Small Cap Value Report (Wed 5 Apr 2017) - STY, HSS, LTG

5th Apr '17 by Paul Scott

13 comments 10573 reads

Good morning, it's Paul here!

I wrote about loads more companies last night. So in case you haven't seen it, yesterday's full report is here, and includes sections on the following companies;

Fulham Shore (LON:FUL)- in line trading update

Keywords Studios (LON:KWS) - good results, but pricey

Utilitywise (LON:UTW) - all sorts of problems, looks messy, I don't like this one at all

Next Fifteen Communications (LON:NFC) - good results, but relies on large adjustments. Weak balance sheet

Koovs (LON:KOOV) - a trading statement that tells us nothing about profitability, or financial position

Adept Telecom (LON:ADT) - good trading update

Universe (LON:UNG) - OK results for 2016

Flowtech Fluidpower (LON:FLO) - results & trading update sound pretty good

Topps Tiles (LON:TPT) - negative LFL sales, but profit still within range of market expectations

Nanoco (LON:NANO) - cash running out fast, and orders have (so far) failed to materialise

Thankfully it's a bit quieter today, and I have to be quick, as am off to an investor lunch at the RAC Club.

So today I intend writing about;

Styles and Wood (LON:STY) trading update

HSS Hire (LON:HSS) final results

Learning Technologies (LON:LTG) 2016 results

Here goes.

Styles and Wood (LON:STY)

Share price: 429p (down 8.3% today, at 10:10)
No. shares: 8.7m
Market cap: £37.3m

Trading update - this company describes itself as an;

"integrated property services and project delivery expert"

Profitability in 2016 seems to have been in line with expectations;

...anticipates delivering strong underlying profit and margin performance in 2016 with adjusted profit before tax in line with Board expectations.

As usual, we have to assume that the Board's, and the market's expectations are the same.

That sounds alright to me, so why is the share price down 8.3%? It seems to be due to these additional comments from the company today;

Following a review of…

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CliveBorg

5th Apr '17

"This company is ideally positioned to go bust in the next recession." Superb.

bestace

A couple of things struck me while looking through the results for Learning Technologies (LON:LTG).

Firstly there are a couple of prior year restatements following a review carried out by the Financial Reporting Council's Conduct Committee. Maybe this is all above board but I'm not sure I like the idea of a regulator's conduct committee sniffing around a company.

Secondly, the retained earnings balance turned negative this year but they are still paying dividends, which I thought was illegal. I suppose it's possible the parent company has sufficient retained earnings while the group's retained earnings are negative in aggregate due to consolidation effects, but it looks odd and I would have expected some sort of narrative explanation.

No half decent auditor would let something like that slip through if something was really amiss, so I assume it's OK but maybe I am being naive with that assumption...

Camtab

LTG were at the UK Investor show. Have to say I really like them but not bought shares in them because I feel they are a bit expensive. That said the CEO has a bucket load which is a good sign, as Nigel Wray keeps pointing out. But this may explain why the dividend is important to the company.

AlanJenkins2

Hi,Paul.Any chance of a look at old favourite Dart DTG - even though it has grown a bit ?

drvodkaquickstep

As usual Paul some excellent commentary and analysis. With respect to Styles and Wood (LON:STY) I have to beg to differ re: the potential valuation and attraction of consulting type business in this space as clearly demonstrated this week by the proposed acquisition of WS Atkins (LON:ATK) by SNC Lavelin at a multiple of around 1 x sales and a hefty double digit forward earnings multiple.

Numerous other consulting firms in this sector have been the subject of M&A activity over recent years, typically being acquired for 0.75 x sales. I dont hold Styles and Wood (LON:STY) but see value in this space and can foresee further M&A which could include the likes of Waterman (LON:WTM), Driver (LON:DRV), Aukett Swanke (LON:AUK), RPS (LON:RPS) and WYG (LON:WYG) amongst others.

JamesrWilson1989

I am a holder in Styles and Wood (LON:STY) so do believe they are undervalued but its worth noting that they are a contractor and not a consultancy like the others you've listed.

James - yes you are of course correct and I forgot to clarify that key point although Styles and Wood (LON:STY) do offer a number of consulting services rather than being a pure contractor. Point noted, however!

Ramridge

Re. £SKIN Just a heads up for IPO fans. First dealing date for a company called Integumen with a fantastic epic code SKIN. Apparently it sells products mainly for skincare.
I suspect it will be a few days before you see it listed on stocko..
I gave the admin doc a once over and found too many negatives for me. Market cap only £8m. ; loss making ; tiny revenues of £153K in last FY. I won't bother but please DYOR

Regards, Ram

ps. just checked sp and it is below the placing price of 5p. Not surprised.

mcfly46

Would be interested to hear peoples thoughts on sirius minerals (LON:SXX) . Plenty of opinions on other boards (and plenty of ramping), but interested to know what you guys thought and if it really is too long away to be considered anything but a punt. Not sure if its small cap but noticed it had a similar market cap to purplebricks. Cheers

Carey Blunt

There are some other threads on here about Learning Technologies (LON:LTG) which are worth reading including this one http://www.stockopedia.com/content/learning-technologies-someone-talk-me-out-of-it-142085/ .

I'm long and bullish on Learning Technologies (LON:LTG) and have been for some time having first bought in Jan 2015.

I don't like the fact that they can't seem to put a figure on just how transformational the Civil Service work is - they should know by now how much they are going to make from the deal and when the money comes through. They are cagey about it which worries me. They could be stating the expected increase in revenue and profits but they aren't.

On the plus side with the Rustici acquisition they have effectively bought the company that defined the standard for e-learning packages. In theory the blend of companies that they now own should be able to provide killer e-learning software and deliver the software and training content results right across the globe. Very little large organised competition in this field.

The potential is huge but they do talk themselves and the SP up a bit early in my mind.

ChrisW

My simple rule on blue sky stuff like this, is not with the pole of the barge!

Normally if you want to invest in this kind of stuff, you have to be happy to throw twenties into the ground and hope fifties come up. Most of the time that doesn't happen.

Maybe on the third capital raise, we've had the first one back at the end of Nov, £330m.

Just my experience of 33 years of investing and making expensive mistakes.

Best of luck either way.

Chris

JohnEustace

Sirius Minerals (LON:SXX) may get a bit of a lift from transferring from AIM to the main market. But as an investment it would require a fair amount of patience and fortune, and after the last fund raising I fear shareholders are in the queue behind Gina Rhinehart when it does start to produce income.

6th Apr '17

Well, this is like London red buses time. Yesterday there was another first dealing date IPO also in the business of skincare, called SkinBiotherapeutics (ticker SBTX) .
It is a demerger from Optibiotix which will retain approx 42% of the equity.
Placing price 9p, sp at close yesterday 13.5p
Check out ShareProphets site for more details.
The company will keep £4m out of the placing to fund development to commercialisation stages.

A huge warning : this is blue sky territory, more of a punt than an investment.

Small Cap Value Report (Wed 5 Apr 2017) - STY, HSS, LTG

Styles and Wood (LON:STY)

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Paul Scott

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