Small Cap Value Report (Fri 16 Dec 2022) - RNK, FUL, BOWL, DEV, SUH

16th Dec '22 by Paul Scott

40 comments 6702 reads

Good morning from Paul.

All done! Have a lovely weekend, and I'll be podcasting tomorrow as usual.

Agenda

This is what I'll be looking at today (with apologies for the late start) -

Latest interview here with Christopher Mills of Harwood Capital, from Paul Hill at Vox Markets. I listened to this last night, and really enjoyed it, hence me mentioning it now. Some terrific insights, as usual from Mr Mills, and he makes good points about very poor market liquidity and delistings. Also some terrific small cap stock ideas, from this highly accomplished, shrewd fund manager. Well worth a listen.

Paul's Section:

Rank (LON:RNK) - Graham normally covers this, but I've had a look today at its latest profit warning. It now looks (as Graham predicted) to be trading at around breakeven for FY 6/2023. I can see the case for a recovery in the bombed out share price, once the consumer & costs squeeze begins to ease. However in the meantime, I'm not happy with its weak balance sheet (over-laden with intangibles). Also I have some ESG concerns over the gambling sector, which might cause problems with investors avoiding the shares, and banks maybe less happy to lend? It's not for me.

Fulham Shore (LON:FUL) - a profit warning is blurred by vague and rather long-winded commentary. A broker update note reveals that adj PBT is being slashed to barely above breakeven for FY 3/2023. Rail strikes have particularly harmed the many sites in London, and city centres, for weekday lunch demand. FUL is one of those shares where I like the trading updates usually, but am less keen when I see the full numbers, with lots of adjustments, and not much statutory profit. Overall, as last time I reported, I'd want this share significantly cheaper to tempt me into buying now. Longer-term though, it should be a decent recovery share.

Hollywood Bowl (LON:BOWL) - cracking numbers for FY 9/2022, and outlook comments suggest the boom in ten pin bowling is continuing. It's a high margin, highly cash generative business model. The cash generation is being used to pay generous divis, and self-fund new site openings. Also it's expanding into Canada now. It all looks fantastic, let's hope it continues. Thumbs up.

Dev Clever Holdings (LON:DEV) [quick comment]…

Unlock with Email

Unlock with Google

Already have an account?
Login here

catalogue

16th Dec '22

£fur Momentum 7 versus £soli Momentum 98 - is there anything more than market sentiment impacting momentum on these two stock reports?

mojomogoz

Its taken a while...but Time Finance (LON:TIME) is a structural growth company.

I don't expect many to believe me, just reporting it here ;) New CEO has really taken a broom to it...bit painful and some pangs likely still to reverberate internally for sure.

My guess is this will compound handsomely in coming years (...I'm known to be wrong so take that with a dose of scepticism...but at another time I'd like to persuade you that lending is the new rock and roll and we're all going to love banks by the end of the 2020s!)

I wrote the following when I saw that Arena Investors took a 20% stake. I saw this as a potential threat to the interests of PIs. But with upwards business momentum...and hopeful revaluation...that ameliorates. Remains an issue to watch though as knowing firms like Arena I find it hard to believe that they invest with mere passive intentions in a biz like Time (note Time are a sort of mini version in some ways of what they do with their $3bn fund)

https://www.stockopedia.com/co...

Metatron

on a personal level i have had an account with the Rank's Grosvenor Online Casino for over a decade which is based in Gibraltar and have found recently that their Customer Services are appalling

Rusty2

£FUR, can't see this listed on the London markets, which stock are you referring to?

Raleigh4343

Thank you for the Fulham Shore (LON:FUL) update. I am a buyer at recent levels and will add. I have a multi year view on them. The management have decades of history of doing what they are doing and In my opinion will eventually do well again. Today’s numbers are far from great but as you say, it is very cash generative and holds a sweet spot in the dining out market that should attract diners away from more expensive options. Time will tell.

johnsmith68

Following the news today of Games Workshop (LON:GAW) 's link up with Amazon, holders (myself included) may be interested in this article which I thought was super, man:

https://www.hollywoodreporter....

Westway001

Yes, it was interesting thanks. This news is very exciting. Games Workshop (LON:GAW) is one of my largest holdings and the money they might make from licensing all sorts of rights to Amazon is huge.

scrooge

Good results. The +68.1% in after tax profit is over three years since 2019, being the last year of normal trading. It's up around 20x last year's if you really want some exciting, if meaningless, numbers. (I hold)

Sorry Rusty2 - Future (LON:FUTR) Momentum 7 versus Solid State (LON:SOLI) Momentum 98

Re Games Workshop (LON:GAW)

A space fantasy epic with 'space nazis', androids and assorted weird creatures will never catch on!

Sell this news!!

Zipmanpeter

Thanks for the Fulham Shore (LON:FUL) write up. I was doing the same and reached many of the same conclusions just slower and less clearly. I particularly like your growl on lack of LFL figures as I wasted time trying to estimate these myself. Why-o-why don't companies give neat little mgt tables on things like sales/quarter and LFL - no internal management review would skip them.

Fulham Shore (LON:FUL) Mgt are experienced and owners and the basic brand concepts seem good . Its interesting that differentiated The Real Greek is doing better on ROCE than much more competitve pizza . Debt outside of leases is low and its generating cash for investment. The business still looks a decent long term bet for 3-5 years time if you believe that retail F&B can ever make good money. I still do and that Fulham Shore (LON:FUL) can.

Trouble is, I thought that 5 years ago when I bought them at roughly twice today's price! I still hold but fear taking on more as I probably should if I (dangerously) believe I know more than the market.

kendal

why nothing on RWS? Good company with progressive dividend growth and just possible takeover target.

Paul Scott

The Explanatory Notes to every SCVR state -

We stick to companies that have issued news on the day, with market caps up to about £700m.

RWS Holdings (LON:RWS) has a market cap of £1.35bn.

Silver Moon

I wonder if any subscribers have a view on Intelligent Ultrasound £ILUG which I've been looking as a someone who has had two operations for different injuries this year that involved surgeons working with ultrasound. I'm interested in the future prospects for this company based in Cardiff but consider that the CEO, Paul Gall may be considerably overpaid.

TheFloatingInvestor

Share prices being hammered back towards previous lows.

With a toxic mix of lower volumes and negative sentiment, we could very well get some excellent buying opportunities over the next couple of weeks.

I would be careful placing stop losses too close if you are planning to close up shop till the new year.

Happy hunting!

Snazzytime

RWS Holdings (LON:RWS)

Because a) It's a mid-cap not a small cap and b) In any case the SP is flat today so wouldn't obviously warrant any comment.

If you would like Paul to comment you've probably got more chance if you ask politely rather posting a rather a curt comment.

The results were yesterday for one and two it is a mid cap.

martinji

To be fair at least kendal gave some reasons for looking at RWS rather than just "why not RWS?" or "RWS next please" like some posters do.

FWIW I had a quick look at RWS as its a holding I've kept an eye on in the past, as it was flavour of the month with a lot of small cap funds a while ago.

I think headline metrics look good and at a reasonable price, however I have two related concerns

1) organic growth at constant currency was very slightly negative, the good headline figures come from acquisitions and favourable FX

2) one reason organic growth was hit was that one significant client had stopped using them and actually started a competing service (just going from their RNS, not looked in any more detail). Granted this was in only one of their three main business areas, but it makes me question if they have much of a moat, and more generally I worry that with AI translation services improving in leaps and bounds, will they be able to continue offering sufficient value add to grow their business medium term?

These were just my top of the head thoughts skimming the RNS so I could be way off, anyone who is an expert on the co or knows the field may be shaking their heads at my ignorance. But thought I'd share anyway.

BnB

I worry that with AI translation services improving in leaps and bounds, will they be able to continue offering sufficient value add to grow their business medium term

Didn't they buy SDL - a leading AI translation service? Seems like they're moving with the times.

Harry Hindsight

Like Lord of The Rings etc there is mileage in Warhammer and Games Workshop (LON:GAW) has modelling, gaming and shops. But the streaming wars between Disney, Prime, Netflix etc is a battleground in itself. Can see Amazon fighting Ebay for the modelling side and maybe comic books on the kindle. Disney wen't woke so picked up by Amazon.

Small Cap Value Report (Fri 16 Dec 2022) - RNK, FUL, BOWL, DEV, SUH

Agenda

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

40 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...