Small Cap Value Report (29 Jul) - CRE, XPP, SNCL, PTCM, ZATT

Monday, Jul 29 2013 by
16

Good morning! The futures are indicating a modestly upwards open for the FTSE 100, up 15 at 6,569. Howewer if you look at the small caps index (see 3-year chart below), it's absolutely gone bananas in the last year, so my overriding sense is that this is a time to be extremely careful, and not over-pay for things just because they keep going up. I think there are many small to mid caps on very stretched valuations now, and personally I will not budge on my value criteria. Many over-bought shares just look like accidents waiting to happen, in my opinion. Hence why I think it makes sense to be sitting on some cash right now, as you cannot buy the dips unless you have some cash to hand. It doesn't really matter that you don't earn a return on cash, that's not the point. It's all about protecting capital.

 

 

 

Creston (LON:CRE 105p) is a share that I've spoken mainly positively about before, and it issues an IMS this morning, covering trading in their Q1 from Apr-Jun 2013. It starts off with a negative (which tends to set the tone), saying that revenue is 5% lower than last year, "as expected". If it was expected to have a soft Q1, then it seems odd that they didn't say so in the last outlook statement issued on 12 Jun. So this might cause slight jitters amongst investors today?

However, there might be enough positive news in the IMS to counter-act that. In particular I like this comment, which is a further pointer towards an economic recovery (my bolding): 

 

Don Elgie, Group Chief Executive of Creston plc, said, "The IPA Bellwether Report on client sentiment towards increased marketing spend is the most encouraging for six years. At Creston we are seeing this being borne out by high levels of new business activity and while opportunities must always be converted, the level of pitching we are seeing is the highest I can remember. Based on our historic pitch to win ratio, we are confident that this will lead to further underlying growth in our client base."

 

Overall then it sounds like Creston have had a fairly slow start to the year, but expect to make it…

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XP Power Limited is a United Kingdom-based developer and manufacturer of critical power control components for the electronics industry. The Company provides power solutions, including alternating current (AC)-direct current (DC) power supplies and DC-DC converters. The Company's segment include Europe, North America and Asia geographical. It designs-in power control solutions into the end products of blue chip original equipment manufacturers, with a focus on the industrial, healthcare and technology sectors. Its product categories include high efficiency/convection-cooled, chassis mount/open frame, configurable, external, encapsulated and printed circuit board (PCB) mount, DIN rail, baseplate-cooled, through hole mount, surface mount, light-emitting diode (LED) drivers and distributed power/hotswap. more »

LSE Price
2350p
Change
-0.4%
Mkt Cap (£m)
452
P/E (fwd)
12.9
Yield (fwd)
3.8




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


2 Comments on this Article show/hide all

dangersimpson 29th Jul '13 1 of 2
3

I agree... a company going bust barely a year after listing negatively impacts the reputation of AIM and it's NOMAD system.

I think the NOMAD should get a big fine if a company they bring to market goes bust or de-lists in the first few years after being brought to market. It would focus a few minds on the continued duty to shareholders that being a AIM NOMAD demands.

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Chrisfarrell21 29th Jul '13 2 of 2

Late release today of a small profit warning for Indigovision (LON:IND) (http://www.investegate.co.uk/indigovision-group--ind-/rns/pre-close-trading-update/201307291304413710K/).

Looks like sales are up (and in line with expectations) but pre-tax profit down to an estimated £2m. I think, and I could very well be wrong, this comes out at EPS of 26.4p, whereas the Stockopedia expectation was for 32.7p (if this is the same profit measure), which would equate to around £2.47m. I think this would put it on a forward PER (now at 306.5p) of 11.6.

No word on cash/debt but it says costs have risen as expected.

This could just be the view of a typical optimistic holder, but the general tone for the turnaround sounds quite positive. Will be interesting to hear your thoughts tomorrow Paul.

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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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