Small Cap Value Report (Thu 19 Oct 2017) - ZYT, IRV, GAW, TSTL, OMG | Paul Scott

18th Oct '17 by Paul Scott

98 comments 29002 reads

Good morning, it's Paul here.

This is a placeholder article, for readers to post your comments & reader requests (small caps please!) from 7am. Then I will be updating the article throughout the morning & early afternoon.

Good morning properly! Thanks for your comments posted so far today. I'll have a look through those in a moment, and make a list of the small cap shares that readers want me to look at. I see that Interserve (LON:IRV) has dropped 31% on another profit warning, so that's already on my list of things to look at.

Here's the link to yesterday's report, in case you missed my afternoon updates on Foxtons (LON:FOXT) and Flybe (LON:FLYB) .

Zytronic (LON:ZYT)

Share price: 577.5p (down 4.2% today)
No. shares: 16.0m
Market cap: £92.4m

Trading update - this is a pre-close update for the year ended 30 Sep 2017.

Zytronic is a UK manufacturer of bespoke & innovative touch screens, for e.g. cashpoint, gaming, and vending machines.

Revenues have continued to show good progress over the prior period, and results are expected to be in line with market expectations.

Sounds alright to me. So why has the share price dropped 4.2% today? It should be emphasised that only 23,763 shares have traded so far today (although there could be more trades reported later - as bigger transactions are reported later). So the immediate share price reaction to news on lots of small caps is often just a knee-jerk reaction from small traders, who are notoriously fickle!

The other thing that strikes me, is that I wonder whether in line with expectations updates are enough, now that many shares have re-rated onto higher PERs?

As you can see from the usual Stockopedia graphics below, Zytronic is a good quality company, but a PER of 20 is historically high for this share;

There's a really neat feature on Stockopedia whereby you can look back at historic StockReports for any company, by pressing the "Print" button, which then calls up a drop-down menu, allowing you to select any previous month's StockReport. This is…

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AstonGirl

18th Oct '17

I'm liking the new system Paul & Graham so may I put a request in for #TSTL please who are £127.5m market cap & should have announced their final results today (hopefully ;-))

fadi sbeih

Great idea Paul & Graham
Can you please cover TRX price dropping , CEO left
, VAST 86% increase in one day !!!
KDNC lithium mining it looks good and good for long term holding

I would really appreciate your input
Thanks

gus 1065

19th Oct '17

Looks like a busy day. Announcements from SCVR regulars such as Tristel (LON:TSTL) , Oxford Metrics (LON:OMG) , Zytronic (LON:ZYT) and maybe Sopheon (LON:SPE) . Maybe also a quick gander at Plexus Holdings (LON:POS) which came out with an interesting announcement on a disposal and collaboration agreement that might help kick start the business.

Can I make a suggestion? Before posting a company for review, it's worth checking if it has been covered by SCVR in the past by looking at the historic company discussion thread. Not infallible, but it will give newer users an idea of what is in Paul and Graham's coverage universe.

Gus.

(Although I suspect it will only take a few seconds to review Zytronic (LON:ZYT) 's minimalist offering!)

ambrosia

may I also put a request for PRP.L Prime People, yesterday they announced a 10% drop in profits following a recent large acquisition in asia. they also said they would continue the divident at the same rate

Brookeda

Would agree on this. The information was very limited, they announced cash was still very positive and that's allowing the continued dividend but given the acquisition in Hong Kong its disappointing the weakness in revenue is from international. It seems they are more reliant on the UK now than before.

Aislabie

Very strong update from Games Workshop (GAW) today. Pointed to operational gearing as giving profits a boost as revenue continues to grow. The p/e of 16 may still not reflect the full possibilities of this stock.
I was a sceptic, I am not any longer, I think this company is executing well in a market it understands.

MrContrarian

My morning smallcap tweet:

Sopheon (LON:SPE), Braveheart Investment (LON:BRH), Oxford Metrics (LON:OMG), Plexus Holdings (LON:POS), Games Workshop (LON:GAW)

Sopheon (SPE) Awarded Funding for two European Research Projects: no figures.
Braveheart Investment Group (BRH) H1. Pointlessly small fund's NAV £2.6m, up £200k HoH. Board "will be to work energetically with the boards of our Strategic Investments to promote medium and longer-term capital growth from the expansion of their operations..we anticipate a busy and exciting period ahead." I feel tremendously reasurred.
Oxford Metrics (OMG) FY trading: revenues and adjusted pretax slightly ahead of market expectations.
Plexus Holdings (POS) sells Jack-up Business for £15m plus £27.5m earn-out over 3 years. Also Collaboration Agreement with purchaser which establishes a framework for development of existing POS-GRIP IP for applications outside of jack-up exploration and new technologies. Cap £81.2m.
Games Workshop Group (GAW) trading: sales to date have continued strongly. "Sales and profits to date therefore continue to be well above the same period in the prior year." Is this a beat or in line? Fund mgr Keith Ashworth-Lord describes GAW's business as “the nearest thing to legalised drug dealing on the stock market”.

Wol

Yes, the 7:00am placeholder seems to be working really well.
I'd like to second the requests for Tristel (TSTL) and Games Workshop (GAW)
The Tristel results look very good on all levels especially as the large share based payments in the prior year makes the real increase in profits and EPS even better than the adjusted / EBITDA / rubbish profits. At the time of writing the share price is down 4%. Was the increase already baked in? Or is the lack of an outlook statement worrying the market?
GAW - are there still so many people keen to buy small scale models of strange creatures?
I would also welcome your thoughts on Keywords Services (KWS). Earnings have been growing fast since 2013. The share price has been growing very fast since 2015 both of the back of serial acquisitions. But is it really possible to keep acquiring at this rate without some degree of indigestion?

marcusb

Good morning Paul and Graham
I have been a follower of your Stock reports since the beginning, and they have saved me from losing my shirt a few times, as well as finding some hidden gems; thank you!
I have always wonder where you find the time to write these articles and I think that this new format makes sense.
Keep up the good work.!
I would like to request Games Workshop (GAW) I would also like to hear your thoughts on KDNC lithium mining. With thoughts on the demand for lithium especially with the likes of Tesla mining so much of it lately, although this is a bit off subject for SCVR!

seadoc

julianh,

Tristel (LON:TSTL) I guess lack of update re: US of A beyond:

"· First North American regulatory submission made"

was not what was priced in prior to release. They do expect:

"These are exciting times for Tristel as we enter the North American market and bring the highest standards of medical device decontamination to the developing world: both new opportunities, but both consistent with our focus of the past twenty years."

This remains a jam tomorrow share but has been since I bought in at 30p. The trebling of sp in a year has dropped yield to just over 1%, plus two distributions of spare cash and there is no debt. ROCE not far short of 20%. I hold and will continue to do so. You are worried about outlook, is not the statement on US of A an outlook?:

"In summary, we have developed a broadly-based business strategy for the North American market, which is built around the regulatory processes in the United States and Canada. We are confident that our plan is proceeding very satisfactorily, and that we are on track to generate revenues in North America during the financial year commencing July 2018."

Regards,

Seadoc

insy09

Hi Paul,
Slightly off topic as they aren't floated but I'm really interested in your thoughts about Brewdog.
They have launched another round of funding.
https://www.brewdog.com/equityforpunks/
Thanks
John

jjis

I would second a request for a review of Zytronic (LON:ZYT) as you have covered it in the past, although not much information in the in line statement. However, not sure if they are just being deliberately cautious to under promise & then over deliver when they report? Otherwise it suggests a second half slow down as they were well ahead at the first half stage. Guess it could also be an unwinding of some of the previous currency benefit too given that the £ has rallied more recently and they export a lot. Any thoughts?

JohnEustace

I would appreciate your views on Oxford Metrics (LON:OMG)

Also any views on the XLMedia (LON:XLM) delayed dividend payments issue. That now seems to be impacting the Taptica International (LON:TAP) share price as well.

Soundbuy

Ditto Oxford Metrics (LON:OMG)

The Phoenix

Second XLM and also Softcat from yesterday would be great popular with a lot of punters even if above your market cap remit.

Thanks

Carcosa

It may be better to limit discussion to those RNS's released on the day which cover half/full year prelims or trading updates on small caps, otherwise this 'placeholder' degenerates into requests for personal portfolio reviews. Also wasn't there a request to add some independent 'content' when posting potential ideas for reviews?

Well that's what I thought it was going to be about anyway?

Beginner

Good idea Gus. This is very cheeky of me, as someone who contributes little but takes away a lot from here, but is it possible for people to avoid posting on tiny miners and totally speculative tech stuff please? It is unusual for these to represent 'value' as in the title here. I love reading the analysis AND comments here, but over the past few weeks we have been swamped with submissions on irrelevant topics and dubious anecdotes.

Paul and Graham's work, and those who comment on it, had established a reputation for producing concise, lucid and incisive analysis. Can we get back to that please? (No offence meant or intended to any party, but this space is in danger of developing into ADVFN's demented little brother!)

Small Cap Value Report (Thu 19 Oct 2017) - ZYT, IRV, GAW, TSTL, OMG

Zytronic (LON:ZYT)

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Paul Scott

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