Small Cap Value Report (9 Jan 2014) - ANP, NPT, DEMG, IKA, MCB

Thursday, Jan 09 2014 by

Good morning! Attention is likely to be focused on the big supermarkets, several of which are reporting this morning. You can read about them in numerous places, so there's likely to be less attention paid to small caps this morning, so let's have a rummage around there and try to find some bargains!



Anpario (LON:ANP) has issued a one sentence trading statement, saying;


Anpario plc is pleased to announce that it continues to trade in line with expectations, and will put out a pre-close trading statement in early February.


I really like the brevity - that is classy. The share price has been very volatile of late, having a big run up from Sep 2013 until a few days ago, when it suddenly dropped from 335p to 250p for no apparent reason. I think it was just a case of the share price getting overheated perhaps?

Certainly it doesn't look good value even now, after the sharp fall. As you can see from the Stockopedia growth & value graphic on the right, the forward PER is 19.2, and the dividend yield only 1.26%.

Growth rates have been nothing to write home about in the recent past either, but of course the market looks forwards and anticipates what it thinks will happen in the future. I don't know anything about the company, so do not have a view on how things might progress. My approach is to just search for value and GARP, and then do more detailed research when I find something that looks attractively valued at first glance, which this doesn't.





 Interactive gambling company NetPlay TV (LON:NPT) has issued a positive trading statement. They finished the year with a strong Q4, with revenue up 33% year-on-year. Full year EBITDA is expected at the top end of market expectations.

In normal circumstances I would rush out and buy some shares, as Stockopedia is showing a mass of green apart from PBV (which doesn't really matter in this case, as it's not an asset-backed business). However, the reason this stock is cheap is because of investor worries about a looming change in taxation of…

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Anpario plc is a producer and distributor of natural feed additives for animal health, hygiene and nutrition. The Company operates through two segments: UK and Eire, and International. The Company is focused on the manufacture and sale of natural feed additive products to agricultural markets. Its products for the poultry, pig, ruminant and animal feed markets include acidifiers, enzymes, essential oils, pellet binders, antioxidants, mycotoxin binders, mold control products and a range of nutritional premixes and performance enhancers. It offers natural feed additive/flavor called Orego-Stim. It offers its customers a number of omega 3 & 6 supplements for use in feed. Its products in the aquaculture range include growth promoters, immune enhancers and pellet binders for both shrimp and fish. The Company's trading brands are Kiotechagil, Meriden and Optivite, which trade across approximately 70 countries around the world. more »

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NetPlay TV plc is a United Kingdom-based online gaming company. The Company operates various interactive gaming services under an Alderney gaming license. The Company operates through two segments: Business-to-Customer (B2C) and Business-to-Business (B2B). B2C consists of various online products and ancillary income. The brands operated in this division are, and These brands operate online gaming and betting products. B2B relates to the online marketing, product development and technology business. The Company allows its customers to interact with its games on various platforms, such as television, Internet, mobile and tablet from a common integrated wallet. Its SuperCasino offers slot machine games, live dealer blackjack and baccarat, card games, a selection of casino table games, video poker and instant-win arcade games. Its Jackpot247 hosts games in the Playtech Latvian studio and their online casino games. more »

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Deltex Medical Group plc is a United Kingdom-based haemodynamic management company, which manufactures fluid management devices. The Company's segments are Probes and Other. The Company's Esophageal Doppler Simulator (EDS) enables clinicians to practice probe insertion, focussing and waveform interpretation outside of a patient setting. The Company's CardioQ-EDM and CardioQ-EDM+ esophageal Doppler monitors (EDM) are designed to allow clinicians to guide fluid and drug administration during surgery. The Company's oesophageal Doppler haemodynamic monitoring (ODM) uses ultrasound to measure blood flows in the central circulation of patients, and allows doctors to fine tune the circulation. Its probes include surgical probes, such as I2S and I2P, and critical care probes, such as I2C and EDP240. Its I2S and I2P are used in patients who are anesthetized, sedated or awake. Its EDP240 is used in patients under anesthesia or full sedation. It has operations in Spain and Canada, among others. more »

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

21 Comments on this Article show/hide all

Soundbuy 9th Jan '14 2 of 21

Notice IPO rising a tad on its IKA holding too.

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jonesj 9th Jan '14 3 of 21

ANPARIO -yet another stock John Lee wrote about a couple of years ago & and invested in, that has subsequently performed really well. I foolishly thought it wasn't cheap enough at 112p.9
There's a lot to be said for following people with outstanding investment track records.

Sadly, John Lee no longer writes a monthly article for the FT.

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jraitt 9th Jan '14 4 of 21

Not sure if it's helpful but I did a very amateur post on pub board for 2014 comp.

They have about 16 customers - ALL global leaders in their fields.
cheers John

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RicGains 9th Jan '14 5 of 21


I'm a big admirer of your blog, avidly read it each day and am a bit of a lurker - I am a Netplay shareholder so will reply to your thoughts, as I know you like the opposing view!

I always write these posts with great humility. I'm just a private investor who knows very very little, so please don't take anything in this post as hard facts. I've made mistakes before, I'm sure I'll make mistakes again. This is just what I deduce from attending their AGM, Mello etc. I own shares, so take this with as much salt as you like.

The tax is due this December (Dec 2014). I suspect NetPlay TV (LON:NPT) haven't given direct guidance yet because:

a. We don't know what the tax number is going to be yet. It's widely expected to be 15%, but the chancellor hasn't announced anything and there is heavy lobbying going on to get that number down, with one argument being if it's too high, decent trusted operators will face unregulated underground operators who can't be controlled at all. The industry is proposing 5-8% - but they would wouldn't they! We will find out in due course. The tax could be delayed or scrapped all together - but this is such an easy win for the government that I doubt this will happen.

b. Netplay have contracts with the TV companies, which need to remain confidential. It could well be that the deals with broadcasters are different and they don't want to reveal the exact details.

However, at the Mello event Charles Butler the CEO said publically, he feels that they can mitigate over half of the 15 percentage points for two reasons.

1. They no longer have to have a costly base in the Channel Islands. I'm sure you're a fan of Supercasino at 1am on Channel 5! When they show the wheel spin, they have this ridiculous situation where every couple of minutes the studios in London cut to the croupier "on the casino floor", who's actually in a second TV studio over the English Channel in Alderney. The viewer is nonethewiser. They have a team over there and also as far as I can tell, a team from, whom they recently aquired. All of that extra cost would go, TV studios, offices etc.

2. The broadcasters have to take their share of the taxes. So a chunky part of it disappears before it gets to the Netplay net revenue line. Netplay have made it fairly clear, although not explicit, that clauses exist in the current contracts.

For me, the key is growth. You have to decide whether or not you feel the company is growing fast enough to swallow up the, say 8 percentage points, off net revenue. Given net revenue has been growing, by my numbers, at the following rate:

Q1 36% yoy, Q2 33.4% yoy, Q3 20% yoy (Hot July!), Q4 34% yoy

I'm quietly confident those points can be absorbed without disappointing EPS. If the tax were applied today and the above is accurate we'd be looking at quarterly net revenue of 7.27m - still perfectly good 23% growth. They still have nearly a year of likely growth to come, before the tax is applied.

The tax might be a worry if the market was valuing Netplay at a crazy valuation, but Netplay's PE is ratio is modest; strip cash out and you have a bargain.

Given most on here are not short termist investors, personally I think all the fear is priced in. Yes, the price may fall on an announcement from the chancellor, but it should soon pick up when people realise that this tax hit is just not likely to have a major impact on the business, unless they literally stop growing. This still looks very cheap and cash will still keep churning out.

On the director selling issue, I think you have to be fair to the CEO. He came into the company on a modest salary when the share price was at a woeful 4-5p. The renumeration was heavily weighted towards share options, so he was rewarded for performance - he has delivered on that and is cashing in his shares at a fairly consistent rate which is basically his salary for the last few years. Maybe I'm naive and happy for you to suggest that! You've been in this game a longer than me.

In a final paragraph, in the style of a bulletin board ramp.... Netplay today published record numbers - record active players, record net revenue, they reckon EBITDA will be at the top end of expectations and they have a large and growing cash pile. They have low PE ratios - excellent PEG ratios, broadcaster contracts tied for for a long time to come, excellent revenue growth, a likelihood of further value enhancing acquisations, progressive dividend policy, possibility of cash returns to shareholders (it's just sitting around on the balance sheet), strong sensible management consistently delivering, a modest but interesting international expansion plan (Holland to kick off with), the Supercasino sponsorship of Celebrity Big Brother renewed, which will have been cheap, but useful, with good press coverage this year and sturdy ratings thus far, the chance of consolidation/M&A in the sector, the recent acquisition likely to add revenue and growth. There's also a tax coming soon that will be a nuisance only if growth completely dries up, plus a director or two, on modest basic salaries, cashing in some options.

There's the opposing view, quite possibly with mistakes or inaccuracies or points I haven't spotted, so I won't be offended if anyone wants to pull it to pieces.

Finally, many thanks for getting up at the crack of dawn each day to write your posts. I've learnt a great deal and it's great to get different views and ideas.

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bobdouglas 9th Jan '14 6 of 21

Hi Paul
Just a query regarding Deltex Medical cash position of 1.5M - In their interims they stated also 1.5M cash but on top of that they had circa 2M of borrowings giving a net debt of 0.5M.


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Paul Scott 9th Jan '14 7 of 21

In reply to post #80399

Hi Ric,

Many thanks for taking the time to post your detailed comments on NetPlay. I don't see it as an "opposing view" at all, merely a process of us trying to get to the truth, and that means taking into account all facts & opinions, weighing them all up, and making a decision.

Some of the points you mention ring a bell from the Mello meeting where the CEO presented to us.

Cheers, Paul.

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Funnymoney 9th Jan '14 8 of 21


Re "My original Blog" I don't know why you are so focussed on small stocks now when the opportunity to make money is generally in the big stocks as it is so much easier to buy them without moving the price and also to spead them too. If you see another Argos where will you mention it?

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Camtab 9th Jan '14 9 of 21

Anyone got any comments on Stafflines decline of the last few days?

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woodcutter 9th Jan '14 10 of 21

Paul i think your ANP analysis is somewhat flawed i've posted on the adfvn thread my thoughs. The basis of which is:

Since '08 revenue has grown from £5.43m to £23.51m in '12.
eps over the same period has grown from 2.99p to 13.32p and H1 this year underlying eps was 6.94p. ANP are on target this year for 14p and although this is only a 5% improvement in eps based on 2012 figures much has been done to grow the distribution network and expand into USA. This all takes management time but is beneficial for future growth. No company can continue to grow eps at 50%+/year, year on year, without pausing for breath.

I accept ANP was a little overvalued at 340p but after the sell off it's still valued below it's peers on a per basis.

Sometimes you have to look at value relative to the sector rather blindly lumping all companies in the same boat. You would never value a supermarket in the same way you'd value a high tech company.


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GN100 9th Jan '14 11 of 21

Paul, GVC Holdings, which you mentioned recently and I hold, released a positive trading update this AM, interestingly the share price took a turn up yesterday:-

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Roger Lawson 9th Jan '14 12 of 21

Re Ilika, I talked to this company at the London Investor Show, and thought they were worthy of more investigation. So they are one of the companies presenting at the ShareSoc Seminar on the 2oth February (see ). Needless to say I did not anticipate the announcement today which sounds exceedingly positive. But it will be interesting to see what they have to say at the Seminar.

Website: Roliscon
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mikehunt 9th Jan '14 13 of 21

Any views on why the market is so dis interested in the ZIOC story/multi bagger potential?

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billytk 9th Jan '14 14 of 21

Hi Paul,
Great blog again today. Very valid point about sticking with your shares and watching them grow (hopefully) over time rather than exercising the natural urge to trade the market. How often do you think about the ASOS (LON:ASC) shares you held a few years ago? What would they be worth in todays market had you held onto them?

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ericb 9th Jan '14 15 of 21

its all very well saying you should have bought and held, but realistically this is hindsight trading. Did anyone think that the market was going to go up and up in 2013?
Very very very often repeated on this blog is how overheated the market is and we are due a pullback any time soon, which could be coupled with unrest in middle east, a tsunami in japan and rising interest rates with tapering. How would you know that this isnt the top of the market?
It is possible that shares could underperform for the whole of 2014 - would you simply hold on to them all the way down and hope theyll come back up again?
If youre an active investor you will want to reduce near the high and fill up again somewhere down near the lows.
Calling those shots leads you to be in and out of positions. And you may or may not cal it wrong.

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brigandchief 9th Jan '14 16 of 21

Are we allowed to comment on other shares here? If so, I have just (a day or ago) top sliced my holding in SEE as I had a healthy gain. They are now raising funds at 5p a share where they are trading circa 9p. The SP is either going to fall back to 5-ish or we are going to make an almost 100% gain. I like the latter idea! Any views?
Cheer David

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Funderstruck 9th Jan '14 17 of 21

I concur with 'erich' ;having identified a stock in which to invest it is sensible to exit ; using sound technical analysis, if there is bad news about the stock or a pull back in the overall market. If the fundamentals still apply after the fall ( & likely more so) then sensible to buy back in. Yes there is a cost for doing this which will not dent the position too much and significantly improve it if the market falls more than the usual correction.

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pyemckay 9th Jan '14 18 of 21

llika held by St Peter Port Capital (LON:SPPC) which itself is at a 46% discount to NAV. news very light at SPPC so all very welcome.

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Paul Scott 9th Jan '14 19 of 21

In reply to post #80410

Hi billytk,

How often do you think about the ASOS (LON:ASC) shares you held a few years ago? What would they be worth in todays market had you held onto them?

I once owned 500,000 ASOS shares, so they would be worth £34.3m now if I hadn't sold them.

It's water under the bridge, so no point in agonising over it. But it certainly makes me think about running winners for a bit longer! Trouble is, you only know which ones are the winners after the event.

Cheers, Paul.

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Cisk 10th Jan '14 20 of 21

Hindsight is a wonderful thing; we've probably all had winners and sold out far too early; e.g. I sold blur group after making 40% in 3 days and then watched them motor on to over a possible 300% gain. Conversely I held Silverdell (LON:SID) until suspension.
Point is that investing is a continuous learning experience. Experience teaches us valuable lessons. I remember doubling up on a conglomerate called parkfield group after it halved in the space of a few days - later to see it suspended and go bust. Now I know that when a stock falls out of bed so dramatically that there is somebody, somewhere, who knows more than you and it's prudent to take heed of these clues.

Anyway, back to topic: one thing I try and do is ride profits by selling half on a double. I know this goes against somewhat on the advice Boros10 gave in his excellent ISA millionaire piece; however it still allows you to participate in the future upside, albeit with a smaller stake.

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Paul Scott 11th Jan '14 21 of 21

In reply to post #80476

Hi Cisk,

You can screen out insolvency risk pretty much completely by constructing a set of simple rules based around the Balance Sheet. The simplest one is to only invest in companies with net cash, and which are consistently profitable & cash generative.

This approach has meant that I've not had any 100% losses for several years now, and has made a big impact on improving my performance. Even profit warnings tend to have a limited impact, and you can just sit and wait for the share price to recover, and carry on collecting in the dividends, which is what I've done with Indigovision (LON:IND) and Vianet (LON:VNET).

I agree with you that top-slicing big winners is an excellent strategy, and that's something I always do. It locks in some of the gains, and frees up fresh money for new stock ideas.

It amazes me how many investors, even very sophisticated ones, almost completely ignore the Balance Sheet, which is very surprising, as it means people are often taking on a lot of risk unnecessarily. This has perhaps been brought about by the Banks' leniance towards zombie companies. However, in an economic recovery the Banks tend to put lots more companies into Administration, as they can get better asset recovery. So people who are blase about Bal Sheet risk will I think get some nasty shocks in the next few years, as more situations like Silverdell blow up unexpectedly.

Cheers, 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 on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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