Mon 3 Dec - SIM, VNET, MAYG, TCN

Here we go again, Monday morning! Not much in the way of results within my remit, but will glance at a couple.

Simigon (SIM) is not something I've looked at before. They are a £7m mkt cap (at 15p/share) Israeli company, which makes flight simulators for civilian and air forces. Their trading statement this morning looks strong, and most of the mkt cap seems to be supported by net cash (NB their accounts are in US dollars though).

Personally I don't invest in overseas companies on the AIM market any more, as it seems to me the motivation to List your shares in one of the world's least regulated small cap markets abroad is likely to be questionable in some cases.

Also I have bad memories of losing a hefty wad on an Israeli company called Vigilant Technologies, where I held about 3% of the company, but when things went wrong it proved impossible to speak to anyone in Israel. All of a sudden calls & messages were ignored, and everybody simultaneously lost the ability to speak English. Whereas had they been in the UK, I could have got in the car and paid them a visit.


Tomorrow should be an interesting day. Interim results are due from Vianet (VNET), one of my largest holdings, and the joint largest position in the model portfolio of my SmallCapValue website. They issued an in line trading statement on 30 Oct, with lots of positive-sounding details (such as previously loss-making subsidiaries moving to breakeven or profit).

Vianet is a classic low PER, high divi yield value situation, but with good growth prospects thrown in for free as well, hence why I am so keen on it. The company has disappointed before, so perhaps that explains the low rating for the moment. There is also a persistent seller in the market, feeding stock out at the end of the day to balance up the market makers. Still, that gives me the opportunity to load up with cheap shares, so it's an opportunity rather than a problem. Hopefully.

May Gurney (MAYG) is also reporting tomorrow, another low PER, high divi yield favourite of mine, which I wrote about here.
The crux with MAYG will be whether they are able to draw a line under various problems in the past, which they have stated are now ring-fenced. So I am hoping no more bad news, if so then the re-rating should continue there.

I'm going to Paris tomorrow morning for a short break on the Eurostar, so if Vianet or May Gurney results are bad, then I could end up getting a margin call whilst underneath the sea, which would be a first!
Updates here might therefore be a little erratic for the rest of the week, but I'll have laptop with me & wifi, so will do what I can.

I'm continually amazed at the number of really tiny companies on AIM. It cannot possibly make commercial sense for companies with negligible turnover and mkt caps of sub-£5m to have a stock market listing. Yet so many do.

Tricorn (TCN) publishes interim results, which look pretty solid, with a higher operating margin more than compensating for a fall in turnover. Adjusted EPS is up nicely from 1.66p to 2.07p for the 6 months.
The outlook statement indicates a weaker H2, with the full year expected to be similar to last year, which was 3.78p adj EPS.

That means that at 16.9p the shares are on a PER of only 4.5!
Also, they have net cash of £1.1m, which is for a company with a mkt cap of only £5.6m. Strip out the cash, and you're on a PER below 4, which looks great value to me.

Divi yield looks stingy though, at just over 1%.

Tricorn calls itself a "tube manipulation specialist", whatever that means. They are opening a facility in China, which one imagines should improve margins, providing they navigate the operational minefield of overseas operations alright.

It's too small for consideration in my portfolio, but looks worthy of a further look for people who do look at micro caps below £10m mkt cap.
I'm wondering if there are any "nasties" lurking, which I've not spotted, as the valuation looks too cheap here. Can't see a pension fund deficit. I do note however that the company has borrowings of about £2m, and associated interest cost of £82k last year in the P&L. This seems odd. Why have debt, and more than that amount in cash, thus wasting £82k p.a. in unnecessary interest costs? Makes you wonder if the y/end figures have been window dressed? Although there is a healthy surplus of working capital overall.

(EDIT: a friend has just emailed me to say that the reason why Tricorn looks cheap is because they are losing their lucrative aerospace contracts, which might be difficult to replace. So that's the area to research for this share).

Right, that's it for today.

Best wishes,
Paul Scott.