Small Cap Value Report (Tue 14 August 2018) - CGS, MUBL, HAT, MMH, FCCN, D4T4

Tuesday, Aug 14 2018 by

Good morning!

Today we have interim results from H & T (LON:HAT), so that's top of my agenda seeing as it remains one of the larger positions in my portfolio.

On the list today we have:

Castings (LON:CGS)

  • Share price: 402.5p (-5%)
  • No. of shares: 44 million
  • Market cap: £175 million

AGM Statement

This heavy industrial stock reports continuing strong demand from its main customers, but the machining part of the business needs more time to recover to profitability. It's going to move into the company's main headquarters, rather than having is own location. Shares are down 5%.

My view -I'm worried that machining is never going to fully recover from the loss of a big contract in 2017. Return on capital for the group as a whole has deteriorated and may only be restored through some shrinkage as part of the restructuring process.

All of that having been said, the company remains profitable and financially sound. The foundry business is still doing well. This could be worth a look.



  • Share price: 3.75p (-17%)
  • No. of shares: 17 million
  • Market cap: 650k

AIM Notice and Update on Proposed Cancellation

Thanks to MrC for pointing this one out. I would probably have missed it, as the RNS was published after 6pm yesterday evening. MBL is being fined £125k (reduced to £75k for early settlement) for breaches of the AIM rules by previous members of the Board.

MBL is now a cash shell after its last operating subsidiary appointed administrators (from Begbies Traynor (LON:BEG) ) in June. It proposes to delist and then, as a private company, return cash to shareholders via an orderly winding up.

I dabbled in these shares about five years ago, when I was doing the "deep value"…

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All my own views. I am not regulated by the FSA. No advice.

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Castings P.L.C. is an iron casting and machining company. The Company caters to both domestic and export markets. Its segments include Foundry operations and Machining. The Company has over three trading operations, including Castings (Brownhills), William Lee Limited and CNC Speedwell Limited. Castings (Brownhills) supplies spheroidal graphite (SG) iron castings to a range of manufacturing industries from its mechanized foundries. William Lee Limited supplies SG iron castings from its foundries in Dronfield, Derbyshire. CNC Speedwell Limited is a machining operation primarily focused on the prismatic machining of iron and aluminum castings from its sites in Brownhills and Fradley. It produces ductile iron castings, SG iron castings, austempered ductile iron (ADI) castings, Simo castings and nickel (Ni)-resist castings up to approximately 40 kilograms in weight using over four Disamatic molding machines and approximately three horizontal Green Sand molding machines. more »

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MBL Group plc is a distributor and wholesaler of home entertainment products. The Company is structured and managed across two segments: Home Entertainment and Other. The Home Entertainment division is a wholesaler of home entertainment products in the export market. The Company has operations in the United Kingdom, Asia, Europe and Rest of the World. The Company also operates Windsong division, which provides a range of compact disks (CD) and digital video disks (DVD) products to export and Internet customers. Windsong is based in South London. The Company's subsidiaries include Air Music and Media Copyright Limited and Windsong International Limited. more »

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H&T Group plc is a non-trading holding company. The Company provides a range of simple and accessible financial products tailored for a customer base, which has limited access to, or is excluded from, the traditional banking and finance sector. Its segments include Pawnbroking, which is engaged in providing secured loans against collateral (the pledge); Gold Purchasing, which is involved in buying Jewelry directly from customers through its stores; Retail, which is involved in retail sales of gold and jewelry, and the retail sales are forfeited items from the pawnbroking pledge book or refurbished items from its gold purchasing operations; Pawnbroking Scrap, which comprises various other proceeds from gold scrap sales other than those reported within Gold Purchasing; Personal Loans, which comprises income from its unsecured lending activities, and Other Services, which comprises third party check encashment, buyback, prepaid debit card product and foreign exchange currency services. more »

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

34 Comments on this Article show/hide all

MrContrarian 14th Aug '18 1 of 34

My morning smallcap tweet: Rare public censure from LSE for MUBL.

Phaunos Timber Fund (LON:PTF), £D4T4, React (LON:REAT), PHSC (LON:PHSC), Castings (LON:CGS), MBL (LON:MUBL), French Connection (LON:FCCN)

Phaunos Timber Fund (PTF) rejects firm offer of 49c. Is selling off assets, guides realisation of 54-60c within 6 to 9 months, which would cover 92% of the Portfolio Value. Will all sales proceeds from the Asset Realisation Process as they are received, after allowing for cash reserves to wind-down the Company.
D4T4 Solutions (D4T4) contract wins. "D4T4 has record bookings in H2 In the year to date, and in line with management's expectations, we have been successful in converting a number of significant opportunities from our strong pipeline. This puts us on track to return to more normalised levels of business weighting for H1."
React Group (REAT) keep the lights on placing of £420k at 0.3p, a 21% discount.
PHSC (PHSC) finals. Lots of detail on subsidiary trading but I can't fathom if group result is OK. Q1 trading: rev £1.56m (£1.82m), EBITDA £121,815 (£121,351), which included results for ALS (discontinued). "Highly encouraging growth in revenue and profit from QCS gives us an expectation that overall and on a consolidated basis, 2018/19 will see an improvement on 2017/18."
Castings (CGS) AGM stmt. Demand from main customers remains strong but "the level of reorganisation at CNC Speedwell is such that we do not foresee it returning to profitability during this financial year."
MBL Group (MUBL) RNS late last night. Public censure for failing to report poor trading in Sept 2017 Also will shortly publish Circular and Notice of General Meeting re mooted delisting. This has been a massive crock, with late-as-possible results only the tip of the iceberg of contempt for holders.
French Connection (FCCN) Times says Mashley won't pay HoF concession debts. He'll only pay for sales since Friday. There was wishful talk of pressure on him to pay. Ha! I hold.

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Rojo 14th Aug '18 2 of 34

PLP please

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muzmanoz 14th Aug '18 3 of 34

H & T (LON:HAT) - Interim results. Profit before tax up, basic EPS up (to 13.51p, h1 17 11.7p), large increase in net debt to fund personal loan book and other capital spend but balance sheet looks good (0.97x Net debt/EBITDA)

Reported all segments are up, Prawn broking, scrap, personal loan, fx, retail although reduced margin on scrap (gold price) and retail.

Interesting that FX was up slightly. Will this read across to Ramsdens Holdings (LON:RFX) where the share price has fallen recently.

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FREng 14th Aug '18 4 of 34

Marshall Motor Holdings (LON:MMH) interims look solid, with net cash and freeholds.

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drvodkaquickstep 14th Aug '18 5 of 34

Morning Graham - if you have time then some words re: the Contract Wins and statement from £D4T4 this morning would be great.........nothing to do with it being my No1 holding.... thanks!

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paraic84 14th Aug '18 6 of 34

Hi Graham - it looks like you have your hands full with results today but at some point in August I would love to hear your wider macro/stock market views. I find these very helpful as an amateur investor with a full-time job which prevents me from properly studying the market.

I've noticed a lot of retail shares have come off over the last couple of weeks and some predominately online businesses have also taken a knock over the last week. I assume the latter is related to the Treasury airing the idea of some kind of online sales tax if they can't secure international agreements on multinational tax payments, but I am wondering if it is also a sign of investors reducing risk appetite?

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sharmvr 14th Aug '18 7 of 34

Second the request for Marshall Motor Holdings (LON:MMH) please.
Tangible Asset backing equal to market cap with a profitable/cheap business attached and a 4% dividend. Margin/return on capital are weak but c'est la industrie!
Looks good - not sure I have room as already hold Vertu Motors (LON:VTU) and there are quite a few cheap dealerships around - probably for a good reason

On a separate note and stupid questions, in this industry, after sales generate 10% of revenue but 40% of profit - why don't they just do after sales

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threeputt 14th Aug '18 8 of 34

Marshall Motor Holdings (LON:MMH) also please, looks solid

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Laughton 14th Aug '18 9 of 34

In reply to post #390609

Marshall Motor Holdings (LON:MMH) Director's Talk interview with CEO on today's results available here -

Sharmvr - I think the answer is actually in your question. They are "after sales". Vast majority of new car buyers return to original sales outlet for servicing, extended waranties etc. so Marshalls need to be selling new cars to garner this "after sales" turnover and, as you say, that's where the real profit margins are.

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jesseowens 14th Aug '18 10 of 34

In reply to post #390604

Selling customers cars on tiny margins is the best way to get them to come back to you for an overpriced service!

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Edward John Canham 14th Aug '18 11 of 34

Whenever I'm tempted by Marshall Motors I'm put off by the free float of only 23% and the consequent low trading volumes.

It's results day today but as I write not one share has been traded.

Cannot see anything on the horizon which is going to change this.


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Graham Neary 14th Aug '18 12 of 34

In reply to post #390609

Sure, I'll look into that after HAT. Cheers. G

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Graham Neary 14th Aug '18 13 of 34

In reply to post #390554

Hi... Ramsdens Holdings (LON:RFX) is up by 3-4% today so perhaps it is reading across! G

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Graham Neary 14th Aug '18 14 of 34

In reply to post #390529

Thanks for pointing out MBL (LON:MUBL). Looks like a grim end to its stock market presence. G

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 Are LON:CGS's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »


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