Small Cap Value Report (27 Aug) - LOQ, PTD, BPI, UTV

Tuesday, Aug 27 2013 by

Good morning! We have a soft open indicated by the FTSE 100 futures, which are currently 42 points down at 6,467. Although once again, I think it is important to note that small caps have been out-performing considerably - check out the chart below for FTSE Small Cap Index XIT (FTSE:SMXX), with the FTSE 100 overlaid onto it (the beige line). This shows the remarkable divergence since Nov 2012, when small caps began a significant rise. So if you invest in small caps, and are pleased with how you're out-performing the FTSE 100, then you're comparing yourself to the wrong index!




Lo-Q (LON:LOQ) announce a common sense decision to move their year end date from 31 Oct to 31 Dexc. This will result in a one-off 14 month period, but more importantly should balance their H1/H2 trading split more evenly from 2014 onwards. Since their product is in use at theme parks, which are seasonal, generally being closed over the winter, then their current H1 to 30 April each year has negligible trading, whereas H2 has almost all turnover. The split in the last full year was 12.7% turnover in H1, and 87.33% in H2, which is clearly ridiculous. A 30 June half year end should balance things more sensibly, so is to be welcomed, in my opinion.





Interim results from Pittards (LON:PTD) look impressive. This is a £10m market cap UK-based leather products manufacturer, using hides imported from Ethiopia. The company has been somewhat accident-prone in the past, and had a poor year in 2012. Things look to be on the mend now, with interim figures to 30 Jun 2013 showing a strong rebound in profitability to £954k profit before tax (versus just £12k last year's first half).

Also, I note that they have a fairly sound Balance Sheet, with net tangible assets considerably higher than the market cap, at £16.9m. Stock seems very high, at £15.6m though, which is more than six months cost of sales (at £14.6m), so that seems a rather inefficient use of capital, and seems to be the underlying reason for the company having £6.7m of net debt.

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accesso Technology Group plc is a United Kingdom-based company engaged in the development and application of ticketing, mobile and e-commerce technologies, and virtual queuing solutions for the attractions and leisure industry. The Company's solutions include accesso LoQueue, accesso Passport, accesso Siriusware and accesso ShoWare. accesso LoQueue is a queuing solution that includes Qsmart, Qbot and Qband. The accesso Passport ticketing suite is built where its customers shop. accesso Siriusware provides clients with ticketing and admission solutions, and includes various modules, such as OnSite Ticketing, OnLine eCommerce, Point-of-Sale and Guest Management. accesso ShoWare offers a range of ticketing software solutions for theaters, fairs, arenas and tours. The Company's products and services support attractions in the world, including a range of paid admission operations ranging from theme parks, water parks and zoos to cultural attractions and sporting events. more »

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Pittards plc is a United Kingdom-based company engaged in the design, production and procurement of leather for sale to manufacturers and distributors of shoes, gloves, leather goods and sports equipment, and the retail of leather, leathergoods and leather garments. The Company's segments include UK Leather, UK Consumer, Ethiopian Leather and Ethiopian Consumer. The Company offers products for women and men. The Company offers products for the industries, including aviation, fashion, interiors, military and services, motorcycling, equestrian, sports, consumer electronics and outdoor performance. The Company's subsidiaries are Pittard Garnar Services Limited, which provides consultancy and other related services; Pittards Global Sourcing Private Limited Company, which produces leather garments; Ethiopia Tannery Share Company, which is engaged in leather production, and Pittards Products Manufacturing, which produces leather gloves and leather goods. more »

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

7 Comments on this Article show/hide all

Gostevie 27th Aug '13 1 of 7

Hi Paul,

Obviously you concentrate mainly on detailed fundamental analysis of the accounts when looking at a company but you seem to be using charts more than you used to when deciding whether or not to buy shares. To what extent do you think that technical analysis has a place when analysing small caps? If memory serves - and I do apologise without reservation if I am wrong here - you were previously very sceptical about the value of TA.

Thanks as always for the excellent reports.


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Garfield 27th Aug '13 2 of 7


Not a comment on this article but a general thank you for your reports. I find then very helpful in an area which hopefully is going to continue to attract more investor interest.

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hayashi22 27th Aug '13 3 of 7

As you say Pittards looks very cheap especially as earnings forecasts may be conservative at 0.4p.also the return to the dividend list implies some confidence on the outlook. Company is seen as somewhat accident prone and at mercy of events outside its control.. Shares should re-rate to 5p -maybe higher if things continue to improve.

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Paul Scott 27th Aug '13 4 of 7

In reply to post #76552

Hi Steve,

I've read a couple of books on charting, but am not in any way an expert on it, so my comments should be taken in that context.

Most chartists seem to earn their living by running courses on charting. That strikes me as a major failing, because if it worked then they would be too rich to need to bother running courses. Also chartists always seem to avoid giving proper predictions, but say that if X happens then the shares will go up, but if Y happens, then they will go down. That's about as much use as a chocolate teapot.

On the other hand, the chart is the best summary we have of investor sentiment over time. So I can certainly see the merit in studying the chart, and working out what events drove sentiment, e.g. how the price tends to move around results time, market reactions to trading statements, etc.

In my view giving some thought to the chart, combined with detailed research on the fundamentals, can deliver better returns, and I know quite a lot of successful investors who mainly focus on fundamentals, but also pay attention to signals the chart is giving them too. On the other hand, I've never met anyone who has made a lot of money consistently over the long term, from charting alone. Maybe they do exist, but just keep quiet about their methods, which is the obvious way to play it, if you are successful!

So if I like a company on fundamentals, and I read on a bulletin board that chartists are getting excited about seeing a "nice bowl developing", then I will factor that into my thinking - i.e. that the odds of the share rising are now higher because a favourable chart pattern is pulling in new buyers.

In terms of simple charts that I like - my favourite one is to buy a share that has been in a long downtrend, and then has moved sideways for several months. I've found that is often a turning point, where negative sentiment has been exhausted & everyone who is going to sell, has sold. Hence once it starts moving up, it can really shoot up. That's exactly what happened with Trinity Mirror (LON:TNI) last year - when it flat-lined at 25p for several months, on a PER of under 1! I loved it on fundamentals at that price, and thought the flat chart also indicated that another move down was looking unlikely.

Also, the other reason I like flat charts that suddenly start moving up, is because there are so many other market participants who like to buy on chart breakouts, and momentum. So once a new up-trend is established, it can just carry on rising, not only to reach a full valuation, but to an excessive valuation.

So for me, I'd say that the fundamentals are about 90% of what drives my investment decisions, but investor psychology/charts will make up the other 10% roughly.

What do others think?

Cheers, Paul.

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it_trader 27th Aug '13 5 of 7

Hi Paul,

I was wondering if you'd glanced at the Plus500 (LON:PLUS) interims this morning? I know they're an Israeli company and not your usual bag, but they do trade in the UK, and have just announced a maiden divi with a commitment to redistribute 50% of profit.

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Gostevie 27th Aug '13 6 of 7

Hi Paul,

Many thanks for the reply. I've been to a few 'free seminars' (i.e. sales pitches) on charting but never been tempted to enrol on any of the "Normally £3,995 but if you enrol today it's only £1,995" courses LOL!

In terms of simple charts that I like - my favourite one is to buy a share that has been in a long downtrend, and then has moved sideways for several months. I've found that is often a turning point, where negative sentiment has been exhausted & everyone who is going to sell, has sold. Hence once it starts moving up, it can really shoot up. - See more at:

I very much agree with you on that point. For me, the Begbies Traynor (LON:BEG) 5-year chart is a great example of this.]3]0]E0WWE$$ALL


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johnrosier 27th Aug '13 7 of 7

Fundamentals most important but I would never invest without looking at the chart. It can help massively on timing entries and exits. Anthony Bolton, before he went walkabout in China, always used the chart to help determine when to buy in. The chart on Globo (LON:GBO), my best stock this year, was instrumental in helping me time my purchase at the end of December. If you look at the current Globo (LON:GBO) chart why would anyone sell now?

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


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