Small Cap Value Report (Tue 26 Mar 2024) - RBG, CHRT, JNEO, 888, ASC, GOOD, LUCE, BAG

26th Mar by Paul Scott

87 comments 9911 reads

Good morning, it's Paul & Graham here as usual!

Sorry we've run out of time, so have to leave it there for today.

Revolution Bars (LON:RBG)

Ominous news from Sky last night. Its says this struggling chain of bars & pubs is talking to investors about an emergency fundraise, wants to close a quarter of its sites (maybe a CVA or pre-pack administration I wonder?), and has also put itself up for sale. Clearly that doesn't bode well for existing equity.

RBG has itself just issued a statement confirming the speculation, which says -

Revolution Bars Group PLC notes recent press speculation. Following a period of external challenges which have impacted the Company's business and trading performance, the Board is actively exploring all the strategic options available to it to improve the future prospects of the Group. These include a restructuring plan for certain parts of the Group, a sale of all or part of the Group and any other avenue to maximise returns for stakeholders. The Company also confirms it is currently engaged with key shareholders and other investors including Luke Johnson in respect of a fundraising.

The Company continues to trade in line with management's expectations.

The Company is not in talks with, nor in receipt of an approach from, any potential offeror relating to an acquisition of the issued and to be issued share capital of the Company.

We've been flagging RBG shares here as high risk for a while, eg

26/7/2023 - AMBER - In line trading for FY 6/2023. Special situation, only for risk-takers.

18/10/2023 - AMBER/RED - Flagged "material uncertainty" going concern statement, high risk.

5/1/2024 - AMBER/RED - High risk special situation.

I previously liked RBG as a value/turnaround situation, but as the facts have deteriorated, we changed our minds here and became more negative. Many bars groups are struggling because younger people are spending less on alcohol (a higher percentage are teetotal than previous generations), plus the experiential leisure groups like XP Factory (LON:XPF) are taking away some market share.

The latest incarnation of the former Luminar/Deltic nightclubs business,now called Rekom, went bust yet again in early 2024. Plus of course the labour-intensity means living wage increases are hurting disproportionately, not to mention soaring energy costs, on top of the pandemic chaos. No wonder many bars are struggling, there…

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Ordinary shares of 5p each

Number of shares

Percentage of issued share capital owned

R S McDowell

1,406,409

4.3%

S McQuillan

468,987

1.4%

S M King

406,938

1.2%

L Thomas

16,000

0.1%

abtan

26th Mar

Michelmersh Brick Holdings (LON:MBH)

Hi GreyInvestor

I completely agree with your cautious sentiment here and coincidentally the paragraph that you have quoted was the exact one that caught my attention the most.

So demand is down, but they're going to keep producing anyway? Seems odd.

I should probably add that I sold out a few weeks ago after reviewing the latest DBT data, which highlighted the material drop in brick deliveries over the last few months:

(https://www.data.gov.uk/datase...)

---

I'm aware that Michelmersh Brick Holdings (LON:MBH) charges a premium for their products (albeit a greatly reduced one after the last few years), implying resilient demand, but I still remain wary that there's a profit warning around the corner.

I also noted the absence of any real outlook for FY24, with focus instead on the long term need for more housing.

It would have been useful if there were some numbers behind the order book as well.

Finally, it looks like the PBT margin on Fabspeed dropped from c8% in FY22 to c3% in FY23.

I saw it as a good sign that the company specifically explained the weak performance here when they didn't really need to - I always like honesty.

Hopefully the outlook for the next 12 months becomes clearer soon.

planetx

Jonno

Ref - Flowtech

You could be right however my point is Rockwood have been incumbent for a long time and have been touting this as a turnaround so they were active with the previous management .

So actually I don’t see this as a new turnaround but one that has faltered .

Even with the standard practice that any turnaround CEO will bring

- cut costs

- increase margin

- reduce stock

- improve stock turn .

It’s still going to be a middle man distributor company that makes a few quid but creates nothing of true long term value .

So I’m not a fan .

Can see why you are a believer .

Avingtrans

Huge director sale by CFO has really pissed on my chip bitty .

Drops this down from my biggest conviction share 10/10 to a less confident holding .

Think I’ll be reducing a bit , don’t like one of the main business protagonists banking a chunk of cash like this .

Maybe something to do with tax planning but really doesn’t give me a warm and fluffy feeling .

BnB

CFO has only sold 5000 shares. Not enough even to buy a new car. Big sale of 110000 is by a divisional MD and, I think, non-board member. Sales by CFOs tend not to worry me anyway as they're a cautious bunch who don't think like investors. I pay a lot more attention to purchases.

Avingtans (rumour spreading )

Amend above . CFO only sold 1% of his holding

It was Austin Adams that ditched a huge holding (over 100,000)

He’s MD of the engineering division .

Could this mean the possible sale of the engineering division is getting close ??

Putting 2 and 2 together and coming up with 5.

My chip butty is tasting a bit better after re reading the RNS .

davidjhill

Hi LeicesterPete

Journeo (LON:JNEO) results bang in-line. Adj eps of 19.8p which was as per previously upgraded forecasts. SO they beat previous forecasts and traded in line with pre results update. Cavendish note confirms this (see Research Tree)

They tend to announce every new contract over £1m. I think this is a hangover from being a much smaller unit - I actually like it because (1) it tells me they are winning business regularly and gives me greater confidence in the numbers and (2) they tell me its in the forecast so I have no need to adjust my numbers.

The only downside is it could be a rod for their own back - ie if they stop doing this without first communicating to the market then people may inversely worry when they don’t announce them!

Anyway - each to their own. Hope you made decent money on it. I’m more in line with the brokers at closer to a 400p target. Look at the PEG ratio - look at the growth and the fact that this years earnings have clearly been conservatively set. Therefore personally I expect a beat but maybe I’m wrong. I think they are really only just scratching the surface of the potential market and I back management having see what they’ve built so far and how good the acquisitions have been.

jonno

Avingtrans (LON:AVG)

planetX

I can't believe they would sell the Engineering Division as a single entity, however I expect a sale of one of its companies, Booths Industries has been touted as the likely first cab off the rank, although it will only be sold if the price is right.

As you have discovered and BnB indicated Austen Adams is not a member of the Board. Also the sale by Stephen King, CFO is beer money (buys a lot of beer though even at today's prices) and he retains 1.2% of the company.

Directors and their interests

As at 26 February 2024,the Directors interests in the share capital of the Company were as follows:

Ordinary shares of 5p each	Number of shares	Percentage of issued share capital owned
R S McDowell	1,406,409	4.3%
S McQuillan	468,987	1.4%
S M King	406,938	1.2%
L Thomas	16,000	0.1%

I fully agree that the turnaround, if and when it gathers pace will have been a long time coming. Rockwood/Harwood clearly lost patience with the previous incumbents and the current management team is new, so fingers crossed!

All the best

NeilS

Great news indeed for the relatively new but experienced management team at Domino's Pizza (LON:DOM) , they are as I understand it Boon working WITH the food delivery apps to generate additional orders but delivering using Domino’s own drivers.
Domino’s have also listened to your point re operational gearing and are considering the addition of another brand to their existing distribution infrastructure ;) I hold.

sharw

Here we go again! At the end of yesterday's SCVR ken mitchell posted:

Yet again SKY are the first to know. How is it that time and again they know ahead of an announcement the next day confirming they got it right? It’s Revolution Bars (LON:RBG) this time.

Today a large cap (excuse posting here) but after market close we have on twitter/X:

Full marks to DS Smith (LON:SMDS) for getting an RNS out at 17 30. The offer is worth 415p (close today 359.8p) and "The Board acknowledges the strategic merits and potential for value creation through a combination with International Paper. Accordingly, the Board is progressing its discussions with International Paper regarding the Proposal".

ken mitchell

Thanks for the Good Energy (LON:GOOD) Update Paul. Enough reasons there not to regret the hasty decision to sell on just a quick scan of the Results. A key reason for getting out asap was because the share had risen so strongly ahead of Results, so even a slight disappointment was likely to see the share price take a hit.

The share was down over 60p today BUT that was only the pre Results fast gains unwinding. The share is now back to where it was Monday last week. The clever investors were those who bought a week ago for a quick profit and who took that profit yesterday, unlike me who ended up with just 14p of profit left……..and had I delayed the sale by another couple of minutes the share was down from the 298p I got to the mid 260s.

KevinS1

Something needs to happen at IG Design (LON:IGR)

Its results back in Nov sounded good and the market liked them, but the price continues to drift lower.

Brokers seem to have targets of 250-275p ish and if they can deliver their plans then this is achievable in my eyes, although I have been tempted to bail more recently in favour of other opportunities and my growing frustration with the small cap space.

Think I will hold on and se what the next results bring.

It does really show the benefits of finding a good company with progressive dividend policy. I think Bank of Georgia (LON:BGEO) now yields something like 30% on my original investment which is phenomenal. If only they were all like that :D

Huwster

I wish MS International (LON:MSI) put out broker notes for PIs on Research Tree. When SP starts drifting you can’t help but think those ‘in the know’ are selling for a reason or if it’s just nervous selling from PIs because of lack of visibility. Other than that it seems a solid business (I hold - nervously)

Boon

abtan - maybe more bad debt being crystallised in Q3? I'm hoping not! Time Finance (LON:TIME)

I thought the value that Flowtech Fluidpower (LON:FLO) had was that they had literally any part you need. Because when a part fails on one of the pipes/fluid systems (you can tell I'm not technical in this area!), it usually is quite critical and needs to be fixed quickly?

So they had pretty much any part you might need... and they could get it delivered / available very quickly...

Whereas manufacturers didn't want to create their own network of stock and urgent delivery across multiple countries?

So therefore - I can very much see a need for a "platform" as this is, where you can find any part you need, and assured it will be delivered as quick as it can.

Would it be a stretch to call this the Amazon for the "flow solutions repairing industry"?

murrb

I find it helps to go back and read over the latest communication from the company when you start to worry. In the case of #MSI there was a spate of announcements a few months ago about a number of contracts received and in particular one which had been expected in the previous period, which has now fallen into this year, so my expectation is that they are likely to be reporting very healthy activity. I could always be wrong of course.

I think possibly also this is a strange time of year when some investors take profits in companies whose share price has risen substantially so that they can benefit from their capital gains allowance before the end of the tax year. Perhaps they then buy back their shares in the new tax year. This may be a factor here as #MSI has risen over 50% this tax year and is quite illiquid so it won't take much selling to move the price.

illiswilgig

27th Mar

MS International (LON:MSI) murrb - fwiw I think you are right. It's always worth re-reading the recent reports. Regularly.

MSI shareholders are in 2 distinct groups >80% directors and long term shareholders, sitting on gains of 4x or more, who are not selling, but also not buying. The remaining <20%, and it might be a lot less, are more recent shareholders who have bought at much higher prices and will be more likely to sell as the price drifts downwards. It's the shorter term shareholders who now set the price - until the results are due in June.

In 2023 the price fell around 40% in the 6 months from January to June. I suspect that some holders have also been selling this year with the intent of buying back in May if the pattern repeats itself. So far its only fallen 12%. I don't see it falling 40% this year, as the promised US Navy contracts all landed in the last few months. But it might well have further down to drift. I'd not be surprised to see 750p under consistent selling and not much buying.

Of course - there is always the possibility that MSI release another rns - which keeps me from trading in and out. That and the knowledge that over many years I've proven myself to be extremly bad at timing and trading. Just not my thing.

It's alway impossible to forecast MSI figures. Expect the unexpected is probably sensible? Few companies actually increase revenues and profits in a streight line. Bumps are to be expected?

Even to interpret the figures we do have takes a lot of backgroud research and digging. H1 defence figures were largely due to taking the £22m revenue on the first deliveries of the land-based system. There appear to have been few if any other defence deliveries in H1. I expect more in H2 accompanied by an increasing baseload of support, maintenance, spares and training. I'd also like to see a slight improvement in Forging operating profits, Superstructures maintained and branding moving to breakeven or just above.

Even though I see a range of possible outcomes, I do like to maintain my own forecasts, so I can see where I went wrong and hold myself to account. Or not. Fwiw I'm current expecting around 80p eps as the - most likely outcome - for the FY, but it could easily be significantly above, and it could be significantly below.

cheers

Mark (long term holder)

Samsgrandad

1st Apr

I'm massively reassured by the fact that there have been no published sales by directors or major holders since the process started. In fact a non-exec purchased over £27000 worth at £1.38p or thereabouts. There are plenty of nervous posters and those who would like to hold at a lower price making all sorts of claims but if I recall the company aren't allowed to discuss the process. So a buying opportunity if you have a stomach for risk. I hold.

Small Cap Value Report (Tue 26 Mar 2024) - RBG, CHRT, JNEO, 888, ASC, GOOD, LUCE, BAG

Revolution Bars (LON:RBG)

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About the Author

Paul Scott

87 comments

Directors and their interests

Ordinary shares of 5p each

Number of shares

Percentage of issued share capital owned

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