SYSTEM1: Remarkable Q2 May Lead To 8x P/E And Potential Recovery Helped By ITV Progress, New Clients And Net Cash

11 December 2020
By Maynard Paton

Results summary for System1 (SYS1):

  • A pandemic-disrupted first half, albeit with headline numbers that disguised a remarkable return to profitability during Q2.
  • Revenue improvements within the Communications and UK segments suggest the tie-up with ITV is working.
  • A bold pricing structure, greater ambition clarity and even improved film-making may explain why adidas has become a client.
  • The accounts are in reasonable shape, with significant net cash, positive cash generation and perhaps a decent profit margin following various cost savings.
  • Extrapolating the Q2 profit leads to a lowly 8x multiple and intriguing recovery/upside possibilities. I have bought more shares.

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TASTY: Survival Rests On Landlords, Barclays, Vaccinations And Christmas Burgers After H1 Covid Cash Burn Implies June 2021 Receivership

09 December 2020
By Maynard Paton

Results summary for Tasty (TAST):

  • Revenue down 59% led to a £10m operating loss after the pandemic guaranteed an awful performance.
  • Cash of £3.2m and six-month cash burn of £1.6m implies TAST will run out of money by June 2021.
  • Immediate survival hopes seem dependent on landlord negotiations, CVA hints, a loan from Barclays, UK vaccinations and Christmas burgers delivered to your door.
  • One pandemic positive: management has been forced/allowed to instigate much-needed changes to an underperforming restaurant estate.
  • The £4m market cap could be a bargain, assuming government restrictions are lifted, rents are reset, competition is reduced and a recovery one day takes place. I continue to hold.

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MOUNTVIEW ESTATES: Significant Gross-Margin Improvements During Pandemic-Affected H1 May Underpin Possible NAV Of Up To £225 Per Share

04 December 2020
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • A pandemic-affected H1 that showed revenue down 23% and profit down 18% following procedural delays to property sales.
  • A maintained dividend, a lack for furloughed staff and rents up 1% did not signal inherent lockdown trouble. 
  • Significant gross-margin enhancements may reflect an underlying step-change in performance and have favourable implications for valuation. 
  • Expenditure on property purchases has picked up, with management hopeful of acquiring “exceptional opportunities”. Debt levels remain modest.
  • Book value inched to a record £98 per share, although new profit assumptions now point to a balance sheet possibly worth up to £225 per share. I continue to hold.

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

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20 November 2020
By Maynard Paton

I am always looking for ‘multi-baggers’ — investments that can double, triple, quadruple or more.

And here’s some very good news: I have stumbled on a company that can find them for me.

Not just the occasional five-bagger or ten-bagger mind, but 20-baggers.

It’s incredible stuff, especially as the track record of success extends for many years and the gains are typically realised within twelve months.

The company behind these multi-baggers is Manolete Partners, which I discovered by employing a very straightforward SharePad screen.

Read my full Manolete Partners article for SharePad.

Maynard Paton

BIOVENTIX: Very Satisfactory FY 2020 Showcases Record 79% Margin, 5th Consecutive Annual Special Dividend And Webinar Remarks Of Troponin Sales Quadrupling By FY 2022

12 November 2020
By Maynard Paton

Results summary for Bioventix (BVXP):

  • Very satisfactory FY 2020 figures, although H2 growth subsided to mid-single-digits after the pandemic reduced demand for routine blood tests.
  • A 21% final-dividend lift plus a special payout for the fifth consecutive year underpinned a generally positive outlook.
  • Revenue from vitamin D gained 10% and may finally have “plateaued”, while troponin sales quadrupling within the next two years is apparently “plausible“.   
  • The books remain in excellent shape with record 79% margins, robust cash flow, a £5m cash buffer and no debt.
  • The ace financials and predictable customer income leaves an understandably lofty P/E of 32. I continue to hold.

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

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05 November 2020
By Maynard Paton

Today I have returned to one of my favourite SharePad screens.

This screen applies two ratios favoured by ‘quality’ investors — operating margin and return on equity (ROE).

The main filter criteria are:

  • 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 margin and ROE consistently above 20% is probably quite special.

I ran the screen and decided to study Jarvis Securities, a small stock-broker best known for x-o.co.uk.

Read my full Jarvis Securities article for SharePad.

Maynard Paton

TRISTEL: 20%-Plus Annual Growth, Odd UK Performance, Bumper Overseas Progress And Potential Pandemic Tailwind All Add Up To Possible 39x P/E

05 November 2020
By Maynard Paton

Results summary for Tristel (TSTL):

  • Revenue and profit reached new highs following very satisfactory 20%-plus growth, bolstered in part by the pandemic.
  • The UK performance appeared odd, given H2 sales were lower than H1 despite the Covid-19 boost.
  • Overseas sales surged 35% during H2, with the purchase of Ecomed during 2018 now proving to be a great success.  
  • The accounts remain in good shape with high margins, appealing equity returns, net cash and respectable cash generation. 
  • A possible P/E of 39 might be justified if the pandemic leads to permanently greater demand for hospital disinfectants. I continue to hold.

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FW THORPE: P/E of 21-25x May Be Justified After FY 2020 Figures Reveal 18th Consecutive Dividend Increase, £63m Cash Reserves And Exciting SmartScan Growth Potential

23 October 2020
By Maynard Paton

Results summary for FW Thorpe (TFW):

  • “Creditable” figures that revealed second-half profit sliding 17% due to the lockdown.
  • A 2% final dividend lift, cash reserves of £63m plus the commendable funding of furloughed staff did not imply imminent financial difficulties.  
  • The SmartScan light-monitoring system provides exciting potential, with sales up 18% to represent 23% of total revenue. 
  • Talk of a “global recession” and a “downturn in orders” suggests trading during 2021 will be challenging.
  • A P/E of 21-25 seems generous but may reflect the ‘pandemic-proof’ balance sheet, SmartScan growth and/or resilient profit history. I continue to hold.

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ANDREWS SYKES: Resilient H1 Results Confirm Profit Up 2% And Bumper £14m Cash Flow

13 October 2020
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • “Resilient” half-year figures that showed revenue down 4% and profit up 2%. 
  • No light was shed on how ASY could sustain its performance when 50% of UK employees were furloughed. 
  • The statement confirmed bumper cash flow of £14m that prompted a special £10m dividend during the summer.
  • The books remain healthy with high margins and net cash, although the pension scheme might require extra funds. 
  • A possible P/E of 17 does not appear completely outrageous for a seemingly pandemic-resistant business. I continue to hold.

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S & U: Monthly Collections Reaching £12m Support Recovery Potential After H1 Statement Discloses Pandemic Write-Offs Of £13.8m

09 October 2020
By Maynard Paton

Results summary for S & U (SUS):

  • Extra write-offs totalling £13.8m did not seem too awful in the circumstances and should reflect the bulk of the pandemic disruption.
  • The interim dividend was reduced by 35% and management hoped for a full-year payout of between 80p and 100p per share.
  • Payment ‘holidays’ have left some 37% of accounts overdue, but monthly collections have rebounded to a respectable £12m after the half-year. 
  • Net debt of £108m remains significant, although cash flow covered interest payments a very reasonable 10x.
  • The shares trade relatively close to book value and could offer double-digit annual returns assuming a full recovery. I continue to hold.

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Q3 2020: Up To 85% Returns From Boring Old Dividends

01 October 2020
By Maynard Paton

I trust your shares have performed well during the last three months.

A quick summary of my portfolio’s third-quarter and year-to-date progress:

  • Q3 gain: +4.4%*
  • Q3 trades: None.
  • YTD gain: +3.4%* (FTSE 100: -20.2%**)
  • YTD winners/losers: 4 winners vs 8 losers 

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

The news from my shares during Q3 was generally satisfactory in the circumstances. 

Among my holdings releasing results during the quarter, two reported lockdown-lowered profits that were complemented with promising director recovery talk. One holding meanwhile lifted its dividend 11% and another announced a very unexpected special payout.

After making no trades during the second quarter, I did not buy or sell during this latest quarter either. Never before since starting this blog during 2015 have I refrained from adjusting my portfolio for six months.

How companies will fare as the pandemic continues is still impossible to predict. I remain 25% in cash and hope a few obvious bargains may one day appear. 

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

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30 September 2020
By Maynard Paton

I am not a great fan of the fund-management industry.

I cannot think of another sector where the employees collect enormous salaries while the customers pay hefty fees and sometimes get nothing in return.

Quite often us amateur investors are better off with simple index trackers rather than falling for the industry’s persuasive advisers and glossy brochures.

Yet here I am about to study Polar Capital — a fund manager that might actually exhibit ‘pandemic proof’ qualities given its investment bias towards technology and healthcare.

Read my full Polar Capital article for SharePad.

Maynard Paton

CITY OF LONDON INVESTMENT: 2020 Dividend Up 11% And Yielding 7.5% After FuM ‘Capacity’ Warning Limits Growth Potential And Explains Upcoming Merger

18 September 2020
By Maynard Paton

Results summary for City of London Investment (CLIG):

  • Funds under management (FuM) endured a rollercoaster second half, but finished the year up 2% to lift profit by 10% and the dividend by 11%.
  • FuM ‘capacity’ has become an issue, and explains CLIG’s limited past progress and probably prompted the upcoming merger. 
  • The Karpus deal appears logical, but similar to CLIG the merger partner has struggled to attract new clients.
  • The accounts continue to sport high margins, decent cash flow, high equity returns and net cash.
  • A potential P/E of 11 and yield of 7.5% seem attractive, although the shares have been rated modestly for years. I continue to hold.

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M WINKWORTH: Stamp-Duty Changes Herald H2 Rebound And Foxtons Outclassed Once Again Following 20% Lockdown Profit Drop

11 September 2020
By Maynard Paton

Results summary for M Winkworth (WINK):

  • A very acceptable lockdown performance, with underlying half-year revenue down 17% and profit down 20%.
  • Temporary stamp-duty changes have supported a “significant uplift in activity” and ought to herald a much stronger second half.
  • Extremely impressive market-share gains continue to be won from London rival Foxtons.
  • Despite a number of accounting re-jigs, the books remain in good shape with respectable margins and net cash.
  • A possible P/E of 11-14 and potential income of at least 4% may offer upside should earnings one day regain their momentum. I continue to hold.

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[SharePad] Screening For My Next Long-Term Winner: Fuller, Smith & Turner

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10 September 2020
By Maynard Paton

First, a wealth warning.

The last price-to-book ‘bargain’ I looked at for SharePad was Hammerson.

Back then investors were in theory able to purchase £1 of assets for just 30p. The share price has since lost 75%.

A few tweaks to the same stock screen now leads me to Fuller, Smith & Turner. 

This pub group has suffered during the pandemic, but sleuthing via SharePad reveals substantial freehold assets that the balance sheet may significantly undervalue. 

This property backing may limit further downside as the group re-opens its pubs and aims to recover.

Read my full Fuller, Smith & Turner article for SharePad.

Maynard Paton