Small Cap Value Report (Fri 2 Oct 2020) - SAGA, CNKS, WIN

2nd Oct '20 by Paul Scott

61 comments 10182 reads

Good morning, it's Paul here with Friday's SCVR.

Portmeirion interview - here is the link to my audio interview today with Mike Raybould, CEO of Portmeirion (LON:PMP) (I hold), which I hope you find interesting.

Timings - should be mostly done by 1pm.

Agenda - as usual, Friday is quiet for announcements. These are the companies (below) that I'm going to be writing about today. If a company doesn't interest you, then please skip to the next section. I cover about 500 companies in total, which should provide enough variety for everyone. Comments on which companies I cover are distinctly unwelcome (because they just cause negativity), and I don't take any notice of them anyway! If you don't find my reports interesting, then maybe don't read/comment on them?

Saga (LON:SAGA) - results of open offer (refinancing)

Cenkos Securities (LON:CNKS) - Interim results

Wincanton (LON:WIN) - trading update

US President - covid

I've just heard the news that President Trump, and the First Lady, have tested positive for covid. That's knocked the futures overnight, as it throws a spanner of uncertainty into the US election. The comment that he will be continuing with his duties as normal, is pie in the sky. As a 74 year old, overweight man, he's at high risk. This virus can knock the stuffing out of you, for quite some time, as I experienced in March/April. It will be interesting to see how things pan out - will someone deputise for him? Whatever people think of his politics (no comments on that either please!), basic humanity means I wish him & his wife a full recovery.

Wincanton (LON:WIN)

220p (up 5%) - mkt cap £277m

Trading Update

· Trading remains resilient underpinned by strong eFulfilment performance

· Agreement reached on 2020 triennial valuation of pension scheme

For background, it's worth recapping on my notes on the trading update here from 20 July.

Wincanton plc, the largest British third-party logistics company, today issues the following trading update ahead of its half year results for the six months ended 30 September 2020.

H1 was "resilient"
eCommerce is growth area
"Encouraging" new business wins (examples given, of big name client wins/renewals)
Guidance unchanged from 9 Sept update (materially ahead of [greatly reduced] forecasts)
Results for H1 will be…

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barnetpeter

2nd Oct '20

Went to London on Wednesday with my wife; hosted a mainly zoom business event although with some delegates attending. Postponed twice because of government restrictions. My first trip to London in. about 9 months. A real eye opener. Victoria station almost empty; usually if you want a taxi you join the longish queue. This time no one waiting and a long line of taxis. Hotel near the centre of London....usually very busy. No bar or restaurant open. Never saw another guest. A reception manager standing well behind so much glass we struggled to hear him. Looked in the pubs; those that were open were almost empty. The roads were so quiet in the evening that as a Londoner born and bred it was almost scary.

The conference venue; delighted to see us. Custom built centre that usually is full most days. This should be peak season for them. We were their first customers in nearly a month. Manager commented that they had often seen Ministers and even PM's presenting there on "vision" and "the way forward". Now they felt forgotten about. Enough funds for a while but end of the furlough scheme will mean most staff gone.

Took a picture of the street at about 8pm. A man walking his dog. At times, no cars, no noise, no people. Fitzrovia, near Oxford Street, London. Yes it was a Wednesday but London is always buzzing.

On the same day, the Office for National Statistics (ONS) disclosed that the UK household savings ratio surged. People seem to sense that bad times are coming. People are paying off debt at a record date; I guess they know that high levels of unemployment is on the way.

Looking at my holdings today. Where will the shocks come from? Will the Ftse100 fall below 5000 again? Shell and BP are apparently at 25 year lows. Lots to think about!

grumpy5

Ususally in these cases the company aggregates the fractions and sells them in the market, giving the total as a donation to charity.

Antehelion

thanks Paul, a helpful write-up and analysis, cheers!

Nebraska1977

Thanks for posting, really interesting on the ground insights.

kgb1953

I didnt think this was twitter and maybe thought that people would wish the President of the USA well. But for the record YouGov just put out the info that Bojo catching Coronavirus did not prompt a surge of support for the government.

psin

a second thanks. terrific reporting. frightening, isn't it?

Roger Baron

£ CRS worked out how to get the ticker in now!

mojomogoz

head to London suburbs where I live and quite busy with bars and restaurants quite full and perhaps a bit more through the week too (anecdotal observation rather than data). Central London is full normally of white collar and professional workers and tourists (from abroad and elsewhere U.K.) so not surprising it’s quiet

sharw

re Saga (LON:SAGA) share consolidation -

Charity - you must be joking - extract from RNS q.v. :

"Where the Consolidation results in any Shareholder being entitled to a fraction of a Consolidated Share, that fraction will not be allotted to such Shareholder and arrangements will be put in place for any such fractional entitlements arising from the Consolidation to be aggregated and sold in the market on behalf of the relevant Shareholders. Amounts of less than £5.00 will not be paid to such Shareholders and will instead be retained for the benefit of the Company. Having regard to the current share price of the Company, it is anticipated that no proceeds of fractional entitlements will be distributed. As a result of the Consolidation, Shareholders with fewer than 15 Ordinary Shares following completion of the Capital Raising will no longer hold Ordinary Shares in the Company".

Paul Scott

Here's slide 19 from the slide deck which I provided a link for in the main report, for Saga (LON:SAGA)

This shows you the pro forma debt facilities position post capital-raise, which looks fine to me. Note the points on the right, including that the RCF will be undrawn. Hence plenty of liquidity. It's not a financial distress situation at all.

ken mitchell

Though agreeing that the SAGA turnaround could take some time, aren't there also possible big shorter time share price triggers too?

e.g Roger de Haan now has over 26%. What are his intentions now? Could be to lead the SAGA recovery. Or could be looking to take SAGA Private?

What about the potential recent bidder at 33? They could well get SAGA for less now but still way above current bombed out 11p price.

SAGA had an exceptionally successful business before they went Public. Now THE man who along with his DAD started SAGA from nothing in Folkestone is back at the centre of things. I remember when Barratt lost their way and the founder Barratt returned to sort it out and the share soared.

If there is no bid or attempt to take SAGA private, then it is likely that the share will bump along around current 11p price or lower perhaps for a good while. BUT even a whiff of better covid news and travel returning to normal (e.g if vaccine promise and near) and SAGA share price should soon start to price that in and long before the recovery is obvious.

SAGA have done so much wrong for a good while. They even managed to mess up the Open Offer just completed, and had to reduce the price from 15p to 12p. Surely they should have got it away at that 15p?

Why only raise £150 million? OK raising more would have meant even worse dilution but it would also have meant debt further reduced.

Was it only £150 million to enable Roger De Haan to get to 26% holding without eating too much in to his £1 billion wealth to do so?

And why was he prepared to pay 27p and that big premium to then share price?

Could all this suggest very interesting turn of events perhaps quite soon?

Obviously SAGA floated at far too high a price. AND worse still (and reflected in some reader comments here today) many of their loyal customers were sucked in to investing in SAGA and it has been a bitter experience for them. 90% loss for them. Ouch!

And now any who hoped to get a bit back via the Open Offer when the share was as high as 20p ahead of it, have just been kicked in the teeth yet again. For all that their cruises are very popular and the quality of their offering and service is superb.

SAGA Magazine is popular and very good with some excellent columnists. Ahead of flotation the plus case for customers and readers to buy the shares then, who had often not invested in any share before, was plugged strongly in their Magazine. But in recent times, including the Open Offer events, the share has never had a mention.

How effective is current CE Euan Sutherland? Not sure that his pointing out in his SAGA column that when he looked over their latest new cruise ship it was the first time ever he had been on a cruise ship!

What about the share price today?

After rising to 13p it then fell all the way back to multi year low 11p. There were a lot of sales, quite possibly some of their now even more disillusioned small shareholders who took part in the Open Offer.

Could they be selling at or very near THE long term low?

SAGA has a potentially very successful cruise, travel. and insurance business. The share is bombed out like so many shares in the hospitality sector. Some of the survivors will likely multi bag once covid is over and travel and business return to more normal.

And could SAGA be one of those very big winners? Yes imo... unless there is a low ball bid.

Susan123

The stocko PER metrics on Cenkos Securities (LON:CNKS) look all wrong, it is reading as PER of 300! More than Microsoft!

Albm7

Saga (LON:SAGA) ( I hold) I think the 1:15 share consolidation is a good move as it makes it easier for institutional fund managers to own as they tend to shy away from penny shares.

2ShedSam

Spent weekend in London. It was fantastic and highly recommended. The lack of crowds made for a wonderful experience. Tower of London was busy but pleasant. Nearby Coffee shops reasonably busy but again, easy to get a table and watch the world go by. Cafe's around Kensington were very busy and we had a lovely brunch. Temp checks on way in, reasonably spaced tables (sufficient for social distancing but not too far that atmosphere was lost). £70 for 4 suggests plenty of money still to be made even with a few less tables. Walking the Mall to Buckingham Palace was serene. What a beautiful place. Walking up to the gates and peering through with no hustle and bustle is an experience to behold. Hyde Park - wow! Albert Hall, we just walked up the stairs and got photos really easily. Trafalgar square was off course rammed with nutters but was fun to observe from afar. As we walked from site to site, there was lots of evidence of shut shops, bars and cafes which clearly not great for the economy. We stayed in Acton and the traffic was chaotic the further away from central London you got. Tube again got busier the further from London you got although didn't enjoy the mask wearing experience. (Generally 99% were wearing masks on Tube). I also used the NHS app for the entire weekend. Most places had a QR code and it was really easy to use and helps keep things moving. Do I care if someone knows I was in Starbucks, no I don't. Do I like masks, No I don't but will wear one if requested to do so. People just need to roll with it and crack on. Overall, I think this is a once in a lifetime opportunity to explore the wonders of London and really take in it's majesty as a city of the world. This time next year it will be rammed again with tourists.

JJB1

3rd Oct '20

Re £Saga I am a recently new share holder and have continued buying today. I haven't reached my full % portfolio size yet, so whilst ' not wanting to catch a falling knife' I am hoping( again not a great investment strategy) that this is ' being greedy while others are fearful'. I listened to the recent presentation again and although a little wooden in places, it is a good team. I thought the best bit was the questions at the end and the management team answered them well and confidently. Bonne chance

Silver Moon

Yes, that is what it was and also I didn't want o tell the wife.

Zipmanpeter

Re Portmeirion (LON:PMP) - Many Thanks to Paul for his interview with the CEO Mike Raybould (see top of this days SCVR.

Raybould came across as very open, honest and trustworthy (if not the greatest public speaker) - for instance in being prepared to push back and explain why Mgt have low stakes currently (new young team) and accepting a measure of overstock). Paul also winkled out i) potential good news in respect of freehold values on property in the UK ii) an intention to use B2B as a way of disposing of seconds iii) a clear understanding of and willingness to invest in solving production bottlenecks, admitting some under-investment in the past and iv) a clear statement of preference for driving organic growth over acquisitions. CEO also recognised need to get out to PI events spread the word and encourage liquidity outside the same old holders. All good to my ears.

Most importantly, the CEO spoke about building online sales and specific investment steps/plans taken to improve this. He quoted figures shared elsewhere of 6% online in company websites in 2019 rising to 15% this half (with retail closure) at 10% better margin. Balance of online through 3rd party (Amazon, John Lewis) at similar margins to retail was also interesting to hear.

I had written to the company to complain about the poor state of its current website and emails with some specific examples and had that acknowledged. The CEO said much the same thing but spoke to me convincingly about investments and new people hired to change this.

Net, I already held some but will slowly buy more in the coming days

Lordyjordy

8th Nov '20

Evening

Just read Paul's write up on saga which is interesting. Can someone explain why when I look at the share price on Google it's saying 134.5p not 12.55 p that Paul says it currently is. The graph shows no major uptrend either?

1 new for 10 old shares consolidation just recently

Ok. Thanks.

Small Cap Value Report (Fri 2 Oct 2020) - SAGA, CNKS, WIN

US President - covid

Wincanton (LON:WIN)

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Paul Scott

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