Small Cap Value Report (3 Apr 2017) - SYS1, CTG, LUCE, IDP, IMG | Graham Neary

3rd Apr '17 by Graham Neary

30 comments 17143 reads

SYS1 (new ticker)

Share price: 787.5p (+1.3%)
No. shares: 12.2m
Market cap: £96m

As previously flagged, Brainjuicer has changed its name to the more professional-sounding "System1". The new ticker SYS1 is now effective and the new website, (system1group.com/) will be launched later today.

Its old website (which can still be viewed online) is very quirky and interesting, so the new one should also be worth a look.

The share rating is fairly high but it remains one of the better-quality companies on AIM, and the new name will serve to unite the company's marketing and researching brands (System1 Agency and System1 Research).

Christie (LON:CTG)

Share price: 77p (unch.)
No. shares: 26.5m
Market cap: £20m

Preliminary Results

A weak result set of results considering the scale of revenues:

Revenue growth of 1.2% to £64.5m (2015: £63.7m)
Operating profit before exceptional items of £1.0m (2015: £3.8m)
Operating profit after exceptional items of £2.3m (2015: £3.8m)

The total dividend for the year is unchanged at 2.5p and is still more than twice covered by earnings.

H2 improvement: The hoped-for improvement in the second half did materialise, despite the referendum result which the company had feared, as it registered an H2 operating profit before exceptional items of £1.9m, about the same as the prior year. This was almost entirely generated by the Professional Business Services (PBS) division.

Exceptional items: The exceptional item is a £1.3 million gain from inflation-capping the company's final salary pension schemes.

It's always refreshing to see exceptional items which improve the results, as it feels like in 99% of cases they are costs which the company wishes it hadn't incurred!

Outlook statement is positive:

The year for both our divisions has started more strongly than in 2016. We have some inflationary costs to absorb which our budgets allow for. Your management and staff alike strive to always deliver a service that is second to none, and on your behalf I thank them. We plan for continued growth in 2017.

Total Comprehensive Income

It's essential to look through the financial statements for the details which get left out of the headline numbers.

In this case, I immediately see that the company suffered an £8 million actuarial loss on its pension scheme (despite the inflation-capping measure, mentioned above).

Losses such as this aren't included in the income statement, instead they're in the…

Unlock with Email

Unlock with Google

Already have an account?
Login here

runthejoules

3rd Apr '17

Hope you had a good Investors Show Paul. Any thoughts on Imagination's Imagination Technologies (LON:IMG) drop? Buying opportunity or flogging a dead one-trick pony?

maillotàpoisrouges

Hi Graham.
Any chance of your opinion on Luceco and their final results out today?
BW
Hederz

andyi

Graham
One of Paul's favourites ,Fulham Shore (LON:FUL), issued a RNS today, is it on the agenda for comment?

A.

Ramridge

Luceco (LON:LUCE) please Graham

Camtab

Just wanted to say thank you for the ticket to the Investor Show. Really enjoyed it. Every time i came to say hi you were surrounded by people Paul.
All the best

Graham Neary

Hederz & Ram: LUCE is now done, thanks for pointing me towards it.

Best

Graham

Tortoise investor

What's your view of it?

I like the business but I am worried it is over valued even as an attractive high growth business. I am not confident the expansion plans are fully funded and that they might need to do another fundraising, and given the margins don't look massively high to me I wonder if the share price is over-pricing future growth a bit too much? It's quite hard to calculate though. Very keen to hear others' views, especially anyone who has done any back of the envelope calculations. Also I note they have managed to increase their bank facilities so maybe expansion is now covered in the short-term.

The announcement of the branch in Italy sounds more like a vanity project than genuine international expansion to me.

ls2g08

Could be - I wonder if Apple might be purposely damaging the price in order to buy it in future. It would be pretty shady as that would be market manipulation; so worth taking with a pinch of salt. They will have to wait quite a while and would probably cite the factors imagination tech do for reasons they cannot come up with their own products - patents etc. and therefore bid for the company.

Hi Graham - Thanks for covering Luceco (LON:LUCE)
A few comments if I may
- There is an EU regulation in place to replace halogen bulbs with led bulbs from end 2018. So my understanding is that halogen bulbs will no longer be sold in the EU from end 2018. Since penetration of led bulbs is currently only around 10%, it points to a huge opportunity for companies such as LUCE.
- The company;s ROCE is around 35%. This underlines your remark that they are not just selling commodity products
- on a PE basis (PE = 23) it looks expensive. But when you factor in an eps growth rate of 102%, PEG drops down to 0.2 . So even if next year's forecast eps growth drops to 50%, it is not expensive.

Declaration. I bought an opening position this morning.

is2g08 -
At the start of this year, Apple's cash mountain was $ 246bn , that's approx £200bn.
IMG's Enterprise Value is around £800m. Less than 1%.
If Apple really wanted IMG they could have bought it from pocket change any time in the past few years.

Small Cap Value Report (3 Apr 2017) - SYS1, CTG, LUCE, IDP, IMG

SYS1 (new ticker)

Christie (LON:CTG)

Unlock the rest of this article with a 14 day trial

About the Author

Graham Neary

30 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...