SYSTEM1: £100m Revenue Ambition Disappears Following Disappointing H2 Loss As Tender Offer Cancelled And Agitated Shareholder Initiates Strategic Review

24 September 2022
By Maynard Paton

Results summary for System1 (SYS1):

  • A disappointing FY 2022 performance, with a Q4 sales warning alongside greater costs leading to a small H2 loss.
  • SYS1’s ‘Reasons to Believe’ have been diluted, and hint at reduced long-term expectations following the disappearance of a £100m revenue ambition.
  • The transition to new data and consultancy services continues, with such income representing 51% of total revenue for FY 2022 and possibly 70% for Q1 2023.
  • A fresh non-exec reveals the agitated shareholder who has initiated a strategic review, which in turn led to the sensible cancellation of a tender offer.
  • Net cash represents 31% of the market cap, with long-term multi-bagger potential presently obscured by weak legacy services and costs running ahead of new-product revenue. I continue to hold. 

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MOUNTVIEW ESTATES: Estimated NAV At £210 Per Share After H2 2022 Shows Average Sale Reaching £379k To Realise 66% Premium Over Allsop Valuation

02 September 2022
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • A steady FY 2022 performance, buoyed by an H2 that saw property sales achieve a record £379k average and realise a 66% premium to their 2014 Allsop valuation. 
  • The final dividend was lifted 11% while expenditure on new properties fell to a 13-year low after management expressed a desire to “not chase purchases at any price“.
  • Net debt remains very modest at just 5% of the property estate and reflects management’s concerns of forthcoming “difficult economic circumstances“.
  • Friction between major shareholders continues, with revised director-pay arrangements perhaps encouraging significant protest votes at the latest AGM.  
  • Net asset value remains at £101 per share, although the balance sheet could be worth £210 per share assuming all owned properties enjoy immediate ‘reversionary’ gains and are then sold at fair-market value. I continue to hold.

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BIOVENTIX: H1 2022 Reveals Dividend Up 21% And ‘Exciting’ Tau Biomarker Although Cash At 6-Year Low Now Reduces Special-Payout Prospects

26 August 2022
By Maynard Paton

Results summary for Bioventix (BVXP):

  • An unspectacular H1 performance, albeit accompanied by a 21% dividend lift, after further pandemic disruption left revenue down 8% and adjusted profit down 9%.
  • Muted progress from vitamin D and other established antibodies continues to leave near-term growth dependent on the fast-selling troponin product. 
  • The “exciting” potential of a Tau biomarker alongside the BVXP website selling pyrene test kits suggest positive developments within the research pipeline.
  • Net cash at £5m is the lowest for six years, and combined with standstill earnings seems likely to reduce the size of any FY 2022 special payout.
  • Troponin’s finite income and a resultant sum-of-the-parts valuation do not indicate an obviously compelling £33 share price. I continue to hold.

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ANDREWS SYKES: FY 2021 Discloses UK Hire Revenue Rebounding 17% To Deliver 34% Margin While Dividend Yield Remains Near 5% Despite Potential FY 2022 Heatwave Bonanza

18 August 2022
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • An encouraging performance, with profit recovering 35% following the pandemic to almost match the record set during FY 2018.
  • Additional reporting disclosures revealed ASY’s main UK Hire division enjoyed sales rebounding 17% and a wonderful 34% margin.
  • European operations expanded to 27% of group revenue following very strong progress, although Middle Eastern woes included an extra £1m provision. 
  • The books remain in good shape, with useful cash generation lifting net funds to £29m and perhaps increasing the possibility of another special dividend. 
  • An estimated 13-14x P/E and near-5% yield hardly seem expensive given the appealing financials, potential for an FY 2022 heatwave bonanza and scope for further European expansion. I continue to hold.

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TASTY: £8m Market Cap Could Still Be Remarkably Cheap After FY 2021 Reiterated 5-6 New Restaurants Despite ‘Prevailing Economic Uncertainties’

04 August 2022
By Maynard Paton

Results summary for Tasty (TAST):

  • The absence of pandemic restrictions ensured a bumper H2 performance that TAST acknowledged may not be repeatable during the current year.
  • Higher wages, rising utility costs, “prevailing economic uncertainties” plus a June update that did not refer to H1 trading could be other signs of FY 2022 not being that profitable.
  • Rent reductions of 27% now appear to be temporary, and explain why total lease obligations remain in excess of £50m.
  • Repaying an emergency loan, appointing a new executive alongside plans to open 5-6 new restaurants confirm management’s mindset has moved from ‘survival’ to ‘recovery’.
  • Although the £8m market cap could be remarkably cheap if TAST ever sustains a modest margin on decent sales, other shares could offer more dependable returns. I continue to hold.

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FW THORPE: Record H1 Results Reveal Thorlux Orders Up 25% And Another Special Dividend As Companies Scramble For Energy-Efficient Lighting

01 August 2022
By Maynard Paton

Results summary for FW Thorpe (TFW):

  • A record H1 performance bolstered by the acquisition of Spanish firm Zemper and complemented by another special dividend.
  • Progress at Thorlux continues to be modest, but a new MD, an order book up 25% alongside growing demand for energy-efficient lighting support future optimism.
  • Dutch profit was assisted by the absence of earn-out provisions, with new manufacturing facilities at Famostar underpinning “continued rapid sales growth“. 
  • Net cash remained significant at £37m after extra stock investment suggested component shortages were no longer as severe as they once were.
  • A P/E of 27 seems generous, but could reflect significant ‘ESG’ attractions as TFW showcases its environmental credentials to quoted companies scrambling for LED lighting. I continue to hold.

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[Podcast] TRISTEL With Mark Atkinson And Maynard Paton

27 July 2022
By Maynard Paton

I have recorded another pilot episode of The Private Investor’s Podcast with my good friend Mark Atkinson. We talked about Tristel and the company’s hospital disinfectants and shareholder open day: 

We cover:

  • 0:00 Tristel’s open day and when we invested.
  • 1:31 Tristel’s business and disinfection chemistry.
  • 3:00 Tristel’s revenue and profit.
  • 5:56 The price I purchased and when I started selling.
  • 7:01 The latest trading update and the potential for US growth.
  • 12:51 The different products Tristel offer.
  • 16:21 Debtors and product restructuring. 
  • 18:26 The shareholder open day.
  • 20:90 High gross margins.
  • 21:92 Patent expiries.
  • 23:44 The CEO, CFO and the non-execs.
  • 26:24 A buy, hold or sell?
  • 29:41 Closing remarks.

We may record more podcasts if sufficient interest is shown.

Happy listening!

Maynard Paton

PS: Tristel’s open day took place on 18 July 2022 and the recording was made on 25 July 2022.

Disclosure: Maynard owns shares in Tristel.

M WINKWORTH: Outstanding FY 2021 Heralds Promising FY 2022 Following 23% Q1 Dividend Lift And Prospect Of Sales Again Exceeding Lettings

08 July 2022
By Maynard Paton

Results summary for M Winkworth (WINK):

  • Extraordinary levels of activity” due to pandemic stamp-duty reductions ensured an outstanding FY 2021 with underlying profit up 167%.
  • Talk of sales income again exceeding lettings income plus lifting the Q1 2022 dividend by 23% underpinned a promising FY 2022.  
  • Earnings at the company-owned Tooting office may have slumped during the year, although the effective return on the branch’s valuation remains impressive.  
  • A super 34% margin, net cash at more than 20% of the share price and trade receivables at just 7% of revenue leave the accounts in good order.
  • A possible 9-12x P/E and 6% yield match WINK’s past rating as investors presumably worry about potential problems within the housing market. I continue to hold.

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S & U: Record Dividend Delivers 6% Yield After FY 2022 Results Signal Higher Expected Write-Offs And Risk Of ‘Adverse Economic Environment’

28 June 2022
By Maynard Paton

Results summary for S & U (SUS):

  • A “lower than normal” bad-debt provision underpinned a record full-year profit, which in turn supported fresh highs for net asset value (NAV) and the dividend.
  • Very mixed signals are emerging from the main motor-loan division, with encouraging collection rates offset by “a more heightened risk of an adverse economic environment” and higher expected write-offs among new loans.
  • Further surplus cash from the motor-loan division was redirected into the property-loan subsidiary, which reported a bumper performance and prompted optimistic near-term management predictions.
  • ROCE levels remain modest and suggest SUS’s inherent value is biased towards the asset value of its loan book rather than annual earnings.
  • Despite current-year profit running “above budget“, the £21 shares trade at 1.24 times NAV and offer a 6% yield. I continue to hold.

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CITY OF LONDON INVESTMENT: FuM Drops 13% To Below $10b After H1 2022 Discloses 49% Margin, Welcome Special Dividend And (Finally!) Some New Client Money

19 June 2022
By Maynard Paton

Results summary for City of London Investment (CLIG):

  • The Karpus merger ensured impressive headline progress, but this H1 performance was almost identical to the preceding H2 as funds under management (FuM) remained at $11b.
  • Wishful thinking perhaps, but two consecutive quarters of net FuM inflows following consistent FuM outflows may signal clients re-appraising CLIG’s ‘value’ approach.
  • Rough market conditions during the subsequent H2 will test CLIG’s investments, with FuM dropping 13% to below $10b not indicating obvious outperformance.
  • A wonderful 49% margin and net cash of £25m funding a welcome £7m special dividend suggest the accounts can survive any further market weakness.
  • Although the possible P/E is 11 and the yield tops 7%, the shares have been rated modestly for years as major new clients remain extremely elusive. I continue to hold.

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MINCON: FY 2021 Reveals H2 Mining Sales Up 30% And ‘Outstanding’ Greenhammer Tests Yet Obvious ‘Moat’-Like Financials Remain Highly Elusive 

02 June 2022
By Maynard Paton

Results summary for Mincon (MCON):

  • A better-than-expected performance, bolstered by a record H2 and perhaps a cracking Q4 following less pandemic disruption.
  • Positive progress was recorded at all three product divisions, with higher commodity prices pushing H2 mining sales up 30%.
  • Encouraging development news included the long-awaited Greenhammer system delivering “outstanding” test results and potentially becoming available to purchase this year. 
  • Despite the long-term commitment to first-class product manufacturing, MCON’s financials sadly still lack signs of an obvious ‘moat’.
  • The shares do not appear outrageously expensive, assuming H2 extrapolations and upbeat FY 2022 trading do indeed support a 15x P/E. I continue to hold.

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TRISTEL: Pandemic-Disrupted H1 2022 Reveals Product Cull And Profit Reclassification With Dividend Held And Share Price Now 50% Lower

30 April 2022
By Maynard Paton

Results summary for Tristel (TSTL):

  • An underwhelming pandemic-disrupted performance, with the dividend held for the first time since FY 2013 as hospital customers delayed resuming normal purchasing activity.
  • Progress was complicated by the understandable culling of numerous ‘non-core’ products, although the associated reclassification revealed TSTL’s surface disinfectants to be less profitable than previously declared.
  • Sector “lobbying” within the United States for EPA-approved disinfectants might have created a new “commercial opportunity” for TSTL’s DUO foam. 
  • Brexit stock-piling, share options and US costs offered a wide range of profit outcomes, but cash flow remained respectable and bolstered net cash to a useful £9m. 
  • A 50% lower share price on a possible 32x multiple is not an obvious bargain, especially if patent expiries, automated competition or single-use medical equipment cause disruption. I continue to hold.

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MOUNTVIEW ESTATES: £11m Special Dividend Accompanies Acceptable H1 2022 Performance And Could Signal New ‘Run Off’ Phase Leading To Estimated Returns Totalling £264 Per Share

25 March 2022
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • An acceptable H1 performance, albeit profit was suppressed by fewer property sales that in aggregate achieved a relatively low gross margin.
  • Certain property disposals realising a record 65% premium to their 2014 valuation alongside an £11m special dividend do not suggest inherent trading difficulties.
  • Management remarks of “difficult times that may lie ahead” may explain why expenditure on new properties remains low and net debt has been kept at just 4% of the property estate. 
  • The special dividend, low expenditure and modest debt all perhaps signal a new ‘run off’ chapter, whereby the group consistently sells more properties than it buys.   
  • Book value inched to a record £102 per share, although run-off guesstimates suggest total dividends following a complete estate disposal could total £264 per share. I continue to hold.

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ANDREWS SYKES: Better-Than-Expected H1 2021 Witnesses European Sales Rebound 29% As Net Cash Reaches £22m And Potential Dividend Yield Hits 5%

07 March 2022
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • Following the disappointing finish to FY 2020, a better-than-expected H1 performance with revenue and profit up 7% and 14% respectively.
  • Progress was buoyed by ASY’s European operations, which witnessed sales rebound 29% to set a new divisional H1 record. 
  • A restatement revealed previously undisclosed furlough income had represented 12% of H1 2020 profit.
  • The books remain in good shape, with a robust 22% margin and net funds at a sizeable £22m, although extra pension contributions are still required.
  • A possible P/E of 13.5 and yield of 5% hardly seem expensive for the appealing financials and potential of further European expansion. I continue to hold.

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SYSTEM1: Data Services Reaching 43% Of Revenue Supports Long-Term ‘Platform’ Ambitions Although Q4 Consultancy Warning Emphasises Risk Of Transition Mishaps

02 March 2022
By Maynard Paton

Results summary for System1 (SYS1):

  • An acceptable H1 performance, albeit with profit lower than I had anticipated due to greater costs associated with the transition to Data services.
  • Data services continue to advance, representing 36% of total revenue for H1 and reaching 43% for the subsequent Q3.
  • UK revenue jumping 33% in part through an influx of new Data clients suggests the partnership with ITV is working.
  • A Q4 sales warning relating to old-style Consultancy activities emphasised management’s upbeat ambitions are susceptible to mishaps.
  • Net cash now represents 25% of the market cap, with long-term multi-bagger upside still obtainable if LTIP revenue targets are met and healthy ‘platform’ margins are delivered. I continue to hold. 

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