Small Cap Value Report (Tue 14 Nov 2017) - ITQ, TRI, SRT, ESCH, CAR

Monday, Nov 13 2017 by

This is the usual placeholder article, ready & waiting for your comments on RNSs from 7am.

Main article to follow.

Good morning it's Paul here.

I'm multi-tasking this week, being a NED for a small restaurant/pub chain in which I invested - setting budgets, KPIs, reviewing accounting procedures, etc. So my apologies, but the SCVRs will have to be a little briefer than usual.

Interquest (LON:ITQ)

I was asked the other day to nominate the small company which seems to worst treat its outside shareholders. Interquest was the obvious choice. Our archive here contains the details of shareholder value destruction by management who seem incompetent, and not to be trusted. They seem hell-bent on taking the company private by whatever means they can, after their lowball takeover bid was not accepted by enough shareholders to push it through. Then they sacked their NOMAD, and took so long to find another one that the shares were suspended.

Today's latest wheeze is that they're trying to dilute existing shareholders, presumably to make it easier for them to have another go at taking it private. Or it might be in order to raise monies for an acquisition possibly?

The purpose of the meeting is to extend the director's authority to allot shares from one third of the issued share capital of the Company as currently authorised pursuant to the Annual General Meeting held on 23 May 2017 to 75 per cent. of the current issued share capital of the Company.

The purpose of which is to authorise the directors so that they may have flexibility to issue shares in the case that these are required as part of any future acquisitions or other dealings.

Clearly the last thing outside shareholders would want, is to give authority to issue shares to Directors who have repeatedly acted against the interests of minority shareholders (something which can actually be challenged in court).

Anyway, it's an awful company, with awful Directors. I have little doubt that they will succeed with their grubby plans to take the company private. I've made a mental note never to invest in anything these people bring to the stock market in future. Leopards don't change their spots.

Trifast (LON:TRI)

Share price: 238.25p (down 3.9% today)
No. shares:…

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InterQuest Group plc is a United Kingdom-based specialist technology recruitment company. The Company offers permanent and contract recruitment in various markets, such as digital, information security, analytics, telecommunications and change management. Its segments are Niche, which includes recruitment practices focused on analytics, business intelligence, cyber security, Internet of things, telecommunications and risk; ECOM Recruitment Limited, which is a recruiter in the digital market space; Enterprise, which includes Recruitment Process Outsourcing services together with legacy client relationships with customers in the financial services and retail sectors; Public sector; Business Change, which is a candidate centric spot business focused on change management and providing the Company with an alternative route to market, and Other. The Company's subsidiaries include InterQuest Group (UK) Limited, Contract Connections Limited, Contract Connections B.V. and InterQuest Asia Pte. more »

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Trifast plc is a manufacturer and distributor of industrial fastenings and category C components to a range of industries and customers. The Company designs, manufactures and distributes mechanical fasteners on a global basis to both distributors and to original equipment manufacturer (OEM) assemblers. Its geographical segments include the United Kingdom, Europe, the United States and Asia. It owns a range of fastener solutions for specific industries and applications, including fasteners for sheet metal, fasteners for plastic, security fasteners, thread-locking nuts and micro-diameter fasteners. Its brands include Pozidriv, Polymate, Binx and Hank. Its products are used in various markets, such as automotive, electronics/telecoms and domestic appliances. It operates in Norway, Sweden, Hungary, Ireland, Holland, Italy, Germany, Poland, Malaysia, China, Singapore, Taiwan, Thailand and India. Its subsidiaries include Trifast Overseas Holdings Ltd and TR Formac Fastenings Private Ltd. more »

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SRT Marine Systems plc, formerly Software Radio Technology plc, is engaged in the marine technology business. The Company's principal activity includes development and supply of automatic identification system (AIS)-based maritime domain awareness technologies, and derivative product and system solutions for use in a range of maritime applications from safety and security to fishery management and environment protection. AIS is a mesh network radio communications system technology specifically designed for the marine domain, and it uses a combination of global positioning system (GPS) and high frequency radio to enable real time, simultaneous data communication between multiple, independent entities providing information, such as identity, GPS position, speed and other customized data. It offers a range of AIS products and maritime domain monitoring system solutions, which also fuse other maritime sensor technologies, such as radar, closed-circuit television and communications. more »

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

55 Comments on this Article show/hide all

Zarathustra 14th Nov '17 16 of 55

In reply to post #240508

Good spot pj8. The RNS regarding the exercise of the options back in February said:

"The Company announces that Mr Malcolm Diamond, a Person Discharging Managerial Responsibilities (PDMR), was issued and allotted 1,000,000 ordinary shares of 5 pence each in the Company ("ordinary shares") on 17 February 2017, pursuant to the exercise of options under the Company's Unapproved 2009 Share Option Plan. Subsequently, 500,000 of these shares have been sold, largely to satisfy Mr Diamond's tax liability on the exercised options. Following this transaction, 1,053,800 Ordinary Shares are held by Mr Diamond (1,051,800) and persons closely associated with him (2,000), a total beneficial interest shareholdingrepresenting 0.88% of the Company's issued share capital."

So he sold 500,000 to meet the tax liability but still gets £1.2m of the company's cash to settle NIC and income tax payments?

I am a holder as well by the way

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Billlynch 14th Nov '17 17 of 55

Anyone know of the reasons for today's sharp fall in STM following suspension?

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rhomboid1 14th Nov '17 18 of 55

In reply to post #240528

Thx Gromley...but the webinar is Thursday 2.45 according to the email they sent out?

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Ramridge 14th Nov '17 19 of 55

In reply to post #240543

Re. STM (LON:STM) How about the CEO being arrested by the Gibraltar police on an alleged money laundering charge?
Please see the RNS dated 30/10/17

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LW25 14th Nov '17 20 of 55


With it being your specialist sector, I was wondering what you thought about the recent falls from ATH in Boohoo.Com (LON:BOO) and £G4M? I see on BMUS you've topped up Boohoo in the past week.

Cheers, LW

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bobo 14th Nov '17 21 of 55

Trifast, like a lot of fastener companies, has a rolling programme of machine rebuilding. The need to buy new machines is low as the technology seldom changes year to year. Hence capital use is relatively low

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bobo 14th Nov '17 22 of 55

Carclo are an odd blend of companies with the LED element sort of bolted on the side. It feels like a cash cow and a ? bolted together and the ? is yet to become a proper business (Porter analysis). It feels like a solid business because the core business is just that (and a bit dull). If it had skilled strategic management it would recognise that it needs to change.

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tightfist 14th Nov '17 23 of 55

Hi Paul,

Thanks for your and Graham's daily Reviews, most useful.

Any chance you would take a look at B&M (BME), I appreciate that at a MC of almost £4b it's maybe rather large for you but it still has considerable growth wind in it's sails, and I think that consumers are going to be increasingly stretched and need their "value" offering. Also has some operational gearing to help it along.

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FREng 14th Nov '17 24 of 55

In reply to post #240563


There's what seems to be a related RNS today at 11.46.

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Camtab 14th Nov '17 25 of 55

The idea of a cheap growth company at this stage of the cycle makes me suspicious that it is either not cheap or not regarded as a growth company,or both. That is the only thing keeping me out of Carclo which I also like the look of!! Does someone know something we don't?

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IR35 14th Nov '17 26 of 55

In reply to post #240598

I think the important RNS was released at 12:00.
The RNS at 11:46 says the CEO has been released from bail without charge. The investigations are continuing. STM hav requested a review of the police actions.
The more important one at 12:00 says that inspectors have been appointed at some of their Gibraltar subsidiaries. They have appealed but if that is unsuccessful the cost could be material.

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Ramridge 14th Nov '17 27 of 55

In reply to post #240608

Thanks IR35 and FREng - re. STM (LON:STM)

It now seems that the investigations are additional to and independent of the allegations against Mr Kentish
The GFSC advised the Subsidiaries at the time of issuing the notices of Appointment that the Appointments are not connected to the recent allegations against Alan Kentish disclosed in the Company's announcement of 30 October 2017.
A proper can of worms.

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rhomboid1 14th Nov '17 28 of 55

In reply to post #240578

Hi Bobo
Re Carclo (LON:CAR) I think you might have missed the fact that the LED bit now makes more money than the technical plastic biz, mainly because its margins are so much higher, it’s also by far the fastest growing bit of the business. What attracts me re Wipac is that they secure multi year supply deals pre launch by being heavily involved with the OEM design & engineering teams , indeed their pre production tooling costs are paid for by the OEM, in the past they’ve been solely supercar oriented but now they’re moving into higher volume premium sectors (think Porsche 911 v McLaren) where they believe they can maintain or improve margins whilst significantly increasing turnover. These mid volume programmes kick in from 2018 onwards,

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bobo 14th Nov '17 29 of 55

In reply to post #240623

Thanks rhomboid, no I'd not missed the margin issue at all. In fact a quiet like the business but the point I was trying to make (and clearly failing) i that the two bits of the business do not really sit together strategically. One is a cash cow and one one a ? The ? in this case is by far the more interesting business but by having the two within the same group structure gives management an "out", which they have used time and time again over the years. A jaguar strapped to a donkey will never pull a cart straight.....

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Gromley 14th Nov '17 30 of 55

In reply to post #240548

Ah yes webinar Thursday - whoops I had misread that!

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herbie47 14th Nov '17 31 of 55

I don't know which shares some of the above comments are referring to, could you please try to put the ticker with a £ in front on each comment, it makes it so much easier to read.

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soyab 14th Nov '17 32 of 55

Hi Paul
Please could you comment on the price drop on CAKE?

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rhomboid1 14th Nov '17 33 of 55

In reply to post #240633

Re Carclo (LON:CAR) thx bobo , I agree totally but mgt see it slightly differently , they see the aeronautical biz as the cash cow whose earnings broadly offset the pension liability in a similar way to an annuity as their committed airframe lifecycle is similar in length to the pension tail liability. They regard the TP business as high growth but middling margin, Wipac they see as the future driver of the business with v bright (boom tish..)prospects, it would attract a far higher rating on a standalone basis but the pension issue keeps the whole lot welded together for now.

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Geronimo9999 14th Nov '17 34 of 55

ITQ - Thanks Paul for confirming my suspicions as to the likely intentions of the ITQ directorate! I suspect that they have misplaced their apostrophe and do, indeed, mean more than one director - maybe I am being very pedantic now, but this firm makes me read stuff very carefully.

I take it that even as an electronic shareholder I may somehow signal an objection from this minority shareholder without being present at this GM?

Cheers for all you do.


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Paul Simmons 14th Nov '17 35 of 55

Hi Paul, like tightfist, I would like to see your views on B&M (BME)

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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 on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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