Derek Pain: Composter is down in the dumps but vet firm has legs
Saturday 26 November 2011
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.
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
10 tips for taking out a personal loan
Weekly Money: Round-up of the personal finance stories you may have missed 26-30 January
City Watchdog to investigate banks' handling of PPI compensation claims
How to start your own internet business
- 1 Woman falls to her death as she celebrates marriage proposal at the edge of Ibiza cliff
- 2 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 3 Dad attempts revenge on teenage daughter, plan backfires spectacularly
- 4 Ball pool for adults opens in London
- 5 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
Day In a Page
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion