Small Cap Value Report (Fri 18 Feb 2022) - PODP, CLIG, AEO, MWE

18th Feb '22 by Jack Brumby

54 comments 8601 reads

Good morning! It's Jack and Roland here with Friday's SCVR. Many thanks to Roland for stepping in over the past couple of days, allowing Paul to take a well earned break. He's back on Monday.

Agenda

Jack's section:

Pod Point Group (LON:PODP) - recent IPO providing chargepoints and other services for electric vehicles in the UK. This is obviously a growth market, and Pod’s revenue is expanding at pace. The group has c£46m of cash on the balance sheet as it grabs market share, but losses continue. Some supply chain issues will hit margins in H1 22 too. I see the thematic opportunity, but at what point does the group become self-funding?

Aeorema Communications (LON:AEO) - extremely small micro cap, c£7.4m in size. The pandemic has prompted management to pivot to online conference events and it’s good to see that the group has not just survived Covid, but is now on course for record revenues as a result of actions taken. It could be that the addressable market has increased, and the valuation looks fairly modest, but the stock is extremely illiquid and so is probably not appropriate for a lot of investors out there. Very wide spread.

Roland's section:

City Of London Investment (LON:CLIG) (I hold) - Half-year results from this specialist asset manager. Limited net inflows and mixed market conditions mean that funds under management are broadly flat, but fee margins are stable and profit performance is quite strong. A special dividend looks likely to push the dividend yield to 9% this year. I remain happy to hold.

Mti Wireless Edge (LON:MWE) (I hold) - exchange rate movements mean that costs rose last year. 2021 profits are now expected to be lower than forecast. However, based on the evidence so far, I don’t think this really qualifies as a profit warning. The balance sheet remains strong and the outlook for 2022 is said to be positive. I remain happy to hold ahead of full-year results.

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…

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Lochinver

18th Feb '22

Anyone else a little concerned by recent developments at Team17 (TM17) ? ( I hold)
One of the gaming magazines (Eurogamer) on 11 Feb published a damning report into poor working conditions, staff morale and worrying behaviour by some staff including the largest shareholder and CEO. Together with ill-advised new product launches that quickly necessitated reversing.

Another recently appointed CEO (?!) was forced to address the workforce the following week promising to deal with these issues. At the same time he criticised the business’ policy of prioritising quantity over quality and said that Team17 was currently “struggling” , with high rates of staff attrition and too many projects.

All sounds a bit of a mess and something of a red flag to me. Not only from an ethical point of view but also a commercial one - there surely cant be many successful companies where there is a large schism between staff and management ? I would have thought that the necessary culture changes are pretty difficult to make, given that it is generally an issue coming from the top down, and not something fixable in the short term.

Its also ironic that exactly 3 years ago the company appointed as NED an HR expert who's day job was Executive People Director for a well known plc. It does make you wonder what on earth some NEDs actually contribute to their employer !!

Many thanks for any comments or advice with regard to my shareholding.

ed_miller

On-road Electric Vehicle charging point cables will be laid under the road/pavement, by the way.

Silver Moon

You can strike a match and poke it into a pan of diesel since it is an oil and gives off little vapour but petrol produces Hi-Flam vapour with your expected result. As in investing, volatility matters. Sorry to be so pedantic.

I think water and electricity are not good neighbours and can foresee some nasty incidents happening out there in the streets. Insurance companies will be on call.

AndrewLeach

Hi Richard

I could probably bore you for hours about the electricity industry and in particular renewable energy, storage, power response / flexibility and the whole transformation of the electricity industry. I've been in this business for 30 years.

There is a huge amount of activity in the storage arena and it is not the large utility companies that are active. It is a whole range of companies, many relatively new dynamic privately owned companies, also fund managers like Gresham, Foresight, Gore street etc. Have a look at the program / agenda for next weeks Energy Storage Summit at Victoria Plaza (23rd and 24th Feb) to give you an idea of the players. A lot of this is focused on Li on batteries but there are many other technologies in development, Vanadium flow batteries (Invinity on Aim), gravity storage (Gravitricity), Liquid Air Energy Storage (Highview Power), I could go on for ages with this list.

EV's will play a big part in storage in balancing the grid and energy storage. We have 20m vehicles on the road. 1m of these plugged in at the same time could meet peak winter grid demand. The potential for cars to balance the grid supply is huge, lots of new companies are looking at these sort of things.

Sadly very few of the companies at the forefront of these changes to the electricity are on the stock market. Pod has a fighting chance to be a player. Smart Metering Systems (SMS) is also in there but I believe there will be many more industry outsiders wont have heard off. SSE is very big in renewables but in general the utilities are not at the exciting cutting edge of what is a 'once in a hundred year' transformation of the electricity industry. I am sure there will be big winners but they wont be the names we know.

Andy

Helvellyn

I am sure they will be but the cable linking car to charger wont be.

I just cant see this being acceptable for all sorts of reasons. How could a visually challenged person walk the streets?

Thank you Andy.

Richard

rmillaree

It wouldnt take much of a redisign to ensure the cable comes out of the kerb , if that was the case and the rules where such that the car needed to be parked ovelapping the bay and the person needs to ensure there is no dangly bits away from the car- seems easy enough to make it so that its unlikely to be a big issue? I would have thught with the charges like thos shown in the picture impaired people are unlikely to be trying to walk between the charger and the cars. In theory you could have the cable coming up out of the road and move the chargers to underneath the car perhaps ? certainly not an insurmountable problem IMHO.

johnmhughes

Revs8, re: Shield Therapeutics, my wife is a pharmacist and she thought that the cost of the drug was very high considering that iron supplements were generally very cheap.

A lot of hype at launch about the product, but as you point out, a very poor performance with regard to the number of prescriptions. Maybe it is not perceived as such a revolutionary product that they claim it is?

Zipmanpeter

In fact, there is already cableless EV charging, just as there is for phones. It will be years before this will be viable for mass produced cars if it ever does (except maybefor taxis on fixed ranks?) but I doubt it will need to be. The real point you highlight is that good, practical solutions are likely to be found once the market need is there and many routes are being explored. What they will be, who knows.

DaviStoVest

I think there are many challenges ... but, at a cost, I also think they can probably be met.

I don't think the roadside bollard solution has any viable future. The risks associated with trailing cables are just too great and would affect far too many people ... not just those who are visually challenged. This should be a non-starter, although it does seem to have started. It's not a solution that has any potential to last, however. Far too many practical and safety drawbacks.

A connection coming up out of the road would seem to have far fewer H&S drawbacks ... although, perhaps, would not be favoured by cats. It will be more expensive and will require more sophisticated computerised control mechanisms and associated comon standards. It's a much more complex engineering challenge but, I believe, not beyond the wit of man.

The tangential possibility, focused as much on commercial as technological innovation, would be development of switchable battery packs ... each one another 'full tank'.

raggedtp

I'm basically with Andrew. It would take hours to go through just the layers of work being done by many companies on infrastructure and power solutions. I was involved 30 years ago to and thought that maybe, on retirement from the conventional world, I would spend some money on some idea of my own. Then I researched it and realised how many £bns were now being put in around the world.

Basically we are only just starting up the incline of the S-curve of the technology (see https://www.rethinkx.com/trans...). But to add an easy snippet or two:

BYD is about to launch an EV in China and Australia almost at parity with petrol versions of the same type of car.

The Chinese are coming. Observe what they did to the solar panel industry. There is no reason why they won't do it to cars. Yes, it might be the death of some legacy European/US auto companies, but I've seen it happen before (Kodak thinking digital cameras wouldn't catch on).

We have a 4-year old Nissan Leaf. Battery state >98%. Repeat that. Fast battery degradation is only for those boy-racers from what I hear. And I know of house storage businesses aren't meeting their own growth hopes, because there AREN'T ENOUGH OLD CAR BATTERIES. So that's the "what do you do with the batteries?" argument weakened.

And we had an early PodPoint courtesy of Nissan, but moved house unexpectedly. Yes, we have the luxury of a garage. No, we don't have a fast charger. Unnecessary. Plug into 13A wall socket on return, get 10 mph charge overnight. So it's not as hard as people are worried about.

Terraced house/apartment is harder, but more offices/supermarket/retail parks are putting them in (Tesco/Waitrose already committing). People going to the cinema will increasingly charge their cars up to full while watching a film.

And BP Retail for one perfectly OK about the profitability of the transition. https://www.reuters.com/busine...

Hope this helps

JohnEustace

If you want the actual numbers in near real time then

https://www.energydashboard.co... is a useful site

DavidMcCabe

19th Feb '22

great site, thanks

Guysdad

£PODP Pod point is one of many EV home charge point sellers; it is in quite a crowded market place. We’ve recently installed a home charger - we have solar panels so went for a system that allows us to utilise our solar PV for car charging and water heating (Myenergi Zappi and Eddi). As ours was a used BEV there was no incentive, other than the government £350 grant, to select any particular brand. If you are going down the new car route, there may well be incentives to use a particular brand such as podpoint.

We have only rarely used podpoint to charge on journeys as they are mainly in supermarket car parks - Tesco currently allow you to charge free whilst shopping. For charging on a journey our go to chargers are InstaVolt, Gridserve (circa 40p) and BP (cheaper per kWh but subscription). We have only once diverted to a supermarket car park (Lidl) and found a Podpoint - I suppose it’s a little like getting off the motorway to buy petrol at a supermarket rather than at the motorway expensive services.

Ponzy Mad-Hoff

Charging EVs with a cable is probably going to be a temporary solution, the future is likely to be wireless inductive charging.

GrahamScott

That picture was taken in 2015. You’d have thought BMW would have had a production ready solution by now!

Epsilon

20th Feb '22

If we did get a long spell of still cloudy weather then we would be in trouble in the future, as you say we are switching from oil to electric and gas heating to electric, only around 25% of our electric comes from renewables.

It would appear today at 3om that the MAJORITY of UK electricity is being generated by renewables. Time to update your NatGrid tables Rusty!

Rusty2

Look at the averages, it’s not always this windy is it? Can you see we are still burning coal even today. NG figures are updated .

Actually at 3.30pm it is only 41% renewables and we are importing 16%, coal even today is around 4%. Average for the last year is still under 25% for renewals.

Andrew niven

Hi jack just an observation regarding podpoint . I see that the grant initiative which was available expires in March of this year and according to their website they do not have any installation slots available until after the grant expires. Will that have any effect , probably not but interesting that wonder whether the delays are Labour or supply issues .
tricky one this company ?

Small Cap Value Report (Fri 18 Feb 2022) - PODP, CLIG, AEO, MWE

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Jack Brumby

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