Bargain Shares decision time

However, the portfolio's performance has been dragged down by shares of Eurovestech (EVT: 8.25p) which, on an offer price-to-bid price basis, are showing a paper loss of 11 per cent. It looks wholly unjustified, too, because the company's portfolio of investments has been performing rather well. In fact, when Eurovestech issued a trading update last week, the board announced plans to sell a 40 per cent stake in one of its investee companies, KSS Fuels, to Invesco Asset Management for £7.2m in cash. KSS Fuels is a fast-growing and profitable company and a global leader of fuels pricing and retail network planning solutions, servicing over 400 customers in 80 countries. To put this deal into perspective, it implies a carrying value of £18m for the 100 per cent-owned subsidiary, or a hefty £5m above the last reported book value of KSS Fuels at the end of December. It also means that the remaining 60 per cent holding in KSS Fuels will have a book value of £10.8m alone after the part-sale to Invesco.

Moreover, the board estimates that Eurovestech's net asset value (NAV) was £57m, or 17.1p a share, at the end of June, an increase of 4 per cent since the December financial year-end, which means that the stake in KSS Fuels accounts for over 30 per cent of Eurovestech's book value. As a result of this deal, Eurovestech, which only has a market value of £27m, will shortly hold cash and liquid assets of £9m. That sum is far more than its needs, so the company plans to pay a special 'E share' dividend to shareholders of 1.32p a share in order to return £4.4m of that cash back. Or, to put it another way, after Eurovestech pays out the special dividend of 1.32p, its ex-dividend share price of 7p will be a hefty 55 per cent discount to NAV of 15.78p, despite the fact that the remaining stake in KSS is worth 3.25p a share alone and will still have net cash of a further 1.38p. That's crazy because it implies that Eurovestech's remaining investments, worth 11.15p a share, are currently being attributed a value of only 2.35p in the current share price.

It's hardly a surprise that Eurovestech's board is far from happy with this situation. It is hardly enamoured by the low level of trading in the shares, either, as there have only been 335 bargains in the past six months and the average daily trading volume is a miniscule 0.04 per cent of the issued share capital. In the circumstances, and given the company has no need for further funding, the board is proposing that it saves the £125,000 annual costs of staying on Aim - equivalent to 12.5 per cent of Eurovestech's annual running costs - by delisting the shares on 24 September. The directors propose to make arrangements for shareholders to trade their shares on a matched bargain facility through London Matched Markets Limited once the delisting becomes effective.

How Simon Thompson's 2012 Bargain Share Portfolio has performed

Admittedly, this is hardly ideal as it will reduce liquidity. However, I am loath to bail out now because, excluding cash and the investment in KSS, which is obviously realisable, the rest of the investments are being priced 80 per cent below their book value. Therefore, if you followed my advice to buy Eurovestech's shares at 9.3p in February, I would continue to hold them and await further cash distributions as and when Eurovestech's investments are sold.

Goals Soccer Centres

Many of you followed my advice to buy shares in five-a-side soccer centre operator Goals Soccer Centres (TIDM: GOAL) at the end of May ('A bid target worth punting on', 28 May 2012) ahead of an expected bid for the company. Having noted the trades that went through the market at the time, the majority of you will have paid around 127p to 128p a share.

It was therefore good news that the Ontario Teachers' Pension Fund made a formal offer of 144p cash per share on 20 July and, after Patron Sports Holdings pulled out of the running on 8 August, that looked like a done deal. However, enough of Goals' major shareholders thought otherwise and voted against the scheme of arrangement on 22 August, which failed by a whisker to get the requisite 75 per cent majority. So, if you hadn't already bagged the 12 per cent net gain by selling your shares in the market after Patron pulled out, you will be suffering a minor loss on your holding with the shares being marked down to a current spread of 118p to 122p.

Moreover, given Ontario is not allowed to bid for another six months under Takeover rules (assuming, of course, any offer is agreed by Goals' board), and there is no certainty it would in any case, the shares could suffer from an overhang for several months. In the circumstances, I would advise crystallising this small loss as the punt on Goals was always a short-term play and there are other more lucrative investments we can capitalise on that offer more potential upside. More on that score next week.