Small Cap Value Report (Mon 9 Oct 2017) - ACRL, YOU, XPP, IPX, CPX | Graham Neary

9th Oct '17 by Graham Neary

38 comments 14785 reads

Good morning folks!

Accrol Group (LON:ACRL)

Share price: 132p (pre-suspension)
No. of shares: 93 million
Market cap: £123 million (pre-suspension)

Paul speculated last week that this tissue supplier would not be put into administration over its net debt, which was last reported at £19 million.

Today we have confirmation that directors think a solution will be found:

The Directors believe that the current challenges facing the Company relate largely to FY18 and are likely to have less of an impact on the Company's trading performance in FY19. The Board are therefore confident that, whilst there can be no guarantee, a solution will be found to the Company's short term funding requirements.

Certainly, this is comforting. What is the probability of a solution being found, then? 60-70%. perhaps?

If a solution can be found, it then becomes a question of how much dilution is needed to steady the ship.

The PE outfit which floated Accrol is still on the register. I'd strongly suspect they are more interested in continuing to divest rather than increasing their stake. So it will be up to the nearly half a dozen other institutions involved, in cooperation with the bank, to figure it out.

If we assume that earnings will return to an approximately "normal" level next year (PBT c. £8 million), but then apply a discount for loss of trust over this incident, and for the debt level, and for the potential HSE fine, then existing equity looks worth maybe 40% of the level it was at pre-suspension?

YouGov (LON:YOU)

Share price: 300p (+2.6%)
No. of shares: 105.1 million
Market cap: £315 million

Preliminary Results

Some nice results from this market research firm, suggesting that I've been too harsh on it in the past. Although valuation remains a concern.

Current trading is in line with expectations.

For the year ending July:

Group revenue increased by 21% (9% on a constant currency basis)
Data Products and Services revenue up by 37% to £47m (24% on a constant currency basis); now represents 44% of Group total (2016: 38%)
Cash generated from operations (before paying interest and tax) increased by 37% to £19m (2016: £14m)

Excluding the currency tailwind arising from US/international sales, the constant FX growth is stronger than the market…

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MrContrarian

9th Oct '17

My morning smallcap tweet:

Earthport (LON:EPO), Digital Barriers (LON:DGB), City of London Investment (LON:CLIG), Accrol Group (LON:ACRL)

Earthport (EPO) wins first contract in Germany from ECB Swiss Euro Clearing Bank ("SECB"), a major euro payment clearing hub for Swiss banks, to provide SWIFT payments. I am short.
Digital Barriers (DGB) sells its main business for £25.5m + £2m earn-out, following the disappointing financial performance of the Existing Group. A review confirmed that the unpredictable nature of the sales cycles the Group faced was unlikely to change in the near to medium term, and larger sales would exacerbate the lumpy nature of revenue streams. Leaves Thruvision, a people-screening business. Cap at 18.875p is £31.2m.
City of London (CLIG) AGM: Q1 Trading Update. FuM $5.0bn (£3.7bn) up by $0.3bn in the Q. Q1 pretax £2.5m (£2.3m, after an unrealised profit on seed investments of £0.2m).
Accrol Group (ACRL) "The current challenges facing the Company relate largely to FY18 and are likely to have less of an impact on the Company's trading performance in FY19. The Board are therefore confident that, whilst there can be no guarantee, a solution will be found to the Company's short term funding requirements."

tony akram

The article below was written only 16 months ago what I have learn from this sorry affair is that company like Zeus who promoted this particular IPO should be treated with caution I am not blaming them entirely but surely somebody must have know something about the accounts where was the due diligence ? It is also interesting that since the founding family exited it appears that the only director that own shares in the company is Stephen Crossley (NED) around 130k based on pre suspension value which he acquired one year ago it would appear no other directors hold any significant position hardly a vote of confidence makes me very wary of IPOs at present .

Peter Cheung, Executive Chairman at Accrol Group Holdings, says: “We are delighted by the level of interest and support we have received from high quality institutional investors and I would like to thank the team at Zeus Capital for delivering a seamless transaction. We are a very well invested company with an attractive and progressive dividend policy and we look forward to creating value for all of our shareholders in this new and exciting stage in Accrol's development.”

Dan Bate, Director at Zeus Capital, says: “It is a pleasure to advise Accrol Group Holdings plc on its admission to AIM, GBP63.5 million fundraising and new GBP38 million debt facilities. The Hussain family has built up a successful business since it was founded in 1993 and will be stepping back as part of a managed hand over process to the executive team. I am confident that with the support of its new institutional investors, Accrol will go from strength to strength as a public company. I am delighted also to have supported NorthEdge on the successful completion of the first exit from its maiden fund.”

Dan Wright, Head of Portfolio at NorthEdge Capital, says: “We are delighted to have partially exited our first investment from Fund I by way of IPO. We believe Accrol will go from strength to strength on AIM as a public company, thanks to the strong shareholder base, management team and underlying operations of the business. We look forward to a new chapter in Accrol’s development.”

Ramridge

Hi graham re. Accrol Group (LON:ACRL) you suggest a post suspension price of around 40% of 132 = 53p.
My fag packet calc goes like this. The directors say earnings will be significantly less. So let's say half 2017's = 5p.
Pre suspension PE was 10. With a debt loading and distressed status, let's say appropriate PE = 6. That makes post suspension share price = 30p
Of course, this is a guestimate as there are huge variances in the underlying numbers and assumptions.
Personally if I wanted to take a punt I would start being interested in taking a long position at a price below 35.

jesseowens

Hi Graham

Do you have time to cover Impax asset management or XP power ?

Thanks

johnsmith68

Hi Graham. I expect I'm not alone waiting with bated breath on Paul's latest RBG instalment especially with tomorrow being deadline day for Deltic. Would also be great to hear a view on XPP after another stellar update this morning. Many thanks as always to you both for such great insights.

iwright7

Ram,

Accrol Group (LON:ACRL) are dubious on 3 points - The forgotten H & S issue, not sufficiently covering forward purchases and not informing the market sooner about their higher paper price with its likely squeeze on margins. There is now virtually no price at which I would take a punt on their competence, or honesty.

AstonGirl

May I please add another vote for XP Power (LON:XPP) if you have the time Graham? (disclosure: I hold)

Philip Wigg

You're not alone indeed.

Exciting times. Can we expect an increased offer from Stonegate? Here's hoping we do.

Dieselhead2

Hi Graham, I would be grateful if you have time to run your slide rule over CPX results today. They manufacture supercapacitors. Starting to look very interesting now upon reading today's results...
Regards DH2.

andrea34

Thanks for mentioning XPP (and Astongirl too), to me this update looks VERY good with a substantial increase in trade/orders, and they still look pretty good value; hopefully the recent acquisition will boost numbers further in time.

I wish I'd bought IPX after the half-year update... but with the share price now up 50% in about a month I have to question the amount of frothy euphoria in it now and wonder if an amount of the portfolio rise is just due to general positive market movements...?

BTW, I notice IMO are up 12% on relatively heavy buying volume all of a sudden, after days and days of selling, with no announcement. Has anyone heard a rumour...?

FREng

The announcement by Digital Barriers (LON:DGB) of the proposed sale of its main business contains some financial details. Has anyone managed to do a rough estimate of the post-disposal enterprise value for the residual Thruvision business? (which is in a growing market, though I don't know what their competitive position is, or their patent protection).

JASPERTHEDOG

Graham,
I applaud your optimism on ACRL.
Over many years investing there are two statements that fill me with dread:
'...the Company is engaging with its major shareholders and its bank.', and
'...pending clarification of its financial position.'
Both have been deployed by ACRL and I fear the worst. If you were a banker faced with management incompetence from lack of hedging and foresight as to the effect of a falling pound, failure to admit to a major H&S failure and plunging profits, would you want to increase your exposure? I for one would not.
And if I were to be persuaded, a bank appointed Chairman, CEO and CFO would be my starting point.

doug2500

Bit of a discussion on XP Power (LON:XPP) here:
https://www.stockopedia.com/content/i-read-the-news-today-oh-boy-9-oct-2017-226378/

It would be good to hear the pro's views on it too.

doublelutz

I have always had some reservations about ACRL but a company with £135M of turnover, apparently up-to-date production lines and a product that is needed by the discounters/supermarkets must have some value. If it comes back to the market it could be that the initial fall will be overdone.

Graham Neary

Hey Astongirl, I've added XP Power (LON:XPP). Thanks for the suggestion!

Regards

Graham

runthejoules

I'd second you taking a look at CAP XX (LON:CPX) Graham, just a small position for me and very forward-looking. Ta!

gus 1065

I can't see Stonegate unilaterally upping their bid for Revolution Bars (LON:RBG) without some pressure being put on them by Deltic (or another bidder for that matter).

Meanwhile, Revolution Bars (LON:RBG) 's existing management seem to have run up a white flag and surrendered to Stonegate without much gumption. This morning's rebuttal RNS of the Deltic merger proposal by RBG reads as though it was written by Stonegate (perhaps it was?) so absent a funded cash offer from Deltic - which seems unlikely without a significant third party backer - I fear the current 203p is all we're likely to get.

Gus.

N Harley

Accrol looks a complete disaster - but is there a chance it could become a takeover candidate in a recapitalized form (assuming that will happen?)

Small Cap Value Report (Mon 9 Oct 2017) - ACRL, YOU, XPP, IPX, CPX

Accrol Group (LON:ACRL)

YouGov (LON:YOU)

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Graham Neary

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