Small Cap Value Report (Wed 29 Nov 2017) - IPX, MOTR, CINE, VRS

Wednesday, Nov 29 2017 by

Morning Everyone,

Thank for the requests - as usual, I prioritise stocks which appear in the comments, while also keeping an eye out myself for new ideas! Paul will be back tomorrow.



Impax Asset Management (LON:IPX)

  • Share price: 161.5p (-3%)
  • No. of shares: 128 million
  • Market cap: £206 million

Final Results

This is an environmentally-focused asset manager which I've written about several times this year.

Unfortunately, I didn't have the spare funds to invest in it earlier this year, when it seemed quite cheap against its earnings and prospects.

The value proposition is different now that the share price has trebled in a year:


So today's slight dip in the share price is in the context of a company where great things have arguably already been priced in.

The results are excellent, as expected. In the year to September, AuM increased by over 60% (we already knew this thanks to the Q4 update:

Assets under management and advice ("AUM") increased 61% to a new peak of £7.3 billion (2016: £4.5 billion), rising further to £7.6 billion by 31 October 2017
Record net inflows of £2.1 billion across several strategies and geographies

So inflows were responsible for three-quarters of the AuM, with market movements responsible for the rest.

Note also that the $52.5 million acquisition of similar US outfit Pax World is set to complete in Q1 2018. This is a debt-funded acquisition which will increase the company's risk profile in the short-term, but could super-charge earnings per share in future years.

The financial highlights below show the effect of operational leverage, as op. earnings rises at a much faster rate than revenue.

It's worth bearing in mind, naturally, that inflows during the year will not have generated fees for the entire year. You only generate fees on average AuM, not on closing AuM.

Revenue: £32.7 million (2016: £21.1 million)
Operating Earnings: £7.9 million (2016: £4.2 million)
Profit before tax: £5.9 million (2016: £5.2 million)

What may be disappointing investors a little bit is the rather muted PBT figure.

£1 million was spent on advice related to the Pax acquisition. £0.6 million has also been lost in FX translation of the value of foreign currency in advance of that deal. There are some more costs…

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

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Impax Asset Management Group plc is an investment company offering listed and private equity strategies primarily to institutional clients. The Company has six listed equity strategies: Specialists, Leaders, Water, Asia-Pacific, Global Opportunities, and Food and Agriculture. Its real assets business comprises renewable power generation and sustainable property private equity funds. The Company has investments sectors, such as energy efficiency, which includes power network and buildings; alternative energy, which include solar, wind and biofuels; water infrastructure/technologies, which include treatment and utilities; pollution control, which include pollution control solutions, and testing and gas sensing; food, agriculture and forestry, which include logistics and sustainable forestry; waste management and technologies, which include tech equipment and hazardous, and environmental support services, which include consultancies and diversified environmental. more »

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Motorpoint Group plc is an independent vehicle retailer in the United Kingdom. The Company's principal business is the sale of vehicles, of which are approximately two years old and which have covered over 15,000 miles. The Company sells vehicles from brands representing vehicle sales in the United Kingdom, with models from Ford, Vauxhall, Volkswagen, Nissan, Hyundai, Audi and BMW. The Company operates from over 10 retail sites across the United Kingdom. The Company has a national contact-center dealing with online enquiries. In addition to sales of vehicles, the Company operates, a business to business online auction platform for vehicles. The Company also offers ancillary products to customers, including customer finance packages, vehicle guarantees, insurance products and vehicle protection treatments. more »

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Cineworld Group plc is a United Kingdom-based international cinema chain. The Company operates in approximately nine countries. The Company operates through two segments: UK and Ireland, and Central and Eastern Europe and Israel (CEE & I). The Company has over 9,518 screens in over 790 sites in across 10 countries. It operates in the United Kingdom, Jersey, Ireland, Poland, Israel, Hungary, Czech Republic, Bulgaria, Romania and Slovakia. The Company's brands include Cineworld Cinemas, Picturehouse, Cinema City and Planet. Its Cineworld Cinemas and Picturehouse brands operate in the United Kingdom and Ireland. Its Cinema City brand operates in over six Central and Eastern European territories. Its brands, including Yes Planet and Rav-Chen operates within Israel. The Company's subsidiaries include Augustus 1 Limited, Cinema City Holding B.V., Cinema Finco 1 Limited, Cinema Finco 3 Limited and Cinema Finco 4 Limited. more »

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78 Comments on this Article show/hide all

Mid Herts 29th Nov '17 59 of 78

Re LON:CINE I agree with your analysis Graham. From my point of view most of the drop had occurred before I started to think and now the price looks very low against the previous valuation of the present business. It is interesting that the present management came in on a similar but much smaller deal but it is hard to see how the present one could be structured especially now. I guess there will be some head scratching going on.


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Julianh 29th Nov '17 60 of 78

In reply to post #247048

Thanks Santa
I really appreciate your response to my question and all the other responses I have had. This really is a mutually supportive community. I also have an account with YouInvest and so far have had very much the same experience so they are definitely on my list of options to take over the portfolios currently being held with Barclays.
All the best

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Howard Adams 29th Nov '17 61 of 78

Hi all

For anyone interested there seems to be a rather big sell off in US stocks occurring as I type. I have about 30 in a US watch list. Virtually all a down over 7% some as much as 17%. A lot of my list are Tech and thus NASDAQ listed, but I think this could read across to UK stocks in the morning in areas such as IQE (LON:IQE). Obviously purely my interpretation.


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Julianh 29th Nov '17 62 of 78

In reply to post #247063

Congratulations on getting out well. I haven't heard of Share Deal Active so will definitely have a look at it.

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Julianh 29th Nov '17 63 of 78

In reply to post #247178

Thanks Keith
I may have to follow your advice, sell everything, transfer the cash and take whatever loss there is as a result.
Hope you enjoy IG

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Julianh 29th Nov '17 64 of 78

In reply to post #247023

It is good to hear that you are almost out now. Hope you can get the last the last statements soon.

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Ramridge 29th Nov '17 65 of 78

In reply to post #247308

Yes, interesting developments. It looks like the NASDAQ tech stocks have been tumbling. The other indices Dow, S&P and Russell look OK within the usual daily range. No sign of the tech shakedown spreading.

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Metatron 29th Nov '17 66 of 78

I would take any day a decent dividend from a company than watch it do `share buybacks`.
The first is that nobody can predict the long term share price of a company and it could easily fall and stay for years below the share buyback price
In my experience a lot of company boards like share buybacks because the executives have lucrative options linked to short term share price performance whilst stockbrokers linked to the company like the commission action and there are probably hidden quid pro deals going on between executives and their stockbroker.
The one stockbroker I know well made his money from inside information

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AlanJenkins2 29th Nov '17 67 of 78

In reply to post #247198

I agree,but do Motorpoint not have rather a lot of debt ? You referred to their 'strong net cash position'.

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herbie47 29th Nov '17 68 of 78

In reply to post #247308

Yes I saw that but that was before our close, Euro tech shares are down also but UK ones seem to have escaped today.

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Howard Adams 29th Nov '17 69 of 78

In reply to post #247373


This might have some bearing on the falls.

This might also explain the read over to European chip maker stocks. This is why I sense IQE (LON:IQE) might get hit a bit (I hold).


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Howard Adams 29th Nov '17 70 of 78

In reply to post #247338

Hi I just did a reply to Herbie with this piece which adds insight into the chip makers sell offs


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herbie47 29th Nov '17 71 of 78

In reply to post #247383

Thanks, yes I saw that yesterday. I hear investors are switching out of tech. Into banks and builders. I sold my IQE (LON:IQE) but do have some us tech shares. Will see what happens tomorrow.

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Gromley 29th Nov '17 72 of 78

In reply to post #246873

LOL - So Cheeky - I saw what you did!

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Andrew L 29th Nov '17 73 of 78

Cineworld (LON:CINE) - Just a few pointers. It is an all cash deal so Cineworld would remain in control. It may be legally a reverse takeover but Cineworld would be buying Regal for cash. That is what Cineworld's announcement states. Interestingly Regal refer to it as a "merger."

US box office - The link you shared shows US cinema spending falling in 2017 to date on a year ago not increasing. This is why Regal's share price has been weak. US cinema attendance has been weak from what I have read this year.

Finally it is worth noting that Cineworld investors can vote the deal down. Given the share price reaction they may be likely to do so. Global City, the vehicle of the management, have 28% so they can't get the deal through. I would imagine the deal needs majority approval.

I agree with your general thesis that on face value it looks like a strange deal. The question is how attractive the US market is. I would imagine it is fairly mature. I would also of thought there would be few synergies given the different geographies. The only real argument for the deal is that Cineworld is buying into US cinema at a good time and buying a good operator. I can't seem to get figures for US cinema attendance but attendance in North America has weakened recently:

Shares in AMC and Regal (the two large US operators have been weak). The trouble for me is that if investors wanted US cinema exposure they could buy these companies directly. Why do investors want to fund a takeover through Cineworld at a takeover premium if there are few synergies? Cineworld's existing markets are also less mature than the US and so appear to have better prospects.

I would have to say that this is one of the most bizzare proposed transactions I have seen. Cineworld's combination with Cinema City a few years ago had some investors scratching their heads. The current proposed deal has investors banging their heads against a brick wall.

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millen 30th Nov '17 74 of 78

Re Barclays - disheartening to hear of the continuing transfer delays. I decided to largely 'sit it out' for the time being but will it become clear when delays have reduced? I really don't like the idea of being unable to sell holdings for 10+ weeks! Not even by phone if a sell-off hits? As others have said, it may be an idea to realise low-conviction holds before starting the transfer process.

For my ISA I opted to partially transfer £35k in cash to another ISA provider but even that simple transfer took them 7 weeks.

Another Barclays whinge. I was completing my CGT tax return last week and discovered Barclays has no trades data on my MarketMaster account prior to Sept 2012! Under the old system you could click on a share and see your full trading history. "Progress" no doubt!

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Graham Neary 4th Dec '17 75 of 78

In reply to post #247403

Two important corrections there - thank you very much.

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apjacko 6th Dec '17 76 of 78

Hi Graham, just wondering if you still believe Rightmove is a Short, particularly whilst its in the middle of purchasing its own shares, which obviously keeps propping up its share price.

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acdoug 8th Dec '17 77 of 78

In reply to post #247403

Cineworld (LON:CINE) I think that the Greidingers EACH have 76m shares held in Global City Holdings - a total of 56%, and a simple majority, although the takeover may need 75% approval. I suspect they'll get it

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Andrew L 8th Dec '17 78 of 78

acdoug - The RNS said that Global City Holdings has 28%. It was pretty clear on that. Global City is the family vehicle. We could check in the annual report but I am pretty sure that is the case. See page 63 which makes it clear:

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

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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