Small Cap Value Report - ELTA, W7L, UPGS | Paul Scott

2nd Nov '21 by Paul Scott

94 comments 10763 reads

Good morning, it's Paul & Jack here with the SCVR for Tuesday.

A quick reminder, can people please remember to put the company name or ticker in your comments. We're still getting orphan comments, where e.g. people say how much they like the company. The trouble is, many readers won't know which company you're referring to, so the comment is completely wasted. Maybe there's only one company in the article when you leave the comment, but please remember more sections are added during the morning, Thanks.

Agenda -

Paul's Section:

Electra Private Equity (LON:ELTA) - it's demerger day! ELTA shares now become just Hotter Shoes, and ELTA shareholders will receive newly listed Hostmore (ticker: MORE) shares, 3 for every 1 ELTA share. Now the market will decide how much each company is worth separately. Expect considerable short term volatility.

Jack's section:

Warpaint London (LON:W7L) - continuation of improving trends and FY results expected to be ahead of expectations. Strong momentum here after a couple of setbacks, and the founders and major shareholders remain in charge, so worth assessing the longer term prospects.

Up Global Sourcing Holdings (LON:UPGS) - supply chain issues are being mitigated and the growth prospects continue to look attractive. The recent moderation in sentiment means you can buy a growing company with a forecast dividend yield approaching 4%.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to cover trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty. We are analysing the company fundamentals, not trying to predict market sentiment.

We stick to companies that have issued news on the day, with market caps up to about £700m. We avoid the smallest, and most speculative companies, and also avoid a few specialist sectors (e.g. natural resources, pharma/biotech).

A key assumption is that readers DYOR (do your own research), and make your own investment decisions. Reader comments are welcomed - please be civil, rational, and include the company name/ticker, otherwise people won't necessarily know what company you are referring to.

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Rusty2

2nd Nov '21

Thanks, I will try that.

gus 1065

Probably a dumb question, but if there can only ever be 21 million Bitcoin and about 18.9 million have already been mined (about 90% of the total) is Argo Blockchain (LON:ARB) running up against diminishing returns as it gets harder to mine new Bitcoin as the residual stock of to be mined Bitcoins is depleted? Not sure if the figures from this site https://www.buybitcoinworldwid... are bone fide but at the indicated newly mined global Bitcoin rate of 900 per day the residual 2.14 million will have been mined out in about 6.5 years. How can a miner trade on a p/e of 8 to 9x with a global resource life of less than 7 years?

Gus.

davidjhill

I try not to get too carried away with BTC because crypto is such a polarised topic. I get both sides of the argument so I try and look it based on its behaviour as an asset rather than as a believer or non believer.

Given the way it has traded over the last 10 years I tend to think it will stick around as a digital store of value if nothing else. By that I mean if you look at how it has traded it has all the hallmarks of an asset class; an immature and therefore volatile one, but an asset class nonetheless. You have seen it bubble, crash, rebase and rise again numerous times with an upward slopping curve over the period. I see a number of wealthy investors putting 1% of their wealth in it - hedge or genuine belief I don't know but I suspect that's likely to continue for the time being. There are ETFs, Funds, Derivatives in the market adding to liquidity and credibility. All of that plus the finite and decreasing supply suggests to me that over time it will rise but quite possibly with crashes along the way.

I own a bit ; some BTC and also ETH as long term holds. I bought Argo Blockchain (LON:ARB) at around 8p pre IPO and cashed out 80% around 200p. The rest I'm happy to run as a play on the theme because I think it might well be very cheap. But I am also very conscious that my view is from a position of having had a very good return on the stock, so I am both biased and hold a natural affinity to it anyway.

Banzii

The bitcoin mining output halves every 4 years so the last bitcoin isn't expected to be mined until 2140.

Also, the value of transaction fees for mining a block is increasing so expected to become a larger source of income for miners over time.

mojomogoz

BTC is nonsense...regardless of the price appreciation. There is no real world use/value case. Its just a fantasy for people who once would have been gold bugs, hard money devotees, 'Austrian' economics fans, etc....the endless myth that value can be captured in a means of exchange and value storage. The denouement when it comes will be a financial supernova like no other...no idea whether that's at $60k or $600k or $6m...the price can be anything as it is an irrelevance powered by its own world...a money virtual reality game.

That said, if you want to play it with extra steroids rather than the drugs already powering the mighty virtual coin ....then just own the 'physical' with a bit a of leverage. Not too much obvs as it is volatile...or time it if you can. Don't go dodgy Argo Blockchain (LON:ARB) whatever the hype merchants on fintwit and in here say.

Owning ARB or BTC brings the same dilemma...how to trade and entry/exit. Then ARB has the extra negative that it can never realise high BTC prices as it cannot merely "mine" hahaha / produce at high prices and will mine equally at relatively bad prices. That brings an impossible trading overlay....if you are interested in its Bitcoinness rather than just trading volatile counters Obvs if you believe you can HODL your coin and not trade and that is superior too.

In addition, mgt at ARB are dogs. Most people promoting BTC are clueless or cynical.

mojo word, out

BTC is such a waste of energy, so much for saving the planet. It should be banned on environmental grounds. We should be reducing our energy consumption not increasing because of crypto currencies.

Db47

can any one offer any views on the Pro Cook IPO (via Primary bid) 137-185p per share - expected market cap of 150-200m. It’s a family run and so far successful business, they’ll retain 60% of business. Or is it best to just stay clear of IPO’s all together and let the dust settle ?

Electra Private Equity (LON:ELTA) Well it is now showing +9.57% instead of - 78%. If I had some spare folios I would experiment with prices to see the effect of buying stocks after a large decline or gain. I'm not convinced it is based on values as otherwise the folio would correct after close? If it was 10% of my folio, I would have been down around 7.8% today.

I can't sell Hostmore yet, pity as the price keeps falling, now 136p.

Sadly my most immediate reference point for the Pro Cook IPO is the Parsley Box (LON:MEAL) launch earlier this year. Family owned business with a strong recent growth record and high expectations brought to the market with a fair element of founder shareholder capital being taken out from the sale proceeds via Primary Bid …. Currently down about 74% from the issue price. Not necessarily all the company’s fault but in the words of Mr. Lydon in The Great Rock ‘n Roll Swindle “ever got the feeling you’ve been had?” I’ll look at the numbers (albeit with a very wide price range being suggested) but not starting from a position of great enthusiasm.

:D Gotta love your conviction

The thing that always amazes me about anything crypto is how certain so many people are that they are right, in both camps. Believers and non believers - so polarised it's almost "unbelievable"! The other side of the trade is always apparently an idiot........

As venn diagrams go I sit somewhere in the middle and seem to find that's a very small space to squeeze into.... My view is BTC currently behaves like an asset class, so trade it like an asset class until / if it doesn't. Argo Blockchain (LON:ARB) is just an operationally geared play on that - there are merits and demerits.

Thanks for your reply Gus, yes parsley box a good example of why might be best to stay clear….

I haven’t had chance to look more closely at Pro Cook website / details or figures yet (with my limited knowledge) but will feed back if find anything interesting !

GTrader

Sometimes it doesn't like XX. (dot on end) or ABCD (4 letters). You can use "LON:"&A2&"" to build the code when Cell A2 is the ticker ref only. So ELTA in CellA2 and CellB2 =GOOGLEFINANCE("LON:"&A2&"","price"), you don't need to add "price" as that is the default attribute. For a full list of attributes see https://support.google.com/doc...

Okay...you are clearly correct as you state you are more reasonable than me...and everyone in here knows I'm an unhinged madman.

But brushing aside your semantic play, you own the assets so actually you are the high conviction one. If the argument is to own anything that trades like an asset then why not all the other coins? NFTs too. Wine. Etc. Just as something is asset-y I fail to see how I'm extreme for not being involved. In fact, I'm uninvolved in most things as, extremely, I choose not to be everything.

I see the errors in my drive by banalysis of Argo Blockchain (LON:ARB) above on reflection...so I'm surprised not to be pulled up analytically on them and instead getting some semantic fluffing about...maybe you don't know what you are invested in and why ;)

Have fun staying rich

andrewdb

I first heard about BTC back in ~2010 when it was around $10 and decided it was for criminals and illegal purchases of stuff (anyone remember the silk road).

Very little has changed since then other than a lot of other people with debatable moral values have piled in.

...and others for whom it does make sense.
I am lucky enough to live in a country where the currency gently depreciates and the govt does not suddenly declare the £50 note to be 'not legal tender anymore' at short notice.

Those living in parts of s. america / africa or india and possibly china have no such luxury.

I think BTC is evolving towards a global "distrust of my govt / currency" index that is being driven by the wisdom / stupidity of crowds.

Will its value persist? I think so. Will that be higher than today? No idea.

Do I regret not getting some back then, no, but I would have liked the money.

monsnaggl

Fd Technologies (LON:FDP), formerly known as First Derivatives. Any opinion on this company. Reasonable set of half year results announced today and positive outlook for full year. Share price has almost halved in recent times, now £20

I don't have you down as an unhinged madman, nor did I say you were extreme for not being involved.

The certainty I refer to are the use of words like "nonsense", "fantasy", "financial supernova like no other" in your description around any ownership of BTC. It's interesting that crypto draws out this type of extreme reaction on the naysayer side and equally vice versa on the "believer" side. You are not alone in your view but I find myself in a very small crowd sat somewhere in the middle. In the main the middle bit of the venn diagram will be largely populated by neutrals whilst the believer/non believer will be a much smaller %age (often sub 10%). Not many (if any) asset classes draw such polarisation across such a large community.

I'm certainly not high conviction by owning a little crypto. It's a very small portion of my portfolio. But yes, wine I own too - I collect it; cellar it; like to drink it and make a reasonable annual return on it by knowing broadly what to buy and when. At least when Armageddon comes I won't be thirsty ;)

so, yes then :D

Did you know the world wide web broadly gained acceptance and popularity because of pornography.......without it the widespread adoption of the internet may have taken a different course, but here we are........ often these types of changes are invented with good intention, used nefariously and then once they gain widespread adoption are used for the purpose they were originally intended.

Not looked at Fd Technologies (LON:FDP) before but I note that the eps forecasts, for the next 2 years, have roughly halved this year, which may explain the share price fall.

3rd Nov '21

The burden of proof remains heavily on crypto to prove its a durable and significant asset class. It hasn't yet had to endure a significant economic downturn (covid just doesn't count) or a sustained period of reallocation away from it (as happens to all asset classes over periods). Yet 'reasonable' people attribute all sorts of established properties to crypto...got love financial shaman.

Big finance always jumps on something that can make some money regardless of its value. Big hedge fund guys that support crypto...do they really?...or are they jumping on a momentum trade and using their cred to pump the trade. There is nothing more beautifully reflexive as an 'asset class' than unreal crypto at the moment

A speculation in crypto I respect. An investment in it stretches credulity. What's the asset backed by other than hype of the great unravelling of fiat and the coming rapture of real money/value that a dude called Satoshi saw...

Its a millenarian cult. Now some of these cults go on to become established durable sects through history...they stick the narrative...but most just wing nut into obscurity taking down their followers.

I await the rapture / supernova implosion. Its clearly absolute nonsense as a genuine economic linked asset class...it just may take a while to realise this in our hyper inflated asset class world.

I know nothing. I'm just a sceptic. Unless you can meme surf or trade very well, scepticism is the only way through financial markets.

PS The only reasonable guy in the world stuff drinking fine wine as you sagely place yourself in the middle of your venn diagram of reasonableness that you have constructed as the measure of reasonableness....<yawn>...tedious self aggrandisement

Ya see - there you go again. can't help with the "PS" abuse - you're a charmer I must say! and self aggrandisement?.....ha! pot and kettle springs to mind.......

I didn't purport that the middle of the venn was the reasonable or even correct place to be: just pointed out the quite strange phenomenon of finding the middle being sparsely populated. The polarisation is unusual. You made up the rest all by yourself ;)

Small Cap Value Report - ELTA, W7L, UPGS

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