Monday, November 5, 2012


Good morning! A bit earlier than usual today, as a busy day planned.
Firstly, some comments on existing positions.

May Gurney (MAYG) is performing very well indeed, delighted with that one. It was flagged here less than a month ago at 138p, and has already risen to 173p Bid/180p Offer, so a rather ridiculous spread there, but a mid-price of about 176p, so that's a pretty impressive 27% gain already!

I double-checked the figures again, and in my opinion it still looks good value. EPS is forecast for about 25p, so I cannot see any justification for a PER of less than 10, or 250p a share. That relies on no more significant bad news coming out, of course. There could be more bumps in the road, although management did recently say that their 3 problem areas are ring-fenced, implying that the bad news is out.

With a dividend yield still over 5%, and not looking under any threat, I'm very happy to hold until the price gets to my 250p target. But as usual, this is just my personal opinion, not advice, and you should DYOR*

The trading statement from Sarantel (SLG) intrigues me, as I've followed this company for years, and remember speaking to the CEO a long time ago. It's a micro cap (c.£2m) that makes specialist, high performance aerials for mobile devices. It's consistently loss-making, and its finances look precarious (need for another fund-raising soon I'm guessing). So extremely high risk. However, sales  do seem to be in the early stages of taking off - full year sales 35% up at £3m. Doesn't say what the loss is, although they only have £0.8m headroom left on a loan facility. But military customers in particular, are making repeat orders. Intriguing, might be worth a further look, with fun money only, given the very high risk.

I have high hopes for the IndigoVision (IND) AGM statement this Thursday, 8 Nov. Since they are in the process of giving away virtually all their cash pile through a Special Dividend, it seems inconceivable that their current trading statement this week will be anything but excellent. The shares are now ex-divi, and in my opinion this could be a favourable entry point at around 410p a share, which is only around £31m mkt cap - not much for a company which could be heading for £3-5m profit this year, and is in a market now growing at 20% p.a. compound.

I suspect 50p EPS is more likely than the broker forecast of 32p, based on the details given in the last trading statement (targeting sales growth of at least 20%). On 60% gross margins the operational gearing is remarkable. Time will tell whether my theory is right or wrong.

There is also an IMS from Trinity Mirror (TNI) on the same day, 8 November, so that will be a busy & exciting morning, although I no longer hold shares in TNI.

Have had a quick look at results from £13m mkt cap SWP (SWP), but can't see anything to get excited about.

Similar with Active Risk Group (ARI) - interims to 30 Sept look pretty poor - turnover is up a bit to £3.8m, but a £0.8m operating loss. Difficult to see how that is a viable business.

That's it for this morning.

Regards, Paul.

* For anyone not already aware, DYOR means "do your own research!"


  1. Paul,

    As a fellow holder for several years (and having topped up since it went ex-dividend), I hope you're right with regard to IND's results. The question is, if 50p eps is achieved, where should the share price go?

    Surely a P/E in the low teens is the least we can expect? 600p plus?

    Thanks for a great blog, BTW!


  2. Hi B2V,

    Many thanks for your kind comments.

    We must all work out our own price targets, so I can only reply, DYOR! Hope that's not too annoying. But this site is really all about stimulating research and discussion, not me dictating what I think is right or wrong.

    Best wishes, Paul.

  3. Don't worry Paul, having DMOR I have my own ideas on this subject, which are:

    "a rather higher price than it is now, all going well..."

    In all seriousness, let's hope for something encouraging on Thursday and long may the IND re-rating continue.

    Best regards


  4. AGM statement:
    "We are pleased to confirm a positive start to sales in the current year.

    In the first quarter revenues grew by 6 per cent and order intake grew by over 10 per cent, continuing the improvement seen in the second half of last year. As expected, the mix of projects completed resulted in lower gross margins than last year's very strong levels. Overheads rose in line with budgets, reflecting spend to support sales growth and further investment in engineering and product development, the key to long term value.

    As the year progresses, we anticipate further benefit arising from a focus on continued product releases and related marketing support, and from the strengthened management team. As ever, the visibility of future orders remains short, but we remain of the view that IndigoVision is well positioned to deliver growth for the year as a whole. Given the outstanding performance achieved in last year's first half, we expect benefits to operating performance to be skewed towards the second half of the current year. Looking to the longer term, management are tasked with increasing sales growth in line with the attractive and growing markets in which IndigoVision operates."

    Nothing spectacular and all seems rather low key, but they still expect to to well over the course of the whole year. Not sure I like the lower margins, anyway, patience has its own rewards. Still happy to hold.

    Regards, Seymour.