Small Cap Value Report (Tue 5 May 2020) - TGP, AIR, GETB, JSG

5th May '20 by Paul Scott

42 comments 8399 reads

Good morning, it's Paul here with the SCVR for Tuesday.

Timings - a bit late today, but should be done by 3pm.
Today's report is now finished.

Please see the header for company announcements I'll be looking at.

Jack has kindly sent me a section on Air Partner (LON:AIR), which I've copied in below. Thanks Jack! Always good to have a contribution from you.

Tekmar (LON:TGP)

Share price: 120p (up 4% today)
No. shares: 51.3m
Market cap: £61.6m

(I have a long position in this)

Trading update

Tekmar Group (AIM: TGP), a leading technology provider of subsea protection systems for the global offshore energy markets, announces the following trading update ahead of the Group's results for the year ended 31 March 2020 ("FY20" or the "Period"),

We're not seeing many positive updates like this at the moment - it's in line with expectations for FY 03/2020, together with a positive outlook statement.

Revenues - up over 40% - despite Covid-related problems. All the more impressive given that Q4 (Jan-Mar 2020) is seasonally important to profits
Order book at year end was up 39% on prior year, at c.£10m
Net cash of £2.1m at year end
Received a £3m loan via Barclays, under Govt's CBIL scheme - good to see this paying out
Liquidity - well placed, given above cash headroom
All sites continuing to operate, with only 8% of staff furloughed
Temporary freeze on capex, recruitment, and pay rises, to conserve cash
Outlook - demand for offshore wind remains strong

There is a catch though - the company warned on profits in Feb 2020, and broker forecast was considerably lowered. Hence it has only achieved the reduced forecast number. It's always worth checking this! See below;

Valuation - this is a rare case where I can actually use broker forecasts! Or rather, I could if there were any broker notes available, which I cannot find on Research Tree or elsewhere for Tekmar.

Going by the Stockopedia numbers (Thomson Reuters data) they have 5.41p EPS forecast for FY 03/2020, and we know the company is in line with that. At 120p per share, that's a historic PER of 22.2 - not exactly a bargain. I can live with that PER, because the order book is up a lot, and outlook promising. The company seems to have excellent niche…

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vprt

5th May '20

Treatt (LON:TET) is Lord Lee's #1 holding, despite a newspaper recently saying otherwise. Yes, he also holds Air Partner (LON:AIR) and has expressed some confidence in its survival chances, if I remember correctly.

Snoo

I hold this.

It seems unlikely that this performance will be repeated - we can surmise that the Government paid through the nose for those rescue flights.

It seems unthinkable that in a few months airlines will still be running at a single digit level of capacity, so I would treat this as a one-off bonus thanks to the virus.

I was not particularly excited about their recent acquisition and considered they over-paid for it. I think it'll be difficult to build in big margins here, and perhaps they could have been patient - now might have been a good time to rescue a company in distress.

The cash balance is illusory IMO, much of it is in Jet Card Cash which is not available to the business.

There is some upside from here I feel - I feel 70p-80p is fair now (I did have a bigger target on it when I bought, but I think there is greater uncertainty facing the whole industry now).

covkid

There were 4321 sales in April - the 871 were private sales. The list posted above refers to 'Best Sellers' out of the 4321...............

Laughton

I guess (maybe) that Tesla really only sell direct and their potential customers are prepared to buy on that basis whereas all the others mainly/only sell via dealerships, which are all closed for visitors. So Tesla sales much less impacted by current situation. Or maybe not.

Mnomis

No confusion on my part - happy shareholder. Yip - agree - the valuation does not compute (certainly not helped by an institution dumping their stock at the bottom).

sharw

"The cash balance is illusory IMO, much of it is in Jet Card Cash which is not available to the business".

The Air Partner (LON:AIR) announcement today does say "At the end of April, the Group has normalised cash in the bank of £13m, excluding significant customer deposits and JetCard cash."

jesseowens

And £11.5 million drawn on a RCF, so a small net cash position I believe

Nick Hewett

Hi Paul what are your thoughts on DUKE Royalty #duke? The last time you mentioned them you had a long position - price has dropped significantly due to CV19 and dividend is very large BUT at risk. I used to hold this company - think it is quality BUT several of its largest royalty partners are badly impacted by CV19 )such as the largest partner which is a small cruise line).

I have added a few today at 18.6p as a punt but you understand their portfolio very well.....

Yeah, that kind of squares with the updates before. The recent trading has been great for their balances.

Just saying that Stocko says net cash of £13.5m for trailing 12 months, which may look exciting relatively to the mraket cap, I do not view it in the same way. Jet Card cash was c.£17m at the last year report.

my bad - I think it is Graham N who has the long position in DUKE not you Paul

gl196

Air Partner (LON:AIR) I have a long position but another aspect of the bear case is that the balance sheet is not as strong as it seems since most of the cash was recently spent on the recent Redline acquisition

laurie

TESLA- According to SharePad, Baillie Gifford has recently sold 6.15% of Tesla, leaving their funds with a holding of 1.56%. I have drawn no conclusions from this. I found this interesting, so I am sharing it.

Beginner

Graham previously stated he had sold up his Duke Royalty (LON:DUKE) as it was a "riskier" investment. He has been proved right so far, as it has dropped more than 30% since he wrote that. They have a fair chunk of dosh out to a river cruise company, so that may need some patience.

grout123

What ? That a Peugeot got into the list TWICE ! Now that is staggering

Wilbraham

Anecdote on Chris Harris' Collecting Cars podcast a few weeks ago. Tesla had to deliver c. 100 vehicles to somewhere like Holland before some looming tight regulatory (tax?) deadline. So they simply docked the container ship, unloaded the cars onto the quayside in two neat long rows (black and white), put the associated keys into two buckets on a table and invited the assembled punters to play lucky dip for a key and drive away their new pride and joy! Shows what can be achieved when you're not saddled with a sprawling dealer network and associated overheads.

FREng

https://www.bbc.co.uk/news/bus...

Tim Moore, economics director at IHS Markit, said the data "highlights that the downturn in the UK economy during the second quarter of 2020 will be far deeper and more widespread than anything seen in living memory".

"The April survey reading is consistent with the economy falling at a quarterly rate of approximately 7%, but we expect the actual decline in GDP could be even greater, in part because the PMI excludes the vast majority of the self-employed and the retail sector."

The Purchasing Managers' Index (PMI) services index showed a record-low reading of just 13.4 in April, down from 34.5 in March. A figure below 50 indicates contraction. The final reading was slightly better than a preliminary - or "flash" - estimate of 12.3 that had been produced late last month.

Certainly this is a one off bonus but one that represents a very significant chunk of the market capitalisation earned in just a few months. One other surprising element is that profits seem to be accelerating substantially as the crisis continues. Pre tax profit for February and March was £2.4 million and for February March and April combined it was £6 million . With the company already declaring May and June to have encouraging order books the one off bonus may get considerably larger.

Hiscox (LON:HSX) have put out an after market announcement covering their possible virus commitments to clients. They also comment on their investment performance. Other insurers should do the same. Having said that, they reckon " the impact of a 12-week lockdown...[will result in an estimated cost of]... between £10 million and £250 million net of reinsurance", so hardly precise.

https://www.investegate.co.uk/hiscox-ltd--hsx-/rns/hiscox-ltd-trading-statement/202005051635010164M/

Hiscox (LON:HSX) - I think that's only relating to the UK property policies where holders claim there is cover but Hiscox claims there is not. There is additional cost of US$150M to US$175M in respect of event, media, entertainment and travel policies which they say they are in the process of paying.

back2value

Jack, a useful contribution, but surely "aeroplanes" instead of "airplanes"?

Small Cap Value Report (Tue 5 May 2020) - TGP, AIR, GETB, JSG

Tekmar (LON:TGP)

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Paul Scott

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