VALUE INVESTING
Small Cap Value

By Stephen Bland (TMFPyad)
August 26, 2005

My last two articles looked at value that may be lurking mechanically in the FTSE100 and FTSE250 indexes, those being the largest and second largest groups of shares by capitalisation in the market. Here, I look at what may be found in the FTSE SmallCap index using the same popular ratios of Price/Earnings, Yield and Price/Tangible Book Value.

Applying fundamental filters in this way is how I obtain initial lists of potential shares for my Value Investor newsletter but do note that this is only the start of the process. Further investigation must be carried out simply because database information can be out of date or plain wrong, plus it is essential to gain further details such as debt levels, directorspeak, the nature of assets and so on. As before, I point out that my database uses only the latest annual accounts for asset figures, with no amendment for interims or news since whilst eps and dividends are consensus forecasts.

FTSE SmallCap Ten Lowest P/E	Price	P/E
SVB (LSE: SVB)	31p	3.1
Sanctuary (LSE: SGP)	10p	4.3
Alea (LSE: ALEA)	152p	6.1
Pinewood Shepperton (LSE: PWS)	129p	6.2
Highway Insurance (LSE: HWY)	44p	6.8
Chaucer (LSE: CHU)	58p	6.8
Kiln (LSE: KIN)	99p	7.0
Hitachi Capital (LSE: HCU)	214p	7.3
Atrium Underwriting (LSE: AUW)	212p	7.5
Kensington (LSE: KGN)	644p	7.6

FTSE SmallCap Ten Highest Yields	Price	Yield (%)
Chesnara (LSE: CSN)	160p	7.9
Acal (LSE: ACL)	301p	7.5
Abacus (LSE: ABU)	125p	7.2
James Beattie (LSE: BTT)	167p	7.2
Telecom Plus (LSE: TEP)	155p	7.1
TT Electronics (LSE: TTG)	147p	6.8
Metalrax (LSE: MRX)	79p	6.8
Highway Insurance (LSE: HWY)	44p	6.6
London Scottish Bank (LSE: LSB)	83p	6.4
AutoLogic (LSE: ALG)	178p	6.4

FTSE SmallCap Ten Lowest P/TBV	Price	P/TBV
Thus (LSE: THUS)	16p	0.64
Alea (LSE: ALEA)	152p	0.73
Eurotunnel (LSE: ETL)	17p	0.81
Centaur (LSE: CAU)	83p	0.84
Goshawk Insurance (LSE: GOS)	44p	0.86
McKay Securities (LSE: MCKS)	281p	0.89
Freeport (LSE: FPR)	442p	0.94
Camellia (LSE: CAM)	6,870p	0.97
Gleeson (LSE: GLE)	296p	0.97
SVB (LSE: SVB)	31p	1.00

Several of the shares featured in these tables have been Value Investor selections in the past. Camellia and Gleeson have been traded at profits of 59% and 42% respectively whilst Freeport is still in play, currently up 26% as is Chaucer up 10%, together with Alea presently down 18% and Hitachi down 16%. These figures include dividends received.

Looking at the individual tables we see that the P/Es include six insurance businesses, being SVB, Alea, Highway, Chaucer, Kiln and Atrium. A couple of moneylending businesses are in there, Hitachi and Kensington, though the latter is a mortgage lender whilst former is involved primarily in vehicle financing.

The yields do not show quite the same sector concentration as the P/Es, though we do have three electronic components businesses being Acal, Abacus, TT Electronics and two insurers, Chesnara and Highway. Note though that these insurers do not operate in similar areas.

The sector groupings in P/TBVs produce yet again some insurers, three in this case, being Alea, Goshawk and SVB together with the expected crop of property shares in McKay, Freeport and Gleeson.

No shares appear in all three lists but there are three dual appearances. SVB and Alea are both low P/E and low P/TBV shows whilst Highway is a low P/E and high yielder.

Insurance businesses are represented heavily in all the tables, telling us that the market definitely does not like this sort of share right now. That does not mean of course that value investors should share that view. On the contrary, we should be particularly interested in that which the market condemns, that is what value is all about.

As with my previous articles, investors must carry out further investigation if interested in any of these shares. I am not recommending them here, they are purely the results of a mechanical filter. Value Investor however does the next step of weeding out for you. Find out more by taking out our free 30-day trial.