Bottom Feeding - TSTL.AIM, WBGR.OM, and CML.AIM
Tristel (TSTL.AIM)
TSTL is a manufacturer of infection prevention products for the health industry.
In the year ended 30 Jun 2024, the company generated total revenue of £41,933k (FY23: £36,009k), gross profit of £33,578k (FY23: £27,918k), operating profit of £6,982k (FY23: £5,281k), and net profit of £6,489k (FY23: £4,461k).
Total equity at 30 Jun 2024 was £32,410k (FY23: £30,684k), and it had net cash excluding lease liabilities of £11,789k (FY23: £9,545k), and £5,925k (FY23: £4,365k) including lease liabilities.
TSTL generated net cash flows from operations of £10,886k in FY24 (FY23: £8,490k), and invested £2,182k in capital expenditure (FY23: £2,423k). It generated free cash flow of £9,093k (FY23: £6,852k), which it used to pay dividends totalling £6,224k (FY23: £4,511k).
Market capitalisation: £144.54m
Valuation: Using the FY24 figures, the shares currently offer an earnings yield of 4.5%, free cash flow yield of 6.3%, and dividend yield of 4.3%.
Reason: The company has just started expanding into the US, and expects a significant proportion of future growth to come from this market. Therefore, I’d say investors are pricing in the potential impact of US tariffs on near-term growth.
Interest level: High - My first impressions are that it’s a high quality and growing company, able to pay out most of its earnings to shareholders.
Wästbygg Gruppen AB (WBGR.OM)
WBGR is a Swedish construction and project development company that builds and develops a mixture of residential and commercial buildings.
In the year ended 31 Dec 2024, the company generated total revenue of SEK 4,989m (FY23: SEK 4,991m), gross profit of SEK 88m (FY23: SEK 25m loss), an operating loss of SEK 216m (FY23: SEK 361m), and net loss of SEK 213m (FY23: SEK 369m).
Total equity at 31 Dec 2024 was SEK 968m (FY23: SEK 1,181m), though this included SEK 427m of intangible assets (FY23: SEK 430m). Net debt at this date was SEK 526m (FY23: SEK 1,126m).
WBGR generated net cash flows from operations of SEK 88m (FY23: -ve SEK 717m), and invested SEK 69m into various tangible and intangible assets (FY23: SEK 36m). Free cash flow was break-even at best, and a fair amount of debt restructuring occurred.
Market capitalisation: SEK 480.19m (USD $47.97m) - This is post-dilution.
Valuation: Using the FY24 figures, the shares currently offer an earnings yield of -44.4%, and trade at a price to tangible book value of 0.7.
Note: these figures account for share dilution from a rights issue and the SEK 150m in cash it raised.
Reason: Business downturn; resignation of CEO and CFO; and share dilution.
Interest level: Low - Don’t see much value here.
CML Microsystems (CML.AIM)
CML develops mixed-signal, RF and microwave semiconductors for global communications markets.
In the year ended 31 Mar 2024, the company generated total revenue of £22,893k (FY23: £20,643k), gross profit of £16,210k (FY23: £15,611k), operating profit of £1,943k (FY23: £4,990k), and net profit of £2,060k (FY23: £4,810k). Note: the FY23 operating and net profit figures were boosted by an asset sale.
Total equity at 31 Mar 2024 was £51,076k (FY23: £50,754k), but a significant proportion of total assets consisted of intangible assets valued at £32,949k (FY23: £22,214k). The company had net cash excluding lease liabilities of £18,213k (FY23: £22,259k), and £17,357k (FY23: £21,207k) including lease liabilities.
For context, CML acquired Microwave Technology Inc on 2 Oct 2023 (2H24) for total consideration of £10,796k, split between £6,266k cash and £4,530k shares. This explains the increase in intangible assets and decrease in cash from FY23 to FY24.
CML generated net cash flows from operations of £5,044k in FY24 (FY23: £5,412k), and invested £5,065k in capital expenditure (FY23: £5,387k). Free cash flow in FY24 was £1,584k (FY23: £2,629k), and the company paid £1,739k in dividends (FY23: £1,589k) alongside repurchasing shares worth £1,750k (FY23: £4,767k). Note: since the company doesn’t split out growth and maintenance capex, I’ve used depreciation/amortisation to calcuate FCF.
Market capitalisation: £33.42m
Valuation: Using the FY24 figures, the shares currently offer an earnings yield of 6.2%, free cash flow yield of 4.7%, dividend yield of 5.2%, and shareholder yield of 10.4%.
Reason: Depressed semiconductor market and FY25 profit warning.
Interest level: High - Could be an opportunity to buy a well capitalised and cash flowing business near the bottom of the economic cycle.
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