Author Archives: Maynard Paton

My Portfolio: Year In Review 2019

10 January 2019
By Maynard Paton

Happy January!

I trust you enjoyed the festive break and are now ready to battle the market for another twelve months!

This 5,562-word post provides a ‘year in review’ of my current portfolio holdings. I recap how each of the underlying businesses performed during 2019, as well as provide a few remarks about valuation.

As I mentioned this time last year, I find writing such reviews extremely useful — not least because I double-check my investment logic to ensure I am still invested for the right reasons! The upsets I will suffer during 2020 will most likely be caused by the shares I already own rather than by new shares I purchase.

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Q4 2019: 2 Sells And Up 13.1% For 2019

02 January 2020
By Maynard Paton

Happy 2020! I hope you enjoyed last year’s positive market and that you continue to find my blog useful.

A quick summary of my portfolio’s 2019:

  • Overall gain: 13.1%*;
  • Nine shares went up and six shares went down;
  • Performances ranged from Tristel, up 61%, to Tasty, down 74%;
  • Three shares were topped-up: Daejan, Mountview Estates and S&U, and;
  • Three shares were sold entirely: Castings, Getech and Oleeo.

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

Before I review my 2019 performance, let me first outline what happened during the final quarter of the year.

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Daejan: £120 Per Share NAV Is More Than Double The £55 Share Price As H1 Update Reveals £46m US Property Devaluation

31 December 2019
By Maynard Paton

Results summary for Daejan (DJAN):

  • The statement revealed fresh first-half records for revenue, up 12%, underlying operating profit, up 7%, and net asset value, up 4%.
  • New rent laws in New York led to a £46m devaluation and put DJAN on course to register its first annual valuation loss since 2009.
  • A 6% strengthening of the USD counterbalanced the New York devaluation and helped support net asset value.
  • The accounts remain conservatively financed, with capital expenditure reduced significantly following earlier cautious remarks from management.
  • The share price represents only 46% of net asset value — despite net asset value advancing 75% during the last five years. I continue to hold.
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Mountview Estates: H1 Figures Show NAV Inching 4% Higher To £96 Per Share After Management Suffered Significant AGM Protest Votes For The Third Consecutive Year

28 December 2019
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • Brexit “uncertainties” led to a dull performance, with revenue falling 1%, underlying operating profit improving 1% and an unchanged dividend.
  • An improved gross margin and the disposal of four investment properties for prices well above book were encouraging.
  • Debt represents a modest 10% of the group’s property estate — which continues to be accounted for at cost.
  • This year’s AGM witnessed further protest votes against the independent non-executives, the board’s pay and the auditors.
  • MTVW’s book value increased by 4% to £96 per share, although the balance sheet could inherently be worth £200-plus per share. I continue to hold.
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Oleeo: Bombshell Tender Offer And Delisting Proposal Forces My Exit At A 30% Loss

23 December 2019
By Maynard Paton

Results summary for Oleeo (OLEE):

  • A bombshell tender offer and delisting proposal overshadowed details of the 2019 results.
  • I have tendered my full holding and recorded a 30% loss after owning the shares for four years.
  • The tender offer was not exactly generous, given OLEE’s net cash represented 93% of the tender valuation.
  • A delisting was always a risk when the executive chairman (and related parties) owned 84% of the business.
  • Full-year revenue climbed 7% to reach a new high, although the significant development expenditure seen since 2015 is set to depress profit for at least another year. 
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[SharePad] Screening For My Next Long-Term Winner: Mears

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20 December 2019
By Maynard Paton

This SharePad article did not turn out as I had expected.

I had thought I would be evaluating a business with glorious financials and tip-top management.

I ended up studying accounting alarm bells and a dissident shareholder trying to oust the boardroom.

The SharePad screen I used looked for companies that offered:

1) A 20-year (or more) record of dividend increases, and;
2) Forecast dividend growth for the current year.

I selected Mears, a £269 million provider of housing-maintenance and social-care services, due to its forecast 5.3% yield.

Read my full Mears article for SharePad.

Maynard Paton

System1: As H1 Figures Show Just 4% Top-Line Growth And AdRatings Burning £2m A Year, Could ITV’s Euro 2020 Competition Validate A Potential Recovery?

20 December 2019
By Maynard Paton

Results summary for System1 (SYS1):

  • Another unremarkable performance, with underlying gross profit up 4% and profit (without AdRatings) rebounding 24% due mostly to improved cost control.  
  • The start-up AdRatings service continues to lose £2m a year and is increasingly dictating the company’s progress, potential and valuation.
  • An ITV competition to determine the most “emotionally engaging” advert during Euro 2020 could create extra recognition for System1-type marketing and SYS1’s services. 
  • The accounts remain cash rich and the business (without AdRatings) exhibited a healthy 21% margin.
  • The P/E could be anywhere between 8 and 26 depending on how AdRatings, share-based payments and the cash position are viewed. I continue to hold.
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Bioventix: Satisfactory 2019 Results Reveal (Yet Another) Special Dividend And Indicate Growth During 2020-2025 Depends Entirely On Troponin

17 December 2019
By Maynard Paton

Results summary for Bioventix (BVXP):

  • Satisfactory double-digit growth spearheaded by notable demand for the group’s main antibody.
  • Progress beyond 2020 now appears dependent entirely on the new troponin product, revenue from which remains low.
  • An unsettling tweak to management’s outlook suggests the pipeline antibodies may require a further five years of development.
  • The accounts remain in excellent shape with terrific margins, appealing equity returns and minimal reinvestment requirements that have prompted yet another special dividend. 
  • The valuation remains rich with an underlying P/E of 28. I continue to hold.
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Tristel: Record Annual Figures (Once Again) And Impressive Three-Year Targets Support An Understandable 30x P/E

12 December 2019
By Maynard Paton

Results summary for Tristel (TSTL):

  • Record annual figures for the sixth consecutive year, supported by satisfactory progress both within the UK and abroad.
  • The underlying performance was complicated by Brexit stock-piling, an acquisition, US regulatory costs and option expenses. 
  • The publication of new three-year financial targets was impressive, and suggested the company could grow organically at 10-15% per annum. 
  • The accounts are still healthy with high margins, net cash and respectable cash generation. 
  • The valuation remains understandably rich with an estimated underlying P/E of 30. I continue to hold.
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[SharePad] Screening For My Next Long-Term Winner: Webinar

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07 December 2019
By Maynard Paton

I recently hosted a SharePad webinar, during which I demonstrated three screens used in my SharePad articles and evaluated three companies using various SharePad features.

The filters I used were taken from my SharePad articles on Renishaw, Rightmove and Medica, and the companies I evaluated were XP Power (01:00), Headlam (15:30) and Sopheon (29:00). 

I finished the SharePad webinar with a Q&A session (45:00). 

Just click the video below to watch a recording of the webinar.

You can import the financial charts I used during the webinar into your SharePad setup by following the instructions half-way down this page.

Maynard Paton

Andrews Sykes: Milder Winter Leaves H1 Profit Down 25% Although Margins Remain High, Cash Exceeds Debt And Current Trading Signals A Better H2

02 December 2019
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • Revenue dropped 8% and operating profit dived 25% following lower demand for ASY’s heaters and boilers.
  • European operations continue to represent almost a quarter of the business, with new depots opened recently in France.
  • Accounts now affected by IFRS 16, although the fundamental attractions of decent margins (19%) and net cash (£20m) remain in place. 
  • Outlook comments appeared encouraging, with the company blog suggesting busy demand for pumps to combat flooding.
  • The underlying P/E could be 16 and the yield is 3.9%. I continue to hold.
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Getech: H1 Results Reiterating ‘Lumpy’ Revenue, Fragile Accounts And Other Drawbacks Prompt My Exit At A 47% Loss

02 December 2019
By Maynard Paton

Results summary for Getech (GTC):

  • Revenue fell 15% to its lowest first-half level since 2010. At least the H1 operating loss did not increase from H1 2018.
  • GTC continues to be dependent on oil and gas operators purchasing its “market leading” data — the income from which remains “lumpy”. 
  • The level of recurring revenue implies a lot of work is needed before GTC can sustain positive earnings.  
  • The accounts are still rather fragile, with cash flow shored up by tax credits and capitalised development costs becoming more significant.  
  • Delays to both a Sierra Leone project and a property sale have not helped support the £9m market cap. I have sold out entirely.
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[SharePad] Screening For My Next Long-Term Winner: Dotdigital

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20 November 2019
By Maynard Paton

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

The exact criteria I re-used were:

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

This time I have pinpointed Dotdigital, a £265 million software business that is blessed with a 30% operating margin and a 30% ROE.

Read my full Dotdigital article for SharePad.

Maynard Paton

S & U: Record H1 Figures Show Profit Up Only 3%, Although Welcome News On Bad Debts Now Signals A ‘Resumption’ Of Growth

19 November 2019
By Maynard Paton

Results summary for S & U (SUS):

  • Record first-half figures that showed revenue up 7%, operating profit up 3% and the dividend up 6%.
  • Bad debts within the Advantage car-loan division have started to subside following 18 months of sharp increases.
  • Management remains upbeat as loan applications continue to flood in, and has appointed an industry ‘heavyweight’ as the new Advantage MD.
  • Progress at Aspen Bridging was “slightly short of expectations” but the division’s long-term potential could be considerable. 
  • Possible P/E of 11 and yield of 5.8% do not appear expensive if indeed the business can enjoy “a resumption of [its] usual rates of growth”. I continue to hold.
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Tasty: Woeful H1 Results Leave Shareholders Relying On Bumper Christmas Bookings To Avert Terminal Cash Trauma

07 November 2019
By Maynard Paton

Results summary for Tasty (TAST):

  • Woeful figures showed weaker revenue and greater losses — with the excuses this time including Brexit rather than unfavourable weather and the World Cup.
  • A £3m equity placing has shored up the balance sheet, while an absence of further write-offs and utilised provisions lends support to turnaround hopes. 
  • This year’s Christmas performance is crucial, with TAST going all out to capture festive-party bookings. Management’s outlook remarks seemed encouraging.
  • Poor Christmas trade causing further cash flow traumas could leave TAST no option but to de-list.  
  • The market cap is £4.1m for sales of £45m from 57 restaurants. I continue to bravely/stupidly hold.
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[Event] Could You Do Me This Quick Favour?

28 October 2019
By Maynard Paton

Could you do me this quick favour?

I am taking part in a charity ‘kickathon’ this weekend (2nd and 3rd November), raising money for three good causes.

If you have ever enjoyed my free blog, then now is your chance to show your appreciation and make a donation :-)

This link gives full details of the event. Essentially a group of us martial-arts students are aiming to perform 200,000 kicks over two days. I will be happy with 10,000 kicks and the ability to walk afterwards!

All contributions will be gratefully received. Simply click on this link to donate.

Many thanks.

Maynard Paton

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

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25 October 2019
By Maynard Paton

Studying free cash conversion is vital when evaluating a set of accounts.

The measure compares free cash flow to reported earnings, and can indicate whether a business is a ‘cash fountain’ or a ‘cash guzzler’.

Ideally we want to own companies that generate plenty of spare cash, because such cash can:

  • Underpin accounting profits;
  • Indicate an attractive business, and;
  • Fund welcome dividends.

By employing SharePad, I identified Rightmove as an elite cash producer.

Read my full Rightmove article for SharePad.

Maynard Paton

FW Thorpe: 2019 Results Declare Record £57m Cash Hoard Despite Slowing LED Sales And Brexit Reducing Profit By 10%

18 October 2019
By Maynard Paton

Results summary for FW Thorpe (TFW):

  • Ongoing economic uncertainty” caused by Brexit led to flat sales and lower profit. 
  • Talk of a “healthy order book” provides hope that trading won’t deteriorate into 2020. 
  • Comments concerning new products imply slowing LED growth and a plucky move into non-lighting applications.
  • Accounts boast enormous £57m cash hoard that could be used for acquisitions — or (fingers crossed) further special dividends.
  • Underlying P/E of 19 seems optimistic given recent progress. I continue to hold.
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Q3 2019: 1 Top-Up, 3 AGMs And Obscure But Important Annual Report Small-Print

01 October 2019
By Maynard Paton

Happy Tuesday! I hope you continue to find my Blog useful… and that your shares are coping well in the current market.

My portfolio continues to lag the FTSE 100. Since the start of the year, I am up a measly 3.6% while the index with dividends reinvested is up 14.3%.

I remain on the wrong side of what has become a two-tier market. While global ‘quality’ large-caps continue to charge higher, my portfolio is still full of smaller UK companies…

…many of which are undergoing potential recoveries (e.g. Getech, Tasty), experiencing standstill earnings (e.g. FW Thorpe, M Winkworth) or operating in an unloved sector (e.g. Daejan, Mountview Estates).

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

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30 September 2019
By Maynard Paton

Dynamic growth shares are among the market’s most exciting investments.

Find a business that has expanded rapidly and offers the prospect of further earnings growth — but also has an overlooked share price — and you could be on to a winner.

Medica — an AIM-traded supplier of radiology reports to hospitals — could be one such opportunity. The company’s forecast P/E of 15 appears modest given the 300%-plus earnings growth seen during the previous five years.

Read my full Medica article for SharePad.

Maynard Paton

M Winkworth: Subdued H1 Results Leave P/E At 10x As Foxtons Beaten Once Again In Brexit-Stifled Market

23 September 2019
By Maynard Paton

Results summary for M Winkworth (WINK):

  • A standstill London property market left first-half revenue down 3% and profit unchanged. 
  • Subdued trading conditions have persisted since the Brexit vote and are likely to continue until the “political and economic uncertainty” clears. 
  • Further market-share gains have been won from London rival Foxtons, while the online competition continues to struggle.
  • The accounts remain simple, high-margin and cash-flush.
  • A possible P/E of 10 and yield of 6.6% do not appear expensive should earnings ever resume their momentum. I continue to hold.
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[SharePad] Screening For My Next Long-Term Winner: Hammerson

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04 September 2019
By Maynard Paton

Buying a share at a discount to its book (or net asset) value ought to be the safest way of investing.

Indeed, what could go wrong if you can effectively buy assets worth £1 per share for, say, 50p?

The reality — sadly — is not always that simple.

Let me show you what I mean by using SharePad to evaluate Hammerson, a FTSE 250 real estate investment trust with net tangible assets of £5 billion and a market cap of only £1.6 billion .

Read my full Hammerson article for SharePad.

Maynard Paton

Tristel: 2019 Open Day Yields No Revelations Although Encouraging Sales Developments Have Emerged In The UK, France And Italy

04 September 2019
By Maynard Paton

Trading update and presentation summary on Tristel (TSTL):

  • TSTL’s 2019 open-day presentation and the associated scuttlebutt did not yield any ground-breaking news. 
  • Unpicking the accompanying trading update suggested second-half UK sales gained an impressive 12%.
  • However, the contribution from international operations was distorted by the purchase of Ecomed in November.
  • The former Ecomed boss was confident sales in France could one day exceed those in Germany — TSTL’s largest overseas market. 
  • The purchase of the group’s Italian distributor — which has expanded quickly during recent years — appears very sensible. 
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Mincon: Remarkable €8m Disposal And Promising ‘Challenger’ Contracts Offset Mixed H1 Trading And 14% Profit Drop

27 August 2019
By Maynard Paton

Results summary for Mincon (MCON):

  • Mixed progress, with little underlying revenue growth and profit down 14% due to a “softening market”.
  • Earnings were bolstered by the remarkable €8m disposal of a subsidiary purchased 15 months earlier for effectively €1m.
  • New ‘challenger’ plan of selling direct to customers appears to have started well with two new contracts won.
  • Financials could be improved after accounts show modest margins, notable write-offs and significant working-capital investment.
  • The underlying P/E of 20 is not a bargain. I continue to hold.
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Daejan: NAV Reaches New £119 Per Share High But Management Remarks Of Slowing Growth Now Leaves Price-To-Book At 46%

14 August 2019
By Maynard Paton

Results summary for Daejan (DJAN):

  • These full-year figures set new records for revenue, up 9%, net asset value, up 7% and the dividend, up 3%.
  • The 3.5% valuation gain was DJAN’s lowest since 2012 following the “uncertainty” caused by Brexit. Management remarks suggested current-year growth could slow further.
  • A significant purchase in the States has lifted the proportion of US properties to 29% of the group’s estate.
  • The accounts remain conservatively financed and the property valuations continue to appear prudent.
  • The share price represents only 46% of net asset value — the lowest percentage for seven years. I continue to hold.
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[SharePad] Screening For My Next Long-Term Winner: AG Barr

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09 August 2019
By Maynard Paton

Quality companies undergoing temporary problems can often become attractive investment opportunities.

On that basis, perhaps AG Barr is worth closer inspection.

The soft-drinks manufacturer famous for Irn-Bru recently warned that profits would be lower than expected… and the share price plunged accordingly.

However, AG Barr does boast a quality track record. During the last 40 years for example, the group has lifted its annual dividend by an average 11% — and shareholders have never seen their income cut.

Read my full AG Barr article for SharePad.

Maynard Paton

City Of London Investment: Dividend Yield Still Tops 6% After Mixed 2019 Summary Shows FUM At Record (GBP) High But Fee Rates Sliding Lower

26 July 2019
By Maynard Paton

Results summary for City of London Investment (CLIG):

  • These 2019 summary figures contained no surprises, as lower funds under management (FUM) throughout the year left revenue down 6% and profit down 16%.
  • FUM ironically ended the year at its highest-ever level in GBP terms (£4.2b), as client money once again trickled out of the main emerging-market funds and in to other strategies.
  • The overall fee rate paid by clients slid from 80 basis points to 76 basis points.
  • The accounts continue to sport high margins, a robust return on equity, decent cash flow and net cash.
  • The P/E is approximately 10 and the yield tops 6%, although the shares have traded on a similar rating for years. I continue to hold.
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[SharePad] Screening For My Next Long-Term Winner: Imperial Brands

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15 July 2019
By Maynard Paton

Imagine this. You find a blue-chip company that offers:

  • 21 years of consecutive dividend increases, with the last ten years showing 10% per annum growth;
  • Management guidance of further 10% annual dividend growth “over the medium term”, and;
  • A share price with a 10% dividend yield.

Too good to be true?

Well, that is the situation at Imperial Brands.

Read my full Imperial Brands article for SharePad.

Maynard Paton

Mountview Estates: 2019 Results Show Encouraging H2 As NAV Climbs To £94 Per Share And Closer To £97 Share Price

15 July 2019
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • Brexit “uncertainties” led to MTVW’s lowest annual revenue and earnings since 2013.
  • At least the dividend was held and net asset value reached a fresh £94 per share high.
  • A higher gross margin during the second half was encouraging and may indicate MTVW is enjoying slightly stronger sale prices.    
  • Debt represents a low 12% of the group’s property estate — which continues to be accounted for at cost.
  • My sums suggest MTVW’s balance sheet could actually be worth £200-plus per share — more than double the recent share price. I continue to hold.
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Q2 2019: 1 Sell, 3 Top-Ups And Portfolio Analysis The Fundsmith Way

28 June 2019
By Maynard Paton

Happy Friday! I hope you continue to find my Blog useful… and that your shares are performing well in the current market.

I am pleased my portfolio remains in positive territory this year — although I am still trailing the FTSE 100. So far during 2019, I am up 7.7% while the index is up 13.1%.

My underperformance is due in part to owning companies that are:

  • undergoing potential recoveries (Getech, Oleeo, System1 and Tasty);
  • experiencing flat earnings (Mincon and M Winkworth), or;
  • operating in an unloved sector (Daejan and Mountview Estates).

Those eight shares represent approximately 40% of my portfolio. Add in cash of 7.5% as well, and almost half of my portfolio is marooned far away from the high-flying ‘quality’ growth shares that (seemingly) keep leading the market higher.

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