Excellent post blouson blouse. However, in some cases such as this one I think it's possible to not see the wood for the trees.
The simple facts are that C21 has an £8.5m m/cap, yet has effectively around £3.5m of cash/property assets. Thus the remaining business has an EV of just £5m, against a forecast PBT for 2011 of almost £1m.
A prospective ex-"cash" P/E of just over 5 for a growing business with prospects for expansion all over Europe - and potentially globally - seems extremely cheap to me.
In terms of the points you have made:
- given that C21 have owned the property for 10 years as you say, then any tax charge should be fairly minimal after the use of allowances over that period - and remember the tax is only on the profit, no the sale proceeds. I'd be surprised if any tax charge was much over £100k if that
- the current £1m+ cash pile is because cash collection was restrained in H1 due to late payment by debtors. This was explicitly stated in C21's interims
- C21 have quietly and quickly introduced a new arm to the business via the implementation of CCTV to railway station concourses etc. This will bring in increasing recurring revenues for maintenance, servicing etc, on top of the need for bus operators to maintain their EcoManager units and ProGuard CCTV
- C21 have the whole of Europe to aim for given their initial success in winning contracts there via Arriva etc. This would knock their success in the UK into a cocked hat and must represent a truly massive opportunity for a small cap like C21, who would only need a small share of this massive market to multiply sales and profits
I haven't seen any recent broker reports from Daniel Stewart. but if their penetration is only 15% as you say, then that means there's 85% still to go for!
In addition, C21 have been investing for the expansion into Europe for a year already, as indicated in the results narrative this year, yet despite these additional costs C21 have managed to meet profit forecasts and beat expectations as regards cash in hand.
If C21 are making £3m PBT then the current £8.5m m/cap will be left a long, long way behind.
In particular I find it very encouraging that such a successful investor as Mark Slater has recently bought over 10% of C21 - he will have done substantial due diligence on the company.
Slater and Gyllenhammer now own 40% of C21 between them. This has likely made shares pretty hard to find. Thus the same relative illiquidity may well with any further news flow drive the share price quite sharply higher.
IMO C21 is not a company in which at present one should invest a large part of one's portfolio.
But I do believe that at the current low rating, and with such substantial Balance Sheet strength, C21 merits an investment as part of the lower-risk part of one's portfolio given the relative lack of downside and the potentially large and near-term upside.
Yup a nice positive statement.
Whilst it does appear this is undervalued ( tho the net likely liquid cash position probably isn't quite as healthy as a straight £1m cash + £2.5ish likely proceeds from sale of property, as there is likely to be a fairly chunky tax charge on the property which I think has been owned for 10 years or more- so tax could easily be £500k. Also we don't know whether the current cash position is just cos of some early collection of debtors/late payment of creditors, and in Jan they will have a tax bill to pay on profits of circa £250k on trading profits- but lets assume £2.75m of cash in Jan.
If house brokers are right eps next year is 0.9p and the burning question is what is a sensible multiplier. That depends on how big the market is, how much penetration they already have, how probable further growth is, and what competition there is ( after all this market is pretty low tech) and importantly what are the ongoing support, servicing and warranty revenues- cos if it is just selling and installing boxes the predictabiliy and security of future revenues is hard and the market will get fairly saturated fairly quickly
I dont have any answers to these questions- does anyone have a brokers report that helps?
All I can find is that , apart from London where penetration is almost zero, they have an average penetration of all the big bus companies of about 15%. positive in that it has grown quickly and so demonstrates they have something compelling to offer- but worrying for how long the sales revenues can last unless we think they can get 50% + of the market.
Then there is overseas of course which could be masssve, tho will require investment.. Unless there are substantial revenues recurring from every sale then the fair value is entirely dependant on how much of the UK and world market C21 can grab. Which depends on barriers to entry to others and genuine size of market.
Without that info it is hard to make an investment decision and it is just gut feel. with 92.23m shares in issue at a mid price of 8.62 = a company value of approx £8m. less likely cash net of tax and disposal gives an EV of £5.25m- once/if the property is sold. At that point eps is reduced by an additional overhead-rent. at 2011 forecast numbers of 0.9p ( pre tax) ( which if property is sold is likely to reduce) this is an Ev multiple of 6.3.
For a micro cap with poor liquidity in the stock that is probably about right. unless with every sale they are locking in significant recurring and predictable support revenues and really are dominating the UK and in turn Europe and elsewhere. The signs are encouraging, but then to achieve this penetration that will justify a 15 or 20p sp investment will be needed and so the cash pile falls and with it the multiple rises- until that investment bears fruit. even if it does this will still be a company in a good year making say £3m a few years out and below most investors radar and with low liquidity
In short we need more info. My instinct is this probably has a bit further to go over the next month or 2, maybe to a mid price of 9.5/10- but there is likely to be profit taking and trade volumes are still very small so that will see the sp hit. It really needs the biggest shareholder to decide to make a bid, or else passage of time and greater clarity to be able to impute greater value. so any and all info greatly recieved
i have sold 30% of my holding this week at an average of about 8.15, for an ok return of about 40%- but this is after several years- and unless I can find further info i think I will continue to sell chunks with every penny rise
Public transport to vehicle monitoring specialist 21st Century has issued an upbeat trading statement for the current financial year. Trading has been robust so market forecasts will be met and thanks to strong cash flow the group has boosted its net cash reserves to £1m - well up on the £200,000 reported at the half way stage. Its three acre head office in Mitcham is also being marketed for sale at a shade under it current book value of £2.7m.
AIM quoted 21st Century supplies on-board CCTV systems to three of the five top bus operators and has also expanded its reach into the railway market. It is providing kit for station platforms with contracts secured from three train operating companies. Transport giant Go-Ahead has provided over £2m of business and new on-vehicle CCTV contracts with new customer First Group chipped in a further £1m.
In 2008 the group launched EcoManager, a product aimed at reducing fuel and maintenance costs on buses, it also serves to improve safety by tracking driving styles against fuel consumption. A rollout is underway with Arriva and total sales of EcoManager will be in the region of £5m for the year - the first orders into Europe have also been delivered.
House broker Daniel Stewart predicts current year pre-tax profits of £800,000 and EPS of 0.8p, for 2011 this rises to £1.1m and 0.9p respectively. We recently highlighted the attractions of 21st Century in Growth Company Investor at 7.5p and with the price now a touch higher at 8p the shares are still worth buying."
- trading in line with expectations of £0.8m PBT against a £7.5m m/cap
- £1m net cash, with £0.8m generated in H2 alone!
- the £1m cash plus the £2.7m property for sale represent £3.7m liquid assets against that £7.5m m/cap, i.e 50%....
- the supply of railway station platform CCTV has taken off from nowhere and can now be seen as another major new market for C21
- mainland Europe sales beginning to grow nicely
- prospects for growth look great
Here's the statement:
"Continued strong performance
21st Century, the supplier and installation service provider of public transport CCTV and vehicle monitoring systems, today issues the following pre-close trading update ahead of its preliminary results for the year ending 31st December 2010, which will be announced on 23 March 2011.
Profit after tax for the year to 31st December 2010 from continuing activities, is expected to be in line with market expectations and cash flow generated from operations has been particularly strong. The Company currently has no bank debt and held cash at bank of around £1m at 30 November 2010 compared to £0.2m at 30 June 2010.
The Company supplies on-board CCTV systems to three of the five top bus operators in the UK and this year has expanded into new markets with the supply of Railway station platform CCTV to the three train operating companies owned by Govia (the Go-Ahead and Keolis partnership); significantly the Company made CCTV sales for the year in excess of £2m to the Go-Ahead Group in the UK of which approximately half was for station platforms. The Company also won new contracts for "on-vehicle CCTV" worth £1m with First Group UK Bus during the period
Despite a challenging economic environment, the Company has continued its investment in, and roll out with Arriva UK Bus, of its award winning EcoManager systems. Total EcoManager sales which include its first units delivered into mainland Europe will be around £5m for the year. Since its launch in July 2008 the Company has sold over 6,000 EcoManager units. Customers have reported fuel savings of up to 12% and a 60% reduction in accidents since fitting the device to their buses.
The Company continues to work hard on its strategy to drive growth through developing its existing business in the UK and expansion into mainland Europe by investing in innovation and by nurturing new and existing partnerships. "
"21st Century sees a profitable future
Surrey-based public transport CCTV supplier 21st Century Technology sees a profitable future ahead of it as it increases its share of a growing niche market while improving margins.
Repositioned and in the midst of an encouraging turnaround, 21st Century is also behind a monitoring system known as EcoManager that has turbocharged its prospects and left the business well placed for profitable growth both in the UK and via expansion into mainland Europe.
Four years ago, we were a distribution business, recounts livewire CEO Nick Grimond, who alongside affable finance director Wilson Jennings has done much to revitalise 21st Century, but today, we are a public transport solutions provider. He refers to the groups origins as in-car entertainment systems group Toad, which hopped down from the Main Board to AIM in 2005.
This move was followed by a corporate upheaval involving an acquisition, the disposal of Toads legacy distribution businesses and an exit from loss-making vehicle installation services for the insurance market. To cut a long story short, the restructured and newly monikered 21st Century Technology is now purely focused on the supply of higher-margin monitoring systems for public transport markets.
Albeit with a modest £6.8 million market cap, the company nevertheless counts household name transport groups as clients. Not only is 21st Century the preferred supplier of on-board CCTV systems for Arriva UK Bus and Go-Ahead, it is also an approved supplier, since the start of this year, to First UK Bus.
Additional excitement is provided by EcoManager, a monitoring system launched as recently as 2008, yet already enjoying strong uptake. Via an in-cab LED display and integration with on-board bus computers, EcoManager provides bus drivers and managers with accurate feedback about their driving style, helping them to moderate their driving, pare fuel expenses and significantly reduce carbon emissions. For bus company clients, the benefits of the system, proven to reduce accidents, also include helping bus and other fleet operators to reduce maintenance costs and improve the passenger experience.
21st Century recently delivered solid results for the first half of 2010, which revealed 33 per cent growth in profits on continuing business to £345,000, ahead of management expectations, on turnover up 6 per cent to £5.63 million (2009: £5.3 million) despite recessionary headwinds.
Perhaps the key first highlight was the fact that EcoManager sales weighed in at £2.9 million (2009: £2.4 million), representing 20 per cent growth year-on-year and including first sales, of around £500,000, into mainland Europe, where Grimond insists that growth prospects are abundant. Investors were also cheered by news of balance sheet improvement, with an £800,000 net debt position swinging to net cash of £200,000.
Going forwards, Grimond and Wilson have set out a clear strategy for growth, key tenets of which include building on the groups customer ties to develop and grow maintenance revenues, expanding the EcoManager product offering and using it to spearhead a European push. 21st Century, which also has a legacy property that it can sell in order to strengthen its balance sheet further, is also developing its global distribution to accelerate the roll-out of its products.
Let's hope so...and that it moves the share price up. Been flat for way too long, and given the changing nature of the Board this year, and the significant shareholders, let's hope there is some positive movement!
With concerns over rising oil prices spreading to mainland Europe, 21st Century has secured orders for the award-winning fuel saving device EcoManager from bus companies in France, Italy, Spain and the Netherlands.
21st Century will be demonstrating the features and benefits of EcoManager at Euro Bus Expo at the NEC on 2nd to 4th November on stand T183.
EcoManager assists drivers in adopting a more economic, smoother and safer driving style by highlighting when braking, accelerating and cornering is done correctly or otherwise through an Integrated Safety Device. The ISD lights a series of red, amber and green lights on a real-time dashboard display according to how efficiently the bus is being driven. This display uses technical details from the vehicles CAN system and G-force data in real time and crosses language barriers, making the system ideal for use across the continent.
Extensive management reports show how well each driver is doing relative to the average, the ideal and the rest of their depot colleagues.
Significant fuel savings of 12% are made almost immediately, and are sustained after the initial success because of continued monitoring. Further savings are gained through reduced wear and tear on the vehicle and therefore lower maintenance costs. Accidents are also reduced, further lowering running costs. Because the vehicle is using less fuel it is also emitting 12% less carbon.
It is estimated that EcoManager makes savings that cover the initial cost of investment within the first year.
Paul Rogers, Director of Sales and Marketing for 21st Century Technology Solutions, comments: EcoManager took the UK by storm when it was launched here two years ago. We launched it in Europe earlier this year and have already received orders in four countries and have begun the installation process with nearly 500 already installed."
The business itself is forecast to make £1.1m PBT next year, up from £0.8m this year, against the current £6m m/cap at 6.5p. The business alone should be worth £10m on a post-tax P/E of around 12 on that basis.
Then there are net tangible assets of over £4m, including the £2.7m property to be sold plus the cash pile which ould be up to say £0.5m at this year end.
A £14m value equates to around 15p per share.
Even allowing for a 50% discount on the assets, or a P/E of less than 11, a £12m valuation would still be 13p per share.
So now Jim/Mark Slater and Gyllenhammer own 40% of C21 between them.
At some point the market will see the value here imo - no doubt at that point (especially since there will likely be a shortage of available shares) the share price will suddenly jump up to 10p-12p and everyone will be looking at their screens wishing they'd been a bit braver.
0.37p EPS for H1 puts C21 on target to thrash the 0.6p broker forecast for the year - we can expect say 0.75p EPS at minimum for the year I'd have thought.
Great to see £0.2m net cash, but that would have been much better if the biggie customers hadn't delayed their payments. With an improvement flagged since June I'd hope for a significant improvement in H2 with £2.7m of debtors to collect, notwithstanding capital expenditure.
No news on the sale of the £2.7m property. I would expect this to trigger a big re-rating if and when....
The conclusion says it all:
"The period under review saw profit ahead of management expectations and an expansion of our customer base.
The business is delivering strong margins and gaining market share which make us well placed to benefit as the markets recover."
"21st Century Technology (LON:C21) report:Positive trading update
Date: 15 July 2010
Contributed by Daniel Stewart & Company
-21st Century today issued a pre-close trading update for the six months to 30 June 2010.
-The Group indicated that profit after tax from continuing activities are currently ahead of management expectations.
-The Company has continued the roll out of EcoManager with Arriva UK Bus and delivered its first series of EcoManager units to Arriva in mainland Europe.
-The EcoManager system, which incorporates a passenger counting facility, is aimed at reducing fuel costs, improving safety and enhancing revenues for bus operators by monitoring driving styles against fuel consumption. 21st Century continues to expect good uptake of this innovative product.
-The Company has also won new on vehicle CCTV business with First Group UK Bus."
I'm holding onto mine. There have been a few developments on the board of directors and the shareholder list recently; whilst no news out yet, the latest large shareholder is not interested in buying a dud, so my own view is that some value realisation will happen at some point. If you don't need the cash at this point, I see no reason why you would sell after all this time.
I have around 5000 Toad shares which I purchased in 1998. I am abit confused now as the company seems to have had a few differnet names in that time. Are these Toad certificates I have relevant and just superceded by the 21st century Tecnology or are they of no use to anyone?!!
I went to the AGM. Nothing much happening that they could tell us about. I believe reading between the lines that there will be some further orders, probably from abroad.
Chairman Ward left by "mutual agreement" but there will be compensation payable so make up your own mind.
The few shareholders that were there i.e. me and the other two told the Board in no uncertain terms what we thought of their bonuses.
My opinion - for what it's worth - a couple of good orders indicating continuing support for eco-manager and with a trailing wind - we might see 10p a share. WE're not going to get back to the dizzy heights of yesterday year unless they find oil at Drake Road.
I share the same thoughts as you moonie. The Northglen (Mark Slater) fund will not hang around with a lame duck and will want to realise value from this somehow; quite how they do it, only time will tell, but it could get interesting.
Looks like the new shareholders have made their presence felt, and as some people thought the BOD set-up was a little bit too cosy for them not a bad thing.
Northglen Aggressive SPC who have the 10% are a hedge fund, and as most of them have been liquidating positions in the market turmoil, either they have seen an oppurturnity for them, or have c*cked up lol.
21st Century Technology are at the moment cash producing with no debt - not a bad thing in these times.
...all seems to be kicking off here with the vote-down of resolutions at the AGM, especially the directors' remuneration report, and the sudden departure of the chairman. Not sure whether these things are +ve or -ve, but with 1 new large shareholder in the business, suspect some changes are afoot. Any views welcome, will try and do some research behind the scenes.
Certainly agree with you. Something is going on, and I imagine we will be the last to find out. Hopefully it raises the share price; the 2 large significant shareholders will not accept a flat share price, so something is stirring.
interestingly it is a fund run by Slater Investments, which runs a concentrated portfolio on an absolute return basis. Would be interesting to know - did he buy some of the stake from gyllenhammer? any which way, picking up 10% of the stock suggests they have seen something...
As I noticed Peter Gyllenhammar had bought 10% of another co. today I thought I would google him, and found this - interesting character. Our % is of course out of date, and he does take co's over, as I thought he just took stakes in them - who knows!
Published in Investing Strategy on 20 November 2009
Chris Menon speaks with activist investor Peter Gyllenhammar.
It's certainly instructive to start trying to track smart investors as they can lead you to a potentially lucrative share that is undervalued.
For example, Peter Gyllenhammar is a Swedish activist investor who specializes in companies trading at substantial discounts to net asset value or in need of restructuring, and he was good enough to respond to my questions for this article.
Peter often invests through his investment vehicles, Bronsstädet AB and Union Discount Company of London Ltd. Bronsstädet AB is his holding company for his property business in Sweden as well as for the investments in UK micro caps, and two consolidated entities. Union Discount is a wholly-owned subsidiary of Bronsstädet.
He describes his investment strategy as being to: "Pick up 'bombed out' shares trading at a steep discount to Net Asset Value. If they are badly managed or not managed in the best interest of all shareholders, then implement change."
"This typically takes you into operationally risky situations and accordingly some of the investments go sour but the risk/reward is in aggregate really attractive," he adds.
Sometimes he seeks board representation directly, or alternatively he sometimes nominates or 'recommends' a non-executive director to represent his interests. He is pretty hands on and at Dawson International he recently managed to oust the incumbent Chairman, Mike Hartley.
He's quite a prolific investor and is estimated to be worth £100m plus. Some of his current holdings in UK quoted companies are set out below:
Chapelthorpe (LSE: CPL) 29.6%
Surgical Innovations (LSE: SUN) 2%
Leeds Group (LSE: LDSG) 23.0%
600 Group (LSE: SIXH) 25%
Dawson International (LSE: DWSN) 29%
Densitron Technologies (LSE: DSN) 29.8%
Hartest (LSE: HTH) 29%
Swallowfield (LSE: SWL) 29%
Abbeycrest (LSE: ACR) 29%
Coral Products (LSE: CRU) 29%
MDY Healthcare (LSE: MDY) 21%
21st Century Technology (LSE: C21) 22%
Vero Software (LSE: VERO) 22%
Telspec (LSE: TSP) 25%
Gyllenhammar's own assessment of his success rate is honest and quite revealing: "We were really successful when entering the UK micro cap market in the late 1990s early 2000s taking an initial £50k closer to £50m in a couple of years' time. However since 2002/3 I would say things have for different reasons been a bit stagnant."
"This is partly due to the quality of the underlying businesses having deteriorated less value for money and also, and to a large extent, to the devastating and highly destructive UK pension system. The latter is really dangerous for 'UK plc' and needs to be seriously re-considered by your politicians."
He admits the picture has been more mixed in recent years. "On a net basis it has still been positive but not at all the same growth as in the initial years. Nothing like it."
Success and failure
Gyllenhammar is disarmingly frank about his success and failures over the years. "I lost quite a bit of money on something called Choice UK (video rental) and also on Yorkshire Group (chemicals), Intimas and a few others. This is partly a consequence of my investment profile but in some cases also the result of bad analysis on my side; too much hip shooting."
"This has however been more than compensated for by profits made from acquiring 100% of a number of companies such as British Mohair, Union, Yorklyde and others."
"In recent years we have not been very successful with the minority stakes, however 600 Group has done well for us hitherto and in Swallowfield we are more than 100% up in a weak market. I am surprised how well some of these companies have
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