Holders Technology Plc: a cheap British nanocap
Holders Technology Plc manufactures special materials and equipment for printed circuit boards, the PCB business and also provides “Lighting and Wireless Control Solutions”, in short the LCS business.
The stock trades in London with ticker HDT. At 1.12 GBP per share I compute only 4.75 million GBP for the market cap and only 1.65 million GBP for the enterprise value.
See also the annual report over the year ending on 30 November 2021.
The company operates from the UK and Germany. In the UK it operates as a distributor and in Germany it also has a factory. The company also has joint venture operations in Australia and New Zealand. Currently the book value of these joint venture investments is 111k GBP.
About half of the revenue is from the EU, about 30% is from the UK and the rest is from the rest of the world.
Over financial year 2021 the company paid out 0.03 GBP per share. Otherwise I have not found any significant repurchases, dilutions or dividends. The dividend over financial year 2021 includes 0.02 GBP related to the disposal of the “commodity PCB product range”. After this disposal the focus is on “a number of specialised PCB products whilst further growing our LCS business”.
The stock is cheap based on EV/EBIT, even after excluding the extra income from the disposal. I compute 3.5 for the EV/EBIT multiple, 0.13 for EV/Revenue and 2.7 for P/FCF. Furthermore, multi-year metrics for judging earnings quality and asset allocation are better than average.
The balance sheet is strong with low leverage and a high current ratio. The company has lots of cash and no debts.”.
Substantial shareholders: Executive chairman R. Weinreich (75) owns 1.85 million shares or 43.82%. Mrs. A Marcou owns 12.31%, Mr. D Loughran 9.14%, Mr. D Barry 5.47%. In 2020 there were 220k options outstanding but they expired that year.
Related party transactions
I have not found any such transactions in 2021 except for management compensation (in total 704k GBP in 2021) and small dividend payments to directors based on their shareholdings. In 2021 directors earned 259k GBP including 131k GBP for the Group Managing Director, Victoria Blaisdell. I think this number excludes 59k GBP of pension benefits for her. I do not think there is anything worrisome with this transactions.
Conclusion
Cheap semiconductor materials company based on EV/EBIT and EV/Revenue, with good chances on revenue and profit growth. Strong balance sheet. Earnings quality is probably better than average as well. In fact, I expect profit margins to improve because of the disposal of business with lower profit margins. I have not found any governance issues. I consider this company shareholder friendly. However management has warned growing LCS business requires substantial capital. Therefore I do not think it will pay significant dividends in the next couple of years.
Disclosure: long Holders Technology Plc.