Small Cap Value Report (7 Nov) - DLC, PURI, ABDP, WIN

Thursday, Nov 07 2013 by

Good morning. Big news today for shareholders in CAD/CAM software group Delcam (LON:DLC). There is an agreed cash takeover bid at £20.75 per Delcam share, from an American outfit called Autodesk Development. No doubt Delcam shareholders will be moaning that it's only a 21% premium to last night's market price of £17.15 per share. In reality however, the market price was already stretched, so to get a 21% premium on an already high valuation is not bad going. The undertakings to accept the offer do however leave the door open to a higher competing bid, so the company is now very much in play.

Looking at valuation, Delcam reported 55.6p EPS last year, so this offer is a generous PER of 37.3. Not bad! 2013 forecast EPS rises to 61.7p, for a still very high PER of 33.6. So it looks an excellent deal for Delcam shareholders, and separately Renishaw has announced their acceptance, relating to their 19% shareholding in Delcam. It sounds like they are keen to trigger a bidding war, as their acceptance will be suspended if any other party announces a firm intention to bid for Delcam at £22.30 per share or more. So this could get interesting! Therefore it seems to me that sitting tight is probably the best thing to do in this particular case, but obviously that's for each individual shareholder to decide. The trouble is that Institutions usually drive these deals through, because disposing of their large holdings is so difficult, that a takeover bid is the only realistic way to do it. Hence they will usually grab a premium-priced offer, whereas many private shareholders would probably prefer for the company to remain independent.

So far there is 44.5% acceptance of the offer, so not a done deal yet, but going that way. A 75% vote is required from shareholders at a General Meeting to approve the takeover deal (which meeting should be held within 28 days), which if passed makes it a done deal.





I've mentioned PuriCore (LON:PURI) here before - it seems just the type of growth company that should be rising substantially in this type of bull market, but so far the share price movement has been pretty pedestrian. This is the company where…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way


As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>

Do you like this Post?
15 thumbs up
0 thumbs down
Share this post with friends

Realm Therapeutics plc, formerly PuriCore plc, is a biopharmaceutical company. The Company is focused on leveraging its immunomodulatory technology to protect and improve the health of adults and children. The Company has initiated drug development programs based on its hypochlorous acid technology. The Company is engaged in the development of small molecule therapies with potential application for the treatment of diseases in a number of therapeutic areas, and an initial focus in dermatology and ophthalmology. The Company has developed proprietary formulations of its technology, with anti-inflammatory and immunomodulatory benefits. Its pipeline of products include PR013 and PR022, which are in Phase I. PR013 is indicated for allergic conjunctivitis and PR022 is indicated for atopic dermatitis. Realm Therapeutics, Inc. is a subsidiary of the Company. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

AB Dynamics plc is a holding company, which is engaged in the provision of testing systems to the global motor industry. The Company is a designer, manufacturer and provider of testing and measurement products for vehicle suspension, brakes and steering to the global automotive research and development sector. Its geographical segments include the United Kingdom, Rest of the European Union, North America and Rest of the World. It designs and manufactures specialized testing systems to produce equipment for its customers to develop suspension, brake, chassis and steering systems; evaluate vehicle dynamics and safety systems on the track; employ driver in loop simulation for prototyping; develop and evaluate the next generation of safety systems in vehicles; test and evaluate the technology for use in future driverless cars/autonomous vehicles, and carry out end-of-line noise/vibration (NVH) testing of power train assemblies. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

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

12 Comments on this Article show/hide all

HumourMe 7th Nov '13 1 of 12

You are probably right on the issues with PURI. The first thing I did was check the data and immediately discounted it on the historical numbers ... then I read the sentence but that has not yet fed through into screening systems, which use the old Bal Sheet data from last year . So now I'll have to look.
Interestingly when using screeners you get a subset of companies and then check their data and discard those that should not have got through the screen through data errors. This may be the opposite case. We always know they exist but it is generally impractical to check all the rejects to see if they should have got through. I suspect though that these 'sleepers' may offer great potential for people with the time to find them.

| Link | Share | 1 reply
Paul Scott 7th Nov '13 2 of 12

In reply to post #78927

Absolutely right! That's very much what I do - i.e. spend 4 hours reading RNSs every weekday, and finding stuff that won't come up on screens, through out-performing trading statements, refinancings, etc. There's good money to be made, if you have the time & inclination to cover 500+ companies! Or you could narrow it down to just a handful of sectors that you have an edge in.

Screening is better in bear markets I think - when there are numerous bargains, you're spoilt for choice! But in a bull market, one has to look a lot harder for good value/GARP, and also to a certain extent be flexible with your approach & recognise that investors will pay more for a stock with a good growth story. So it's also a question of running positions for longer than you would usually be comfortable with in my view. Then top-slicing into strength & recycling the money into the next thing. The compounded returns can be astonishing.

Cheers, Paul.

| Link | Share | 1 reply
kenobi 7th Nov '13 3 of 12

Paul do you have a link to your thinking on puri ? the price chart from stockopedia shows a price of 51p and a forward pe of 23.4, I'm sure these figures aren't uptodate, can you provide a link ? (unless of course they don't tell the whole story ?)

kind regards,


| Link | Share
Beginner 7th Nov '13 4 of 12

Sorry to go off subject, but I have done some superficial digging on Naibu Global International (LON:NBU) . A Chinese state report from 2008 (OK, a long time ago!) notes the company had a turnover of 'less than $1m'. The accompanying illustrations show a rather antiquated looking factory. The company website formerly noted it made shoes for the likes of Fubu and Diesel. I cannot find this connection confirmed elsewhere. Currently it says that most of its turnover is from 'Naibu branded' goods. I cannot buy any Naibu shoes or bags anywhere on the net. The Naibu logo looks remarkably like the Nike 'swoosh', and I would have expected Nike to take legal action if Naibu had established a large market. Many of the very positive postings on message boards are clearly and disproportionately written by people whose first language is not English. I am probaly wrong here, but I just cannot see the value.

As far as Wincanton (LON:WIN) goes, the company made some bad takeover and expansion decisions a while back and is paying the price, BUT the UK core business is exceptionally sound (and they are a lovely firm to work for!!). The banks may be hoping there is a turnaround here rather than closing in and getting less than nothing. It is massively overpriced at the mo mind, whether judging by figures or sentiment.

(Top report today, as always)

| Link | Share
maillotàpoisrouges 7th Nov '13 5 of 12

Paul, can you or anyone else recommend a book on assessing the balance sheet, or if too dry a good book on value investing?

| Link | Share | 1 reply
bsharman 7th Nov '13 6 of 12

Hi hedley.

I'm currently reading Value Investing - tools and techniques for intelligent investment - by James Montier. I highly recommend it! Also another good book is: The FT guide to Value Investing - how to become a disciplined investor.

| Link | Share | 1 reply
bsharman 7th Nov '13 7 of 12

Hi Paul, I see that New Pistoia Income Limited now hold over 19% of Indigovision.....

| Link | Share
ajrc00 7th Nov '13 8 of 12

In reply to post #78933

'Accounts Demystified' by Anthony Rice, Prentice Hall , 4th ed 2003. Elementary but quite detailed for people without a financial background. I've found it very helpful but you have to work at it.

| Link | Share
lightningtiger 7th Nov '13 9 of 12

Delcam looks good to me .I was only thinking yesterday ,when my broadband kept going down, what about 3 D printing. I am not sure whether Delcam uses this new tech or not?I know it can be utilised to manufacture things in engineering. 3D is in the news right now. My kind of share.
Cheers from Lightningtiger

| Link | Share
cig 7th Nov '13 10 of 12

Re not arguing with big director buys, it probably doesn't apply with Puricore, but it may not always be a sure sign. For instance, for executive-controlled companies, you can argue it's just moving money from one pocket to the other and they could always do it for effect, and get their money back in compensation or through other tricks that cancel the ecomomic impact of the buy, while still getting the PR effect of a RNS-ed buy.

| Link | Share
maillotàpoisrouges 7th Nov '13 11 of 12

In reply to post #78934

Thanks for that!

| Link | Share
snaj 7th Nov '13 12 of 12

In reply to post #78928

Hi Paul

Thanks for all the write-ups, it's a terrific body of work - even when I might (rarely) disagree with you!

The second paragraph of your post that I'm replying to is a gem on strategy - if you ever have the time, I wonder if it's worth doing an article or two just on your strategy and where you flex it? A bit like Stephen's Value Investing articles over at TMF that were, I believe, inspirational to many investors.

Kind regards

| Link | Share

Please subscribe to submit a comment

 Are LON:DLC's fundamentals sound as an investment? Find out More »

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 »


Stock Picking Tutorial Centre

Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis