Valuations/K3C

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That was quite a big rally in the US, up 9.4%.  A firm called Cambria quantitative research soon poured cold water on it noting the best days are in bear markets.  The list of years when the US market had a day where the market rose more than an 8% rise didn’t read well:

1929

1931

1932

1933

1987

2008

2020

Below TNAV

  • Most announcements are telling us they have no idea what results will be, see Ramsden this morning, aided by the FCA requesting results to be suspended. So I have checked the companies trading below tangible NAV on my watchlist. The list is below with the historic ROE.  The two resilient ones that show as trading below TNAV which also have a reasonable ROE are the Irish agricultural insurer FBD Holdings and STM.
P/NTAV ROE
FBD Holdings 0.9 29.8 Farm insurer
DFC Holdings 0.9 -26.9  
Ramsden 0.9 17.5 Closed stores
PCF 0.9 12.6 Lending risk
STM 0.9 11.5 Resilient
Walker Crips 0.9 1.6 Market sensitive
SL Aberdeen 0.8 6.7 Market sensitive
M&G 0.8 17.5 Market sensitive
Cenkos 0.7 12.1 Hiatus
NSF Plc 0.7 5.2 Lending risk
Bank of Georgia 0.7 26.2  
Paragon 0.7 11.9 Buy to let pay hol.
Prov. Financial 0.7 16.5 Lending risk
First Property 0.6 8.8 Property value risk
Secure Trust 0.6 12.3 Lending risk
Funding Circle 0.6 -14  
TBC Bank 0.5 22.4  
Arbuthnot 0.5 2.8 Lending risk
IPF Plc 0.5 16.5 Cease collections
OnePM 0.5 12.5 Lending risk
Mercia 0.4 -0.4  
Amigo 0.4 84 For sale
Investec 0.3 11.7 Lending risk
Arden 0.2 -32.3  
Just Group 0.2 8.9  
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K3Capital – Trading Update

Share Price 136p

Mkt Cap £57.6m

Conflict Disclosure: No Holding

  • News For the  months to March the company has achieved revenue of .m and EBITDA of 6.5m. Further transactions may complete ahead of the May year end. The company has achieved salary sacrifices across the board and senior management team and furloughed a proportion of the workforce under the government’s job retention scheme. Consequently monthly overheads are expected to reduce by 7o% from April and the company expects to be EBITDA positive in April and May. The outlook is constructive in noting that many buyers will be looking to expand through acquisition at the moment. Beyond that no one has a scooby.
  • Estimates FY to May expectation was for 7.5m EBITDA and 6.5 to March was tracking ahead.
  • Valuation At the half year the tangible NAV was 4.1m. Cash 6.8m.  
  • Conclusion Most companies are raising the white flag on updates at the moment. Few can take decisive and drastic action as well as achieve break even in the face of a dramatic decline in their revenues. Investors have often criticised the lumpy nature of this company’s revenues and this response should ensure this company merits a core holding status to a broader range of investors going forwards. This is a time when quality management proves itself.

jeremy@charltonillingworth.co.uk