Small-cap value shares worth buying

This year's portfolio (Bargain Shares 2012, 10 Feb 2012) is doing well, too, rising 6 per cent against a market down 3 per cent. More importantly, irrespective of how the general market moves over the coming months, I believe there is scope for further upside in each of the 10 special situations.

Molins' smoking investment

Shares in Molins, a tobacco machinery company based in Milton Keynes, have been smoking in the past three months, which fully vindicated my buy advice ahead of full-year results at the end of February. On an offer-to-bid basis, they have risen 18 per cent from 107p to 125p. We have also been rewarded with a 5 per cent hike in the full-year payout to 5.25p, which was more than three times covered by adjusted EPS that last year soared over 30 per cent to 18.9p.

The board can certainly afford to be generous with dividends as Molins was sitting on a £7.1m cash pile, equating to 38p a share, at the December year-end and the £1m cost of the payout is less than a quarter of the company's annual underlying operating profit of £4.5m. Yielding over 4 per cent, trading on only seven times earnings and a third less than book value of 203p, I remain a medium-term buyer of the shares, especially as Molins' order intake at the end of April is well ahead of last year.

Stanley Gibbons stamping out gains

Investors have really cottoned on to the attractions of Stanley Gibbons, the most famous name in stamps: the shares have soared 26 per cent to 228p since I advised buying at 178p. Stamp collectors are also showing a growing appetite for the company's offerings, particularly online, as internet sales rocketed 72 per cent in 2011 and have doubled in the first four months of 2012. Further strong growth is firmly on the cards, as Stanley Gibbons will be launching a trading platform and online auctions during 2012 to become a 'market maker' in rare collectibles.

Stanley Gibbons is also tapping into the Chinese market, having opened a Hong Kong office in September. A Singapore office will open in the second half. More traditional channels are performing well and sales to Channel Islands' residents rocketed from £2m to £4.9m last year. Not surprisingly, all this activity is translating into bumper profit growth, with adjusted pre-tax profits surging 19 per cent to £5.1m in 2011, and a further rise to £5.5m is forecast in 2012.

On 12 times prospective earnings and supported by a near 3 per cent forward yield, the shares remain a medium-term buy.

How Simon Thompson's 2012 Bargain Share Portfolio has performed

Telford's Olympic dream year

East London housebuilder Telford Homes is due to release full-year results on Wednesday 30 May and it's worth buying the shares in advance because we are virtually guaranteed another bullish trading announcement. It is also one that I expect investors will latch onto after a pre-close update last month revealed profits will be ahead of market estimates. Broker Shore Capital was previously predicting an increase in pre-tax profit from £1.4m to £2.5m for the 12 months to 31 March 2012, rising to £7.5m in the current financial year. However, it would be no surprise to see upgrades in three weeks time once the current development pipeline and pre-sales already secured are factored in.

So the risk to earnings looks firmly to the upside which, in my view, is not priced into Telford's current valuation. The shares, at 102p, are rated on a modest nine times EPS estimates for the 12 months to March 2013, are priced 25 per cent below book value, and offer a forward yield of around 3 per cent. Buy.

Mallett in the M&A picture

Mallett, one of the UK's oldest dealers in high-quality antique furniture and works of art, is well on the way back to trading profitably following the move from its London showroom in New Bond Street to Ely House, an 18th century Grade I listed townhouse in Mayfair's Dover Street. The building not only provides more accommodation for the company's works of art, primarily 18th century and Regency period furniture, clocks and pictures, but has slashed the annual rent bill from £1.2m to £550,000.

At 77p, the shares are priced well below the book value of 112p, which is anomalous considering the company has an ungeared balance sheet after Fendi paid a £1.7m premium for Mallett's New Bond Street lease. The company's valuation certainly looks attractive to activist investor Peter Gyllenhammar, who controls 25.5 per cent of the share capital. It's not difficult to see why, as Mallett's market value of £10.2m is more than covered by stocks of those upmarket antiques alone and there is almost £3m of property in the price for nothing. Mr Gyllenhammar's lead is worth following. Buy.

Indigovision wired up to fly

Edinburgh-based Indigovision, a pioneer in internet protocol network-based security surveillance systems, reported bumper half-year results in mid-March, which prompted broker N+1 Brewin to significantly upgrade its profits estimates for this year and next. However, the good news has yet to be factored into the shares.

In fact, with the benefit of a recovery in margins and lower operating costs, analysts expect pre-tax profits will more than double from £1.2m to £2.7m in the 12 months to end-July 2012. EPS estimates have been upgraded by 20 per cent to 25.8p, up from 8.4p in 2011.

Moreover, there should be a hefty profit uplift in the year to July 2013 when the operational gearing of the business really kicks in. Analysts are predicting a modest 4 per cent rise in forecast revenues (to £31m), which N+1 Brewin predicts will drive pre-tax profits up by a quarter to £3.4m and produce EPS of 32.4p. The latter is an eye-catching 30 per cent rise on earlier estimates. Interestingly, the broker "believes the risk to forecast remains on the upside" even after these steep upgrades.

On this basis, the shares are trading on a modest 10 times next year's earnings estimates, a rating that is even more attractive when you consider that Indigovision is sitting on net cash of 96p a share. Or, to put it another way, net of cash the shares are on nine times current year forward earnings, falling to only 7.5 times estimates the year after. Add in a prospective yield of 3 per cent and the shares are worth buying at 330p ahead of a pre-close trading statement in early August.

Trading Emissions: a value buy

Aim-traded closed-end investment company Trading Emissions has drifted back to my advised buy-in price of 25.25p, having been as much as 20 per cent higher at one stage. In my book, this is another buying opportunity. Sentiment may be poor, but there is obvious value on offer.

In fact, the valuation is so miserly that the shares are now trading in line with the company's cash pile of 25p a share. Moreover, they are priced on a huge discount to NAV of 74p, which includes a private equity investment portfolio, albeit an illiquid one, valued at 56p and factors in a negative liability of 7p a share on legacy contracts to buy carbon at above current market prices. Analyst Andrew Shepherd-Baron at Peel Hunt notes that even if you write off 50 per cent of the value of the private equity portfolio and charge £10m to wind up the company, Trading Emissions still has a NAV of 48p. Even in the worst case scenario, which assumes a carbon price of zero, NAV would still be 28p a share. Buy.

Rugby Estates ready for cash return

Property company and asset manager Rugby Estates is making steady progress towards selling off its entire portfolio by the year-end and will provide another update to shareholders on Thursday, 17 May. Admittedly, sale prices have been soft given the uncertain commercial property market, and last month the board indicated that shareholders could expect "an aggregate return in cash in the range of 450p to 500p a share". That figure is well below Rugby's triple NAV of 667p at the end of July, but having sold property worth £4.2m since that date, by my reckoning the company is now sitting on £8.4m of cash, equating to 330p a share. This underpins the current share price of 440p and means the downside risk is limited. So, even though potential upside on this holding is likely to be less than I originally anticipated when I advised buying Rugby's shares at 433p, I am happy holding the shares at 440p ahead of the operational update.

MJ Gleeson worth banking in your portfolio

Urban regeneration and strategic land specialist MJ Gleeson continues to be valued at a deep and unwarranted discount to book value. In fact, with the shares now trading back in line with my advised buy-in price of 110p - having been as high as 132p in late February - the discount to the company's NAV of 184p is over 40 per cent, even though there is net cash of 29p a share on the balance sheet. Strip out that £15.1m cash pile from Gleeson's market value of £59m and in effect we are getting our hands on £82m of assets - mainly land and property stocks - for a bargain basement £44m.

Admittedly, it is going to take time to realise that value, but Gleeson is going the right way and, following disposals, the company is now focused on two businesses: building low-cost homes on brownfield sites in the north of England and obtaining planning permission for high-value greenfield land in the south. In my view, the company is well-placed to benefit from any improvements in the housing market and, with a policy of returning excess cash as special dividends, shareholders are well placed, too. A medium-term buy.

Watch out for Eurovestech news

By the end of June, Aim-traded investment company Eurovestech will either receive £12.2m of cash for its holding of loan notes in online market researcher Toluna, or its stake in Toluna will rise from 10 per cent to 16 per cent. Either way, it is a win-win situation for shareholders. If the loan notes are redeemed for cash, then Eurovestech's own cash pile will equate to half its current share price of 9p.

Moreover, with the valuation of wholly-owned and profitable subsidiary KSS Fuels rising a third to £13m, this adds another 4p a share of assets and leaves all of Eurovestech's other investments in the price for nothing. That's unwarranted as these include a stake in Maxifier, which helps publications maximise results of their advertising campaigns. It's worth noting that Maxifier is in advanced talks with other investors about a fundraising to accelerate development of the business, which "would value Eurovestech's stake substantially above its carrying value of £2.3m". Trading around 40 per cent below underlying NAV, Eurovestech's shares are worth buying at 9.25p.

Bloomsbury Publishing results a worthwhile read

Bloomsbury Publishing has done really well to sell its heavily loss-making German imprints for around £3.6m in cash to Bonnier Group. The titles have underperformed for some time and the sale reduces the company's exposure to western Europe. Last month's acquisition of New York-based Fairchild Books for $6.5m in cash is a good deal, too, as the publisher of textbooks and educational resources for students of fashion, retailing and interior design posted $706,000 (£440,000) of profits last financial year.

Following these deals, broker Malcolm Morgan at Peel Hunt has sharply upgraded his earnings estimates for Bloomsbury and expects pre-tax profits on ongoing operations to have increased from £7.7m last year to £11m in the 12 months to end-February 2012, rising to £11.6m in the current financial year. On this basis, the shares, at 109p, are trading on less than 10 times EPS estimates and are well supported by a 5 per cent forward yield based on a dividend of 5.7p. Bloomsbury reports full-year results on 22 May and I continue to rate the shares a buy.

■ Updates on Polo Resources, Pilat Media Global and Victoria will be published on our website on Wednesday 9 May.