Zetar (ZTR)

Zetar plc (ZTR)

Market cap of £27m

Current share price (as at 19 May) 202p

EPS 2010 35.4p (adjusted) Giving current P/E of 5.7

Forecast EPS 2011 37p Giving forecast P/E of 5.5

Forecast EPS 2012 38.9p Giving forecast P/E of 5.2

Zetar plc pays no Dividend currently.

What do they do?

Zetar has two main businesses – confectionary and natural snacks.

http://www.zetarplc.com/AboutUs/OurBusinesses.aspx

The confectionary division specialises in novelty chocolates such as kids character advent calendars and easter eggs, baileys filled chocolate, caramel filled salted chocolate biscuits, and so on. They have a range of large licenses including Disney Pixar, Barbie, Hello Kitty and Top Gear as well as their own brand (Kinnerton). The natural snacks division makes other such unusual snacks as marmite nuts, reggae reggae cashews, vimto fruit snacks, as well as their own range of snacks.

Customers
Zetar have an impressive range of customers. The majority of the supermarkets are customers as Zetar produce a lot of the supermarket own brand items.

Strengths
Zetar are known for their quality and product innovation, and it is this innovation that is part fuelling their growth (they introduce around 400 new products a year out of a total product range of 2000).

Outlook
They are keen to expand both organically and through acquisitions with the focus being on more “everyday” (i.e. all year round) products and impulse buy items to reduce seasonality. There is also a focus on value and increasing margins through a better product mix (i.e. coating cashews in reggae reggae sauce mix allows a much higher price to be charged and hence increases margins).

Summary
The company clearly has growth aspirations, which are not factored into the current share price. Infact the share price was well above 500p just a few years ago, and could well get back to that level once the market wakes up to how undervalued the company is.

Northern Bear (NTBR)

My first recommendation is Northern Bear.

Summary
EPIC NTBR
Current Share price as at 18th May 2011 - 11p mid point.
Market cap of equity - £2.13m (yes, just £2m, it really is a micro cap)
Year end March 2011
Historic EPS 4.5p
Forecast EPS 2011 3.6p, 2012 4.3p, 2013 4.9p
(although the company have admitted they are unlikely to hit the 2011 target - more of this later).

Historic p/e 2.4
Forecast p/e 3.1

Half -Year results to 30 Sep 2010 can be seen in the link below.
http://www.northern-bear.com/financialoverview.html

Company Description
Northern Bear is an acquisitive support services and building services business, or at least it was acquisitive until it ran out of cash. They are based in the north east of England.

Revenues are split approximately 45% to the social housing sector, 8-9% new build houses and the rest from private contracts including high margin areas such as asbestos removal and fire prevention.
A good write up can be found here...
http://www.stockopedia.co.uk/content/northern-bear-aiming-to...


Share price history
The share price has been hit very hard recently by exposure to government contracts, building services and the cold snap in November and December causing a profits warning to be issued recently.

http://www.northern-bear.com/announcements.html#aaz

The profits warning effectively saying that even though trading this year is strong, it has not been sufficiently strong to make up for lost trading due to the cold snap and as such, profits will be behind broker forecasts.

Additionally there has been concern over the banking covenants, though they currently have facilities for £10m, net debt is £9.1m at September and they are paying down debt at a rate of £1m per year.

The share price peaked at 173p in July 2007, and since then has seen a steady decline to the current 11p level.

Trading history
Year Ending Revenue (£m) Pre-tax (£m) EPS
31-Mar-07 4.75 0.08 1.40p
31-Mar-08 32.24 2.25 10.30p
31-Mar-09 41.76 2.86 12.20p
31-Mar-10 34.98 -1.11 4.50p

HY to Sept 2010 15.9 0.3 2.2p

Outlook
While the profits warning hit the share price, they did acknowledge that "Trading conditions improved in January, and activity has increased further since that time. Whilst March was a very positive month".

Loss making businesses are being disposed of, with the latest, Hastie D Burton, being sold for just £1 in April.

This could be a very interesting turnaround story and while the balance sheet does look rather shaky (very shaky indeed if you strip out the £21.7m of intangibles), they are cash generative and profit making and while they continue to have the support of their finance providers and continue to pay the debt down, they could turn this into a lovely recovery business.

In summary, I am looking for the good trading in January and February to continue into 2011, allowing more paying down of the debt, and increased profits.

Once the market sees that the debt is manageable and the cashflow is continuing, then this share could increase significantly. However, as with all very small companies, it is cheap for a reason and there is substantial risk involved.

The aim...

I have recently turned my investing attention to AIM market shares, and have spent a considerable amount of time picking shares that I believe will give any investor a return far in excess of the FTSE 100.

The aim of this blog is to document the companies that I believe are currently undervalued by the market and as such provide potential for large share price increases.

I will focus on companies with a current market capitalisation of under £30 million, and note all the reasons that I believe each company is worth investing in.  As a disclaimer, I will be investing in every single share that I propose here.