Densitron released their final results this week, a couple of weeks later than normal. Following my last blog, I was pleasantly surprised to read that there were no further nasty surprises given their trading update back in February. In fact the results were pretty much as expected following that particular update.
The headline figures give profit down to £0.6m, EPS at 0.36p, dividends down to 0.3p for the year (50% reduction from last year) but booked orders up by 9% to £23.1m.
Densitron's current market cap. is £4.3m which is supported by £3.2m of net tangible assets and a dividend yield of 4.8%. The company has little debt and £1.6m cash on it's balance sheet. Gross margin decreased from 29.6% to 28.6%.
So what are the pros and cons going forward?
On the negative side there is still a claim against the company in respect of unpaid rents on a property occupied by a former Group Company. It appears that they are trying to negotiate an out of court settlement but are unable to say at what level the settlement will be made.
On this year's earnings the company stands on a p/e of 16 and the dividend has been cut in half. They will pay a final dividend of 0.1p.
The share price has remained around current levels for some time now because, as I said in last week's blog, most of the bad news is already priced in.
Going forward, what are the bull points.
It's always easy to lose perspective. Firstly, Densitron is still profitable and, although current trading is mixed, the business should return to growth with a more favourable global economy and their introduction of internally developed products and additional services.
Their balance sheet is strong and certainly more than supports the current share price, and whilst the dividend has been reduced this year, they have clearly shown a willingnes in the past to return plenty of cash to shareholders when it is prudent.
Finally, they have a 1.25 acre strip of land in Blackheath, South East London which they wish to develop and are making slow but hopefully steady progress in their objective to do so. However, this is unlikely to be concluded this year.
Overall, the outlook statement is cautious (sensibly so following disappointments this year) but hints at optimism, "The pipeline of new business remains strong and we expect to see this being converted into new orders over the next few months."
I shall continue to hold , and would possibly add with any reasonable outcome to the rent claim made against them.
As ever, no advice is intended or given, and the blog remains an individual account of my personal experiences investing in the stock market.
Saturday, 25 May 2013
Sunday, 19 May 2013
Updates - Angle, Densitron, and Avesco
It's been fairly quite on the news front regarding some of my holdings, although in recent weeks Angle, a specialist medtech company, has released some encouraging news. Firstly they have appointed a specialist regulatory company to manage the process of CE mark and FDA approval for their Parsortix cell separation system and their time targets for both CE and FDA approval appear to be running to schedule. The RNS stated:-
"Although ANGLE has not yet started to market Parsortix, there has been a stream of potential users expressing interest in the product, particularly in its harvesting capability. These include major hospitals, leading research groups and several commercial companies. Geographically, interest has come from across the UK as well as several international locations including the US, Canada and Australia."
Last week they followed up this news with further positive developments about Parsortix's harvesting capability stating that :-
"the Company has further extended the operational capability of its Parsortix non-invasive cancer diagnostic product by automating its cell harvesting function."
and
"We have seen widespread demand from researchers and clinicians for CTCs to be made available in a test tube after isolation from blood. It is testimony to the versatility of our separation technology that we have been able to introduce and automate this capability in such a short time. The consequent prospects for our Parsortix sales are significant."
Angle will hopefully be launching this product into a multi-billion dollar market eventually, and this harvesting capability appears to be " a major advantage and a key competitive differentiator".
Whilst not allowing myself to get over excited just yet, the news sounds very positive and I await further developments with interest.
On a separate note, I had hoped that Densitron would have released their final results by now. In the previous two years results were released in the first week of May. This is rarely a good sign given that the previous trading update was disappointing.
However, Densitron already has a significant amount of bad news already priced in, and given that it has a strong balance sheet and negligible debt, I continue to hold.
Finally, Avesco will release their interim results in mid June, and whilst this will be a relatively modest year for the group following last year's bumper Olympic contribution, it's worth remembering that Avesco has done extremely well despite the less than favourable worldwide economic conditions in recent years. This is a cyclical company and if the world economy is now beginning to recover more substantially then Avesco will benefit greatly. Underlying growth should continue, the Disney payout will shortly arrive and next year is an even year with the Football World Cup and Winter Olympics to contribute to revenues. Avesco should continue to prosper, and whilst the exact details of the Disney payout are still unknown, the shares are likely to be on a very undemanding rating post any distribution of the cash.
"Although ANGLE has not yet started to market Parsortix, there has been a stream of potential users expressing interest in the product, particularly in its harvesting capability. These include major hospitals, leading research groups and several commercial companies. Geographically, interest has come from across the UK as well as several international locations including the US, Canada and Australia."
Last week they followed up this news with further positive developments about Parsortix's harvesting capability stating that :-
"the Company has further extended the operational capability of its Parsortix non-invasive cancer diagnostic product by automating its cell harvesting function."
and
"We have seen widespread demand from researchers and clinicians for CTCs to be made available in a test tube after isolation from blood. It is testimony to the versatility of our separation technology that we have been able to introduce and automate this capability in such a short time. The consequent prospects for our Parsortix sales are significant."
Angle will hopefully be launching this product into a multi-billion dollar market eventually, and this harvesting capability appears to be " a major advantage and a key competitive differentiator".
Whilst not allowing myself to get over excited just yet, the news sounds very positive and I await further developments with interest.
On a separate note, I had hoped that Densitron would have released their final results by now. In the previous two years results were released in the first week of May. This is rarely a good sign given that the previous trading update was disappointing.
However, Densitron already has a significant amount of bad news already priced in, and given that it has a strong balance sheet and negligible debt, I continue to hold.
Finally, Avesco will release their interim results in mid June, and whilst this will be a relatively modest year for the group following last year's bumper Olympic contribution, it's worth remembering that Avesco has done extremely well despite the less than favourable worldwide economic conditions in recent years. This is a cyclical company and if the world economy is now beginning to recover more substantially then Avesco will benefit greatly. Underlying growth should continue, the Disney payout will shortly arrive and next year is an even year with the Football World Cup and Winter Olympics to contribute to revenues. Avesco should continue to prosper, and whilst the exact details of the Disney payout are still unknown, the shares are likely to be on a very undemanding rating post any distribution of the cash.
Sunday, 12 May 2013
Offer for Datong at 50p
On Friday (10/5/13), having put the company up for sale in February, Datong announced that they had now received an offer for the entire issued shared capital of the company at 50p per share.
At that price I would receive a 31% profit on my share purchases in less than 6 months. So I'm very happy because that's a great return isn't it? No, actually I'm less than happy because whilst my profit is a good return, the offer hugely undervalues this company.
In my previous two articles I did state what I felt were reasonable valuations given the strength of the balance sheet and current trading prospects. The offer values Datong at just £6.92m which is less than £0.5m above Datong's current assets less all it's liabilities. If this was a company in trouble and about to be wound up then £6.92m might be acceptable, but in December they won a lucrative two year contract worth £7.5m and the balance sheet is strong with £2.5m in cash on the balance sheet. The company should see some substantial growth this year and next. In my opinion the valuation at 50p is clearly short-changing shareholders by a considerable margin. See my two previous articles to get, what I think, is a more realistic value.
http://michae1mouse.blogspot.co.uk/2013/02/value-share-heading-for-growth.html
http://michae1mouse.blogspot.co.uk/2013/02/datong-up-for-sale-markets-overheating.html
Heaven only knows how they appear to have come up with this 50p valuation. It looks like it's been plucked out of thin air because it's a nice round number.
As you can gather, I'm not a happy bunny despite making a very decent profit.
Commenting on the Offer, Richard Moon, Chairman of Seven (Technologies) said:
"We are delighted that Datong will be joining Seven". I bet he is at that price.
Currently they have received around 62% in Irrevocable Undertakings to accept the Offer. They will need 90% to complete the deal.
What does really annoy me in these bid situations is that they tend to quote the premium they are paying to the average share price over the past 12 months etc. This is totally irrelevant. The business should be valued based on it's balance sheet, future earnings and prospects not some arbitary value from a depressed share price. In particular shares in micro-cap companies often see large swings in the share price given their relative illiquidity, and the share price often doesn't necessarily reflect it's true worth. That's one reason why micro-caps are attractive to buy for private investors since pricing anomalies are more frequent and these companies rarely appear on the radar of the larger institutions.
Anyway they still need a further 28% of irrevocable undertakings before the offer is completed, and maybe the offer will be improved or another suitor will emerge. Who knows? I will hold until the situation reaches a resolution and then think about where next to invest the profits.
At that price I would receive a 31% profit on my share purchases in less than 6 months. So I'm very happy because that's a great return isn't it? No, actually I'm less than happy because whilst my profit is a good return, the offer hugely undervalues this company.
In my previous two articles I did state what I felt were reasonable valuations given the strength of the balance sheet and current trading prospects. The offer values Datong at just £6.92m which is less than £0.5m above Datong's current assets less all it's liabilities. If this was a company in trouble and about to be wound up then £6.92m might be acceptable, but in December they won a lucrative two year contract worth £7.5m and the balance sheet is strong with £2.5m in cash on the balance sheet. The company should see some substantial growth this year and next. In my opinion the valuation at 50p is clearly short-changing shareholders by a considerable margin. See my two previous articles to get, what I think, is a more realistic value.
http://michae1mouse.blogspot.co.uk/2013/02/value-share-heading-for-growth.html
http://michae1mouse.blogspot.co.uk/2013/02/datong-up-for-sale-markets-overheating.html
Heaven only knows how they appear to have come up with this 50p valuation. It looks like it's been plucked out of thin air because it's a nice round number.
As you can gather, I'm not a happy bunny despite making a very decent profit.
Commenting on the Offer, Richard Moon, Chairman of Seven (Technologies) said:
"We are delighted that Datong will be joining Seven". I bet he is at that price.
Currently they have received around 62% in Irrevocable Undertakings to accept the Offer. They will need 90% to complete the deal.
What does really annoy me in these bid situations is that they tend to quote the premium they are paying to the average share price over the past 12 months etc. This is totally irrelevant. The business should be valued based on it's balance sheet, future earnings and prospects not some arbitary value from a depressed share price. In particular shares in micro-cap companies often see large swings in the share price given their relative illiquidity, and the share price often doesn't necessarily reflect it's true worth. That's one reason why micro-caps are attractive to buy for private investors since pricing anomalies are more frequent and these companies rarely appear on the radar of the larger institutions.
Anyway they still need a further 28% of irrevocable undertakings before the offer is completed, and maybe the offer will be improved or another suitor will emerge. Who knows? I will hold until the situation reaches a resolution and then think about where next to invest the profits.
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