[SharePad] Small-Cap Spotlight Report: JUDGES SCIENTIFIC

*** Announcing SharePad’s Crazy BLACK FRIDAY Sale ***
Use promo code mpbf23 to claim a
massive 66% discount for your first 3 months!

18 November 2023
By Maynard Paton

Today’s rough market for small-cap shares could be the exact time to hunt for your next great portfolio winner.

Take Judges Scientific, the £540 million group of scientific instrument manufacturers, which joined AIM at 95p at the bottom of the dotcom crash during early 2003:

(Source: SharePad)

These shares topped £100 earlier this year to give initial shareholders a staggering 100-bagger return. What can investors learn from this astonishing performer?

Let’s take a closer look.

Read my full JUDGES SCIENTIFIC article for SharePad >>

Maynard Paton

MOUNTVIEW ESTATES: Lowly 50% FY Gross Margin Despite Record £395k Average Sales Price Signals Property Purchases Realising Limited Gains And Leaves £100 Shares Trading At NAV 

28 October 2023
By Maynard Paton

FY 2023 results summary for Mountview Estates (MTVW):

  • A lacklustre FY performance, with profit down 2% to the lowest level for ten years despite average property sales (excluding ground rents) rising 14% to a record £395k.
  • Property sales achieving a 50% gross margin, the worst for 14 years, suggest properties purchased following a 2014 valuation have realised very limited premiums on disposal.   
  • Debt remains under control at 12% of the property estate, although £56m was spent on new properties — the largest amount since FY 2008 — despite management talk of ongoing “difficult economic circumstances“.
  • Protest votes against the board’s composition and remuneration continue to increase, with property investor David Pears among the unhappy shareholders asking questions at the latest AGM.
  • The £100 shares trade at net asset value (NAV), which in theory prices in no future property gains, and offers a 5% income, the highest for decades aside from the banking crash. I continue to hold.

Read more

[Podcasts] HARGREAVES LANSDOWN, FOCUSRITE, STRIX, QUARTIX And More

IMPORTANT! From 1 August 2023 all my podcasts became part of a premium service for UK private investors. More details here >>

21 October 2023
By Maynard Paton

I have recorded two podcasts during October with good friends and fellow investors Roland Head, Mark Simpson and Bruce Packard:

MAYNARD
PATON

ROLAND
HEAD

MARK
SIMPSON

BRUCE
PACKARD

Our Investors Roundtable Podcast discussed Bruce’s liking for Hargreaves Lansdown, why Focusrite has appeared on my radar and why Mark reckons Strix is undervalued.

Roland and I also discussed telematics specialist Quartix for the latest Private Investor’s Podcast.

Read more

BIOVENTIX: H1 Dividend Up 19% Might Indicate Small 8th Special Payout As Pipeline Potential Still Rests Upon ‘Exciting’ Alzheimer’s R&D That Runs To 2026

20 October 2023
By Maynard Paton

H1 2023 results summary for Bioventix (BVXP):

  • A record H1, with revenue up 25% and profit up 26% helped by a post-pandemic recovery and favourable currency movements.
  • Product sales were frustratingly conveyed through a broker note, which ‘estimated’ vitamin D income gained 11% and troponin income increased 52%.
  • Pipeline efforts and potential continue to rest upon “exciting” Alzheimer’s research, although the work looks set to run to 2026 and associated revenue may occur beyond 2030.
  • Repeating the 19% H1 dividend lift for the subsequent H2 would leave room only for a small eighth special payout, a prospect supported by remarks about taxation changes.
  • Forecasts for a flat H2, troponin’s finite income and a lack of near-term R&D winners may explain why the £35 shares have not made headway during the last four years. I continue to hold.

Read more

[SharePad] Screening For My Next Long-Term Winner: FONIX MOBILE

***SharePad New Subscriber Special Offer***
Readers of my blog can claim one month of free data. Click here for details. #ad

14 October 2023
By Maynard Paton

Whisper it, but a few UK small-caps are still progressing well and maintaining resilient share prices in this difficult market.

Fonix Mobile is a good example. Recent full-year results from this £206 million business showed revenue up 21%, earnings up 10% and the dividend up 12%, which ensured the shares remain within touching distance of their all-time high:

(Source: SharePad)

Fonix currently appears on an old SharePad screen of mine that seeks respectable companies that have grown without acquisition. I have always believed the very best companies are those that can expand ‘organically’ and do not rely on purchasing other businesses for higher profit.

The screen’s filter criteria are:

  • Positive five-year turnover and operating profit growth;
  • A minimum of 15% for both return on equity (ROE) and operating margin;
  • Net bank borrowing of no more than zero (i.e. a net cash position), and;
  • A five-year acquisition spend of zero.
(Source: SharePad)

I selected Fonix as it had exhibited the strongest revenue growth after Alpha Group — which broke its organic-growth history by announcing an acquisition last month — and VAALCO Energy — an American oil explorer that I had no desire to review.

Let’s take a closer look at Fonix.

Read my full FONIX MOBILE article for SharePad >>

Maynard Paton

Q3 2023: Enjoying 100% Returns From Ordinary Dividends

08 October 2023
By Maynard Paton

Happy Sunday! I trust your shares are coping well during this lacklustre market.

A summary of my portfolio’s progress:

  • Q3 return: +8.0%* (FTSE 100: +2.2%).
  • Q3 trades: 1 Sell (Tasty).
  • YTD return:  +9.4%* (FTSE 100: +5.5%).
  • YTD winners/losers: 5 winners vs 6 losers.

(*Performance calculated using quoted bid prices and includes all dealing costs, withholding taxes, broker-account fees, paid dividends and cash interest)

My year-to-date performance has improved as I slowly recover from last year’s 23% drubbing. This Q3 was in fact my portfolio’s strongest three months since June, July and August 2021 (+8.7%), and I now need ‘only’ a 19% advance to revisit my all-time high of December 2021. 

Read more

[Podcasts] LIONTRUST ASSET MANAGEMENT, RWS, QUIZ, MOUNTVIEW ESTATES And More

IMPORTANT! From 1 August 2023 all my podcasts became part of a premium service for UK private investors. More details here >>

30 September 2023
By Maynard Paton

I recorded two podcasts during September with good friends and fellow investors Roland Head, Mark Simpson and Bruce Packard:

MAYNARD
PATON

ROLAND
HEAD

MARK
SIMPSON

BRUCE
PACKARD

Our Investors Roundtable Podcast discussed my Liontrust Asset Management contrarian idea, why RWS is on Roland’s watch list and whether Quiz is a compelling deep-value investment for Mark.

Roland and I also discussed my attendance at the Mountview Estates AGM for the latest Private Investor’s Podcast.

Read more

S & U: £22 Shares Valued At Potential 1.15x NAV With 6% Yield After Positive FY 2023 Shows New ‘A Gold’ Borrowers And ‘Excellent’ Collections Supporting Healthy 18% Motor Loan-Book Growth

29 September 2023
By Maynard Paton

FY 2023 results summary for S & U (SUS):

  • A seemingly lower-than-normal bad-debt charge underpinned a very positive FY, which compounded net asset value (NAV) to a fresh £18.51 per share high and the dividend to a fresh 133p per share high.
  • New “A Gold” borrowers, rising used-car prices, bumper application numbers, “excellent” collection rates and waning pandemic issues led to healthy motor-finance progress, with a net loan book up 18%.
  • A “sparkling” property-finance performance witnessed a 78% net loan-book surge and impairments kept to a minimum, although the division’s returns on capital remain very modest.
  • Higher interest rates will hurt near-term margins and slow NAV growth, but debt costs remain amply covered by the estimated 20%-plus returns earned through the group’s most reliable customers.
  • Post-results updates acknowledging reduced lending and “economic headwinds” leave the £22 shares trading at a possible 1.15x NAV and supplying a useful 6% income. I continue to hold.

Read more

[SharePad] Small-Cap Spotlight Report: NCC

***SharePad New Subscriber Special Offer***
Readers of my blog can claim one month of free data. Click here for details. #ad

22 September 2023
By Maynard Paton

“Instead of buying back shares or raising dividends, profitable companies often prefer to blow the money on foolish acquisitions. The dedicated diworsifier seeks out merchandise that is (1) overpriced, and (2) completely beyond his or her realm of understanding. This ensures that losses will be maximised.”

Market legend Peter Lynch never liked great companies that ‘diworsified’ into less appealing sectors in the quest for growth.

His book One Up On Wall Street recounted how many famous US stocks blew big money on foolish acquisitions to ensure losses were maximised during the 1980s.

Diworsification sadly remains a popular management strategy, and UK small-caps have not been immune from ambitious boardrooms undertaking low-quality acquisitions and trying to prove Mr Lynch wrong.

NCC is a prime example. The IT group was once dominated by a terrific subsidiary, but lots of acquisitions created a series of mishaps and the shares are now back to where they were twelve years ago:

(Source: SharePad)

Let’s take a closer look.

Read my full NCC article for SharePad >>

Maynard Paton

SYSTEM1: Bumper Q4 Supports Stronger H2 2023 But New Marketing Course Raises Fresh Management Doubts And Leaves Disgruntled Shareholders Hoping For Trade-Sale Exit

15 September 2023
By Maynard Paton

FY 2023 results summary for System1 (SYS1):

  • A much stronger H2 versus the unsatisfactory H1, with disgruntled shareholders and proposed board changes prompting management to lift Q4 Data/Data-led revenue by a bumper 81%.
  • New partnerships and customer wins support the H1 strategic review, although partnership revenue and customer numbers remain frustratingly inconsistent and unclear. 
  • Progress at Test Your Idea/Brand continues to be slow, with rival Zappi taking market share and an upcoming marketing course raising fresh doubts about management’s Data-platform focus.
  • Vague signs of favourable ‘operational gearing’ may now be emerging, although regular adjustments and capitalised IT still complicate reported earnings.  
  • A deeply divided shareholder base and languishing share price may leave the door open for corporate activity, with global market-research groups hopefully able to recognise significant sales/cost benefits. I continue to hold.

Read more

TRISTEL: Record 81% Gross Margin Supports Positive H1 2023 As FDA Approval Creates 43M Disinfection Opportunity Alongside Management Ambition To ‘Double Revenue Over The Medium Term’

28 August 2023
By Maynard Paton

H1 2023 results and FDA approval summary for Tristel (TSTL):

  • A positive pandemic-recovery performance, with H1 revenue up 16% to a record £17.5m and H1 profit rebounding up to 33% albeit after a bevy of adjustments.
  • A record 81% gross margin helped offset greater H1 staff costs, with useful cash conversion keeping net cash above £8m — which oddly earns no interest. 
  • The H1 effort was perhaps eclipsed by the subsequent FDA product approval, which creates the opportunity to capture 43 million US disinfection procedures and collect a revised 24% US royalty.
  • An informative open-day webinar revealed dividend cover was under review, option grants had been paused, H2 revenue per disinfection procedure had surged plus an ambition to “double revenue over the medium term“.
  • An estimated 23x P/E for FY 2026 is not an obvious bargain, but a premium rating could be justified by lucrative US income and management proposals to raise the group’s three-year targets. I continue to hold.

Read more

[Podcasts] KITWAVE, M WINKWORTH, SOLID STATE And More

IMPORTANT! From 1 August 2023 all my podcasts became part of a premium service for UK private investors. More details here >>

28 August 2023
By Maynard Paton

I recorded two podcasts during August with good friends and fellow investors Roland Head, Mark Simpson and Bruce Packard:

MAYNARD
PATON

ROLAND
HEAD

MARK
SIMPSON

BRUCE
PACKARD

Our Investor’s Roundtable Podcast discussed Roland’s investment in wholesaler Kitwave, my investment in estate agency M Winkworth and Bruce’s investment in electronics specialist Solid State.

Roland and I also discussed an attractive FTSE 250 business for the latest Private Investor’s Podcast.

Read more

FW THORPE: Record H1 Shows Profit Up 34% After Supply Problems Ease Although Net Cash Declines To 16-Year Low And Shareholders Await Suitable Returns From Eventual £37m Zemper Acquisition

15 August 2023
By Maynard Paton

H1 2023 results summary for FW Thorpe (TFW):

  • A record H1 performance bolstered by acquisitions of Zemper and SchahlLED that showed total revenue up 29% and adjusted profit up 34%.
  • Thorlux and SchahlLed combined well, with adjusted Thorlux profit up 57% after supply problems eased and the launch of a new SmartScan system.
  • Mixed progress was delivered elsewhere, as Dutch profit fell 8% and Zemper not obviously living up to what could be an eventual £37m purchase price. 
  • Net cash of £18m was the lowest for 16 years and no longer covers the anticipated earn-outs for Zemper (£12m) and SchahlLED (£7m).
  • A possible 20x P/E seemingly reflects TFW’s distinguished operating history and the persistent demand for energy-saving lighting rather than any doubts about the hefty acquisition expense and the uncertain wider economy. I continue to hold.

Read more

[SharePad] Screening For My Next Long-Term Winner: RECORD

***SharePad New Subscriber Special Offer***
Readers of my blog can claim one month of free data. Click here for details. #ad

12 August 2023
By Maynard Paton

I have once again revisited a SharePad screen that applies two ratios favoured by ‘quality’ investors — operating margin and return on equity (ROE).

The exact criteria I re-used were:

  • An operating margin (latest and 10-year average) of 20% or more, and;
  • An ROE (latest and 10-year average) of 20% or more.

Any business with a persistent margin and ROE of at least 20% could be very special.

To narrow the field down further, I also sought companies that carried net cash (i.e. net borrowings excluding IFRS 16 finance leases of less than zero):

(Source: SharePad)

This time the filter yielded 20 matches, including Games Workshop, Hargreaves Lansdown, Plus 500 and Polar Capital.

I selected Record because it was among the better share-price performers of the last twelve months that I had not already studied for SharePad. Let’s take a closer look.

Read my full RECORD article for SharePad >>

Maynard Paton

M WINKWORTH: Acceptable FY 2022 Shows Ordinary Dividends Up 18% To Lift Yield To 7.6% But ‘Delayed’ Property Sales Prompt FY 2023 Warning And Reduces Possible Payout Cover Towards 1x

21 July 2023
By Maynard Paton

FY 2022 results summary for M Winkworth (WINK):

  • An acceptable FY performance that revealed ordinary dividends up 18% and remarkably took FY franchisee income close to the £64.8m exceptional level of FY 2021.
  • A subsequent trading update rather overshadowed the figures by admitting a “more challenging” housing market had “delayed” agreed sales and in turn caused current-year profit to run below expectations.
  • The “uncertain economic outlook“‘ had already reduced the proportion of franchisee commissions converted into revenue to 10% — WINK’s lowest percentage since at least 2009.  
  • Healthy rental commissions, favourable competitor comparisons, resilient company-owned branches and cash-flush accounts suggest WINK should be well prepared for any house-price downturn. 
  • Possible earnings around 12p per share may limit advances to the 11.4p per share trailing dividend, although net cash of £5m plus owner-directors who “prioritise” income should sustain the 7.6% yield. I continue to hold.

Read more

ABOUT ME

Investing in shares for 25+ years. Former share tipster. SharePad evangelist. Blogger. Webhost nerd. FIRE. Read more | Contact

PORTFOLIO

All holdings and buy prices. Latest trades. Quarterly updates. Annual returns since 2012. Purchases since 2004. Read more

SHAREPAD

The very best all-in-one research and data service for UK investors. Why I Use SharePad | Special blog offer

BLOG POST ALERTS

A simple link to every new blog post. No spam!

© maynardpaton.com 2023 • Disclaimer • Privacy • Contact