My Shares

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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City of London Investment: Market Crash Pushes Yield To 9% After Positive H1 Results Show 11% Dividend Lift And Potential To Maintain Payout

23 March 2020
By Maynard Paton

Results summary for City of London Investment (CLIG):

  • Funds under management rallied to a record level in GBP terms, lifting revenue by 11%, profit by 22% and the dividend by 11%.
  • However, the market crash that followed these results has superseded a lot of the statement’s commentary and accounting.
  • Profit may now be running almost 40% lower than at the start of the year and may just about cover the 28p per share full-year dividend.
  • The accounts continue to sport high margins, decent cash flow and net cash — all of which ought to see the business through the present downturn.
  • Although the shares have been rated modestly on a P/E basis for years, the possible yield now tops 9%. I continue to hold.

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Tristel: Management Reveals Extra NHS And Chinese Orders To Combat Coronavirus After H1 UK Sales Advance A Superb 14%

29 February 2020
By Maynard Paton

Results summary for Tristel (TSTL):

  • Bumper first-half figures showed very satisfactory double-digit growth following superb sales increases within the UK and various overseas markets.
  • The underlying profit performance was complicated by undisclosed acquisition contributions, US regulatory costs, hefty option charges and cheeky bookkeeping.
  • Following these results, the coronavirus outbreak has led to an emergency “special exemption” order from China and prompted “substantial” extra purchases by the NHS.
  • The accounts remain in good shape with high margins, net cash and respectable cash generation.
  • The valuation has become extremely punchy with an estimated underlying P/E of 43. I continue to hold.

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My Portfolio: Year In Review 2019

10 January 2020
By Maynard Paton

Happy January!

I trust you enjoyed the festive break and are now ready to battle the market for another twelve months!

This 5,562-word post provides a ‘year in review’ of my current portfolio holdings. I recap how each of the underlying businesses performed during 2019, as well as provide a few remarks about valuation.

As I mentioned this time last year, I find writing such reviews extremely useful — not least because I double-check my investment logic to ensure I am still invested for the right reasons! The upsets I will suffer during 2020 will most likely be caused by the shares I already own rather than by new shares I purchase.

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Daejan: £120 Per Share NAV Is More Than Double The £55 Share Price As H1 Update Reveals £46m US Property Devaluation

31 December 2019
By Maynard Paton

Results summary for Daejan (DJAN):

  • The statement revealed fresh first-half records for revenue, up 12%, underlying operating profit, up 7%, and net asset value, up 4%.
  • New rent laws in New York led to a £46m devaluation and put DJAN on course to register its first annual valuation loss since 2009.
  • A 6% strengthening of the USD counterbalanced the New York devaluation and helped support net asset value.
  • The accounts remain conservatively financed, with capital expenditure reduced significantly following earlier cautious remarks from management.
  • The share price represents only 46% of net asset value — despite net asset value advancing 75% during the last five years. I continue to hold.

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Mountview Estates: H1 Figures Show NAV Inching 4% Higher To £96 Per Share After Management Suffered Significant AGM Protest Votes For The Third Consecutive Year

28 December 2019
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • Brexit “uncertainties” led to a dull performance, with revenue falling 1%, underlying operating profit improving 1% and an unchanged dividend.
  • An improved gross margin and the disposal of four investment properties for prices well above book were encouraging.
  • Debt represents a modest 10% of the group’s property estate — which continues to be accounted for at cost.
  • This year’s AGM witnessed further protest votes against the independent non-executives, the board’s pay and the auditors.
  • MTVW’s book value increased by 4% to £96 per share, although the balance sheet could inherently be worth £200-plus per share. I continue to hold.

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Oleeo: Bombshell Tender Offer And Delisting Proposal Forces My Exit At A 30% Loss

23 December 2019
By Maynard Paton

Results summary for Oleeo (OLEE):

  • A bombshell tender offer and delisting proposal overshadowed details of the 2019 results.
  • I have tendered my full holding and recorded a 30% loss after owning the shares for four years.
  • The tender offer was not exactly generous, given OLEE’s net cash represented 93% of the tender valuation.
  • A delisting was always a risk when the executive chairman (and related parties) owned 84% of the business.
  • Full-year revenue climbed 7% to reach a new high, although the significant development expenditure seen since 2015 is set to depress profit for at least another year. 

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System1: As H1 Figures Show Just 4% Top-Line Growth And AdRatings Burning £2m A Year, Could ITV’s Euro 2020 Competition Validate A Potential Recovery?

20 December 2019
By Maynard Paton

Results summary for System1 (SYS1):

  • Another unremarkable performance, with underlying gross profit up 4% and profit (without AdRatings) rebounding 24% due mostly to improved cost control.  
  • The start-up AdRatings service continues to lose £2m a year and is increasingly dictating the company’s progress, potential and valuation.
  • An ITV competition to determine the most “emotionally engaging” advert during Euro 2020 could create extra recognition for System1-type marketing and SYS1’s services. 
  • The accounts remain cash rich and the business (without AdRatings) exhibited a healthy 21% margin.
  • The P/E could be anywhere between 8 and 26 depending on how AdRatings, share-based payments and the cash position are viewed. I continue to hold.

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Bioventix: Satisfactory 2019 Results Reveal (Yet Another) Special Dividend And Indicate Growth During 2020-2025 Depends Entirely On Troponin

17 December 2019
By Maynard Paton

Results summary for Bioventix (BVXP):

  • Satisfactory double-digit growth spearheaded by notable demand for the group’s main antibody.
  • Progress beyond 2020 now appears dependent entirely on the new troponin product, revenue from which remains low.
  • An unsettling tweak to management’s outlook suggests the pipeline antibodies may require a further five years of development.
  • The accounts remain in excellent shape with terrific margins, appealing equity returns and minimal reinvestment requirements that have prompted yet another special dividend. 
  • The valuation remains rich with an underlying P/E of 28. I continue to hold.

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Tristel: Record Annual Figures (Once Again) And Impressive Three-Year Targets Support An Understandable 30x P/E

12 December 2019
By Maynard Paton

Results summary for Tristel (TSTL):

  • Record annual figures for the sixth consecutive year, supported by satisfactory progress both within the UK and abroad.
  • The underlying performance was complicated by Brexit stock-piling, an acquisition, US regulatory costs and option expenses. 
  • The publication of new three-year financial targets was impressive, and suggested the company could grow organically at 10-15% per annum. 
  • The accounts are still healthy with high margins, net cash and respectable cash generation. 
  • The valuation remains understandably rich with an estimated underlying P/E of 30. I continue to hold.

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Andrews Sykes: Milder Winter Leaves H1 Profit Down 25% Although Margins Remain High, Cash Exceeds Debt And Current Trading Signals A Better H2

02 December 2019
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • Revenue dropped 8% and operating profit dived 25% following lower demand for ASY’s heaters and boilers.
  • European operations continue to represent almost a quarter of the business, with new depots opened recently in France.
  • Accounts now affected by IFRS 16, although the fundamental attractions of decent margins (19%) and net cash (£20m) remain in place. 
  • Outlook comments appeared encouraging, with the company blog suggesting busy demand for pumps to combat flooding.
  • The underlying P/E could be 16 and the yield is 3.9%. I continue to hold.

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Getech: H1 Results Reiterating ‘Lumpy’ Revenue, Fragile Accounts And Other Drawbacks Prompt My Exit At A 47% Loss

02 December 2019
By Maynard Paton

Results summary for Getech (GTC):

  • Revenue fell 15% to its lowest first-half level since 2010. At least the H1 operating loss did not increase from H1 2018.
  • GTC continues to be dependent on oil and gas operators purchasing its “market leading” data — the income from which remains “lumpy”. 
  • The level of recurring revenue implies a lot of work is needed before GTC can sustain positive earnings.  
  • The accounts are still rather fragile, with cash flow shored up by tax credits and capitalised development costs becoming more significant.  
  • Delays to both a Sierra Leone project and a property sale have not helped support the £9m market cap. I have sold out entirely.

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