Derek Pain: Composter is down in the dumps but vet firm has legs

It's about time I reinforced the no pain, no gain portfolio. I have decided to recruit two contrasting shares – one down in the dumps, the other riding relatively high. They are both small caps that, I hope, will not be too troubled by the recessionary climate and could, with a little luck, emerge as valuable constituents.

TEG, a composting technology specialist, is the share that has seen better days. Animalcare supplies veterinary products and by comparison enjoys a near glamour rating. Their arrival takes the portfolio's membership to 15, away from the number this superstitious old timer finds rather uncomfortable. TEG shares stand, as I write, at just 8p, capitalising the company at £9.4m, and Animalcare is 171p, putting a £36.1m value on the business.

In the jargon of the stock market, TEG is what is known as a "speculative buy" – in other words a bit of a gamble. The shares were once around 150p and have fallen from 35p or so in the past year. They endured a nasty summertime knock when the company surprised with a 10p placing and open offer, raising £3.8m. I have long campaigned about a privileged few enjoying private placings with most shareholders left out in the cold. At least TEG offered all shareholders the chance to get involved and its open offer was heavily oversubscribed.

Contract delays seem to have been a factor in its decision to raise capital. Still, the group's outlook appears positive and I am prepared to take the view that in the current atmosphere, with small caps completely out of favour, the shares are over-sold.

Pre-tax profits for the current year are unlikely, although it has achieved such a milestone in the past. At the interim stage the pre-tax loss was doubled at £798,000 but operating profits of £2.3m, up 5 per cent, were achieved. In September its cash kitty hovered near £3.3m.

TEG gets much of its revenue from turning waste – from gardens and kitchens to animal byproducts – into compost. Such an activity has obvious merits, with many local authorities under pressure over landfill sites. TEG has also ventured into energy output, with one installation going into production, although it will not reach full capacity until later next year. Various other developments are in the pipeline.

Animalcare is by quite a few degrees in a stronger position. Its last accounts recorded pre-tax profits up 21 per cent at £3m, with the year's dividend lifted from 3p a share to 4p. And, with new products launched and planned, the group seems set to continue to prosper from the nation's love of cats, dogs and other pets. I have read that in the present financial climate some owners can no longer afford to provide the necessary care. There have even been stories of pets being harmed to allow the collection of insurance. But I believe we are still a nation that is prepared to go to extraordinary lengths to lavish expensive attention on household animals.

From my own experience I have witnessed in recent months two members of my family indulging their love of pets, and, at the same time adding to the income of vets and their suppliers. In addition to regular and costly checks, one spent nearly £400 on nursing a dog back to health after a snake bite; the other's unexpected vet bill is approaching £1,000 (and repairs are not yet complete) on the removal of a growth from a dog.

Animalcare arrived on the stock market in 2008 and its shares have risen from a low point near 60p. They are now on a fairly fancy – but by no means exotic – rating. I usually seek what I regard as under-valued shares, but on this occasion I feel justified descending on the veterinary group.

I have also toyed with the idea of adding another blue chip to the portfolio. Such an addition would add a little ballast. Wm Morrison, the supermarket chain, and Lamprell, an oil services business, are among those I have examined. I regard 16 as the ideal number for a modest portfolio, and on that premise could add another constituent. Of course, 16 is not a magical number. It is merely indicative and I have strayed from its embrace many times.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave crime series
premier leagueManchester City vs Chelsea match report from the Etihad Stadium
Esteban Cambiasso makes it 3-3
premier league
Mario Balotelli celebrates his first Liverpool goal
premier leagueLiverpool striker expressed his opinion about the 5-3 thriller with Leicester - then this happened
people'I hated him during those times'
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
Arts and Entertainment
Female fans want more explicit male sex in Game of Thrones, George R R Martin says
tvSpoiler warning: Star of George RR Martin's hit series says viewers have 'not seen the last' of him/her
Dame Vivienne Westwood has been raging pretty much all of her life
peopleFirst memoir extracts show she 'felt pressured' into going out with the Sex Pistols manager
Arts and Entertainment
Lauryn Hill performing at the O2 Brixton Academy last night
musicSinger was more than 90 minutes late
Lewis Hamilton in action during the Singapore Grand Prix
Formula OneNico Rosberg retires after 14 laps
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Arts and Entertainment
tvReview: 'Time Heist' sees a darker side to Peter Capaldi's Doctor
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam