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I’ve scanned the entire UK market for new NCAV investments. Only two made it to my first short-list – maybe the low availability of NCAV shares tells us something about the price level of the UK relative to balance sheet value?
I have to do a lot more work on these before I can report any real analysis to you. However I can give brief outlines of why these two got to be shortlisted.
Avingtrans
This company is a collection of niche engineering businesses. The directors seem to like putting together sub-scale firms, melding them and then selling the viable division created.
In May they sold the largest unit, an aerospace business, for £52m cash. The whole company is valued by the stock market at £55.4m.
It has net cash of £51m and a first-glance crude NCAV of around £54m (before removing one-third of inventory and one-fifth of receivables, or allowing for the value in saleable property).
So, it is probably not a solid NCAV buy (that is yet to be determined by a more thorough analysis) but if there was a move down in the share price by a relatively small amount then it might become a solid NCAV investment by having sufficient margin of safety. Therefore it might be worth putting on the watch list for now.
Some words from the aerospace division sale announcement will give you some flavour of how they run this business:
“Following the proposed Transaction, Avingtrans will continue to develop the Energy and Medical markets …….. It is intended that Avingtrans will return a substantial portion of the proceeds of sale to shareholders [£28m is to be return through a share buyback].
As well as partly repaying the Group’s existing debts, the retained portion of the sale proceeds will be used to continue to build Metalcraft’s leadership in Energy related markets (notably in the nuclear sector) and potentially in other high value engineering niches, where the Board believes that it can use its turnaround expertise to add substantial shareholder value.
Steve McQuillan, CEO, commented……….To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
