The Martian - Lets Do The Math (a bit of fun)

The Martian - CTO takes off like Mark Watney (some more fun)

The Math - CTO background, financial metrics and financial modelling Sept 2018(the serious stuff)

Directors present at Mello video Nov 2018

Investors Chronicle Alpha 17 page article Dec 2018
https://pdfs.investorschronicle.co.uk/IC_Alpha_TClarke_Simon_0712.pdf

Company Website

Financial Calendar

Recent Broker notes & Director Purchases

BarChart Indicators

Recent Market news

TClarke Fundamentals (CTO)

Old thread here

If you do nothing else read the serious stuff link. The basis proposition for the trade is that even in the worst case scenario, with a forecast EPS of 13.2p per share and a dividend of 3.5p per share so much cash is being retained in the business that for a company with £11.7m net cash at 2017 year end, we reach a point soon where the directors have to increase the dividends by more than 10% a year and the share price rises as well.

Market expectations of profit before tax £7m with £4m done at half time, £12m net cash and a market cap of £35m and a growing business with improving margins.

I subscribe to a view that the safest way to make money investing is on the basis of knowledge that either isn't easy to find in the public domain or is freely available but no-one has taken any notice.

In other words what's "the edge", what makes the trade more than an educated gamble.

In the case of CTO, I find the impact of MIFID II, a reserved house broker, a major shareholder currently selling has created a situation where the current share price looks highly attractive.

If you like the level of inefficiency in the share price has become extreme and can be demonstrated by the evidence over the last few weeks in that it's peer group have moved up strongly but CTO's share price hasn't budged an inch. It's so far off the radar (more of that later), that an opportunity arose some time ago but now it's getting extreme.

Blue is CTO, Red is Kier, Green is Galliford, Black is Gleeson


Firstly MIFID II.
Background article from Independent
The points of interest are:
"financial research - which in many cases so far has been bundled with other services and associated costs - will need to be paid by separately funded managers and other third parties, in a bid to reduce the possibilities of a conflict of interest amongst analysts"
"Because of the new costs associated with distributing research, she said that brokers might avoid covering smaller companies in their research, which in turn might impact those firm's abilities to access investors".

The outcome of which is that with a market cap of only £35m, it has become uneconomic for analysts to look at CTO other than on an occasional basis and when they do the time that is spent is very limited. The willingness of funds to hold small cap stocks has reduced due to lack of research updates (and lower quality).

Funds are therefore selling such stocks and we therefore have two advantages.
1. We now have a time advantage over the funds as we can act quicker on information in the public domain
2. Funds have been selling off their small caps for the last 2 years but this is now coming to a conclusion. I'll talk more about this with an example of NMD which has 4 bagged in 3 years in post three, but in summary, the level of stock in fund hands on NMD was very low so it worked it's way through fast. On CTO it is still working it's way through at Miton sell. They've still got a fair load to sell but once that's done I suggest the share price can take off

Second - a reserved house broker.
The house broker currently has a profit target of £7m for 2018. A bit surprising since CTO had done £4m at half time and CTO profits are seasonal and weighted to the second half of the year as evidenced by the last 3 sets of accounts.
Also, they forecast a rise in dividends of 0.2p, which on first sight is 5.7% and sounds Ok, but if you examine the figures in detail looks odd. Even if CTO only make £7m profit that's a rise of 7.7% compared with last year and why would a company with net cash of £12m choose to pay out an even lower proportion as a dividend. The directors seem to agree with me, as they increased the first half dividend by 10%. Whether they do the same in the second half is of course anyone's guess but it seems to me the house broker are asleep on the job.
To be fair the house broker does see intrinsic value as 104p, so at least that is higher than the current share price. It is however, based on a blended average of peer group multiples. One of the peer group is Interserve ffs, over half of which it's revenue is in support services, not construction, has borrowed £810m and by any normal measure would have breached it's covenants.

MIFID II and free float.

As posted above funds have been dumping low market cap stocks due to MIFID II. The shares they are dumping have to be absorbed by someone and in general this is falling to private investors.

In the case of CTO, before all this started there was a large institutional holding and PI's haven't soaked it all up.

By contrast if we look at NMD (same sector, same turnover) before all this started approx. 70% of the shares were owned by the family and the directors. They've added to their positions along with one insider who knows the company well. All the shares being dumped were soaked up with as far as I can see the last lot going at around 340p. Here's the chart on NMD. As you can see it's gone vertical. I'm waiting for the last of the institutional shares to be soaked up on CTO at which point I think it will fly too. (see post 4 on how many shares are left to be dumped by the funds)

So, there's an opportunity to buy these as Miton are off-loading and keeping a cap on the share price rising.

Miton's transactions from RNS are as follows:
12/07/16 starting point 7,385,611 17.66%
11/01/18 7,166,611 17.13%
29/06/18 6,818,221 16.30% - selling really starts here
03/07/18 6,056,923 14.48%
05/07/18 5,790,137 13.84%
05/07/18 5,488,041 13.12%
23/07/18 5,090,660 12.17%
25/07/18 4,521,777 10.81%
26/07/18 4,178,775 9.99% - thought they might stop here. They did for a month
07/09/18 3,539,847 8.46%

Interestingly the 8.46% is split between 2 funds, one has 2.27%, the other has 6.19%. The one with 6.19% hasn't sold any since 2016. Whether they are different fund managers I don't know. The shares have been sold at prices ranging from 80.5 to 83p

Now the more intriguing part. While this has been going on a company called Regent Gas has been buying the shares as follows:
03/07/18 1,440,000 3.44%
18/07/18 1,750,000 4.18%
25/07/18 2,585,000 6.18%
26/07/18 2,925,000 6.99%
31/08/18 3,466,234 8.29%
Strange indeed as Regent aren't a fund but a privately owned company. Website here
They provide everything up to and including the meter, so the supply, connection and meter. T Clarke provide everything after the meter.

Research from companies house shows Regent Gas has £48m of net assets of which £36.5m is cash, although presumably about £2.75m lower having bought all these T Clarke shares. Further research shows the directors Nandal and Deep Valecha pop up on the Sunday Times rich list with a wealth of around £128m for 2017. Plenty to buy T Clarke without the need to raise cash. (so no banker is going to get a tip off about this if that's the case)
Link here

Make of it what you will. They are very patient about buying their shares. I'm guessing they are sitting on the order book right now trying to buy another 40k shares at 82.2. It might not be them of course. Earlier in the week I'm guessing the two iceberg trades of 25k at 82.2 where them as well.

Why would they invest in T Clarke out of all the companies on the LSE? (noting they do have investments in UTW and another of their competitors). Your guess is as good as mine. Do they see what I see and the shares are just crazy cheap or perhaps they are collecting shares before making a bid. If so, they clearly aren't in any hurry and why would they be when no-one seems to have noticed and Miton keep offloading to them. If you are going to make a bid, might as well get as many from the market at 83p as you can before you either collect up to 30% at a price of 100p or go straight for a bid at say 120p.
I think Regent run into a problem though once Miton have finished selling. I think the share will gap up, in the same way Kier has moved 20% in the last two weeks. Indeed Miton may have seen this and choose to up their exit price from the current area.

To be clear I have alot of shares and it's a significant part of my portfolio. Apart from about 2% which I may or may not have to sell by the end of January to cover my capital gains tax bill for last year (I have to sell something to raise the cash, hopefully it will be something else) I won't be selling any at any price under 250p in the foreseeable future. The post in red "the serious stuff" explains why.

Looks like Miton and Regent are swapping 25k blocks again today.

I don't why they don't just phone each other up.

Good stuff CC , keep us informed.

There we go - RNS out to prove it - Regent add another lump.

03/07/18 1,440,000 3.44%
18/07/18 1,750,000 4.18%
25/07/18 2,585,000 6.18%
25/07/18 2,925,000 6.99%
31/08/18 2,966,234 7.09%
31/08/18 3,466,234 8.29%
25/09/18 3,813,036 9.12%

Imho they are still sitting on the bid at 81.6 waiting to collect some more.

Cheers CC , strapped in and ready :-)

Welcome aboard Dil. Regent loading up their 25k iceberg orders. Historically they tend to be 150k. Sometimes 100k. Sometimes 50k.

They got filled twice at 81.6 this morning so tried for 81.0. Now at 81.2 as well.

CTO presents at Mello London

26th or 27th November - not sure which day

CTO work on project of the year Bloombery

CTO did building services for Robert McAlpine on Bloomberg. Covered on the news last night.

This is partly why I'm in this stock. If the economy ever picks up T Clarke is the go to company for high end projects. They are also currently working for Dyson which interests me as I'm excited to see what car he comes up with. Future work there could be massive depending where he chooses to manufacture.

CC

I wish you well with the share but the economy will take time to recover by the latest comment from the IMF yesterday.


"The IMF says the global economy is now expected to grow at 3.7 percent this year and next year — down 0.2 percentage points from an earlier forecast, according to the fund's latest World Economic Outlook"

Bizarre trade flow. Share price up 5% this morning for no apparent reason and buyers happy to pay a price we haven't seen for a month.

I don't get my JLIF money til next week!!!

I used to like this thread :-)

.

Looks like Regent are back. 3 x 25k blocks yesterday and now another 25k sitting on the order book at 81.0

TClarke plc, ("TClarke" “the Company” or the "Group") the Building Services Group, is pleased to announce that Louise Dier has been appointed as an Independent Non-Executive Director of the Company with effect from 1st January 2019. She will also join the Audit, Remuneration and Nomination Committees of the Company.

Louise Dier is 58 and until recently was Managing Director of London based David Chipperfield Architects having joined them in 2013. Whilst undertaking the role of Managing Director, Louise also project managed significant assignments, such as the redevelopment of the Metropolitan Museum of Art in New York.

Louise studied law at Cambridge University and was called to the bar, however quickly moved into management, spending nearly 8 years at International Management Group, the US based sports management group, the last 2 years as head of HR for IMG Europe.

A very exciting appointment.

A search of David Chipperfield Architects brings up an impressive portfolio of projects. All high end stuff. Exactly the sort T Clarke are the go to company for. Too many exciting projects globally to list. Includes the Sterling Prize in 2007 for the Museum of Modern Literature in Marbach which kinds of fits nicely to the Sterling Prize in 2018 for Bloomberg London where T Clarke did the building services.

Contacts, expertise. And her profile shows she's got a degree in law, was called to the bar and has also been head of HR in her career. A wide set of skills showing the ambition and aspiration of the directors.

It's always good news when directors surround themselves with heavyweight non-execs.

oh and there's something going on with the trades. Regent back again?

36k sells at 81.34 yesterday. Another 18k today

And I can get a quote to sell 100k on instant fill at 81.34 (which is usually the most you can get on one ticket)

A couple of large trades on Friday.

A purchase of 484,820 shares at 81.8 by the Company Employee share ownership scheme and a 450,000 trade at 81.5 which I assume is Miton selling another lump of shares.

If correct given Miton have been dripping shares into the market over the last month I reckon they are now down to slightly less than 3m shares to sell.

Possibly what is more interesting is that CTO hasn't fallen with the rest of the market and Miton seem to be comfortable letting their shares go at 81.5 and don't want to go any lower.

I am at a loss to understand the price action here. Not that it matters as it's all good.

Someone has just bought 28k shares at 84.9 when we haven't seen that price in a long while. Either the MM's have completely ripped them off or they've got no stock or both. The trade flow would suggest the MM had no stock and have been waiting for the sellers to come to them without success but they usually find a way to force out some sellers.

I don't know and I guess I don't really care. The trading update is in a couple of weeks and there seems to be a flow of buys going through which outweigh the sells. Not before time imho given the likely future of CTO.

MM must have large buy order in.