Triad Share Discussion Threads

[netcurtains] 18/6/2020 09:03

currently Triads Market Cap is more or less the same as its cash pile!

Hopefully it will recover a lot over the coming months...

[arthur_lame_stocks] 18/6/2020 08:58

Yes results tolerably bad but they need to return to profit quickly otherwise that cash pile is going to disappear.

[cjohn] 18/6/2020 08:57

Hi England80,

"My understanding is that value realisation in some of the Japanese net nets is problematic due to the incestuous nature of some of the stocks due to interlinking ownership of companies."


Many Japanese companies, the net-nets are classic examples, maintain levels of cash and securities on the balance sheet which would be considered highly inefficient in an Occidental firm. This is a cultural difference that some Western investment houses are trying to change. (Good luck with that!). Likewise, interlocking shareholdings and directors does not bode well for corporate governance.

Certain precautions are clear:

-only invest in Japanese net-nets that are showing very marked declines from recent highs and absolute highs. This is true of a very good number currently.

- Pick net-nets with viable businesses over several years.

- You could also find net-nets with Western value houses as shareholders.

[cjohn] 18/6/2020 08:46

The results were tolerably bad, much as expected: A loss for the full year of £0.8m. Loss for the 2nd half of £0.4m

Other points worth highlighting:

- small positive net cash inflow from operations.

- net decrease in cash overall was £764k. Dividend paid was £479k. Given that the dividend has been eliminated and they are focusing on rapid cash collection, the current level of net cash may not go down that much over the coming months. (If volumes of business continue to drop there may be a net release of cash too.)

[netcurtains] 18/6/2020 07:51

Well four pluses from the results:

1. The cash pile has recovered somewhat from last six months (I guess they got paid for that contract that was delayed)... A cash pile of £3.8M is a lot for a company valued at just £5M..

2. They seem to have lots of work in various places within government.
3. They are expanding permanent head count quite fast (permanent workers tend to have bigger margin)
4. Work is good enough that no workers need be furloughed (better than a lot of firms)

[weatherman] 18/6/2020 07:48

So no e-o-y dividend. Results as per expectations.

[netcurtains] 17/6/2020 22:10

WGB - Walter Greenback went up today. That was my stab at a net net...
Cheers Net!

[england80] 17/6/2020 21:51

Thanks CJohn/netcurtains

Every so often in my background reading on net nets the Japanese market is highlighted as fertile hunting ground. The language barrier puts me off, especially as reading the subtleties in the accounts is so important to making sure you’re not misunderstanding or falling into a value trap.

My understanding is that value realisation in some of the Japanese net nets is problematic due to the incestuous nature of some of the stocks due to interlinking ownership of companies. As you say CJohn, demanding a larger discount than normal mitigates that risk to some extent.

It’s more of a curiosity. I need to make sure I’m nailing my choices at home first.

Sorry for hijacking the thread in a completely random direction.

Lets see what the next set of results bring for TRD.

[cjohn] 17/6/2020 16:15

Hi england80,

Many private client brokers deal in Japan. But you need to check with each broker.

Interactive brokers is another option.

As for screening, stockopedia is an expensive option, but pretty good on the Far East.

You can find a very similar amount of information less attractively packaged at investing.com. You have to do more brainwork. (Not a bad thing that.)


Use of English on Japanese company websites varies from zero to total coverage - usually companies with a strong international presence. With the least-English friendly, you have to use translation machines and the coverage of screeners.

Given the difference in culture and occasional lacunae in what you know it makes sense to be more demanding in valuation in Japan.

Japanese stock markets in aggregate market cap are the second largest in the world after US, so it makes sense to really home in on what you're interested in.

Japan is indeed net-net world capital. Good hunting!

[netcurtains] 17/6/2020 16:04

england80: you could start with stuff like this:

[england80] 17/6/2020 15:54

Hi CJohn,

re post 1663

I’ve heard before that the Japanese markets are good hunting ground for net-nets, but I’ve never ventured outside UK stocks.

Can I ask what tools you use to screen for these and then how you read their statements of accounts? I’m assuming you don’t speak Japanese!

Also which broker you use to purchase the shares (if you don’t mind)?

Cheers

[netcurtains] 16/6/2020 17:33

CJohn: Motely Fool seem to echo your views:

Asian dividends’ growing appeal

Almost a fifth of global dividends come from Asia.
Footsie-focused investors miss out on most of this.
Asia-focused income-centric investments trusts are an easy way to access Asian income.
Tuesday 16th June 2020
Malcolm Wheatley, Investment Writer
Dear Fellow Fools,

To say that income investors are shell-shocked is something of an understatement: few income investors – if any – are unaffected by recent events.

In short, almost half of the companies in the FTSE 100 have reduced, cancelled, or suspended their dividend payments; Bank Rate stands at 0.1%, and gilt yields are on the floor.

Older investors, in particular, have been hit hard.

For those in retirement, there isn’t a lot .........

[dangersimpson2] 16/6/2020 10:11

I would rather a company retained cash than wasted it on an acquisition they can't execute, or tried some expansion into an area they can't deliver. I would generally prefer they return excess cash via special dividend or buybacks - I think the SOM policy is a good one generally, say how much cash you want to keep as downside protection and return what ends up in excess of that amount each year.

With TRD & ZYT having not returned that cash pile in the last couple of years they are now sitting very securely to navigate the current crisis, which is great, but doesn't seem to get any recognition. In the current market CBILS loans (which act as dividend blockers while outstanding) and rights issues are greeted as bullish signs, whereas conservative cash management is seen as a negative!

In TRD's case the very conservative stance comes from the Chairman. I expect he views TRD as the culminationation of his professional career and supportive of his family through future generations and won't take any risk that may jeopardise that. This means that any return of that cash pile will be slowly through regular dividends when it comes. With this in mind I am still hopeful they will retain the dividend despite recent difficult trading conditions.

[cjohn] 16/6/2020 09:51

A cash mountain is generally a strong positive.

Unfortunately, in companies with poor corporate governance and behaviour, it can lead managers to profit at the expense of owners. I've seen this happen in a significant minority of shares whose principal asset was net cash of more than market cap. So personally now I avoid shares with large net cash piles, UNLESS they also have a sustainable and profitable business.

[cjohn] 16/6/2020 08:20

Principal motivation for Brexit voters - I think - was recovering control - however that was understood: whether over borders or bringing decision making back to Westminster.

I personally would have voted Remain. (Lived too long away to have a vote: broken promise of Tory government BTW. Said they'd give the vote back to expats.)

I thought the negatives of Brexit outweighed the positives, but I could certainly understand and appreciate the thinking of those who thought otherwise.

[netcurtains] 16/6/2020 08:09

CJohn that is true - and also with USA stocks you dont have to pay such large fees. I will take a look at Japanese shares -

the structural problem with Japan and China is that because they make money exporting their companies are going to be in serious trouble if the IMPORT MARKETS dry up.....

I have a feeling the UK is probably going to be a good place for manufacturers post crisis as that was the whole point behind the "dire" brexit decision - "make stuff here up north". If that does not work then what was the whole point of brexit?

[cjohn] 16/6/2020 08:03

Net Curtains: "Not sure why late this time - I think it is a couple of days later now than last year."


As you're perhaps aware many companies are reporting later; COVID has slowed down accounting too.

[cjohn] 16/6/2020 08:00

Hi Netcurtains,


You've got some good ideas and I wish you well in your quest to be a millionaire. It's doable, if you are disciplined and follow a coherent and proven strategy.

I started with ten thousand quid in the late 90's, wasted a few years as a very naive momentum and growth investor, but have lived off investment since around 2004. I'm a much better investor now than ten years ago. Experience really helps in investment: accumulating a diverse pile of errors - best way to learn.

For example, having been through serious crashes in 2001 + 2003, 2008/9, this time I've done much better. Piled money in at the bottom without fear, but kept a reserve in case of a double dip.

Personally, I've found diversifying from the UK has improved my returns too. It also means you can be more demanding on investment criteria.

[netcurtains] 16/6/2020 07:47

Thanks CJohn. Looking at this site, it appears March's CASH BALANCE normally rises (or falls less) than the September CASH BALANCE (there is quite a marked difference). If this holds true this year, Triad might have better results for March 2020 than September 2019.... Its possible.

[cjohn] 16/6/2020 07:44

As to the differences between the two approaches:

the approach I'm using discounts net cash too - by a third. This makes some sense in my view: large piles of cash seem to cause a significant percentage of directors to behave badly and blow the stash on poor acquisitions or greedy or out-and-out dishonest behaviour.

The approach you mention will heavily discount stocks like WYN, who have scant net cash and so the bulk of their current assets is in receivables and inventory. As your rightly point out, on this approach, WYN doesn't come close to being a net-net.

[netcurtains] 16/6/2020 07:39

No news yet. Last time they were late while waiting for a payment of about 800k (at least it looked like that) - cash was down but accounts receivable was up 800k. Not sure why late this time - I think it is a couple of days later now than last year. Perhaps there is a contract waiting to be signed or something .... Some bit of news they can add in to the results... Perhaps its not late at all and next monday was always going to be results day.

[cjohn] 16/6/2020 07:35

Hi dangersimpson,

I've been thinking about net-nets overnight.

I think there are alternative formulations.

I believe the formulation I'm using of net current assets minus all other liabilities to get NCAV, then applying a margin of safety of 33.3% comes out of Ben Graham too. Certainly, in the secondary literature I've looked at last night, this is the formula referred to.

As you know, Ben G was a protean writer, who re-formulated his approach many times. I have a copy of Security Analysis and Intelligent Investor in front of me.

But you are a historian of value investing and may be able to find the references more quickly than me!!!

[netcurtains] 15/6/2020 22:09

CJohn: I suspect it does need John Lewis to be working though (so bare that in mind)

[cjohn] 15/6/2020 20:33

Hello net curtains, Walker Greenbank looks very interesting at first glance.

Thank you for the heads up. Will read annual reports tomorrow.