CITY OF LONDON INVESTMENT: Net Client Withdrawals Of $752m Continue To Limit Re-Rating Potential Despite FY 2021 Showcasing Record $11.4b FuM, 49% Margin And £26m Net Cash

25 November 2021
By Maynard Paton

Results summary for City of London Investment (CLIG):

  • The Karpus merger ensured a record financial performance and a 10% dividend lift, although funds under management (FuM) during H2 (+4%) did not enjoy the buoyant market gains experienced during H1 (+31%).
  • Further client ‘rebalancing’ led to FuM withdrawals of $752m — almost entirely negating the net client inflows of $758m received during the previous five years. 
  • The absence of fresh client money and investment gains lagging the MSCI World index — as well as staff using paper payslips and fax machines — could be evidence of a business rather stuck in its ways.
  • A startling 49% operating margin, net cash at a hefty £26m plus small demands on cash flow confirm the accounts remain in good shape.
  • Although the possible P/E is 10-11 and the yield tops 6%, the shares have been rated modestly for years as major new clients remain very elusive. I continue to hold.

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[SharePad] Small-Cap Spotlight Report: AQUIS EXCHANGE

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21 November 2021
By Maynard Paton

Investors love ‘disruptors’. Find a pioneering upstart that is stealing market share from industry dinosaurs, and your portfolio may enjoy a huge stock-market winner. Amazon of course is the textbook example.

One company that could be a genuine disruptor is Aquis Exchange, a £180 million small-cap trying to revolutionise share trading and taking on the likes of the London Stock Exchange and Euronext.

(Source: SharePad)

Let’s take a closer look.

Read my full Aquis Exchange article for SharePad.

Maynard Paton

BIOVENTIX: FY 2021 Results Unveil Record H2 Profit (+14%) While Finite Troponin Income Shifts Longer-Term Perspective Towards Pyrene Project And Alzheimer’s Research

05 November 2021
By Maynard Paton

Results summary for Bioventix (BVXP):

  • Acceptable annual figures that included a record H2 profit (+14%) despite the pandemic continuing to disrupt demand for routine blood tests.
  • Mixed progress from vitamin D and other established antibodies leaves near-term growth dependent mostly on the fast-selling troponin product. 
  • Additional research efforts suggest pyrene biomonitoring and detecting Alzheimer’s disease may be the more likely long-term pipeline winners.
  • A 19% dividend lift, another special payout, 70%-plus margins and low retained-profit requirements underlined the wonderful economics of collecting antibody royalties. 
  • Troponin’s finite income and a resultant sum-of-the-parts valuation do not indicate an obviously tantalising £36 share price. I continue to hold.

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TRISTEL: Pandemic-Disrupted FY 2021 Admits H2 Profit Down 36% But Also Re-Introduces FDA Timetable As Sector Rival Implies $180m US Market Opportunity

29 October 2021
By Maynard Paton

Results summary for Tristel (TSTL):

  • A disappointing pandemic-disrupted performance, with H2 revenue and profit down 15% and 36% respectively on the preceding H1.
  • Progress was curtailed as NHS outpatient clinics closed and orders “dried up“, which left certain UK product sales running at a six-year low.
  • Overseas revenue up 3%, a resilient 16% H2 margin, net cash of £10m and a 2% final-dividend lift suggest the business is not broken just yet. 
  • A re-introduced timetable for product launches in the United States provides hope of the seven-year FDA process concluding during 2023.
  • The £236m market cap remains elevated, and is supported by a sector rival implying the US market for ultrasound-probe disinfection is worth up to $180m. I continue to hold.

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[SharePad] Small-Cap Spotlight Report: GOODWIN

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20 October 2021
By Maynard Paton

This quote from Richard Beddard caught my eye the other week:

If something truly special is incubating, we may profit from our investment for decades.”

I am always up for profiting from an investment for decades.

Richard was writing about “pivots” — companies that are adapting to change by “incubating another better business“.

He highlighted four examples and today one of the quartet — Goodwin, a £277 million market-cap engineer — goes under my SharePad microscope.

Richard described these pivots as “decent but humdrum” businesses, but do not let that put you off. Goodwin has 30-bagged during the last 20 years and a heritage of family management could indeed lead to decades of further profit.

(Source: SharePad)

Let’s take a closer look.

Read my full Goodwin article for SharePad.

Maynard Paton

S & U: Record H1 Profit Prompts Welcome 50% Dividend Rebound And Management Talk Of Loan Volumes Increasing 25%

19 October 2021
By Maynard Paton

Results summary for S & U (SUS):

  • A record H1 profit performance supported by a “lower than normal” bad-debt provision and the dividend rebounding 50% to pre-Covid levels.
  • The main car-loan division has recovered well from the pandemic, with collection rates (94%) and on-time first payments (98%) now standing at multi-year highs.  
  • The fledgling property-loan operation enjoyed a bumper six months following the government CBILS scheme.
  • Interest charges at 3%, increased borrowing facilities and headroom of £65m indicate no obvious funding concerns.  
  • The £28 shares are close to an all-time high and may already reflect management’s webinar talk of car-loan volumes increasing 25% to 25,000 a year. I continue to hold.

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Q3 2021: Linking Revenue Per Employee To Investment Success

30 September 2021
By Maynard Paton

Happy Thursday! I trust your shares are flourishing and that you still find my blog useful.

A summary of my portfolio’s third quarter:

  • Q3 change: +5:1%*
  • Q3 trades: none
  • YTD change: 19.0%*
  • YTD winners/losers: 9 winners vs 2 losers

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

I am pleased the portfolio gains recorded during the first half of the year were extended during Q3.

Newsflow from my shares has been generally encouraging, and I hope boardrooms will remain optimistic as the pandemic subsides.

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

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22 September 2021
By Maynard Paton

Shares offering ‘Quality At a Reasonable Price’ have been hard to find during the last few years.

But specialist SIPP provider Curtis Banks could meet some QARP-type criteria.

At present this small-cap offers:

  • Predictable income, with approximately 60% of revenue said to be recurring through annual fees;
  • Respectable financials, including 20%-plus margins and an ambition to reach 30%;
  • A history of growth, although future prospects have admittedly moderated, and;
  • A reasonable P/E of 14-17 depending on which projections you believe.

Let’s take a closer look.

Read my full Curtis Banks article for SharePad.

Maynard Paton

MINCON: Mixed H1 Suffers Pandemic Disruption And Extends ‘Moat’ Questions As Management Expects A Better H2 After Creating A ‘Platform For Future Growth’

22 September 2021
By Maynard Paton

Results summary for Mincon (MCON):

  • A very mixed H1 performance, as record €67m six-month revenue contrasted with profit down as much as 13% due to general pandemic disruption.
  • European construction revenue encouragingly climbed 50% supported by numerous smaller projects and innovative sector products.
  • Customer testing of the “disruptive” Greenhammer system remains on hold, although other developments are now “poised to deliver“.
  • The move to selling a wider range of equipment direct to customers continues to limit margins/returns on equity/cash flow and raise doubts about an indisputable competitive ‘moat’.
  • While a P/E of 20 is not a clear bargain, the long-time family management expects a stronger H2 and claims to have established a “platform for future growth“. I continue to hold.

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

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08 September 2021
By Maynard Paton

Everybody loves a share that keeps going up.

SharePad lists 168 names that have delivered 15% or more annualised turns during the last one, three and five years:

(Source: SharePad)

SDI Group is ranked tenth of the 168 and its shares have certainly kept going up. They have surged 146% during the last twelve months and 12-bagged since 2016:

(Source: SharePad)

Let’s take a closer look.

Read my full SDI Group article for SharePad.

Maynard Paton

SYSTEM1: Better-Than-Expected FY 2021 Results Reveal Accelerating Data Transition And Bold £1 BILLION Market Cap Opportunity

07 September 2021
By Maynard Paton

Results summary for System1 (SYS1):

  • A better-than-expected H2 accompanied some bold management commentary that cited an eventual £1 billion market cap. 
  • The acceleration towards ‘scalable’ data products continues, with ‘disruptive’ pricing and partnerships with ITV and LinkedIn spearheading the transition.  
  • Downgraded option targets and upgraded director pay looked awkward given the optimistic narrative and receipt of government pandemic support.
  • Greater net cash, a mooted share buyback and a 21% adjusted H2 margin suggest the accounts have recuperated from their pandemic nadir.
  • Despite extra growth investment limiting near-term earnings progress, long-term multi-bagger upside may still be obtainable. I continue to hold. 

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[SharePad] Small-Cap Spotlight Report: PURPLEBRICKS

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28 August 2021
By Maynard Paton

Investors love disruptors. Find a pioneering upstart that is stealing market share from industry dinosaurs, and your portfolio may enjoy a huge stock-market winner. Amazon of course is the textbook example.

But not every disruptive idea actually works. In some cases the old way may still be the best way.

Take estate agency. Despite vast amounts of investment and marketing, online estate agents presently handle only 8% of UK property transactions.

Let’s see what can be learned from Purplebricks shares, a company which has led a high-profile challenge against traditional estate agents — but has yet to prove truly disruptive.

Read my full Purplebricks article for SharePad.

Maynard Paton

[SharePad] Small-Cap Spotlight Report: HORNBY

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22 August 2021
By Maynard Paton

Turnarounds can be tempting.

You find a business that has hit big trouble with a stock price at rock bottom…

…but you believe your contrarian instincts will yield a huge return as the company enjoys a full recovery.

Mind you, distinguishing genuine turnarounds from shares heading for the graveyard is never easy. And even if the company does recover, the journey typically involves multiple false dawns and takes far longer than anyone ever expects.

One potential recovery worthy of consideration is Hornby. Although the manufacturer of the famous model trains has suffered numerous setbacks during recent years, the following bull points may attract the turnaround investor:

  • The company owns a collection of celebrated old brands that could be hard to replicate;
  • Customers include enthusiastic hobbyists, with the recent success of wonder-stock Games Workshop showing what is possible with such committed purchasers;
  • A previous company recovery led to a 10-bagger share-price gain;
  • One institution seems very keen on the group’s prospects by owning 75% of the stock;
  • The limited free float, £78 million market cap and absence of broker forecasts keep the company off many investors’ radars, and;
  • The latest results showed a return to profitability and a net cash position, which may negate the chance of further major problems.

Read my full Hornby article for SharePad.

Maynard Paton

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

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28 July 2021
By Maynard Paton

One of my favourite screening strategies is to hunt for attractive growth companies with unloved share prices.

The criteria I use for these searches are:

  1. A negative share-price performance since the start of the year;
  2. A compound 5-year earnings growth rate of 10% or more;
  3. A forecast 1-year earnings growth rate of at least 0%, and;
  4. Net borrowing of zero or less (i.e. a net cash position).

The other day the filters returned only 14 matches:

(Source: SharePad)

I selected ASOS because the company:

  • Had the largest market cap on the list;
  • Boasts an incredible growth story, and;
  • Recently issued a trading statement that wiped 18% off the share price.

Read my full ASOS article for SharePad.

Maynard Paton

MOUNTVIEW ESTATES: Estimated NAV Still Surpasses £200 Per Share After Remarkable H2 Shows Welcome 1.55x Sales Premium And 12.5% Final Dividend Lift

15 July 2021
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • A respectable performance supported by a remarkable H2 comeback, with full-year profit up 5% after declining 18% during a pandemic-disrupted H1.
  • Property sales realising a welcome 1.55x premium to their 2014 valuation alongside the first dividend lift for three years suggest favourable near-term trading. 
  • A small text change to AGM-related statements imply some unhappy shareholders have started to engage with management. 
  • Debt of £22m stands at a 21-year low and represents just 5% of the £398m property estate.
  • Book value inched to a record £101 per share, although my calculations still point to a balance sheet inherently worth beyond £200 per share. I continue to hold.

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