Small Cap Value Report (9 Apr 2015) - NXR, RNO, SCPA, MTEC

Thursday, Apr 09 2015 by

Good morning! Timings are very tight for me today, so there's not likely to be that much posted here this morning, but I'll try to do some more this evening, and I need to circle back to review Snoozebox Holdings (LON:ZZZ) in yesterday's report too - it's on the to do list!

Norcros (LON:NXR)

Share price: 17.0p (up 4.5% today)
No. shares: 597.1m
Market Cap: £101.5m

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

Trading update - for the year ended 31 Mar 2015, from this bathroom fittings and tiles company, which operates mainly in the UK, but also S.Africa.

Key points;

  • Most importantly, underlying operating profit is "expected to be in line with market expectations"
  • Turnover C.£221m - up 1.1% on prior year, and 1.8% below broker consensus
  • Sales growth accelerated usefully in H2 (up 5.4% in H2, up 1.5% for the full year)
  • UK housebuilding sales were strong, offsetting "challenging" (why?!) UK retail sector
  • S.Africa - strong local currency sales (up 19.1% in H2)
  • Impact of S.African Rand depreciation now stabilising, so growth is feeding through into sterling terms too now
  • Closing net debt lower than market expectations at c.£15m
  • Pension fund & deficit not mentioned

Valuation - this share has a high StockRank of 92. Also there is plenty of green on the usual Stockopedia graphics - in particular the forecast PER is very modest, at 8.25, especially considering the company has little debt now (which in any case is more than offset by remaining freehold properties). I also like the growing divis, yielding about 3.6%.


My opinion - this is a strange share. There seems a permanent overhang in the market, but for the patient investor that doesn't really matter. What is more important is that the shares look good value, and the company is trading well. I particularly like the low PER, and there should be favourable macro tailwinds too (with increasing housebuilding), especially in the UK.

The only issue on trading that concerns me a bit, is the lack of progress in the UK retail sector. This suggests competitive pressures may be problematic perhaps?

Also, the pension fund here is huge, which wasn't much of a problem in the past, as it was quite well funded. However, recent lower bond yields has probably increased the deficit. So investors should be…

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Norcros Plc is a holding company for the Norcros Group. The Company's principal activities include development, manufacture and marketing of home consumer products in the United Kingdom and South Africa. The Company's segments include UK and South Africa. The Company has six United Kingdom businesses, including Triton Showers, Vado, Croydex, Abode, Johnson Tiles and Norcros Adhesives, and three businesses in South Africa, including Johnson Tiles South Africa, TAL and Tile Africa. The Company is focused on showers, taps, bathroom accessories, tiles and adhesives. In the United Kingdom, the Company offers a range of bathroom and kitchen products both for domestic and commercial applications. The Company offers mixer showers and accessories; tile and stone adhesives; taps, bathroom accessories and valves; bathroom furnishings; ceramic wall and floor tiles; kitchen sinks; tile adhesives, pourable floor coverings and tiling tools through its United Kingdom and South Africa business. more »

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Renold plc is engaged in delivering engineered and power transmission products and solutions across the world. The Company's Chain segment manufactures and sells power transmission and conveyor chain and includes sales of torque transmission product through Chain National Sales Companies (NSCs). It has manufacturing sites in the United States, Germany, India, China, Malaysia and Australia. It also offers leaf chain used in the forklift trucks. Its Torque Transmission segment manufactures and sells torque transmission products, such as gearboxes and couplings. It is a manufacturer and developer of coupling and gearbox solutions, from fluid couplings to rubber-in-compression and rubber-in-shear couplings, and a range of worm gears, helical and bevel helical worm drives. It also manufactures gear spindles. The applications of conveyor chain include theme park rides, water treatment plants, cement mills, agricultural machinery, mining and sugar production. more »

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Scapa Group plc is a United Kingdom-based global supplier of bonding solutions and manufacturer of adhesive-based products for the Healthcare and Industrial markets. The Company has a global footprint, with production sites in Asia, Europe and the United States. The Company conducts the activities through two distinct and separate businesses: Healthcare and Industrial business units. The Company’s subsidiary Scapa Healthcare is a outsource partner in the advanced wound care, consumer wellness, medical device fixation and drug delivery markets. Scapa Industrial operates across a diverse range of market segments throughout Europe, North America and Asia, through the two business models of engineered products and commercial products. more »

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

8 Comments on this Article show/hide all

WarrantStar 9th Apr '15 1 of 8

Hi Paul.
Thank you for the update on Norcros (LON:NXR) . Do you or anybody else know who is behind the share selling overhang & when it might end?

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Redrumtum 9th Apr '15 2 of 8

Looking at RNS's, Schroders has been a recent seller. Don't hold your breath though, they still own a shed-load.

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WarrantStar 9th Apr '15 3 of 8

In reply to post #96105

Thanks. So it looks rather unlikely that we will get a decent share price increase any time soon then!

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merlin51 9th Apr '15 4 of 8

Schroders have been reducing on a lot of small cap shares over the last few weeks, I've noticed.

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imranawan 9th Apr '15 5 of 8

Hi Paul

In terms of tracking short positions I use the short tracker website, but can't see any short position information related to MTEC. Just curious about where I can obtain this information from?

Best wishes,

| Link | Share | 1 reply
imranawan 9th Apr '15 6 of 8

In terms of the NetPlay TV (LON:NPT) results, I note that the POC came into effect on the 1st December 2014, but the POC charge on the P&L statement equated to £333k for just one month presumably? Does anyone know what the expected POC charge for a full year would be? In the narrative it says the POC is set at £15% of gaming and sports betting gross win and the accounts aren't very clear about the annual charge.

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Paul Scott 9th Apr '15 7 of 8

In reply to post #96153

Hi Imran,

I've generally found websites providing info on short positions to be quite unreliable, so now I use the FCA's website, which publishes a weekly spreadsheet that you can download.

(see link on the RHS)

The shorts on Matchtech appear to have disappeared, so the sellers must have closed off the positions with the new Matchtech shares issued a few days ago.

Regards, Paul.

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imranawan 10th Apr '15 8 of 8

In reply to post #96195

Thanks Paul, much appreciated.

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 Are LON:NXR'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 »


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