paul Scott 20th Jun '13 8 of 17

In reply to post #74413

Hi it_trader,

Indeed the 40p/45p spread on PuriCore (LON:PURI) is absurd. But remember that's just the published spread. The real spread will usually be well inside that, but you need a telephone broker to sniff around for cheaper stock - I find that the 0.5% commission I pay to my telephone broker easily pays for itself (sometimes several times over) compared with a discount online broker, who can be tied to one Market Maker, which means whilst you might save on smaller deals (through them dealing via an RSP machine), you may not get the full range of market quotes.

Cheers, Paul.

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kenobi 20th Jun '13 9 of 17

Hi Paul,
would you mind sharing who you use for a phone broker ? I've occasionally wondered whether I wouldn't get a better deal on some of these shares by having an account with one of these, what's the minimum sizes where it's worth using these ?

K

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it_trader 20th Jun '13 10 of 17

I hear you Paul. although as a smaller less experienced investor using an online broker I actually find it quite disciplining however frustrating waiting for that right spread and dip in share price before pouncing!

Any ideas why Norcros (LON:NXR) is slow to catch up with its last results?

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mathewawood 20th Jun '13 11 of 17

Paul,

Unfortunately in PURI case its almost as bad as it looks. Iv'e used on-line and phone and for £.500, its 44.0p to buy and 41.0p sell. A real 7.1% spread. Coupled with the fact that their broker Cenkos doesn't make available earnings forecasts. The brokers are strangling this company to death for the average small investor. Hence an average of 1-2 small trades per day done on this share!
Compare that with IND. Similar Mkt Cap yet 1.5% real spread and 10+ trades daily.

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mathewawood 20th Jun '13 12 of 17

Don't know why it put in "Amundi" I didnt type it. Should be £500

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it_trader 20th Jun '13 13 of 17

In reply to post #74426

I've always thought the use of the '£' symbol for turning tickers into links was a bit funny, especially on an investing site. Maybe they should use a different character.

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Murakami 20th Jun '13 14 of 17

Ah, good point - there aren't many numerical tickers in the UK but that's one - and we'll probably find more as we internationalise. We've added it to the bug list.

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Paul Scott 20th Jun '13 15 of 17
3

In reply to post #74422

Hi K,

"Hi Paul,
would you mind sharing who you use for a phone broker ?"

Sure, I use W H Ireland as my main broker, as Richard Griffiths (0207-220-1682) there has done a lot of my broking for almost 10 years now, and I find him very efficient & helpful. Good price improvements on small caps usually. Their minimum fee is £50, which is expensive, but you get what you pay for. I find they usually more than recoup the fee in price improvement on small caps, and they add value in lots of other ways.

Also, you can get round the £50 minimum by opening a white label spread bet account with them, where the commission is only 0.25% with no minimum. So I put sub £5k trades on with them using spread bets, which is much more cost effective. A £4k trade would only cost £10 in commission that way, as opposed to £50 on ordinary account. But you get the same price improvement, as WHI source the stock cheaper, then put it into a spread bet wrapper - a fantastic product in my view. But obviously you have to manage the gearing carefully, or not use any gearing at all, you don't have to. No Stamp Duty either. But there is 3% p.a. funding cost, however, the divis normally cover that for the stuff I buy.

Their normal fees are much higher than 0.5%, so if you ring them, ask to be put onto Paul Scott's group tariff - a group of me & my mates all use the same broker, which is useful in other ways.

Obviously for larger caps, a discount online broker is more cost effective, so I tend to have a range of brokerage accounts, and use each one for where it's most suitable.

Cheers, Paul.

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Paul Scott 20th Jun '13 16 of 17
4

In reply to post #74431

Hi,

Just another point re brokers - I've found that if you are holding quantities of micro/small caps that cannot readily be sold in one go, then I've found it highly advantageous to spread your holding over several brokers. The reason for this is that you can get locked in if something goes wrong.

I had a situation with Hargreave Hale a few years ago, several times, where I placed an order to sell and was curtly told that I would have to wait, as there were other clients in a queue in front of me. If the price is plunging because of a profits warning, and you need to get out quickly, that is no good at all.

Also the etiquette of brokers is that if they do one trade for you with a particular Market Maker, then if you come back the same day & want to sell more (which is generally considered bad form anyway), then your broker is obliged to go back to the same MM. He can then say no. So you again are restricted.

Hence why I've found it much better to spread a say £100k small cap holding equally between about 4 different brokers, so that if you need to sell, you can dump the stock through different brokers on the same day, with no restrictions.

I remember over 5 years ago, when I changed my mind on Volex, and decided to sell after a profits warning, my main broker at the time said they could only sell about £10k worth on the day. So I got the other brokers on the case (as I had spread the position across 4 brokers), one by one (so they are not fighting against each other & driving the price down fast), and dumped almost all of the stock in the one day. That would never have been possible if the whole position had been with one broker.

Cheers, Paul.

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kenobi 26th Jun '13 17 of 17

Paul,

Many thanks for the tips and suggestions,

K

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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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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