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.

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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.

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[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.

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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.

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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.

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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.

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[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.

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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.

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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.

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[Podcast] OCEAN WILSONS, TRISTEL And ARCONTECH With Roland Head, Mark Simpson, Bruce Packard And Maynard Paton

IMPORTANT! The podcast below remains freely available, but from 1 August 2023 all my podcasts became part of a premium service for UK private investors. Please do consider joining if you enjoy the conversation. More details here >>

11 July 2023
By Maynard Paton

I have recorded another episode of The Investor’s Roundtable podcast with fellow investors and good friends Roland Head, Mark Simpson and Bruce Packard:

MAYNARD
PATON

ROLAND
HEAD

MARK
SIMPSON

BRUCE
PACKARD

We talked about Bruce’s investment in shipping and investment group Ocean Wilsons (OCN), my investment in disinfectant specialist Tristel (TSTL) and Mark’s investment in software developer Arcontech (ARC). We also discussed whether private investors should consider asset allocation within their portfolios:

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CITY OF LONDON INVESTMENT: Possible 34p EPS Just About Supports 33p Per Share Dividend And 7.8% Yield After H1 2023 FuM Slides 18% And Q3 Update Admits Client Fees Cut To 71 Basis Points

01 July 2023
By Maynard Paton

H1 2023 results summary for City of London Investment (CLIG):

  • Choppy” market conditions causing funds under management (FuM) to slide 18% to $9b led to revenue dropping 9% and profit diving 26%.
  • Significant new clients remain very elusive, with H1 outflows of $107m negating the inflows enjoyed during FY 2022 and aggregate withdrawals reaching $404m at merger partner KIM.
  • Rising staff costs represented 42% of revenue following a 24% profit share, and questions remain as to whether i) employees rank ahead of shareholders, and ii) the total-return KPI really stretches management.
  • The follow-up Q3 update admitted fee rates had declined from 73 to 71 basis points, as clients seemingly chip away at charges after perhaps watching the cheaper S&P 500 continue to outrun their CLIG portfolios.
  • Reduced FuM, lower fees and greater expenses now point to earnings of 34p per share that just about support the 33p dividend and 7.8% yield. Capital gains meanwhile look dependent entirely on a broad market recovery. I continue to hold.

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MINCON: FY Profit Hits Record €20m As Stock Level Balloons To €77m, Free Cash Flow Squeezed To €2m And Greenhammer Lifespan Set To 15 Years

24 June 2023
By Maynard Paton

FY 2022 results summary for Mincon (MCON):

  • A positive performance buoyed by healthy post-pandemic orders, showing revenue up 18% (to €170m) and profit up 9% (to €20m) to set new FY records.
  • Bumper construction income, greater direct sales and increased US revenue counterbalanced weaker mining activity in Europe and Australia.
  • Rig problems have beset early revenue from the “transformational” Greenhammer system, which management now believes has a 15-year useful life.
  • A €14m working-capital investment pushed stock levels to a huge €77m, squeezed free cash flow to only €2m and raised questions about the debt-funded dividend.
  • MCON’s “superior technical and innovative technology” is still to translate into superior financials, with obvious evidence of smart capital-allocation decisions remaining elusive. I continue to hold.

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TASTY: Formal Blog Coverage Ceased After Woeful £2m FY 2022 Loss Exposes Flawed Cost Structure And Suggests Wildwood Format Is Now Broken

30 May 2023
By Maynard Paton

FY 2022 results summary for Tasty (TAST):

  • A woeful H2 performance delivered a full-year £2m loss following a trio of Christmas-trading “impediments” combined with “unprecedented inflationary costs“.
  • Rising staff wages, stagnant revenue per employee, a return to pre-pandemic rents and a debatable depreciation policy do not suggest TAST’s cost structure will improve any time soon.
  • Comparisons with Restaurant Group and Fulham Shore suggest TAST’s menus are in fact inherently flawed and confirm a radical business overhaul was needed during the pandemic. 
  • The departure of an experienced industry manager after only a year as a TAST executive may well indicate the main Wildwood restaurant format is broken.
  • TAST now looks a lost cause with a de-listing a possibility. I continue to hold with vague hopes of a recovery, although formal blog coverage has ceased.

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TASTY: H1 2022 Shows Encouraging £797k Sales Per Restaurant But Higher Costs Reduce Profit To Breakeven And Curtail Plans For 5-6 New Outlets

30 May 2023
By Maynard Paton

H1 2022 results summary for Tasty (TAST):

  • The absence of pandemic restrictions ensured H1 sales returned to pre-Covid levels, with sales per restaurant of £797k encouragingly at their best H1 level since H1 2016.
  • A “steep rise in inflation in relation to wages, utilities and input supplier costs” limited underlying profit to just £0.2m and will “inevitably impact” the H2 performance.
  • Pandemic-prompted rent reductions seem to have run their course, with annual lease costs appearing to return to £5m and total lease obligations staying at £52m.
  • Management curtailing plans to open 5-6 new restaurants was disappointing but understandable given the “prevailing economic uncertainties“.
  • Can TAST ever achieve a worthwhile margin from revenue now running at almost £45m? No evidence has emerged that TAST’s restaurant formats can easily pass on, reduce or absorb much higher costs. I continue to hold.

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MOUNTVIEW ESTATES: £115 Shares Trade At Lowly 13% Premium To NAV Despite Positive H1 2023 Revealing Sold Property Prices Gaining 19% And Welcome £10m Special Dividend

16 May 2023
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • A positive H1 2023 performance, with revenue up 21% and profit up 17% due to property selling prices gaining 19% and a greater number of properties sold. 
  • A significant £26m spent on new properties implies buying opportunities are emerging as “difficult times” and “economic storms” are forecast.
  • A 54% sales premium was realised against the 2014 Allsop valuation, and the remaining Allsop-valued properties now represent less than half of the property estate. 
  • Net debt remains very modest at just 6% of the property estate and allowed the welcome declaration of a 250p per share/£10m special dividend. 
  • The £115 shares trade at a lowly 13% premium to net asset value, which inched higher to a fresh £102 per share high, although the balance sheet could one day still be worth £200 per share. I continue to hold.

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