Small Cap Value Report (4 Mar 2015) - VLK, COG, CRES, ANP, FOUR, HYDG

Wednesday, Mar 04 2015 by

Good morning!

Vislink (LON:VLK)

Share price: 48.6p
No. shares: 122.6m
Market Cap: £59.6m

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

Trading update - good news for shareholders here, as the company reports trading for 2014 ahead of expectations;


The recently acquired "Pebble Beach" software company appears to be driving overall out-performance.

Valuation - Vislink has a high StockRank, of 91, and the PER (based on broker forecasts) looks modest:


My opinion - this is encouraging news today, and more will be revealed with results due on 24 Mar 2015.

Cambridge Cognition Holdings (LON:COG)

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

USA office opening - the company today says it is opening an office in the USA, and refers to increasing demand, which sounds promising - see highlighted bit below;


On the other hand though, another office means more overheads & higher cash burn, initially at least.

Coalfield Resources (LON:CRES)

Placing & Open Offer - this is an interesting one. The company owns 25% of a property group, called Harworth Estates, which owns 27,000 acres of development land. A deal has been done to acquire the remaining 75% of Harworth, and change the name of the listed company from Coalfield Resources, to Harworth Group plc.

A Placing has been done at 7.25p per share, and the NAV of the enlarged group will be 9.0p per share.

Anpario (LON:ANP)

Final results for calendar 2014 look good, here are the highlights from today's announcement;


I note that turnover was only up 2.4%, to it looks as if the profit improvement has come mainly from improved margins, since gross profit was up 7.9%.

The reported EPS figure of 15.6p appears to be well ahead of broker forecast of 13.5p, which seems to have pleased the market, with the shares up 5.5% to 300p this morning.

Balance sheet - is excellent, no problems here at all! The company has surplus cash, reporting cash of £6.6m, and no debt.

My opinion - this looks a nice company. With hindsight, there was a good oppportunity to buy these shares last summer/autumn, but with the price now back…

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Pebble Beach Systems Group plc, formerly Vislink plc, is a software and technology company. The Company is engaged in the collection and delivery of video and data from scene to screen. The Company's Pebble Beach Systems division is a developer and supplier of automation, Channel-in-a-Box and content management software solutions for television broadcasters, cable and satellite operators. For the broadcast markets, the Company provides wireless communication solutions for the collection of live news, sport and entertainment. The Company's products include Marina, which is an enterprise level playout automation platform for multi-channel applications; Orca, which is an Internet Protocol (IP)-enabled cloud-based integrated channel delivery solution; Dolphin, which provides multi-format integrated channel delivery solutions based on information technology (IT) hardware, and Stingray, which is a self-contained Channel-in a-Box. more »

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Cambridge Cognition Holdings plc and its subsidiaries develop and commercialize computerized neuropsychological tests for sale, principally in the United Kingdom, the United States and Europe. The Company's segments include Pharmaceutical Clinical Trials, Academic Research and Healthcare Technology. The Pharmaceutical Clinical Trials segment includes products and services for use in regulated pharmaceutical clinical trials. The Academic Research segment includes cognitive test products for researchers working in a non-regulated environment, typically in academia. The Healthcare Technology segment includes medical software for use in healthcare delivery settings. The Company is a provider of validated touchscreen cognitive assessments for clinical trials. The Company's product, CANTAB Mobile is a Class II medical device, used to identify patients exhibiting the early signs of Alzheimer's disease. It also offers Cantab Insight for dementia assessment in secondary care. more »

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Harworth Group plc, formerly Coalfield Resources plc, specializes in the regeneration of former coalfield and other brownfield land into employment areas, new residential development and low carbon energy projects. The Company operates through three segments: Capital Growth, Income Generation and Acquisitions. The Capital Growth segment of the business focuses on delivering value by developing the property portfolio. This includes taking sites through the development cycle from master planning, inception through to plot sale and build out. The Income Generation segment of the business focuses on retaining and effectively managing selected land and property assets. The Acquisitions segment focuses on replenishing the Company’s land and property portfolio with new sites. The Company's portfolio includes properties at varying stages of completion, across the various sectors, including mixed-use, industrial and retail. more »

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30 Comments on this Article show/hide all

Damian Cannon 4th Mar '15 11 of 30

In reply to post #93688

No problem. I see what you mean about the sector: why take such a low margin when Brainjuicer (LON:BJU) and STV (LON:STVG) have triple the margin and similar or better returns on equity? Not that I'm saying that these are directly comparable but they're in the same market.

Blog: Ambling Randomly
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Paul Scott 4th Mar '15 12 of 30

In reply to post #93667

Hi Calalily,

Cambridge Cognition Holdings (LON:COG) - it's a speculative share, but I like the product, and demand was impressed with contract wins. Also there are some shrewd investors in it. Not my normal type of holding admittedly, but I like to have a small number of more speculative positions.

As regards NTAV, all I do is take net assets from the latest balance sheet, then deduct goodwill & any other intangible assets within fixed assets.

Regards, Paul.

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herbie47 4th Mar '15 13 of 30

Yes good news about Vislink, I did pick a few up in January when they dipped below 40p. Yes different stategies for buying shares, I don't think value is always the best way, missed out on some good companies because they never are good value, Next for instance, or more recently RSW and TRAK as Paul has said several times missed out because of price. Maybe just buy some in good quality companies then if shares dip buy some more?

Whats peoples views on new 52 week high shares, I can never bring myself to buy at the highest price?

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Paul Scott 5th Mar '15 14 of 30

In reply to post #93709

Hi Herbie47,

I agree, it's very difficult at the moment. Value is not working very well as a strategy - I find that my value shares tend to stay value shares, as they don't seem to have very much in the way of growth or excitement. Although that can change quickly of course, so you do get the odd nice surprise.

More convincing, growth companies - yes, they're all very well, but how can I pay up a PER of 20 for them? That is a tall order in terms of rating, especially when interest rates normalise - remember that we're in a QE-fuelled asset bubble at the moment, so prices are generally too high. I don't believe all this deflation stuff, people in the West are too used to inflation, and won't tolerate stagnant wages forever. Inflationary forces will always resurface in the UK and USA. The Eurozone are conducting their own bizarre experiment of trying to impose German hard currency rules on countries which are demonstrably incapable of sticking to them, but that's their problem - if you don't like the gig, don't sign up for it.

As we saw in Oct 2014, there were some fantastic spikes down, which gave really good buying points, so I am leaning towards not over-paying, and instead keeping some powder dry - which means you can nip in and grab the bargains when the next market wobble happens.

Just an opinion, as always, take no notice!!!!

Regards, Paul.

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Paul Scott 5th Mar '15 15 of 30

The other thing is this. People say, "where is the growth going to come from?"
In a word, cheap energy!

Every time before that the USA has had cheap energy, its economy has gone into a multi-year economic boom. That stimulates the rest of the world too.

So overall, I think investors should be looking at things with more optimism than some think. I reckon that the huge stimulus of Govt deficits, and ultra low interest rates, and cheap energy, are likely to get things moving. Then once a certain point has been reached, things become self-fueling. Then you have a nice 5-years or so of strong growth. Maybe we are at the starting point of that? On balance I suspect we might well be, and that's probably why equity markets are buoyant (well that, and liquidity from low interest rates & QE).

All conjecture, but for me things are looking better now than they have done since 2007, and that means I'm more prepared to push the boat out a little on valuation for the right type of companies. I'll go up to 15 now on a PER, where I would have felt safer on 10 or 11 a couple of years ago. Providing the balance sheet is strong.


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Beginner 5th Mar '15 16 of 30

In reply to post #93709

Hi Herbie, Hi Paul
Thank goodness! I thought it was just me that reckoned everything was just too expensive. I do some very basic value screening every few days.  Fewer and fewer thing are coming up. A year ago I hade sixty or so hits on average. Now it is below thirty, and most of those are statistical anomalies. Value is hard to find, unless you can get in on a temporary fall back. I notice Vislink (LON:VLK) and Indigovision (LON:IND) are still coming up for me, as is Dillistone (LON:DSG) , and I have a few of each of them. This seems to confirm Paul's 'value staying value' comment.

Rather than shift my criteria like Paul, I have opted for a slightly different approach in the short term. I am looking for companies with problems! If they have a sound balance sheet (as best I can make out), I am considering companies that have hit hard times or are having a run of bad luck. Also there seem to be some firms that the market just never seems to like, and I am popping in there. So far I have added Avingtrans (LON:AVG) , Huntsworth (LON:HNT) , Microgen (LON:MCGN) ,and Aeorema Communications (LON:AEO) under this set of assumptions.There could be either a shorter term movement here, or longer term gains to be made.
Overall though the market reamins, to me, overvalued in a very drastic way.  A broad adjustment is surely due, and we should keep some funds available to take advantage of that.

(I also meant to say that I have missed the boat too many times now, waiting for a price to fall then seeing it gracefully pull away.  Bellway (LON:BWY), Cenkos Securities (LON:CNKS) , and Melrose Industries (LON:MRO) are such!)

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kenobi 5th Mar '15 17 of 30

In reply to post #93724

The other thing is this. People say, "where is the growth going to come from?"
In a word, cheap energy!

I agree, there seems to be quiet a lot of gloom and doom about, which I guess is because the ftse has broken through it's previous high so is it a good time to get out ?
Certainly the market is no longer cheap. However as well as America growing well, we now have cheap energy, which should help everywhere apart from the producers. Then we have the europeans on the verge of a trillion euro stimulus, Austerity in Europe is obviously going to be watered down a bit, and a muddle through is going to be found otherwise it will fall apart with several southern states defaulting and leaving the eurozone. This would probably be the best solution but I don't think this will be allowed to happen, I'm guessing a muddle through will be found. Europe's recovery will help multi nationals and exporters alike and is a significant chunk of the world economy, probably the most significant still not growing strongly ?

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Ramridge 5th Mar '15 18 of 30

Guys -
I can only concur that I am seeing good value or growth shares that I would like to invest in but won't because of (by my calculations) overrated current market prices. Patiently waiting for a pull back worked for me last year, but not now. So I see from the sideline quite a few of my picks go up in double digit %. Very irritating. It appears that bottom fishing is not a viable game in the current climate.
Oddly enough I got a hint of what I might try next to counter this. In today's Shares mag there is an article on Warren Buffett's latest pronouncements. I am no WB groupie but the following advice he got from Charlie Munger strikes a chord at this moment:
"Forget what you know about buying fair businesses at wonderful prices; instead buy wonderful businesses at fair prices".
Mmmm. OK. I will give it a whirl.
Regards, Ram

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janebolacha 5th Mar '15 19 of 30

Three shares that, imo, still combine fair value with growth are Avation (AVAP), Character (CCT) and Entertainment One (ETO), all with the potential for surprising favourably. Others to consider would be Empresaria (EMR), Finsbury (FIF), Gulf Marine Services (GMS) and Waterman (WTM). I'm still not needing to push my PER limit anywhere near 15. There's still, imo, plenty of cheap value out there.

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PeteB 5th Mar '15 20 of 30

Paul (or anyone else out there) - any thoughts on the recent decline in Synety (SNTY)? Trade levels look low, but I can't see any good reason behind the drop.

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Beginner 5th Mar '15 21 of 30

In reply to post #93760

Results are imminent, so it may just be people lacking in confidence about these. Also private investors may just be bored with this one. It used to figure regualrly on tip sheets, but has not done so for a while. I spent the last hour looking for good reasons, and came up with none! Good luck.

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dangersimpson 5th Mar '15 22 of 30

In reply to post #93709

Whats peoples views on new 52 week high shares, I can never bring myself to buy at the highest price?

That's why a strategy of buying the 52 week highs actually works because assuming that on average shares are moving up in response to good fundamental performance you get a psychological barrier where people won't buy even if the news flow means they should be and you get undervaluation.

That said, I know all that, but like you still can't bring myself to buy them - I'm far more comfortable buying something at it's 52 week lows! But I don't think it really matters because my strategy is based around my own strengths, weaknesses and temperament. The best strategy is one you believe in so you have the confidence to stick with it through the ups and downs - different people have different ways of gaining this confidence - studying other investors with similar strategies, diversification, stockranks, detailed research, checklists, etc. So much better to have a 'sub-optimal' strategy that avoids buying 52 week highs if it doesn't fit with your proven strategy or doing so leads you to doubt your process and sell at the wrong times.

Where I have modified my strategy is that I try not to sell at a 52 week high - I find the Momentum Stockrank (which included fundamental momentum as well as technical) helps me to hang on and maximise returns when value stocks start to perform well or become popular. This is not without it's psychological pitfalls though since selling after momentum has peaked leaves you open to the strong influence of loss aversion. So I still end up selling too early most of the time, although it seems to work ok for me.

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herbie47 5th Mar '15 23 of 30

In reply to post #93730

Beginner, thanks. VLK, IND and DSG are on my watch list, I have some VLK bought back in January. At the moment Im picking companies I like and setting a target price which has worked quite well although its early days. 2 I picked up today are TRCS and DOTD both have fallen back. Others I have bought this year are ECM, IRV and IOM. As for PER I believe the market average is 18 and historic average is 16? I don't think it is overpriced, above 20 things will be getting a bit hot. My worry is the uSA market which has gone up more than London, if that crashes I know ours will follow. Interesting Paul's comment about US and oil prices, does that still hold now US rely less on overseas oil and there own oil is suffering from the low oil price?

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herbie47 5th Mar '15 24 of 30

In reply to post #93760

I did ask Paul about SNTY as on my watchlist, he said he on;y comments on trading statements or news. Each day they are dropping about 10p. Not sure I think I will wait for the figures.

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herbie47 5th Mar '15 25 of 30

In reply to post #93742

Im watching AVAP, WTM and CCT, don't know ETO. Not sure about AVAP seems a bit risky to me. CCT has gone up 40% recently so Ive missed the boat again. WTM was going to buy but brokers system was down last Friday when they were 69p so missed out.

Is PE that important, CCT is an interesting one, 2013 PE was 46 2014 PE is only 7 because the profits shot up. Also good companies will have higher PE? Many good value companies have low sp because they have announced a profit warning or bad news.

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herbie47 5th Mar '15 26 of 30

In reply to post #93820

Yes I agree with a lot of what you say. I'm not a 52 week high buyer, I try to get in earlier. I also suffer from selling too early and my stop loss strategy has not worked, I need to sort that out soon. But I'm learning a lot here.

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herbie47 5th Mar '15 27 of 30

In reply to post #93739

RE: WB surprised by his Tesco experience. I think its was maybe a good company to buy but not at that price, if he had bought later at around 165p he would have done rather well. But I agree buy quality at fair price but they are hard to find at the moment.

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herbie47 5th Mar '15 28 of 30

SSY seems good value still, PE 10, has high rating, Paul seems to like it apart from the divi. I bought some a few weeks ago.

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janebolacha 7th Mar '15 29 of 30

In reply to post #93829

Herbie, re your comment, "is PE that important", look at the first chart in this article:

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herbie47 9th Mar '15 30 of 30

In reply to post #94012

Hi Jane, thats not really what I was talking about. Im talking about good quality companies who's PE is a bit more than average or average, take AHT for example at profits 2013 PE was 18, at 2014 profits PE was 18, so its not worth buying? If profits go up 60% then the sp has gone up 60%? I would rather buy shars at PE 18 in a good company rather than some that issue profit warnings. You can wait for a company to get cheap but often they don't, in the meantime you have missed out as sp has shot up.

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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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