Jeroen Bos, manager of SVS Church House Deep Value Investments Fund (GB00B79XM025), explains why he has invested in oil services company Enteq Upstream (NTQ).
"During the month we established a new holding in Enteq Upstream, a company operating in the oil services industry," says Mr Bos. "This consolidator has a strong management team that has previously transformed a similar small company in the same industry, quadrupling its share price before it was sold to a subsidiary of GE in the US. We bought our position at a discount to working capital. At least we are seeing some value appearing, which bodes well for the future."
SVS Church House Deep Value Investment Fund puts its money into companies that are trading at a discount to their net asset value, but have strong balance sheets, creating a margin of safety. However, these tend to suffer from low profitability, albeit temporarily, due to problems such as specific business issues and industry cyclicality.
Read our interivew with Mr Bos
Enteq, which is listed on the Alternative Investment Market (Aim), reported a 29 per cent rise in its revenue to $13.6m over the six months to 30 September, and a 120 per cent rise to $1m for its reported profit before tax adjusted for interest, depreciation, amortisation, foreign exchange movements, performance share plan charges and exceptional items.
The company also said it has appointed a distributor in China for shipments of its integrated measurement while drilling systems, and has also made its first significant system shipments to the Middle East.
Investors Chronicle rated the company a 'Buy' at 25p on 18 November 2014 for reasons including its progress through 2014, and because the company has established a nascent presence in overseas markets which should help long-term growth. However, Enteq's management concedes that demand for its products could fall away if a weakening oil price undermines the US rig count. The shares were trading at 26p on 2 December 2014.
