Small Cap Value Report (23 Dec 2015) - INB, TRCS, GMD, PTD, PMR

23rd Dec '15 by Paul Scott

22 comments 22580 reads

Good morning!

Over the coming Xmas & NY period, If the markets are open, then I will write a report here. Also, sorry to disappoint those readers who have a sense of humour, but I won't be doing my traditional vodka-fuelled special report this year, as my NYE celebrations will be limited to sipping a sweet sherry & nibbling Quality Street with mother, here in Bou'mth, as opposed to my usual partying in London with friends. On reflection, that's probably a good thing!

Yesterday's report was a bit of a rush, as I had to travel back to Hove to pick up some more things & then return to Bou'mth. So re-reading my report on the train, I spotted several typos, so I'll revisit that report later, and correct the errors. My apologies for that.

There's still plenty of news today, despite the proximity to Christmas, so here goes.

Interbulk (LON:INB)

Share price: 8.5p (up 112.5% today)
No. shares: 467.9m
Market cap: £39.8m

Results y/e 30 Sep 2015 - these results are only of passing interest, because the company also today announces an agreed 9p takeover bid.

This is an outstanding outcome for shareholders, because INB has one of the worst balance sheets of any company on the market. It's technically insolvent, with negative net tangible assets of -£34m. The interest cost alone consumed the bulk of profits, and the company was resorting to asset disposals, sale & leasebacks, etc, to reduce debt.

So clearly a distressed company, therefore shareholders should consider themselves extremely lucky that a white knight has come along, and is prepared to pay a substantial premium for the business. I would bite their hand off, if I was reckless enough to have held shares in this company.

So good to see a happy outcome for shareholders.

Tracsis (LON:TRCS)

Share price: 497p (down 2.0% today)
No. shares: 27.2m
Market cap: £135.2m

Disposal of non-core business - this announcement came out yesterday, and I pondered why Tracsis had decided to dispose of an Australian subsidiary which generated £0.25m in profit, for only £0.5m sales proceeds, most of which is deferred.

I try to build good relationships with the CEOs of quality companies, so dropped John McArthur an email querying the logic for this disposal, which on the face of it doesn't appear to be a good deal.

He replied…

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jonthetourist

23rd Dec '15

I must say, that communication from the Tracsis (LON:TRCS) CEO, both the content and the tone, makes me even more happy to have a significant holding. Well done Paul for querying. And all the best for Xmas and the New Year.

Jon

Rusty2

Who is the Nomad for Park?

Re Park I guess they rely heavily on Christmas sales, which do not seem to be good this year, think there could be a profit warning coming soon. One of Lord Lee's holdings.

hayashi22

I note more bad news from that bargepole Pittards.

Paul, Yes thanks for that one Tracsis, I did wonder about that, did not look a good deal to me either. Yes agree about the management and I will be looking to top up my holding if the share price falls anymore.

FREng

Herbie

Park (LON:PKG) website shows their NOMAD as
Arden Partners plc
125 Old Broad Street, London EC2N 1AR
Tel: +44 (0) 20 7614 5900

Park (LON:PKG) is certainly heavily dependent on Christmas, but they take orders throughout the year.

On 1 December, in the interims, Chris Houghton, chief executive officer, commented:

"The second half has started well, as we enter the key delivery period, with orders significantly ahead of the same period last year. Park looks forward with confidence and is well placed to deliver another strong performance."

I see thanks. Yes I think I know how it works, never been comfortable with that sort of thing, there was a big problem a few years ago with a similar company going bankrupt and people losing their money. Well something seems to be happening, to sell 50m shares, all of them is unusual. He did sell over 5m last year.

OsullivanB

Thank you for another year of excellent posts, Paul. I wish you a Merry Christmas and a Happy and Prosperous New Year!

EmptyPockets

Enjoy all your posts Paul, very rarely I comment, but just thought I'd like to thank you for them.Have a Happy Christmas with your Mum and enjoy a successful & Peaceful New Year

cig

As a totally unbiased holder, I'd like to blame careful analysis on the Interbulk (LON:INB) takeover.

It was distressed, yes, but as effectively a joint venture between two well capitalised parents, with a cash flow commensurate with the interest bill, it was not at much risk of going out of business. It's to be expected that a capital-heavy equipment leasing business in a sector cyclical downturn makes no profit and ends up with a stretched balance sheet. The trade was a bet on either the cycle turning (when operational leverage will kick in) or someone buying them out in expectation of the cycle turning (as here).

The gambling element was perhaps more the risk we minority shareholders would be shafted by the parents on an upturn than balance sheet risk. Glad they're being good, it's not all crooks on AIM after all!

Splode

herble - I believe Lord Lee sold out of Park (LON:PKG) in the summer (before the autumnal run-up in its SP). It was not listed in his portfolio that was published in his interview by the FT earlier this month.

Brothersinarms

Herbie, the chairman of Park (Peter Johnson) is non-exec and the founder. He's also 75 years old and none of his family are directors so it's not too surprising that he's decided to sell out when they're having a good year. The 93p peak was a spike (the shares are quite illiquid although hopefully that will improve now) with the real price being around 80-85p. A discount of 20% for 30% of a small company is not that unusual.

There was an issue with their main competitor going bust in the financial crisis but the regulator subsequently introduced new rules (with Park's input) that all client money is held in a separate trust.

Park is one of the few companies that actually benefits from rising interest rates as they get the interest on the trust monies (peak of 206mm in November).

I picked up some at 66p yesterday.

OK its hard to keep track of his holdings as the House of Lords is not upto date. I'm not a FT subscriber so I can't see that. Actually I was able to read it, it only has 13 holdings, if that is correct then he has a lot of shares this year, thats down from 22 in the summer. What happened FW Thorpe, he only bought that fairly recently?

Ok thanks for the info. Even so I would have thought he would keep a small holding and why sell now the price has dropped. You maybe right but its not one for me.

BahrainChris

I wonder if any company with a "value creation plan" should automatically be added to your bargepole list?

Happy Christmas to you and your family.

DarwenLad

Paul, Just wanted to add my thanks for your daily smallcap commentary over the last year. The speed with which you get the column out, and the quality of your writing/analysis are really impressive especially when compared with the drab commentary coming out of the professional stockbroker analyst community. Hope your Mum is on the mend. Best wishes from "the North".

Paul Scott

24th Dec '15

Hi BahrainChris,

You asked;

"I wonder if any company with a "value creation plan" should automatically be added to your bargepole list?"

In a word, YES! Greedy c***s in my eyes. Execute them all!

Yes I agree, maybe there should be a list of such companies on here?

But thinking about it are some not any different from share options?

Had a quick look and Matchtech (LON:MTEC) does have one, I believe Paul is a holder?

And Finsbury Food (LON:FIF), does have a "long term incentive plan" which seems very generous. Similar one at ASOS (LON:ASC).

Well had a quick look and it seems that a lot of companies have these schemes, less so at Aim companies, in fact probably more companies have them than don't.

timarr

The FT article is specifically about his ISA holdings. Only some of John Lee's holdings are held inside his ISAs. He has a wider, non-ISA'd portfolio, which is presumably where FW Thorpe, Park, Gooch and Housego, etc are held.

timarr

I see that would explain it, thanks. On the HOL he has 22 currently listed but I gather he has sold some of those fairly recently. I was surprised at the size of some of the holdings.

Camtab

Paul,
A very happy Christmas to you and your family. Thank you for your generous insights and comments. Having left full time employment a while back I look forward to your daily posts and treat you and your other readers as my team and your post as my daily meeting. A discipline which is extremely important to me. I wanted you to know that you serve as more than just another investment commentator, all be it a very good one.
A prosperous 2016 to all!!
Kind regards

Small Cap Value Report (23 Dec 2015) - INB, TRCS, GMD, PTD, PMR

Interbulk (LON:INB)

Tracsis (LON:TRCS)

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Paul Scott

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