Small Cap Value Report (Fri 13 May 2022) - TTG, FCRM, FIH

13th May '22 by Paul Scott

20 comments 6256 reads

Good morning! Paul & Jack here.

Agenda -

Paul's Section:

TT electronics (LON:TTG) - an in line update for FY 12/2022, after good trading in the first 4 months. Order intake looks particularly strong, and inflation is being managed well. There is an H2 weighting expected for one division. Looks excellent value, with a decent divi yield, so a thumbs up from me.

Fulcrum Utility Services (LON:FCRM) - a tale of woes today, due to problems in the energy supply market. However, a big fundraising at 12p in Dec 2021 means the business is cash-rich, and has other assets. 7p share price now could be an opportunity, but special situations investors who can put in the time to properly understand risk:reward of this business model. Shrewdies, Harwood Capital, are involved, which means there's probably an opportunity here.

Jack's section:

FIH (LON:FIH) - curious mix of businesses tracing its origins back to 1851. A recovery is on the cards, and potentially some operational gearing. The group has property, too. But the stock is illiquid and there has been minimal share price appreciation for a long time, so you have to weigh up whether or not it’s worth investing time into.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to review 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.

Paul’s Section:

TT electronics (LON:TTG)

176p (last night’s close)

Market cap £311m

Trading Update (AGM)

TT Electronics plc ("TT", "the Group"), a global provider of engineered electronics…

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Ukjrb57

13th May '22

GMS- Full year results confirm the recovery on track. Might be a multi bagger for equity holders as very high level of debt falls. Still undecided on whether to raise $50m of new equity or issue warrants (11% dilution at 6p). Higher utilisation of the 13 vessels at higher rates should continue given activity in Middle East. stock for the higher risk investors.

Antehelion

hi Paul, if it is quiet today and if possible, I wondered if you had any thoughts on the update from Unbound (LON:UBG) from yesterday.

"Strong performance in Q1" "Challenging external outlook continues" "Costs are being tightly managed with marketing, variable and fixed cost
efficiencies being delivered as revenue continues to grow" "The Group's full year outlook remains unchanged"

We know the conditions at the moment are ugly out there, the update feels reassuring in that they are in control and keeping their head above water until the waves subside a bit.

Interesting and perhaps predictable partner brand growth into new areas to expand their cross selling options against their database of 30% of the uk female market.

Overall, it feels encouraging I think. Would have liked to have seen some £ numbers.

Zipmanpeter

Also second for £UBG which did give some numbers (vs LY Rev +10%, %GM up, emails now >1Mn). They also said retail "especially pleasing". Overall, full year f'ct unchanged - not surprising after 1 quarter perhaps but not reflective of what share price has done of late. I think the cost-of-living storm will be less intense in their core harbour (mass affluent older females) with some straightforward cross-selling opportunities that will send a signal about long term possibilities.

The majority of these older customers probably own their own home , up in value many thousands of pounds, pay next to no tax or NI and spend on very modestly on food but have declining health and mobility etc. Bluntly, they also in 'run down' mode - in that frame, spending £50 on a pair of shoes that promise more comfort and a chance to move better doesn't seem to be the first saving to make.

At the current price, we have to assume a collapse in demand or an jump in costs that cant be passed on. None of that is visible yet. (I hold )

Dieselhead2

Thankyou for your write up on TTG Paul. Whilst I don't hold them, I do hold Volex, so hopefully a positive read across for them too....

DH2.

ken mitchell

I also hope Paul will have tine to cover £UBG.

That “strong Quarter1” included double digit increase in revenues AND increase in gross margin. Also one of the “partners” is £MKS.

Market cap is only £13 million. Share price has fallen from £1.20 to just 33p. The retail sector is under the cosh (including Marks and Spencer (LON:MKS) Down nearly 50% from the peak in January) but is the extreme 70% fall in the Unbound share price overdone?

Berksbee

Hi Jack, Great write up on LON:FIH. I've held them since 2014 and am, with a bit of judicious top slicing and buying back, just in the black. I would/should have sold out but am a bit nostalgic about them (I know never a good thing for an investor).

One thing worth noting is that the Falklands has huge off shore Oil and Gas reserves, if exploration/development ever started up again there would be a huge uptick in the price as FIH would service the Oil Explorers.

On the buy volume, I've never had a issue buying or selling a couple of thousand through Barclays. Maybe everyone is holding on for the next results.

JimMcLad

For some light entertainment on a quiet Friday – the inventor of a new chart pattern comes clean.

https://www.ft.com/video/2452d265-ef0e-4f7f-b0b2-ca1dc076ff33

Howard Adams

Hi JimMcLad

Great vid :)

Regards

Howard

Shucks Howard – I can’t take the credit. John Authers mentioned it this morning in his brief before he showed numerous other ‘serious’ charts which suggest we’re not out of the woods yet :(

Snazzytime

hi Berksbee - FIH (LON:FIH) Never come across this one before. Just had a read of the history - quite fascinating short read. An eclectic mix of businesses but too small / illiquid and a sporadic yield to interest me. Can see why you became nostalgic about the business though - good luck with your investment / trading on this one.

Thanks Jim - very amusing video. Quite a few of my holdings have entered the 'splat zone' in recent weeks :-)

gmtrader

got to say, it’s been a while since I’ve seen a vomiting camel.

laurie

BritishExpat70

I notice Hostmore (LON:MORE) continues to slide steeply. Not checked for recent news - it may just be market sentiment towards the discretionary eating out sector.

if I'm reading the stock report correctly for Unbound (LON:UBG) , currently SP is around 50% of the last reported negative net debt, and there's a negative ev to ebitda figure.

bodes well for a re rate if the world doesn't cave in.

FederalReverse

I don't think the stock report figures for £UBG (I hold) are entirely correct unfortunately. From the last set of results I believe net debt was around £8m, which will probably be nearer £6m now with the recent disposal of the property. Still looks good overall though, expecting to see pretty decent op. margins here over the next couple of years off forecast revenues of £60m-£70m. I was slightly concerned by the debt levels, but on balance market cap of £13m seems far too cheap to me.

Harry Hindsight

After a decent rise the 'two mountain top' with neckline (300p) is as good a 'stop loss' as any other 'rule'. Got 20p to go IMO and may look at shorting to hedge.

Boon

On Fulcrum Utility Services (LON:FCRM) I was pleasantly surprised that you (Paul) decided to write this tiddler up! I'm a suffering shareholder, having gotten in at 14p. Luckily, it was only a starter position, was less than 2% of my portfolio when I bought, and now much less.

I'm very puzzled as to what's happening here. Clearly Harwood and Bayford, the two largest shareholders and acting in concert, think there is some value. They've been in since pre-COVID in early 2020, having made a bid (26p) back then. And then also investing heavily during the recent December placing at 12p. They'd forced a change of management, and have ears on the board, so clearly knew what they were investing in when they dumped in extra money at the fundraising.

Yet, 5-6 months on, we have yet more disappointment, with no real good news coming out of the company.

They had a record high order book as at Oct21 - so it would be interesting to see what's happened. They were talking about the macro-economic opportunity of local I&C upgrades/new installs to support electric car charging "stations" and the likes. This "opportunity" is conspicuously missing from this latest trading statement.

There's a good amount of NTAV here, as well as enough cash for a bit, and what I can see will eventually be a take-private by Harwood or Bayford. They will of course offer the customary premium to ensure minority shareholders don't complain, probably like a 20-30% to a bombed out share-price. But I never expected it to get this low, otherwise would have bailed at 12p during the time of the fundraising. If Harwood were to offer 9p now they would most likely get a steal, but most shareholders would probably bite their hand off.

(I hold in the Boon Fund - unsure what to do)

Paul Scott

Hi,

Sorry I didn't get round to looking at Unbound (LON:UBG) (I hold) - I've been on a mini-break late this week, doing rambling around the countryside with a big group of friends - necessary to recharge human contact, fresh air, and some exercise. So I had to rush down a full english at 7am, and then rattle out 2 quick company sections here, then spend the rest of the day walking & talking nonsense to lovely friends! (I'm very good at that!!)

With UBG, I don't know what to think. Clearly the demerger strategy from Electra has been a total flop. It's not clear though, whether that's down to bad timing, bad execution, or whether we might have been sold a pup?

As always, we can only ever work on the information provided, I've never claimed to be clairvoyant.

Apologies to everyone (like me) who has suffered big paper losses on Electra. I cannot see anything wrong with either business, MORE or UBG, so the bombed out share price is not a bid that I want to accept. Hence I'm happy to completely ignore the current share price.

Nobody likes to see paper losses, so I apologise to everyone who is currently nursing a heavy loss on MORE and UBG, as indeed I am. We're trying to help each other make money, so it's really painful when our best ideas lose people money (in the short term). We're not tipsters, we're just trying to flag up interesting shares. So as always, it's your decision whether to stick with anything that has gone down in price.

But it's horrible, and I still want to apologise. My stuff has done really badly in the last year or so. That's just the way it goes sometimes.

Best wishes, Paul.

15th May '22

I note with interest that Zytronic (LON:ZYT) are releasing HY results on the 17th May, and also announced they will do an investor presentation on Investor Meet Company on the 23rd May. Did a scan through RNS announcements back to 2019, and this is the first time they're doing a public PI investor presentation.

I infer that the results to be announced on the 17th May will be good? The fact that they are also doing an aggressive buyback at the moment supports that theory, along with great footfall stats coming out of Las Vegas calendar YTD (where they make quite a bit of money selling displays to gaming operators there).

Anyone sitting on the fence and on a watchlist, Monday will be the last day to buy before results announced at 7am on Tuesday.

(I hold in the Boon Fund)

Small Cap Value Report (Fri 13 May 2022) - TTG, FCRM, FIH

Paul’s Section:

TT electronics (LON:TTG)

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Paul Scott

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