Small Cap Value Report (27 Apr 2015) - REDD, BRY, SPRP, STAF | Paul Scott

27th Apr '15 by Paul Scott

30 comments 27729 reads

Good morning!

Charity challenge

It's been a while since I've done anything for charity, so this one caught my imagination - it's called "Live below the line" - and is a 5-day challenge, starting today, to see if you can live on just £1 per day for all food & drink. The idea is to raise sponsorship for charities helping some of the poorest people in the world.

It's always difficult to choose which charities to support, so I picked 3, and the donations are split 3 ways on my fundraising page, here was my rationale for picking each charity;

VSO - has a very good reputation, and the people going abroad to help are volunteers.
Syria Relief - the scale of destruction in war-torn Syria is just appalling, and we must help.
Action Aid - particularly relevant, as they're fundraising to help the earthquake victims in Nepal.

I've posted a starting video blog, created the other night, and have stocked up on Asda smart price provisions for this week. Breakfast this morning was porridge made with water only (so, gruel basically!) which was OK. I really missed my morning coffee today though, but there was no room in the £1 per day budget for any coffee, tea, or milk.

Anything you can donate (any amount is welcome, however large or small) would be great, and it's fine to wait until the end of the week, if you want to be sure that I've actually completed the challenge. Hopefully I might lose a couple of pounds too, as I am apparently a "pompous, pie-eating, salad-dodging windbag", according to a charming fellow called "Stud-Muffin" on advfn bulletin boards!

Redde (LON:REDD)

Share price: 122.5p
No. shares: 294.1m
Market Cap: £360.3m

Trading update - it's more good news from this legal services, accident management group. The group has undergone a remarkable transformation in the last couple of years, coming back from almost going bust, to being strongly profitable and cash-generative - unlike most other players in this sector. It has also been paying out generous dividends.

As the company has a 30 June year end, today's update covers Q3, which has seen "strong trading volumes ... operating profits exceeding the Board's expectations". Excellent stuff!

Cash collection - "a new record low" for debtor days, down to only 104 days, "and further reductions are expected". Compare this with the chronic inability…

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colinhow

27th Apr '15

High Paul - thank you for reports as always. I am hoping to see your thoughts on SPRP this morning.

Whilst the new products sound good, I thought they downplayed the impact of French market so what at first looked like a very strong set of results was not so encouraging when you started to consider the whole picture. I sold mine first thing and seems others have thought the same?

Mark Simpson

Good trading update from microcap Red24 (LON:REDT) this morning:

http://www.investegate.co.uk/red24-plc--redt-/rns/trading-update/201504270700073233L/

As a result, the Board considers that the Company's financial performance...will be ahead of Board expectations.

There has also been a significant increase in the year end cash balance with gross cash at £3.4M and net cash at £3.2M, achieved through improvements in working capital management and the better than expected financial performance.

The current financial year has started well with new contracts with insurers in both the product safety and special risk areas.

Still pretty cheap and Stockrank of 99 so should have further to go if the positive trading momentum highlighted in the TS continues.

iwright7

Danger, I brought some more RED24 today on basis of the +ve update. In addition to a 99 Stockrank it has a 99 Quality Rank which is a very strong combination. Ian

FREng

Paul

You wrote about Digital Globe Services (LON:DGS) on March 20th. It seems that the merger between their main clients that caused the 50% drop in SP may have ended. The shares are up 20% today. I looked at them following your comments and bought some as the drop seemed overdone, so I'm feeling smug (and grateful!).

Cleeve

Paul Good luck with the diet it maybe something that will replace all those diet books! What do you think of Sprue Aegis today?

JDW72

Re SPRP - I'm a bit annoyed about this announcement which I think is badly written and clumsy. The wording is all jumbled up with loads of bullets at the top that don't really tell a story and a warning on profits hidden away in the last paragraph almost hoping that nobody would spot it which is plain ridiculous. Get the news you want to communicate out in the open up front, explain the situation and move on. It's a currency effect and unless you believe that we are midway through a permanent change in the exchange rate, what goes down will come back up (and vice-versa) so the company will get the benefit in the future.

"At like-for-like exchange rates with the previous year, 2014 Group profit would have been approximately £1.7m higher than reported" which is 15% higher.

There's products that are in demand, reassurance with regards the BRK supply line, investment in new products, net cash, a new CEO who should energise things (maybe this is a bit of a "kitchen sink job" by the new guy?), a 3% divi that is well covered and expansion underway throughout Europe. (I would like to see the number of shares in issue stop growing every year and will ask mgt about that as it does dilute things).

It's not a "value share" based on some of the PBV and PTBV multiples but it has a good balance sheet and a good growth story (maybe a bit "QARPy"?).

I hold, I see no reason to sell my shares whatsoever.

imranawan

Agree with your points JDW72. I sold out first thing this morning for a modest profit, as I agree with your point about currency headwinds being a temporary factor. I think what spooked the market and private investors was the Jarden factory issue, which was detailed in the Chairman's Statement. The outlook combined with the possible relocation of the factory meant the share price dropped this morning. I'll look to buy back in, but am happy to wait on the sidelines for the timebeing.

bicboy100

Paul,
Take your point re REDD about being up with events and it's not a sector you like. However where else can you get a turnaround like this on a modest/fair rating, paying a 6% dividend, plus showing all the signs of growing further. I would have thought it was exactly what you look for.
I note that Investco holds 29%, and Woodford has been buying with his new fund recently, getting to 15%.
So he is still stake building. Schroders and Artemis, have another 8.5%, between them.
Given the next results look very likely to be strong, seems to me the time to sell some, would be after those are announced, and probably after the next dividend at the earliest.

Lee

Ramridge

Hi
Re. Sprue Aegis (LON:SPRP) I have held these shares for about a year now and see the currency issue as a temporary blip. Take away the currency factor and the rest of the story is pretty good. Was very happy to top up when the price fell -19% this morning. This is a 2 year holding for me and see no reason to change my mind.
Regards, Ram

Paul Scott

Hi Lee,

I've liked Redde (LON:REDD) up to now, but just feel it's fully priced now.

If you want something a lot cheaper, in a similar sector, look at Fairpoint (LON:FRP). That is on a PER of less than 7, has little debt, and pays a 5.5% divi.

Worth a look. As usual, not a tip, just an idea for further research.

Regards, Paul.

Small Cap Value Report (27 Apr 2015) - REDD, BRY, SPRP, STAF

Charity challenge

Redde (LON:REDD)

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Paul Scott

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