Small Cap Value Report (23 Mar 2016) - ALY, TRCS, CLL, QXT, BAR, SWP, CNKS

23rd Mar '16 by Paul Scott

33 comments 25803 reads

Good morning!

What a busy day yesterday! I added loads more companies to yesterday's report, but there were so many companies reporting, in the end I had to do brief comments on the last 8 companies added to yesterday's report. So you might like to recap on that report here.

My CEO interviews seem to be popular, so I've got more in the pipeline. Yesterday afternoon I had a long chat with the CEO of accesso Technology (LON:ACSO) (at the time of writing, I hold a long position in this share) - very illuminating too, he's so bullish about the business, and its seemingly unique opportunities for growth.

Accesso seems to have a huge moat around it once clients are signed up - the company already has c.60% visibility of its revenues for 2022! The interview is just over an hour long, which I know some people baulk at - I can't understand why, because if I'm risking thousands of pounds on a company's shares, an hour of my time to listen to the CEO is time very well spent. The link for the audio is here.

Laura Ashley Holdings (LON:ALY)

Share price: 24p (down 0.7% today)
No. shares: 727.8m
Market cap: £ 174.7m

(at the time of writing I hold a long position in this share)

Results 52 wks ended 30 Jan 2016 - the company is in the process of changing its year end from 31 Jan to 30 Jun, so this will be an extended, 17-month year. Hence today's results are called "second interim results", but are 52 week figures, so I'll treat as a normal year's figures.

The share price has already come down a lot from last summer's peak of 35p per share. So clearly the market has been anticipating lacklustre performance. That's why the price has barely budged today, on publication of lacklustre figures.

The core UK retail business performed pretty well in 2015/16, as you can see from the table below:

The highlighted items are what I regard as the underlying performance of the retail business. As you can see, "contribution" (i.e. the profits from the UK shops, before central overheads such as warehouse, Head Office costs, etc) rose 8.7% to £ 31.3m. That's a…

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dscollard

23rd Mar '16

very bullish price action with ALY... complete reversal on the day with higher than average volume. Guess the results when digested were more palatable.

From a technical POV this may well break-out towards 28p

I am a holder for the divi and thought about adding this am on weakness...didnt expect such a quick bounce!

aiminvesting

Hi Paul,
Any thoughts about Cenkos Securities (LON:CNKS) ? FY results are out today, and I can't really understand why the shares are down 10%, since everybody knew 2015 would not be as good as 2014. Revenues for the FY are down 14% vs 20% in H1, so I think they are doing pretty well, and the yield is over 10%. Would really like to read your interpretation of those results, or anything strange yoy may have spotted.
Thanks as always for the reports!
By the way, I think yesterday's acalarations were not needed, you have every right not to publish reports when you don't want to!!
Thomas

2020vision

Paul, I noticed you didn't comment on SEE yesterday in the end. What's your view on their premium placing with VSI, looks like VSI will manufacture their new 'reduced cost' fleet product, VSI are Malaysian based and have a link with Dyson.

Paul Scott

I didn't get round to commenting on Seeing Machines (LON:SEE) yesterday. However I did look at their deal, with a Placing (at a premium) from a technology company. Looks very promising I think. Certainly it's an important validation of their technology & its potential I think. Not one I currently hold.

P.

apad

Friday 8th January, John McArthur, Chief Executive, disposed of 120,000 ordinary shares of 0.4p each ("Ordinary Shares") in the Company, at an average price of 515.9p per Ordinary Share.
Worth including in your opinion piece.
apad

MichaelFBS

Sorry Paul was meant to be a thumbs up but my hand was shaking. Thanks for the write up on ALY.

Ramridge

Re. Tracsis (LON:TRCS). I like this company a lot and I am looking for a reason to invest.

For the full year the company expects to make eps of 21p. Today's HY report shows a normalised eps of 4.04p. So for the results to be in line, TRCS has to make some 17p in 2nd half year.

Yes, the 2 acquisitions SEP and Ontrac are expected to fire on all cylinders in the 2nd half. But my back of fag packet calculations say it will be a tall order to make 17p in the next 6 months, from base business plus the 2 acquisitions.

However far be it for me to bet against John McArthur, who I rate to be one of the best CEO in the business. So I am going to take the coward's way out, and sit this one out.

Edward Croft

We're just testing some new tickerize fixes.

888 Holdings (LON:888) BP (LON:BP.) Vodafone (LON:VOD) £10m £174

We've changed the £XYZ to work for characters or digits and only for UK stocks. We'll figure something out for international stocks later.

@Paul give it a go and see if it works better. My test seems ok

Actually - it's not released yet. Please wait a mo.

gus 1065

Hi Ed. could you have a look at Sports Direct while you are at it please? There are three SPD's at the moment, two of them in the UK. Only one of them ever seems to be talked about ...

Thanks,

Gus.

seadoc

Hi Paul,

Thanks for chat with Tom Burnet at accesso Technology (LON:ACSO). The introduction of ticketing solutions to Asia sounds very positive.

janebolacha

Carcosa, this article refers to the reasons for the collapse of the licensed Laura Ashley business in Australia:

http://www.ragtrader.com.au/news/laura-ashley-the-shocking-reason-behind-its-collapse

The chance of recovering the debt would seem slim.

Re Laura Ashley Holdings (LON:ALY) and the £1.3m debt from its Australian franchise partner going bust. I haven't looked into the detail, but normally in these situations, unsecured creditors get nothing. Occasionally there might be a small payment (a few pence in the pound), but that's the exception rather than the rule.

The business will usually resume trading, but under a new limited company, which does not inherit the debts of the old company, it's a clean sheet.

So I would work on the basis that the £1.3m exceptional charge is an unrecoverable bad debt. It's not material anyway, so forget about it.

In many ways this is a much cleaner way of doing things for ALY than it operating the stores itself. When the franchisee goes bust, it kills all the lease liabilities for the shops, which is a good thing. Therefore although ALY has been stung with a bad debt, imagine how much greater the losses might have been, if it had operated the shops itself, and been liable for years of rental payments on loss-making shops (look at the mess French Connection (LON:FCCN) has got into on that front).

So I like the franchising model that ALY uses.

Regards, Paul.

grym02

24th Mar '16

If you can update on Lamprell when you get a chance, it would be much appreciated.

Hi grym02,

I'm reporting on absolutely loads of companies at the moment, as we're in the busy season.
So once the article's signed off for the day, that's it, I'm done!

There are only so many companies one person can cope with. I do about 500, which is hard work.

Perhaps you could take up a bit of the slack, and tell us why you think Lamprell is good or bad? Just a couple of sentences is good. It's a team effort here So it's much more useful when people say something about the stock they are interested in, rather than just asking me to do the work for you, which is a bit annoying to be honest, when I'm busting a gut to cover as many companies as I can already - so asking me to do more, after already having spent all day & all evening writing the above, is a bit annoying. I'm not a machine FFS!

Regards, Paul.

LAM LN: Leading shipyard in the Middle East, where the NOCs are ramping production low oil prices. 2016 will be slow year, but can still generate EPS of 0.10 GBP per share, or 10% yield on a trough-ish earnings number. And tax advantaged status means zero tax rate so EBIT = NOPAT. In addition, company has net cash of 201m USD or almost 40% of the market cap. This will only grow due to the NWC unwinding as part of PoC accounting (they have done a lot of upfront work). so even if a chunk of that cash is needed to run the business, LAM trades for less than 8x EV/NOPAT. 2016 revenue are 90% covered by current projects. 2017 is a mystery, but doubtful that they stop drilling in the Middle East no matter what happens to oil.

Curious if you or others see it differently?

I'm not especially familiar with the company, but it looks as though they may suffer from the view that their new business flow is lumpy and unpredictable. Yes, the producers will keep drilling in the shallow water ME but pressure on Capex might lead them to sweat their rig assets for longer delaying new orders etc., for Lamprell (LON:LAM) . Presumably they themselves have pretty high overheads so if running at less than full capacity there is likely to be significant cash burn. This said, this already seems built in to the share price so I agree there seems a good risk:reward profile, especially if you think there is an oil price recovery on the way.

Gus.

bobo

middle east shipyards, dealt with a few, dodgy to say the least, i'd avoid

Rusty2

25th Mar '16

Paul, many thanks for the link to your interview with accesso Technology (LON:ACSO) CEO, does sound very promising, I'm now a long holder. Also thank you for the Tracsis (LON:TRCS) review.

tiswas

8th Apr '16

I am surprised that there is no comment on the ALY RNS yesterday where over 100m shares are pledged as collateral for a loan.

rhomboid1

Hi tiswas

I'm assuming in a sense it's old news as everyone knew his divorce was going to be painful so this looks like just his chosen way to maintain exposure to Laura Ashley Holdings (LON:ALY) upside whilst providing an alimony pot?

Small Cap Value Report (23 Mar 2016) - ALY, TRCS, CLL, QXT, BAR, SWP, CNKS

Laura Ashley Holdings (LON:ALY)

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Paul Scott

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