Total systems

I've been having a look at a tiny company listed on the main exchange: Total Systems. Its profit record is patchy, but its share price is underpinned by a fantastic balance sheet.

Current assets
Trade and other receivables £1.45m
Cash at bank and in hand £3,35m

Non-current assets
Property, plant and equipment £0.9m (but see below)

Current liabilities
Trade and other payables £0.99m
Current tax liabilities £0.18m

So according to the balance sheet this company is worth £4.5m. However, they own outright a 6600 sq ft office in Central London, EC1. This is listed on the balance sheet at cost of £742,000. It was bought in 1987, and property prices have increased somewhat since then! I found a property nearby, 50% larger, on the market for £4m. That would suggest a value for Total Systems' office of around £2.7m.

Property in this area can be rented for around £27.50 per square foot. A 6600 sq ft property would therefore cost £180,000 per year. The long-term average commercial property yield is 6.4%, which would translate to £2.8m.

Let's have a stab at their being around another £2m of hidden value on their balance sheet. Not to mention their intangible assets - none of their R&D appears on the balance sheet, and they are carrying no good will.

So it looks like Total Systems have around £6.5m of tangible assets, no debt, and presumably some intangible assets to boot. The market capitalisation is £2.5m at Friday's close of 23.5p.