Monday, January 7, 2013

Mon 7 Jan - STAF, NPT

Good morning! Here is my usual trawl through the morning's RNSs, looking for the undervalued and overlooked.

Recruitment/outsourcing group Staffline (STAF) has issued a short & sweet trading statement, saying that 2012 earnings will be in line with market expectations. They reiterate they are, "well placed to continue to capitalise on a number of strategic opportunities that exist across our business", the biggest one of which is the  Govt's welfare to work programme (which could become pretty lucrative for STAF in the next 5 years).

Morningstar shows the broker consensus EPS as 33.6p for 2012, so that puts STAF on a fairly cheap PER of 8.9 times 2012 earnings. There is also a 8.3p forecast divi, giving a yield of 2.8%. So it's no longer amazing value, but certainly good value. However, if EPS grows as forecast to 40p (with a 9.5p divi) then the 2013 forecast PER falls to 7.5, and the yield rises to 3.2%, which is looking a lot more interesting.

STAF has been heavily tipped by the Mail on Sunday, so I suspect that pulled in a lot of the recent buyers, so personally I shall sit this one out, and look to buy back in any significant pullback to say the 260-270p area.

On 4 Sep 2012 I published a report here following a private client broker lunch I attended with Staffline's Directors, and was very impressed. I bought shares at 226p, although have recently sold them at c.300p, in order to recycle the money into something that hasn't yet moved up (Vianet), but looks like it will once the overhang from a large seller is cleared.

Incidentally, I also made Staffline the "share of the month" for Sep 2012 on my sister site, Small Cap Value, which I'm pleased to say is now up & running again after some major IT problems (had to recreate the website from scratch, but have installed proper automatic backups now, so should be fine in future).

Netplay TV (NPT), the interactive gaming company, puts out a strong Q4 & full year trading statement, indicating that they are confident of exceeding full year market expectations. So that means they should deliver over 1p EPS for 2012, therefore these look potentially good value at 12.2p.

They note that mobile/tablet is a strong area of growth (isn't it everywhere?!).
I'm not terribly keen on gaming companies, as they are essentially preying on people with addictive personalities, so it's not for me. But purely based on the numbers it looks like a potentially interesting growth company.

OK, that's it for today. Not much else to report, other than that my training runs for the Brighton Half Marathon on 17 Feb are going well - am going out 3 or 4 times per week now, and managed about 5 miles last night with relative ease. Thank you to everyone who has sponsored me for either MacMillan cancer care, or the Sussex Beacon charities. The Justgiving link is here if you wish to donate. I'm at 59% of target funds raised so far ...

Also, I'm doing the DryAthlon for Cancer Research, which is to renounce alcohol for the whole of January. People who know me acknowledge that I (harrumph, coughs!) enjoy a drink occasionally, but so far so good. If you fancy sending me a virtual diet coke (for the benefit of Cancer Research), then please click on this different Justgiving link. Thank you to "Ajay" who kindly donated £20, much appreciated!

Have a good week!

Regards, Paul.


  1. Hi Paul

    Your patience and belief about VIANET has paid off! Why such a huge rise this morning? Can't find any news. Or are more people following you than you thought!

    (Thanks to your alert about them I bought Vianet a couple of weeks back so very gratified by its leap this am)

    Any info on the price hike much appreciated.

    1. Hi Jane,

      The overhang in VNET from a big seller (New Solera) has been cleared - they issued an RNS this morning. That means buyers will now have to compete on price to get stock, which is pushing up the price.

      That tends to feed on itself, as a rising price pulls in more buyers. So good news. I think the shares are still very good value, but DYOR as usual!

      Regards, Paul.

    2. Hi Paul. Yep your belief in vianet is spot on. More power to your elbow .
      Best. Ram

    3. Cheers Ram, and many thanks for the charity donation!
      Much appreciated! :-)

  2. Hi Paul- I am really sorry to ask this again as I can see Jane asked the same question above.

    Regards the VNET price increase presently up 15% - basically what your saying is that "New Solera Holdings Limited " has sold off a lot of its stock/or brought lots more stock ? as I find it difficult to tell from the RNS if its a sell or purchase and this has resulted in the increase?

    Sorry to ask you but I am really trying to learn best I can and cant find the answer to the above questions I ask anywhere else ?

    Ps well done on your gains( I didnt buy in as I go by DYOR ) and have just decided to understand the movement in prices firstly -( hence paper trading )..

    Is there anyway you could explain in laymans terms please ?

    Also does the RNS ever tell you like the RNS today if the inst: has sold or brought stock ?

    Keep up the fantastic work its a wonderful site and I am learnig so so much from your site please dont stop !


    1. Hi Haich,

      I can probably best explain this by copy pasting an email I sent to a friend 2 days ago about Vianet, explaining my thinking about the seller (New Solera);

      Paul Scott
      5 Jan (2 days ago)

      to xxx
      Hi xxx,

      I reckon the seller must be nearly done by now.
      RNSs from New Solera (the seller) are as follows;

      12 Dec: Below 8% (2,174k shares left)
      7 Dec: Below 9% (2,300k shares left)
      5 Dec: Below 10%
      4 Dec: Below 11%

      17 Jul: Below 15%

      Interesting to note;
      - pace of their selling rapidly accelerated in Dec (i.e. more buyers!)
      - since 12 Dec (esp in last few days) there has been heavy buying in the market, matched by the big seller, yet no RNS, when surely one must be due?
      - note that New Solera did not notify the market between July & Dec, when they dropped from 15% to 11%, so they are clearly not reliable at notifying the market when they sell every time.
      - therefore it stands to reason that they might by now be well below 8%, but just haven't notified the market yet.

      I suspect they might be down to 3%, or almost out by now, judging by the heavy buying in last couple of weeks.

      Myself & a friend are buying another 60k on Monday.

      This has the look & feel of a coiled spring to me.
      Most good small caps are up 20-30% in last 6m, whereas seller has prevented VNET from moving. So a rebound once seller cleared, and will pull in momentum traders. So I think we could see a rapid move up to 130-150p. Hope so!

      Cheers, Paul.

  3. Thanks so much Paul for explaining what's going on but like Haich I can't quite see why New Solera is selling so many shares of what seems to be an excellent company – and undervalued too.


    1. Hi Jane,

      People sell for all sorts of reasons. With Institutions it can be because, e.g.

      - a new fund manager is clearing the decks of positions he inherited.
      - redemptions from their own investors mean they have to raise cash, and therefore sell the most liquid things, where there is demand in the market.
      - some small cap funds just close down if they are not doing well
      - a change in strategy at the fund
      - they lose patience with an investment they have held for a few years & the price is static.

      Also, bear in mind that Institutional fund managers are not actually investing their own money, they are just managing other people's money. So they simply don't have the same focus as a good private investor who is trying to preserve their own personal wealth.

      I understand that New Solera simply wanted to liquidate the position & move on, for whatever reason.

      Regards, Paul.

  4. Thanks Paul - that explains a lot, including backing up what my dear late Dad had always said – no one will care about managing your money more than you will yourself, so get on and learn how to do it and don't delegate to others.

    So that is what I am trying to do, (having like you, got burnt during the great tech bubble and the excess exuberance it generated in amateur investors like me) and blogs like yours help greatly in the learning process.


  5. Hi Paul
    Have you thought about potential black swan events in 2013 and if so what is your strategy for avoiding losing your shirt and more? I have to confess that post Lehman I imagine seeing black swans everywhere!
    Regards, Ram

    1. Hi Ram,

      As a value investor, minimising risk is inherent in my approach - i.e. I only buy under-valued companies, on low PERs and usually with decent divi yields, and strong balance sheets.

      So that protects the downside.

      The other thing is to minimise or eradicate gearing - it was the gearing that killed me in 2007-8. If you're not geared, then you can just ride out a market downturn.

      Generally though, I'm bottom-up, rather than top-down, so whilst I think about macro factors, my main focus is on analysing individual companies & finding undervalued, overlooked small caps.

      I tend to view market corrections as a good opportunity to look for bargains to buy, but that means keeping some powder dry for such occasions.

      Equally, one should be selling & going into cash whenever everyone else is elated & bidding prices up to unreasonably high prices. But I certainly don't see that yet. Most small caps are still cheap or at least reasonably priced.

      Cheers, Paul.

    2. wow ! paul thank u so much ! it really makes sense ..thank you so much for taking the time and effort to explain it m perfect sense now.