Topnotch Share Discussion Threads

[logica2me] 04/11/2002 13:44

Staying steady at the 7p mark............. any more for any more?

[sreddy] 01/11/2002 16:07

London Trader (or AS),

Hi. I don't agree that we are looking at only a double. Given the special circumstances of this share (the warning, the illiquidity, overall market conditions) the graph is much less relevant. If the banking is sorted, and because the asset write-downs have already been done and because there is some optimism that trading can be turned (see results), then the discount of 85% from NTA to share price would be far too high. If this were a profitable company then there is no reason why it should not trade above NTA, ie above 45p!

This may take some time, of course, but in the meantime a lower discount would seem appropriate. What that should be is subjective, but 85% is too high. If, say, it was a still large 50% discount, then a share price of 22.5p would result. This share has traded in excess of 50p this year and for most of the year was above 20p.

Remember also that there is a strategic review going on. This could lead to disposals and a re-focussing of the group, speeding up it's return to profitability and reducing bank debt. It could also lead to an offer for the company from a competitor or even via an MBO. In these scenarios the offer price would probably need to be much nearer the NTA than currently for an offer to be successful.

As you know I am heavily into this share, but hopefully you see the logic of my analysis. We all know that logic does not always count in this market, but I think the share offers above average chance of significant capital growth. If held for 2 years any CGT would also be chargeable at only 10%. There are risks involved, but if you don't take risks you rarely get above average returns.

[london trader] 01/11/2002 14:42

Hi sreddy,

well I was tipped when the share price was 4.5-5p to buy. Before I did not know anything hardly about them except that the share price had already gone up from 1.25p to buy. They are not my cup of tea since there is only double to go at the most according to the graph if you go by what they were before the fall.

AS

[sreddy] 01/11/2002 14:23

London Trader,

I'm up over 200% in a week and we haven't even had the bank announcement yet. If it does come then the discount of 85% between share price (6.75p) and NTA (c.45p) is just not justified at all.

Even if you then keep a discount of 55% because of continuing losses (this discount still would be high in my opinion if the bank is sorted), then you get a share price of 20p per share. I'm not promising this will happen, but I'm not in this share only for a couple more pence.

[london trader] 01/11/2002 13:15

Im glad I never bought into these cause I done much better in percentage out of buying into British Biotech instead.

Thanks for the tip anyway Logica,

AS

[double6] 31/10/2002 00:57

Logy, further to our succes with THC - have a look at IVS (similar fall - similar situation) - could end up being a cracking double.

[logica2me] 31/10/2002 00:56

Glad to hear it my dear !

Expect a rise soon........................

[logica2me] 31/10/2002 00:47

Well done for trusting me love !

Did you buy ALY by the way?

[tokyogirl] 31/10/2002 00:40

WELL DONE LOGI!

[logica2me] 31/10/2002 00:29

I'm considering topping up at this level....................

[clark1] 30/10/2002 17:19

Missed the screaming buy at 2.25 - Have I missed the boat or still time - sreddy looks confident

[sreddy] 30/10/2002 14:33

Further analysis of the results:

If you look at the results for the year ended 04/2002 you will see that the
loss before exceptionals but after interest was £0.5m, after a change in accounting policy deferred £0.5m of annual subscription income to later months. The statement also gives reasons for some slow branch starts due to disruption and states that September and October show marked improvement. Although they say they are still making losses, the situation appears mendable, particularly if management aren't side-tracked by too many new openings. This appears to be recognised. Also the disposal of loss-makers should improve profitability and release management time.

All-in-all, some reasonable grounds for optimism. If this trend of improvement continues, then the discount of 80% between NTA and share price will be well over the top. Assuming the bank negotiations are satisfactory and reducing the discount from NTA to, say, 40% gives a share price of 27p. In the longer term, if profitability returns then there is no reason why the shares should not trade at a premium to NTA, ie. in excess of 45p.

[sreddy] 30/10/2002 13:15

double6,

Be careful with IVS. It is not the same situation as THC at all. Its market cap now equals its NTA. THC's market cap is only 17% of its NTA! THC are having positive discussions with its bankers. There is still risk, but at least the right noises are being made and not countered. THC's accounts are out and trading at the operating level is not too bad, even if loss-making. The accounts describe areas where trading can and is being improved. Also THC has alredy written down its assets in these accounts and still have NTA of 45p per share. IVS says it has NO other sources of funding, which means the banks can't be interested. IVS needs the support of Klippan. They may take the view to write-off their investment in IVS and pick up the assets cheap. I'm not saying this is what will happen, but it is a possibility.

Not the same situation at all.

[sreddy] 30/10/2002 11:14

Spike,

HEC had a surprise £3m error in its prior years accounts and the FD was sacked!

SWD was only supported during the sale period. No-one wanted to buy SWD so it folded.

Neither of these two companies had anywhere near the level of NTA that THC has compared to its borrowings.

But yes, of course there is a risk. Based on my reading of the situation, it is one I am prepared to take.

[spike_1] 30/10/2002 11:03

sreddy - I'm not as confident as you. The going concern basis only exists IF the bankers come up with the cash, and they would say they were confident wouldn't they.

"However based on discussions with our bankers we remain confident of agreeing new facilities in the near future. Accordingly the financial statements for the year ended 30 April 2002 have been prepared on a going concern basis."



There are (in my mind) similarities here to both Health Clinic and Sportsword both of whom went bust.

But obviously I home I'm wrong.

Regards - Mike (PRM looking good again today)

[spike_1] 30/10/2002 11:03

sreddy - I'm not as confident as you. The going concern basis only exists IF the bankers come up with the cash, and they would say they were confident wouldn't they.

"However based on discussions with our bankers we remain confident of agreeing new facilities in the near future. Accordingly the financial statements for the year ended 30 April 2002 have been prepared on a going concern basis."



There are (in my mind) similarities here to both Health Clinic and Sportsword both of whom went bust.

But obviously I home I'm wrong.

Regards - Mike (PRM looking good again today)

[sreddy] 30/10/2002 10:13

Results actually better than I expected. Net assets after write-downs are still 45p per share!

Discount to net assets of 90% to reflect losses is far too high. Remember most of loss is one-off. Reflects the uncertainty of the bank situation. Once this is cleared up, I expect a big bounce. If not, then take-over/take private must be a possibility. I don't mind if I have to hold these for 2 years, though I think I will get the choice to get out at a much higher price or hold on for the tax saving. For the directors to sign off accounts on a going concern basis, they must have good confidence on bank position.

[londonthing] 30/10/2002 09:57

Results expected lunchtime Logica?

[logica2me] 30/10/2002 09:49

Sign of confidence that they are still recruiting at board level.....

[logica2me] 30/10/2002 09:48

Results are as expected..................

[bbfifi] 30/10/2002 09:28

Is this an AIM stock?

[sore loser] 30/10/2002 09:24

6.5/6.75

A perceived delay only then?

Could be a bit of profit taking only - I guess a positive Bank support statement will reverse?

[wingdings] 30/10/2002 09:23

Bad news on the way?