The share price has been falling for the last few weeks on no real news and the company is 30-40% below its recent highs. These falls are not based on substantial transaction levels but £20,000 - £30,000 transactions.
The company currently has a PE below 9 and a dividend yield in excess of 4, with a cover in excess of 2.
Market Cap is circa £50m with an EPV calculation of £70m. We see this as a good margin of safety.
Price to NAV is 0.5 (+) PTNTAV 3.2 (-) Price to Sales 0.7 (+).
Since our initial purchase the company has broadly done what it said on the tin. There have been a number of complimentary acquisitions which have increased debt, but the price and the debt levels have been sensible.
There is clearly some business weakness in fields related to oil and gas but whilst we see that as delaying success it does not fundamentally change our thesis on the business which we see as a consolidator and cost stripper in a fragmented arena.
As a distributor the company should be able to run Cash positive and asset light and whilst it is never going to set the world on fire it should be able to make a sensible return for many years into the future.
We have decided to take recent price weakness as an adding opportunity but have to caution that we do not really understand why the recent price weakness has occurred. As such there may be a significant issue on which insiders are selling that would damage the thesis.