NEWSLETTER 27 - THE 2014 UPDATE 25TH NOVEMBER 2014

Northamber has a share price of 42.65p and a market capitalisation, MCap, of £12m.  Is it a 'buy' at these levels?
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The latest annual report was published last week, and the headline numbers do not make for comfortable reading:
 

• Turnover down 18.9% at £62.9m
• A loss of over £1m, following a similar loss in 2013
• Net asset value per share falling again, to 76.4p
• Dividend per share at a miserly 0.6p
• Gross margin 6.8%, down from 7.7%
• Son of the founder in strategic role

 
But we need to dig deeper than that to get a picture of what is going on.
 
First let’s check on the balance sheet
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NCAV is greater than the MCap (if we can trust the BS figures for inventory and receivables), with £5m in cash.  On top of that we have two highly marketable properties to take into account:
 

• The headquarters offices in Chessington (23 Davis Street). This is in the books at £1.9m. However, it is located on the edge of a residential area and a planning application has been submitted to Kingston Council.  If you Google it you can see the design for 28 flats within the current building (20x1-beds, 6x2-beds and 2x 3-beds). I have heard that the building could be worth over £4m.  Quite sensibly, the managerial team are not committing themselves to this course of action, merely, “testing plot’s valuation” and starting the consultation with locals.
• The warehouse in Weybridge. This was bought for £6.7m a couple of years ago. It has over 80,000 sq ft of warehousing, with more than 7,500 pallet bays and 13 loading bays.  With a diminished turnover Northamber only needs the use of one-half of this building.  The rest could be rented out.  Alternatively the building could be sold. I’m guessing here, but I think industrial property prices in the south of England are on the rise.

 
Thus the value of its property is about the same as the MCap, which means that the MCap is covered twice, once by net current assets and once by saleable property.
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Tomorrow I'll check out the how trading is going