New Investment – Titon Group

Bought a bit of Titon group @84p – about a 5% portfolio weight. They make window furniture – handles / vents and extractor fan systems in the UK and Korea.

Stole this idea from ADVFN… Company has a 9.5m Market cap. Balance Sheet is rather healthy – 2.4m cash. 3.8m inventories, 4.9m receivables, 3.2m PPE – of which circa 2.2m is freehold land / buildings, 3.9m liabilities – mostly payables. In total assets worth 10.4m – over the current market cap.

Cashflow is looking good – 800k from ops in the first half. Strong earnings – 8p in 2014, indications are for something similar in 2015.

I would arrive at a very rough valuation of 7*earnings – given the small size of the company, commoditized product – 56p. I would then add the net assets of the company – about £1 a share giving a rough price of £1.50.

There has been a bit of M+A in the sector – a likely catalyst.

Bull points are UK planning permission applications are up quite a bit – apparently topping 200k for the first time since the crisis (link)
& link

I am a bit concerned about the sector these guys operate in – I believe UK property is fundamentally overvalued (particularly in London). I expect the bubble to pop within the next year or three – being the likely cause of the next recession. Still there is no sign of this at present so I am happy to put a bit in here…

Share ownership is reasonably dispersed – management collectively hold about 34%. Discretionary Unit Fund Managers Ltd hold 19.7% and Mrs A J Clipsham 7.5%.
Ideal ownership – not so dispersed as no one cares – not too concentrated so insiders can oppress the little guy…

On a portfolio level bit concerned I have too much in tiny sub 50m MCAP companies such as this – looking for more larger companies but finding them hard to find…


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