My Shares

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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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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MINCON: H1 Dividend Disappointingly Deferred Yet Bumper ‘Geotech’ Sales Help Profit Gain Up To 28% And Perhaps Support A Reasonable 14.3x P/E

21 August 2020
By Maynard Paton

Results summary for Mincon (MCON):

  • A generally satisfactory update given the pandemic, with underlying revenue up almost 5% and profit before adjustments perhaps up as much as 28%.
  • The postponement of the interim dividend due to Covid-19 was disappointing after earlier statements barely mentioned the virus.
  • An emphasis on “geotechnical” drills and services has reduced the dependence on mining customers to 52% of revenue. 
  • Modest cash generation, average margins and enormous stock levels offer significant scope for accounting improvements during the current ‘moat-rebuilding’ phase.  
  • Various (perhaps optimistic) assumptions alongside opportunities from new products lead to a reasonable 14.3x P/E. I continue to hold.

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Mountview Estates:  FY 2020 Statement Signals Modest 8% Gearing, ’Happy’ Auction-Room Activity And Potential To Pick Up Possible Pandemic Property Bargains

13 August 2020
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • Standstill 2020 figures that showed 8% more properties sold at prices 9% lower than last year.
  • A maintained dividend, a lack for furloughed staff and the directors currently being “happy in the auction room” underline some pandemic-resilient qualities. 
  • Net debt representing a very modest 8% of the group’s property estate suggests significant scope to pick up any property bargains.
  • This week’s AGM witnessed a further bout of protest votes against the independent non-executives, the board’s pay and the auditors.
  • MTVW’s book value increased by 3% to a record £97 per share, although my calculations suggest the balance sheet could be worth £200-plus per share. I continue to hold.

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System1: 2021 Recovery Hopes Seem Dependent Upon ITV And (Bizarrely) 18th Century German Literature Following Profit Crash, Scrapped Dividend And AdRatings Write-Off

17 July 2020
By Maynard Paton

Results summary for System1 (SYS1):

  • Somewhat academic annual figures that showed pre-AdRatings profit down 27% due to weak trading prior to Covid-19.
  • The pandemic has since caused demand for SYS1’s services to drop 38% and created pre-tax losses.
  • AdRatings continues to generate minimal revenue at significant cost, although the tie-up with ITV suggests the fledgling service has some inherent value.
  • SYS1 bizarrely remains very poor at marketing its own services. A flagship company film commences with references to 18th century German literature. 
  • A £3.9m cash buffer ought to keep SYS1 afloat as it moves towards more reliable revenue sources. Valuation in the meantime remains anyone’s guess. I continue to hold.

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Tasty: Radical Management Action Urgently Required As Estimated Pandemic Cash Burn Could Leave Company Broke By November

01 July 2020
By Maynard Paton

Results summary for Tasty (TAST):

  • Largely redundant annual figures that revealed revenue down 6% and another operating loss.
  • TAST’s 56 restaurants were shut in March and my estimates suggest the group could survive without sales until November.
  • The second half seemed encouraging after Christmas bookings were helped by a turkey-themed festive menu.
  • A £2m property disposal bolstered cash and cleared debt but significant liabilities remain.
  • The £2.8m market cap could be a bargain, but radical management action is now essential to keep the business afloat. I continue to hold.

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Andrews Sykes: FY 2019 Results Admit 50% Of UK Staff Are Furloughed Although Management Talks Of “Resilient” Trading And Even Declared A Final Dividend

16 June 2020
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • Creditable full-year figures that showed revenue down 2% and profit down 7% due to less extreme weather. 
  • The decision to furlough 50% of UK staff feels odd given management talks of “resilient” trading, kept company depots open during lockdown and has declared a final dividend.
  • A commendable cash flow projection raises pandemic-profitability questions but suggests extra funding is not needed.
  • An impressive second half ensured the accounts remained healthy with high margins and an appealing return on equity.  
  • A possible P/E of 12-14 and yield of 4.5% does not seem expensive if indeed ASY does “return to normal levels of trading” for 2021. I continue to hold.

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M Winkworth: Q1 2020 Dividend Overshadows Foxtons-Beating 2019 Figures And Hints At Better-Than-Expected Pandemic Progress

31 May 2020
By Maynard Paton

Results summary for M Winkworth (WINK):

  • Acceptable full-year figures that showed revenue up 8% and profit up 12% following an encouraging second half.
  • The declaration of a Q1 dividend for 2020 implies possible resilience to Covid-19 and hints at a better-than-expected pandemic performance.
  • Very impressive market-share gains continue to be won from London rival Foxtons.
  • Despite a number of accounting niggles, the books remain in pretty good shape with high margins and net cash.
  • A possible P/E of 8-12 and a potential income of 6% may offer upside should earnings revive and then one day thrive following Brexit, stamp-duty changes and Covid-19. I continue to hold.

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FW Thorpe: Immediate Covid-19 Problems Prevented After £47m Net Cash Allows 2% H1 Dividend Lift And Commendable Refusal Of Government Assistance

18 May 2020
By Maynard Paton

Results summary for FW Thorpe (TFW):

  • Acceptable 7-9% first-half growth, although profitability has essentially stalled for the last 2-3 years as the LED mini-boom subsides.
  • A 2% dividend lift, net cash and investments of £47m, a “strong” order book plus an outstanding response to government assistance do not imply immediate Covid-19 problems.
  • However, trading is not perfect, as margins at the largest division continue to decline while overseas cross-selling progress remains slow and small. 
  • The SmartScan light-monitoring system could be a ‘hidden gem’, with sales up 50% last year to represent 20% of total revenue.
  • A P/E of 22-25 feels warm, but may reflect the ‘pandemic-proof’ balance sheet, SmartScan potential and/or resilient profit history. I continue to hold.

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Bioventix: 34x P/E Understandably Reflects ‘Pandemic-Proof’ Outlook As H1 Dividend Lifted 20% And Margins Hit 80%

01 May 2020
By Maynard Paton

Results summary for Bioventix (BVXP):

  • Very satisfactory 26% first-half profit growth led by continued demand for the group’s vitamin D antibody.
  • A 20% dividend lift alongside presentation references to broker forecasts were very reassuring given the current Covid-19 uncertainty.
  • The fledgling troponin product seems to have gained momentum while an emerging pollution-biomonitoring project offers intriguing long-term potential.
  • Despite a part-time FD and an accounting error, the books remain in excellent shape with terrific 80% margins, a notable cash buffer and no debt.
  • The seemingly ‘pandemic-proof’ outlook leaves the valuation remaining understandably rich with an underlying P/E of 34. I continue to hold.

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S & U: Final 2020 Dividend And No Furloughed Staff Underline Management Confidence Of ‘Non-Prime’ Customers Repaying Loans Totalling £302m

19 April 2020
By Maynard Paton

Results summary for S & U (SUS):

  • Another set of record annual figures that showed steady progress — albeit overshadowed entirely by the potential impact of Covid-19.
  • The boardroom’s confidence is encouraging. The final dividend was reduced only slightly and no staff have been furloughed.
  • Some £302m has been loaned to customers with patchy credit histories, and recouping that money has become vital. Management says collections are “very good”.
  • Net debt of £118m and a 26% net-interest margin lead to respectable returns on capital, but the borrowings will not prove ideal if defaults increase and profits fall.
  • Current-year earnings have become anyone’s guess, and a bargain-basement P/E may be rather less than the current 10x trailing multiple. I continue to hold.

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Mincon: Muddled 2019 Figures Reveal Profit Down 28% But All May Be Forgiven If The Maintained Dividend Signals A Resilience To Covid-19

08 April 2020
By Maynard Paton

Results summary for Mincon (MCON):

  • A rather muddled and subdued update, the highlight of which during the present Covid-19 uncertainty was a maintained dividend.
  • Impairments, exceptionals, accounting quirks and profit diving 28% may all be forgiven if, as seems to be the case, operations have not been too affected by the pandemic.
  • An emphasis on “geotechnical” drills and lack of “challenger model” references imply new priorities as the business remains in a ‘moat-digging’ phase.
  • Appealing management remarks about product quality, patents and future innovation have yet to make any impact on the somewhat messy financials.
  • A post-results acquisition leaves the business with net debt while the underlying P/E of 16 is not an obvious bargain. I continue to hold.

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