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Six UK small cap trades to catch our eye
Nigel Thomas and Leigh Himsworth feature in our latest round-up of the interesting stockmarket trades over the last week or so.
Karen Robertson ups Close Brothers stake
Standard Life Investment’s UK equity income specialist Karen Robertson has upped her stake in merchant banking, investment and specialist finance group Close Brothers Group.
Robertson increased her holding in Close from 8.86 million shares to 8.89 million or 6.02% worth £96.8 million at a price of £10.88, up 41.72% over the last year versus a FTSE 250 return of 16.4%. The shares are held in her UK Equity General and UK Equity High Income funds.
While Close has risen hard over the last year the shares still trade at a discount to peer group, at 11.4 times expected 2013 earnings versus an average of 12.5 and a yield of 4% versus 3.8%.
‘The company is benefiting from a very strong competitive position in its niche banking business,’ Robertson told Citywire at the time of her initial purchase in 2011.
At the end of July Peel Hunt upped its price target against Close from £11.35p to £12.75p.
Nigel Thomas increases Dixons holding
Citywire AA-rated UK stock market veteran Nigel Thomas has upped his holding in turnaround consumer electronics retailer Dixons as it emerges as last man standing of its former competitors.
Thomas increased his investment in Dixon, Europe’s second-largest electrics retailer, from 179 million shares to 182 million or 5.03% worth £83.94 million at a share price of 46.3p.
The shares are held in his £4.04 billion AXA Framlington Select Opportunities fund which over the last five years has returned 77.68% versus a FTSE All Share return of 53.13%.
Dixons had its own near-death experience in 2008 with shares falling 83% from 45p to 7p, before recovering in a much-reduced high street. The shares have been clawing their way back ever since, and last week passed their pre-crash valuation.
At the end of June broker WH Ireland upped its price target against the company from 45p to 50p, after Dixons said it did not anticipate any immediate slowdown in triple-digit tablet sales growth.
Cevian Capital II fund buys into G4S
Sweden’s Cevian Capital II fund, the largest activist investor in Europe with around $10 billion (£6.4 billion) under management, has taken a substantial position in troubled security specialist G4S.
The fund bought 72.14 million shares in G4S or 5.11% worth £176 million at a share price of 244p, down 5.61% over the course of this year versus a FTSE 100 return of 11.46%.
Cevian was founded by managers Christer Gardell and Lars Forberg in 2002. The firm has a strong performance record, but has also attracted controversy. The Swedish press has described Gardell as ‘the butcher’, while former Swedish prime minister Goran Persson claimed the managers threatened capitalism.
G4S has suffered a series of setbacks in the past year, the most public being its failure to deliver adequate numbers of security staff for the 2012 London Olympics.
The company is currently facing a Serious Fraud Office investigation into alleged overcharging on G4S-administered electronic offender tagging programmes.
Henry Dixon initiates Energy Assets position
Henry Dixon, manager of the Matterley Undervalued Assets fund, has initiated a position in gas metering company Energy Assets.
The Citywire AA-rated fund manager bought just over 200,000 shares in Energy Assets, representing a 0.75% position in the company and just over 1% of the Undervalued Assets fund.
Dixon highlighted growth of around 30% in the smart metering market for commercial and industrial premises, on the back of growing demand for energy efficiency and operational improvements.
Commenting on the attractions of Energy Assets, Dixon said: ‘Despite significant and visible growth opportunities we estimate that 100% of the value of the company is already accounted for in the value of their current book of 15-year inflation-linked contracts. The company has consistently upgraded earnings expectations and on our returns based metrics we see material upside. Further comfort can also be drawn from peer group valuation analysis.’
Leigh Himsworth adds to Xchanging holding
City Financial fund manager Leigh Himsworth has upped his stake in support services group Xchanging.
The City Financial UK Select Opportunities manager bought just under 109,000 shares in Xchanging at 135.7 pence per share, bringing his fund’s total position up to 500,000.
Prior to Ken Lever coming in as CEO in June 2011, Himsworth said he felt Xchanging was difficult to understand and value. But Lever’s efforts to unravel complicated joint ventures and problematic contracts over the past two years has left Xchanging looking like an attractively valued support services group in the fund manager’s view.
‘With radical change now behind it the focus is firmly on growth with the range of businesses starting to win incremental business. If the worst of the downturn is now behind us, this is a cheap way to boost exposure to outsourcing,’ he explained.
Gervais Williams and Martin Turner lift Lok'n Store stake
Miton fund managers Gervais Williams and Martin Turner have upped their position in Lok’n Store.
The managers bought an additional 75,000 shares in the self-storage company through the Diverse Income investment trust and Miton UK Multicap Income fund, bringing their collective position up to 1.3 million shares. This equates to a little over 5% of the share capital.
Over the six months to the end of January Lok’n Store posted a 36.2% rise in its operating profit to £1.3 million, alongside a 2.2% rise in revenue at £6.6 million.
AIM-listed fund management group Miton recently announced plans to acquire Psigma Asset Management, which was part of the Punter Southall group for a sum up to £13 million. The deal is set to boost Miton’s funds under management up to £2.8 billion.