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I’ve sold all my shares in Northamber (LSE:NAR) at 57.2p making a modest profit over the three month holding period (they were purchased at 50.4p – so only a 13.5% return). The primary motive was to add to a cash war chest, ready for purchasing value shares when the crisis reaches its height. But there are also nagging doubts about this business, made more worrying by the prospect of reduced spending throughout UK society on capital items such as audio-visual equipment and computer peripherals in the months ahead.
Why I bought
At 50.4p its market capitalisation was £13.9m, but its cash holdings were over £16m, and it had no debt. The only liability was £7.4m of payables which was more than covered by £9.5m in receivables and £3.3m in inventories. It also had an office building worth north of £3m.
Net current asset value from latest announcement (half-year report)
| £’000s | Sept 2019 | |
| Inventories | 4.5 | |
| Receivables | 8.1 | |
| Cash | 14.7 | |
| Payables | -7.5 | |
| Less one-third inventories | -1.5 | |
| Less one-fifth of receivables | -1.6 | |
| NCAV | 16.7 | |
| Value of Chessington office property | 3.0 | |
| NCAV plus freehold property | 19.7 |
Market capitalisation at 57.2p = 27.4m x £0.572 = £15.7m. Thus the shares are trading at a 20% discount to NCAV + freehold property. But annual operating losses in the next recession – that awful new factor – might close that gap fairly quickly.
Net current asset value being greater than market capitalisation is where the good news about this company stops. The negatives I list below were just about tolerable in times of normal economic growth and when the share price was 50.4p. But the ramifications of Covid-19 tip the balance against the firm.
The directors continue to refuse to give a dece
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