Small Cap Value Report (9 Sep) - SAL, HYDG, MDZ, BRY, ESCH

Monday, Sep 09 2013 by
17

Good morning! One of my favourite small growth companies is Spaceandpeople (LON:SAL), which I was able to get into at 86p in a secondary Placing (disposal of early investors' stakes) a few months ago. It was obvious to me at the time that this was a remarkable bargain, because EPS was heading towards 10p, and this innovative company had created its own niche from scratch, and had delivered  growth for the last five years. Management are impressive too - just the sort of canny entrepreneurs that you want to back. So to my mind the price was at least 50p light, and since then it has risen by over 40p, so I was right (although getting in at a 15% discount to the market price at the time was a bit of a coup too!).

Spaceandpeople manage "pop up" shops & kiosks on behalf of shopping centre owners, optimising the income from such sources in each shopping centre, and also managing promotional activities within shopping centres (e.g. new product launches, such as new cars). Both Spaceandpeople, and the shopping centre landlord get a cut of the income generated through these activities. Best of all, SAL effectively invented this market, and have no significant competition, and it is an area they now dominate in the UK and Germany, and has strong barriers to entry. So the future is all about developing these existing markets, and entering new geographies. I believe it is likely to be a much bigger company than now, in say 5 years time, and my intended holding period for the shares is forever, providing the story doesn't change and the valuation doesn't get too high. Here is the graphical history, which is pretty impressive in my opinion:

 

Anyway, their interim results to 30 Jun 2013 look good. Gross revenues are up 46% to £18.2m, and net revenues (after the landlord's share of income has been paid over) is up 29% to £6.66m. Profit before tax is up a whopping 60% to £613k, although it should be noted that profits are heavily weighted to H2, so the full year profit growth is likely to be a lower percentage against last year.

Assuming the same sort of H1/H2 split as last year, then broker consensus of…

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SpaceandPeople plc is a United Kingdom-based media specialist company. The Company is engaged in marketing and selling of promotional and retail licensing space on behalf of shopping centers and other venues throughout the United Kingdom, Germany, France and India. The Company's segments include Promotional Sales, Retail, Head Office and Other. The Company markets, sells and administers promotional space in a range of footfall venues across the United Kingdom, including shopping centers, theme parks, garden centers, retail parks and airports. The Company offers a service covering from consultancy services to the provision and management of retail merchandising units in shopping centers. It enables venues to market, administer, promote and sell their promotional space. Its subsidiaries include MacPherson & Valentine Limited, SpaceandPeople GmbH, Retail Profile Holdings Limited, POP Retail Limited, Retail Profile GmbH, SpaceandPeople India Pvt Limited and S&P+ Limited. more »

LSE Price
14p
Change
 
Mkt Cap (£m)
2.7
P/E (fwd)
5.8
Yield (fwd)
3.6

Hydrogen Group plc is a United Kingdom-based company, along with its subsidiaries, is engaged in the provision of recruitment services for mid to senior level professional staff. The Company operates through two segments offering both permanent and contract specialist recruitment consultancy for the organizations. The Company's segments are Professional Support Services and Technical and Scientific. The Company recruits for roles in Professional Support Services, including legal, finance, technology and business transformation placements, and in Technical and Scientific market sectors, such as power, mining, oil and gas and life sciences. The Company's subsidiaries include Hydrogen UK Limited and Hydrogen International Limited in the United Kingdom; Hydrogen Group Pty Ltd in Australia; Hydrogen Group Pte Ltd in Singapore; Hydrogen Group Ltd in Hong Kong; Hydrogen Norge AS in Norway, and Hydrogen Group LLC in the United States, among others. more »

LSE Price
46.9p
Change
0.9%
Mkt Cap (£m)
15.4
P/E (fwd)
5.5
Yield (fwd)
3.7

MediaZest plc operates as a holding and investment company. The Company provides support to the subsidiary company to deliver a one-stop audio, visual, satellite delivery, content management and consumer interaction platform to retailers and brand owners to communicate with the customers. The Company's segments include Project Division, Service and Maintenance Division and MediaZest Ventures Division. The Project Division supplies goods and installs audiovisual (AV) equipment to a range of clients in both the public and private sectors. The Service and Maintenance Division provides services in the form of both proactive and reactive service visits, remote diagnostics, equipment repairs and content management to a range of clients in both the public and private sectors. The MediaZest Ventures Division covers the supply and installation of AV equipment to blue chip clients mainly within the retail sector. Its subsidiary includes MediaZest International Limited. more »

LSE Price
0.07p
Change
-9.6%
Mkt Cap (£m)
1.1
P/E (fwd)
n/a
Yield (fwd)
n/a



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


7 Comments on this Article show/hide all

kevanp 9th Sep '13 1 of 7

Morning Paul. Thanks to your previous comments about Spaceandpeople (LON:SAL) I bought some at 101 back in June, so I am very happy with progress. Just a small correction to today's piece: their projected dividend (according to Stockopedia) is 4.18p and 5.01p, making the yield 3.19% and 3.82%. I think you read the yield data as the dividend ps. So it's an even better story!

Best, Kevan

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Paul Scott 9th Sep '13 2 of 7

In reply to post #77011

Morning Kevan,

Arrrgghhhh!! You are are absolutely right, I read the wrong figures off the screen, and mistakenly put the dividend yield data into my article, instead of the dividends in pence.

Thank you very much indeed for pointing out this error, which I have now corrected. Much appreciated. I'll have to make my morning coffees a bit stronger in future :-)

Regards, Paul.

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Brokertobroker 9th Sep '13 3 of 7

Morning Paul,

Did you catch Brady this morning, FD left and somewhat of a profit warning. Quality business that ticks a lot of boxes - shaping up to be a bargain?? As ever, would appreciate your thoughts.

Best,
BtoB

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Paul Scott 9th Sep '13 4 of 7

In reply to post #77015

Morning BtoB,

Am looking at Brady and Escher next. Will keep going until about noon today.

Cheers, Paul.

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Gostevie 9th Sep '13 5 of 7
1

In reply to post #77016

The Brady interims mention the word 'solution(s)' 39 times. That alone is enough to make me think "Here is another company that can't explain what it is they actually do without resorting to Directorspeak".

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Brokertobroker 9th Sep '13 6 of 7
2

“They talk about a strong Balance Sheet, but it isn't strong at all”.

No debt and cash c. 11% of its market cap. The high intangibles (goodwill) relate to the completion of six recent acquisitions – these acquisitions should provide good cross selling opportunities. The ‘other intangible’ are a bit high, but not as bad as I've seen with other software companies.

M&A is bullish characteristic of the sector and the recent exit multiples of similar companies (Openlink, Solarc, Triplepoint, FFastFill) have been at on average c.4x sales and c.20x EPS. Q4 has always been its strongest period (when the trading houses spend there yearly budgets) and given the acquisitive growth I expect to see deals, so is a buy for me. Just need to work out the an entry point from the charts and when the dust settles (especially given the FD has left).

On a separate note: I picked up some Zanaga Iron Ore on the back of your tweet about the overhang 'possibly' clearing.... Well done Paul!!! - Your portfolio is flying!! Are you hedging buying the VIX or shorting the russell e-minis?

Cheers,
BtoB

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Ramridge 9th Sep '13 7 of 7

Hi Paul
Telit Comms (TCM) have published cracking HR results. Share price up over 7%.
More impressive than that is the CEO's name: Oozie Cats. ( I am not making it up...).
Cool.
Ram

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 Are LON:SAL'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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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