Small Cap Value Report (Fri 22 March 2019) - VLE, SPE, PMP, TFW, XAR, SFE | Graham Neary

22nd Mar '19 by Graham Neary

27 comments 11705 reads

Good morning!

News today has thankfully calmed down a little, at least as far as UK small-caps are concerned.

This means I can go back and look at some of the stories I've missed this week:

Volvere (LON:VLE)
Sopheon (LON:SPE)
Portmeirion (LON:PMP)
FW Thorpe (LON:TFW)
Xaar (LON:XAR)
Safestyle UK (LON:SFE)

From today's news, I might look at:

Henry Boot (LON:BOOT)
Robinson (LON:RBN)

Volvere (LON:VLE)

Share price: £11.25p
No. of shares: 3.1 million
Market cap: £35 million

(Please note that I have a long position in VLE.)

I've been slow to update on Volvere. This might seem strange, given that it's my biggest holding, at 16% of my portfolio.

However, I felt there was little to say, since not much had changed as a consequence of Tuesday's trading update.

This update was the first piece of news since October. Things move slowly in Volvere-land!

Results for the year ending December 2018:

revenue from continuing operations improved to £18.6 million from £16.2 million. £18.3 million of revenue is attributable to Shire Foods. The rest to Sira Defence.
underlying result before tax from continuing operations is £100k.

Segmental Analysis

Shire's profit before tax and intra-group charges was £790k.

Volvere plans to invest £2 million into Shire in 2019, in the form of new plant and equipment.

Francis wrote a great comment on Wednesday after attending the company presentation, explaining that the focus is now on expanding Shire's vegan/vegetarian and healthy pies. The product range has already expanded a lot over the past year.

I still have a pretty good impression of Shire: could it be worth £10 million+ on eventual disposal, or is that too much to hope for? It has a freehold property in Leamington Spa, blue-chip customers and a decent track record. I'd like to see it generate PBT before intra-group charges of £1 million+ this year, but I know that it operates in a fairly competitively sector so I'm not going to get carried away at this point.

On top of that we have…

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MrContrarian

22nd Mar '19

My morning smallcap tweet: Friday sees Robinson crew so confident

Robinson (LON:RBN)

Robinson (RBN) FY rev up 10% to £32.8m vs F/C £32.2m. EPS 4.2p vs adj F/C 4.8p (comparable?). Outlook: "we feel the business is in a much stronger position to face the challenges in front of us and we expect to achieve double-digit sales growth again in 2019. We also expect a marked step-up in profitability, ahead of market expectations, arising from our "Strategy into Action" program."

Camtab

Graham I wondered if you have any thoughts on XLM. I appreciate you have commented on them in the past and I do appreciate they are an overseas business listed on AIM with all the beware signs flashing. BUT they have a momentum rating of 14 (so noone is interested) but quality and value are good leaving them with an overall stock rating of 77. That's decent. They have an A+ in the magic formula. Bal sheet looks strong with total assets minus goodwill and intangibles just under double the total liabilities. Cashflow looks healthy and the bit I like is they are using it to buy back shares, 10% of the total issued. The price appears to below the issue price 5 years ago. With the exception of being an Israeli company listed on aim I am struggling to see why this share isn't cheap. MArgin 30%. Yield 8% covered nearly 2 times. I am naturally cautious, I don't hold these shares at all but I am starting to lean toward a small purchase. Arghhhhhh................I think I will think about it a bit longer.

rmillaree

Robinson (LON:RBN)

It's hard to get any enthusiasm with regard to this company based on the current level of profitability, the debt (substantially up by the looks of it) they have and the amount they seem to need to be investing in plant etc to generate the profit they do.

Ok they could sell the surplus property and possibility/presumably be debt free but looking at the earnings history over the last 5 years it's simply way to patchy to be worth taking the risk of owning the shares from my perspective.

Having said that it looks like good news today and i could easily imagine the shareprice doubling if they can continue to progress the business forward. I just don't think they have a solid enough downside protection if things get tougher again in the future.

XLMedia (LON:XLM)

Is the trendy in reducing sales not a big worry with regard to this share?
$137 mill 2017
$117 mill 2018
$94 mill estimated 2019

In the last month alone 2019 profit estimates have dropped by $5.5 mill from $32.7 mill to $27.2 mill.

However, the strategic shift away from Media is expected to reduce 2019 revenues by approximately US$30 million. This, together with increased Publishing investment, will largely account for an expected reduction in 2019 adjusted EBITDA of between US$6-7 million.

What about 2020 - is this trend going to reverse itself?

I guess the main question is how confident are you in the stability of the companies main profit generating streams to be confident that it will be churning out a similar level of "easy" profits over the next 5 years or so.

This just seems such a hard sector to get a decent handle of exactly how they make their profit and how sustainable this is. If there are future headwinds coming up shareholders with no sector knowledge will probably be the last bods to see any bad news coming (like last months news). It maybe that the price is so low purely down to bods not taking the chance as they think something is wrong when it isn't - but i am not sure this is the kind of share that i would want to be betting that the shareprice is actually below its true worth.

jonno

Morning Graham
I would be interested in your views on Henry Boot (LON:BOOT), which you have previously reviewed. This morning's results are I think overall pleasing, although the immediate future, as with many UK smallcaps is clouded by the current political chaos. However Henry Boot (LON:BOOT) reports a positive start to the year and if one subscribes to the maxim of never wasting a good crisis it looks interesting.

Also if you have an opportunity, perhaps you might at look at Portmeirion (LON:PMP) that produced very creditable results yesterday.

MichaelFBS

Hi Robinson

"It's hard to get any enthusiasm with regard to this company..." Which company please?

Thx

brballs

Best accidental comment ever. Especially on a Friday! :)

Small Cap Value Report (Fri 22 March 2019) - VLE, SPE, PMP, TFW, XAR, SFE

Volvere (LON:VLE)

Segmental Analysis

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Graham Neary

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