Small Cap Value Report (Fri 2 Sept 2022) - ALM, TED, SHOE
Good morning from Paul!
Short update today. Edit - I've since spotted a couple more items, so will do a bit more writing, which should be up by, and beyond, the 1pm deadline.
Update at 14:23 - OK we're done for the day, and the week! Sorry for the slow start this morning, blame the Spitfires! ;-) Many thanks for some superb reader comments today, I've just read through them, and am loving the input from you all on energy cost hedging, and watch list/ potential buys. Great to see people posting interesting comments, instead of hiding behind the sofa in terror, at what are incredibly awful markets (esp in small caps) right now. But as with all crises, it will pass, at some point. Next week should see a new PM, and business-friendly measures being announced, and action on energy too. Depending on what is announced, it might be time for another rally? Although I tend to think these rallies are being sold into, so think it's probably too soon to anticipate a new bull market in UK small caps anyway. But as we always say, who knows, anything could happen! I'll record another podcast this weekend with my latest ideas, and a summary of the week. I see lots of people are listening via Apple, so it's good I set that up.
Paul’s Section:
There’s apocalyptic news from the hospitality sector morning newsletters, eg. Propel. Pubs are already closing, citing excessive energy utility bills, which in some cases have now risen to more than rent & rates combined. This is expected to render a third of all UK pubs non-viable. I imagine that a similar impact is likely on many other businesses.
It’s obvious that drastic Govt intervention is needed, and fast - not just in the UK, but in Europe too.
I wish I’d kept a list of the companies that have already told us that their energy costs are hedged, as that’s vital information. It’s buried in the archive here though, because if companies mentioned it in their results or trading updates, I would have reported it here. So if you're looking for that information, click on the "Discussion" tab for any company we cover here, and previous SCVRs should be shown, which might have this information in them.
My experience at the Bournemouth Air Show yesterday afternoon was brilliant, well worth visiting, it runs today, tomorrow, and Sunday, FYI). The highlight as usual was the superb Red Arrows, although one of the 7 planes disappeared during the display, so maybe it had to return to base? Hopefully not another bird strike, although if so, that's one fewer pesky sea gull to bother me at 5:00 squawking its lungs off on the flat roof directly above my bedroom!
The sound from the Typhoon fighter was astonishingly loud - just one aircraft filled the whole of Bournemouth Bay with its engine roar, which you could feel on your chest bones, as well as hear! Spectacular stuff. I loved the WWII commemoration too, with the last remaining Blenheim, escorted by a Hurricane, and a Spitfire. Seeing and hearing what my grandparents would have experienced on a daily basis in the 1940s, was quite moving, but I kept it together!
As regards hospitality, it was £6.50 for a pint of Spitfire, which I literally winced at. Plus they had the temerity to leave an excessive head on it, so it wasn't even a full pint, so I demanded a top up, saying that for £6.50 I want a proper full pint! Then of course you spill a bit on the way out, so a futile gesture, and in any case the minimum wage server doesn't give 2 hoots what anyone thinks. At that price level, it's really only viable to have one pint, so my next trip was to a nearby Tesco, who are selling 4 pint cans of Carlsberg for £4.00 with their Clubcard discount. So £1.00 a pint, versus £6.50 a pint, for a similar product (both nicely chilled). The economics of this are so extreme, that I can understand Tim Martin of J D Wetherspoon (LON:JDW) saying that pubs are facing ruin because of the supermarkets undercutting them to this extreme extent. Now with unaffordable energy bills on top, the whole sector is looking grim. But that's why the share prices are so low, as the market factors in known things like this. If some solution is found, there could be good upside, who knows? Although it seems to early too be anticipating that. Although as they say, the cure for high energy prices, is high energy prices - people use less, and the price comes down again. There is a limit to what people will pay for drinks though, and I suspect hospitality has reached that limit.
Allied Minds (LON:ALM)
10.7p (up 2% at 11:02)
Market cap £26m
I was about to look into the interim results out today, but then spotted Graham & Meghan had written about its plans to de-list here on 24 Aug 2022.
So there’s not a lot of point in digging into today’s detail.
ALM has also been trying to sell itself, through a Formal Sale Process, but says today that this is “on-going, but no notable interest has been forthcoming to date”. Oh dear. What a pity it didn’t sell itself during the boom years, when its valuation peaked at a bonkers >50x the current price.
Cash position is currently $10.0m, but several of its investments require additional funding, well beyond this level.
Listing costs - how on earth does a micro cap spend (waste!) $2.2m p.a. In listing costs?! It should be more like a tenth of that -
…. the Board believes that a successful de-listing of Allied Minds could reduce annual running costs by approximately $2.2m per annum. The Board believes that such savings when combined with the current cash position should provide two years of cash runway for Allied Minds with necessary headroom to make strategic investments in portfolio companies if deemed appropriate and necessary to maximise value for Allied Minds shareholders.
Outlook - some signs of life here -
The Board remain of the view that there is substantial value to be realised within the portfolio of investments and that this can be achieved within a time frame of 18 to 24 months. It is therefore important that the Company has sufficient resources, including an appropriate buffer, to achieve this which is the key reason for considering and consulting with Allied Minds shareholders on a potential delisting.
If I were a shareholder, I’d ask the company to remain listed, but drastically reduce its costs. Management could be replaced, or moved onto remuneration which is linked to the value they realise for shareholders, a cut of the outcome over a pre-determined level, perhaps?
I recognise a couple of the major shareholders - e.g. Crystal Amber, holds 18.1%, and I believe is winding itself up? Also Metage Capital with 6.55% rang a bell, then I remember they were involved in PPL Therapeutics, which was one of the shareholder actions groups I set up in 2003, and I recall meeting them at PPL’s AGM in Scotland. I got some vague death threats (NB. not from Metage Capital!) afterwards, and was told that I was very lucky to have left Scotland in one piece. Although in person, everybody I met at the AGM was perfectly civil. Maybe I was blissfully unaware of the simmering rage? Anyway, after that, I decided that shareholder activism was too unpleasant, and after doing 5 ShAGs, decided to move on to focus on being positive towards decent companies, rather than trying to extract value from bad companies (which is incredibly difficult to do, as well as being unpleasant).
Metage’s website requires a login, so I couldn’t research them, and it seems to be a secretive Cayman Islands company. But I assume they’re probably a bit activist, based on my previous experience with them. I remember them being so paranoid about the Concert Party rules, that after requesting a meeting with me in 2003, they proceeded to refuse to say anything meaningful, in case it broke the rules! That was a long time ago now though, and as the royals say, recollections may differ.
Anyway, it will be the attitude of these shareholders below that determines if ALM will de-list or not, as there will be a vote -
.
My opinion - reading its update today, some of ALM’s investee companies look quite interesting. The prospect of a sale/disposal of some or all within 2 years, sounds a reasonable timeframe.
Although personally, I wouldn’t be happy holding shares in a company which might be about to de-list. The trouble with de-listing, is that it then removes the ability to sell the shares at a time of my choosing. I have heard of cases where people who held on to a share which de-listed, then went on to do quite well with it, so they’re not necessarily always a bad thing.
I see the new Chairman of ALM is called Bruce Failing, a turnaround specialist apparently. I see he embraces his name, with an email address which is: Failing@.....
Would I want to make a fresh investment in ALM, shortly before its possible de-listing? No. It doesn't look a complete basket case though. So having lost 98% of the value from the peak, it would probably be tempting to just hold the remaining scrap, and see what happens.
Ted Baker (LON:TED)
109.2p
Market cap £201m
The takeover bid at 110p cash, from Authentic Brands Group, is going ahead. Every situation is unique, so shareholders have to personally weigh up what you’re most comfortable doing - i.e. selling in the market now, for c.109p, or holding out for that last penny. As it’s a big acquirer, and the scheme document has been posted, then I suspect this deal is going to happen. Although given the worsening macro picture, personally I would bank the profit now, and forego the last penny, just in case something were to go wrong.
To what extent is the takeover bid boosting the share price? A lot, I would say, comparing this share with other struggling mid-market fashion brands. If this bid falls through, then I reckon the share price would probably instantly halve. Why take that risk, for a 1p final payout? One reason might be the potential for a higher, competing bid, which would be nice upside, but in current circumstances I’d say that’s highly unlikely, but we don’t know for sure, it’s always just educated guesswork with takeover bids, and weighing up the probabilities of various possible outcomes.
Current trading doesn’t look good.
Q2 (14 weeks to 29 July 2022) saw revenue up 3.4% on last year, but still down 28.3% on the pre-pandemic comparator from 2019. That’s awful, given that costs will have risen a lot over those 3 years (e.g. wages, utilities). Companies need to be healthily beating pre-pandemic numbers, to cope with the higher costs.
Ecommerce performance is also bad, barely any higher than pre-pandemic. Although some of that poor performance seems to be self-inflicted, with “challenges” launching a new eCommerce platform.
Licensing is up 62%, but no actual numbers provided.
Inventories are too high, due to slow-moving old season stock.
Net debt of £34m is OK in the context of available headroom (an additional £46m), but not OK in the context of TED probably now being loss-making. So there could be issues with bank covenants looming.
My opinion - this very much reinforces my view that TED shareholders have had a very lucky escape with this 110p takeover bid. The bidder is clearly over-paying, for a poorly performing, and poorly managed, loss-making business. Hence why I think grabbing the money now, rather than waiting for the last 1p, is probably sensible, just in case.
Does the lacklustre trading here have read-across for the rest of the sector? Let me answer that with another question - who in their right mind would be expecting a positive trading update from any fashion retailer right now?!
Shoe Zone (LON:SHOE)
167p (up 15%)
Market cap £82m
Announces today a £3.5m share buyback, between now and end November 2022.
This news has added £10m to the market cap, which seems a little excessive. Although I think the share price had recently sold off irrationally, despite positive newsflow on current trading.
Energy costs is the big current issue, so can anyone remember if SHOE has fixed or capped its energy prices?
I covered SHOE's latest positive trading update here, just a couple of days ago.
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94 comments
As an aside to Paul's preamble, I get the feeling the £6+ for a pint is the norm these days (outside of a 'Spoons, of course!)...
Not around here unless its changed considerably in the last 2 months. I think that was at the show rather than in a pub? I can't see pubs surviving if they charge £6.
I wouldn’t normally post this here, but on a quiet day for small caps and with continuing risk of market falls, a post on high dividend paying shares and Investment Trusts might be of a bit of interest. These all provide very useful and regular income; a real bonus in falling markets and free funds for new investments too. The share prices were at the close yesterday.
I hold these 2 paying astonishing dividend yield:-
£GKP. 242p.
Stocko has the yield at 13.5%. Unfortunately the yields shown on Stockopedia are often wrong and the Gulf Keystone dividend is a near incredible 36% this year already. They paid 17.2p in Feb, 23.8p in May, 9.6p in July and then another 19.5p in July. The big snag, despite 99 Stocko ranking is that all their revenues are from just one field in Iraq. Keenan Cooper posted an excellent article on Gulf on February 14th. It only got 45 ticks reflecting the lack of interest here in resource shares perhaps?1 month up 16% and ytd up 25%.
Thungela Resources (LON:TGA) 1587p.
Stocko has the yield at 42.5%! It good but not that good! It’s 25%. Thungela paid 91p dividend in May and recently announced a big £3 dividend. Its not too late for that. Keenan Cooper wrote an excellent article on Thungela on Feb 14th. Up 14% 1 m and up 288% ytd.
I also hold the following dividend payers. Note the exceptionally high yields. Normally much above 6% can be a warning sign of likely cut ahead but some of these are increasing dividends already higher than that.
Up 14% 1 month and up 288% ytd.
Aviva (LON:AV.) 412p. 8% dividend. Increases promised. 1m Up 4% but down 27% ytd.
Chesnara (LON:CSN) 304p. 8% dividend. Recently announced another annual increase. They’ve increased it for multiple years now. 1m Up 7%and 1 yr up 8%
£DLG Direct Line 202p. A recent buy at 189p. 11% dividend. 1m Down 2% and ytd down 30%
£LGENLegal and General 250p. 8% dividend. Again increases promised. 1 m down 5% and ytd down 18%
£PHNX Phoenix. 591p. 8.5% dividend. 1 m down 8% and ytd down 10%
£PLAR 447p. Polar . 10.5% dividend. 1 m down 9% and ytd down 43%
£RCH 70p. Reach. 10% dividend. 1 m down 26% and ytd down 75%. Lots of current headwinds and share still falling but perhaps negatives priced in fully now? Unlike many of the others a dividend cut on the cards?
Wentworth Resources (LON:WEN) 25p. Dividend increase just announced. 8% dividend. 1 m up 6% and ytd up 10%.
£SOM Somero 440p. 7.5% dividend. 1m Up 4% and ytd down 20%.
INVESTMENT TRUSTS.
I hold a lot of Investment Trusts. They are way superior to the much more popular Unit Trusts/Open ended Funds imo not least because they can sometimes be bought at big discounts to NAV whereas Funds always trade at Par. Commercial Property Trusts are paying dividends up to 7% and some are on discounts up to 35%.
Vietnam Trusts and the case for Vietnam seems little Understood. I’ve held VietNam Holding (LON:VNH) and VinaCapital Vietnam Opportunity Fund (LON:VOF) for years and both are great performers.
I also hold Henderson Far East Income (LON:HFEL)
9% dividend. It’s been increased multiple years in a row, albeit at expense of capital gains. 1 m up 1.5% and ytd down 18%.
NextEnergy Solar Fund (LON:NESF) Next Energy Solar. 120p. 6% dividend. 1 m up 5% and ytd up17%.
I do hold quite a few of those.
On Thungela Resources (LON:TGA), is there not an issue with withholding tax?
Also the share will probably fall back by £3 when goes it ex dividend?
I would avoid putting . after the ticker as it does not then work.
Thanks Rustbucket. I hadn’t realised I had posted those fall stops. I edited by typing the £sign and re typing the code but it still didn’t work, so I’ve given up now.
Yes. I had forgotten the withholding tax. I think it’s 20% which if applied reduces that £3 dividend to a still very useful £2.40. And yes again, as is always the case that dividend is taken out of the share price at the start on 22nd September ex dividend date, but final price that day again as usual depends on subsequent trading. I’ve known share prices fall by far more than the dividend on ex day, and sometimes make up the entire dividend drop the same day.
Downsides to TGA at moment. Great run and close to all time highs, 20% withholding tax on dividends, social poiltical problems in South Africa with Transnet supply disruptions and possibilty Government might impose extra royalty taxes with ultra high coal prices . Hold though .
Well ... one 'all time high' is no more than a precursor to the next 'all time high' ... potentially. My assessment is that Thungela Resources (LON:TGA) will probably rise significantly further ... driven by energy sector fundamentals. But it is very high risk.
I am sitting on a huge (for me) paper gain on Thungela as things currently stand. The actual cash coming in from dividends helps me be a little more sanguine about possible future losses.
This is a conviction hold and build for me. Bear in mind, however, I am not some rich man luxuriating on a yacht. I might possibly just be completely wrong.
Similar circumstances. As you say, high risk but high reward and as long as coal prices stay high. . Presently about 10 % of holdings, managed to get in early last year. Personal rule is safety first in order to preserve capital and as much as possible with no one at all having ability to see what's around the corner. Good luck with your investments.
Amazing, Ken, I hold most of those. Thought about Gulf Keystone Petroleum (LON:GKP) but chickened out over the geopolitical risks right now. Any comment on that?
I have increasingly few stocks dependent on the UK now, and thought Wentworth Resources (LON:WEN) results this week very good. It's being priced for being single asset, but I think everything else about it is more reliable than the UK and am looking to buy more at these prices.
Also hold £CAML. Copper really is in long-term structural deficit. Prices will rise again.
And Kenmare Resources (LON:KMR) recent purchase. Sustainable and increasing divs.
What about Diversified Energy (LON:DEC)? It seems a compelling business model, with high and rising divs as they consolidate the very fragmented shale gas industry in the US. Prices likely to rise somewhat, reducing emissions, being good stewards of a currently necessary commodity in the US. 15% withholding tax, but I still make it a >10% forward yield in $. Comments welcome!
Thanks raggedtp.
I guess that Gulf Keystone Petroleum (LON:GKP) operate in Iraq is enough to put a lot of investors off and hence the PE under 2 and 36% dividend yield. It is high risk. I’ve only held since the start of this year.
I’ve held Diversified Energy (LON:DEC) for a good while, including a lucky add at just 55p. . It’s complicated insofar as I can never get to grip with the decommissioning aspect. And it gets occasional vicious short attacks rubbishing their whole business model. So I didn’t include it in my post yesterday. BUT the longer they go on paying those big and still increasing quarterly dividends the more likely perhaps that Rusty Hutson knows what he’s doing. Yes the dividend even with that withholding tax is about 10%.
I also bought Abrdn (LON:ABDN) recently. It’s been downhill for years for share price but surely priced in now? And they’ve reassured on the dividend which is nearly 10%.
Finally one I hold but forgot to include was M&G (LON:MNG) That’s another paying a 9% dividend. Down 9% 1 m and 7% ytd. The big income from these is a bonus in a bear market and while waiting for the bombed out smaller companies so well covered here (e.g Volex (LON:VLX) Vertu Motors (LON:VTU) Sosandar (LON:SOS) Quiz (LON:QUIZ) and PLEASE Boohoo (LON:BOO) ) to perform!
Shoe Zone (LON:SHOE), Energy is fixed until Sept 2023
Depends what it is fixed at. BG just sent me a fixed rate deal, its nearly double what Im paying now, the joke was it was dated 12th August, expires 24th August, letter received 31st, good job it was not a great deal.
So,
we had Johnny 2 jags,
now we've got Pauly 5..........
So why has the price of beer in supermarkets not gone up ?
It is the same now as it was 2 maybe 3 years ago and plenty of discounted offers ( although this has probably always been the case) . A decent 550ml bottle of beer, lots of choice, is £1.60 - £1.80 against a pub pint going from £4ish to £6-£7 . I dont think the VAT situation has changed. Apart from labour costs mainly caused by Covid or Covid and Brexit combined what costs does a pub have that a super market doesnt ? What have I missed ?
I am not familiar with the brewing process but i imagine it uses energy and as a heavy product must be expensive to deliver .
R
Some prices have gone up in supermarkets and choice of £1 bottles is more limited, still can buy beers like Lancaster Bomber for £1, which is ok, not as good as it used be but acceptable. Theres some Greene King beers also usually for £1 or Banks for even less but I don't like amber beers. Pubs are expensive and often the beer is not that good, for £4 you want a decent pint, lower turnover on cask beers is not a good thing, some pubs stock too many different beers, I usually order a half to check its ok.
Just ask for a taster. I have never been refused. Lidl Green Gecko excellent at £1.20 a bottle if you like hoppy beers.
Can't get Green Gecko in my local Lidl any more but IPA in the Aldi is possibly better and a penny less.
Amongst so many headwinds right now , there is one dramatic tailwind for a section of UK listed companies, the incredible weakness of the pound vs the dollar . Revenues and costs in US dollars is good but even better is companies with a UK cost base and US revenue streams that could see a spectacular uplift to margins. I have a small list from my own portfolio that I am adding to but would appreciate any new ideas.
accesso Technology (LON:ACSO)
Advanced Medical Solutions (LON:AMS)
£INS
Gulf Marine Services (LON:GMS)
Judges Scientific (LON:JDG)
MaxCyte (LON:MXCT)
Record (LON:REC)
Quixant (LON:QXT)
Spectra Systems (LON:SPSY)
Transense Technologies (LON:TRT)
UK cost base and US revenue streams
I posted this a little while ago
Our thoughts are aligned jesseowens I hold Record, Spectra and Judges. But recently my thoughts are turning the bombed out retail shares. I have avoided and avoided recognising a recession is on its way but Quiz and SOS for me look real long term value. Problem is how long is long term? I should emphasise I am ultra concerned so focus on index linked/gold/ shorting 10 year yields. So equities I am concerned about simply because we have had so much central bank money inflating assets for so long I believe in a return to the mean.
Like everyone I have a list of stocks to buy. Indivior (LON:INDV) is one of my favourites. Primary market is USA in $ and not affected by consumer sentiment.
Recent selling by ABRDN might be due to redemptions. SP May have hit a short term low today.
Morning Paul S. Re hedging, the only one I can remember was from a presentation by Hostmore (LON:MORE) to Mello some little time ago when the CEO definitely made that a big selling point, especially on gas - presumably a big user for food.
Doesn't seem to have done much for the share price, but I add it here for what it is worth. It may also be in one of their latest reports - Trading Statement or Ints/Fins.
Hostmore (LON:MORE) - from trading update 26/5/22 :
Furthermore, early hedging of gas and electricity costs, both volume and pricing, and success in limiting food and beverage costs increases, has limited the impact on margins.
I don't have the specific details though I'll try and do some further digging.
£HOST Interim results presentation on 19/9/22. I will submit a pre presentation question on this via IMC
Apologies got the ticker wrong - should be Hostmore (LON:MORE)
Loungers (LON:LGRS) hedged till September 2024
Just been to lunch (! Caveat) .in dependent family owned for 50 years .electric company cancelling his contract because he fixed a year ago . It’s all in the T & CS apparently . I’m sure host more and loungers won’t suffer that but I’m more in favour of windfall taxes right now
I notice the housebuilders are hitting pandemic lows.
I appreciate there's lots of pressures coming at them all at once with materials & labour inflation and interest rate rises.
However, they're cash rich right now with several years of land banks . Not to mention the demand vs supply problem is not going away any time soon.
I'm sure this sector is going to be unloved for sometime to come but i wonder if the energy crisis will start to sharpen peoples minds to the cost benefits of energy efficient new homes with solar panels.
A friend of mine works for a firm that delivers a lot of raw materials to the building industry reckons demand has fell off a cliff in the last month to the point where he can see redundancies for the truck drivers delivering the gear and this is from a firm that was going gangbusters for the last two years.
Has anyone got a buy list in these brutal markets ?
Not sure if anyone here is topping up or adding at the moment or hiding under the sheets and ducking for cover .
I keep reviewing my shares and honestly can’t find any that worry me too much, and some of them I am tempted to add if they touch the right price on market sell off days .
I did sell off my Conygar shares 2 days ago as despite being asset backed with valuable land bank the directors are rather fond of large salaries for doing bugger all and any development costs will be through the roof . Just can’t see much happening here and I generally avoid property based companies, sold out at 132p .
Added a few Sureserve this morning which is very clearly well placed .
In A-Z here’s what I’m holding and after reviewing notes below .
Avingtrans - good position already but very well run, slight exposure to energy I guess but beneficiary of nuclear . Buy on weakness if goes to 420 level (occasionally touches there but rare)
Belvoir - solid company, I’m a bit underweight here and rentals very strong, needs to be a good dip though so that’s a a buy at 200-205 level . Managed to catch this low a few months ago .
Bloomsbury - Super solid company and the Harry Potter foundation underpins it . Can’t see it being exposed to current risks so happy to buy the dips. Added a few at 395 yesterday
BP - sit and hold I guess, much bigger than I normally bother with but it’s the counter balance to an overexposure to AIM shares (which I hold for IHT reasons )
Crestchic - Big fan of this and it is coming off its recent jump, loadbanks are going to be in huge demand as companies concerned about lower supply are going to need to regularly check their backups . Total no brainer if the pullback continues to 220 level will be adding .
Equals - Should not be affected and arguably a beneficiary of currency volatility. Not my normal value share but happy to hold and buy on extreme weakness (in the 70s)
Gresham House Energy Storage - Super strong share price, wish I had a bigger holding and I managed to buy a chunk at 145 in the recent placing but didn’t have cash available to buy a big chunk. Rising tide market probably won’t add as it’s at the top of its range just continually edges up .
Gulf Keystone Petroleum - the gift that keeps giving, Must admit this is a gift horse that I don’t fully understand and is paying at current rates about 30% dividend . I’m not a huge fan of resource stocks as no matter how much you understand a company it’s success depends on a resource price.
Will hold of course and keep banking that silly dividend .
Hargreaves Services - like this a lot as I think the land bank is a goldmine for wind farm projects. Asset backed. Bit concerned about the German trading division but they seem to know their stuff . If this dips to 400p level would be the one to buy .
Holders Technology - super illiquid and tiny market cap but has to benefit from energy prices as their intelligent lighting systems will help companies reduce their bills. Has to gain traction in the next years , be warned this is a total value trap but the technology they are working with is very good . Founder is a major shareholder but I’ve met him and de-list risk mentioned here last week is zero (famous last words )
National World - Sit and hold, ridiculous prince IMHO but ever downward trend and Mr market does not like this share. It’s the heartbreaker in my portfolio .
Somero - Will be a beneficiary of GBP going down the toilet so I think going to keep knocking it out the park for the next years and it’s technology very good . Share price has spiked up so it’s arguably at the top of its range.
Sureserve - looks well poised to be a beneficiary and solid cash balance , good share to be into in this environment , buy on the dips to 82 level .
Vertu - Looks exposed but such a solid property portfolio and has generated 2 years of huge profits that I’ll cautiously buy the dips as I dont have too many .Bought a few at 47p this morning which is bottom of its range I think .
Wynnstay - not totally convinced here but it seems pretty safe and solid . Recently added so I’m about right for now need to sit back and see what they do with the cash .
That’s all , not sure if anyone is interested .
Thanks for this planetx, it's hard not to like.
Thanks Dave,
always interested in opinions.
R
I bought 4 yesterday XP Factory (LON:XPF), Eurocell (LON:ECEL) Eenergy (LON:EAAS) and Eneraqua Technologies (LON:ETP)
I think they all look good companies that are really cheap
Eenergy should be making hay in this environment yet market not pushing them higher. Why?
Re Eenergy (LON:EAAS) - who should be "making hay in this environment yet market not pushing them higher. Why?"
Massive share dilution, loss of CFO this week and no real busines history and a rapidly changing business focus. I loved the original story (schools save money by switching to LED lights at no CAPEX cost to them, EAAS skim a little on the way) but share count has gone from 10Mn to 228 Mn in 3 years and now there are many other lines (energy trading, other installations). Too many moving parts. Feels super high risk.
It is such a young company it's hard to base it on not making money. They are forecasting to generate a profit this year, all eyes on the earnings report in October
The strip does not look as bullish as it did. Also German gas storage is better than expected for this time of the year given their exposure to Nordstream 1.
Some argue that the futures market has become detached from the physical market. It is certainly true that there is a less and less liquidity and less volume in the futures markets whilst US oil storage is declining rapidly. US gasoline demand has also dropped. Many worry we are about to enter a period of huge demand destruction as a result of a massive recession. I remain bullish because:
Maybe Venezuela and Iran will save us?
Hi JamesAlastair, do you know how much of the oil that say BP (LON:BP.) sell at spot versus on futures? Cheers Tommy
ps. I hold
But XP Factory (LON:XPF) does not make any profit and has some debt, if there is a recession, these type of companies often go under. I think that sector is quite risky at the moment. Have the directors bought any shares?
Only through the EMI scheme. I agree it's a risky one but they did a huge fundraise at 30p to tale them to profitability. Last update is they are keeping in line with their Boom Battle Bar roll out with the Oxford Street flagship due to open soon. And the current box economics from BBB's that have been opened being achieved. After the interims this Month would be a better time to buy but I'm always impatient.
Worst case scenario is if they didn't do their calculations correctly and need more cash.
Thanks for this planetx - a few very familiar names.
I’ve only just signed up to Stockopedia having listened to Paul Scott’s excellent, insightful and entertaining weekly podcasts. Paul often talks about adding specific shares to a personal watch lists (most recently Eurocell (LON:ECEL)) which would be interesting to review.
Welcome to Stockopedia, The Jayman!
Lovely to hear that my podcasts engaged your interest.
Also thanks to others for posting buying list ideas. I might follow suit at some point next week here, as I have an interesting buy list (or watch list anyway) of about 30 companies. But I think at least 2 have already plunged on profit warnings!!
Regards, Paul.
Now I’m reviewing the daily reports the weekly podcasts provide a great take-stock on the key headlines and developments as well as broader context. Quality
As an aside Paul what's Bournemouth like to visit for a say four day mini break these days beach looks lovely and those 500k pent houses have some stunning views but is it over run with youths on skateboards and pushy beggars ? I only ask as I spent a lot of time in Brighton when younger and loved it went back for the first time in ten years last summer and couldn't believe how down hill it had gone real shame.
In Bournemouth last weekend and after long time. If you like historic commercial and figher airplanes along with big helicopters, the aviation museum by the airport well worth visiting for children and adults alike, encorages interaction so can seat in the cockpits and get up close. Holding mostly high dividend paying shares at moment to protect as much against inflation, waiting to see for developements, hopefully war in Ukraine will be over as soon as possible.
I've only gt an overlap with you on two, Planetx. I'm planning on topping up Belvoir (LON:BLV) a bit, but too many of us must be of the same mind as the share price doesn't seem keen to fall that much. The rental market is going to get tighter, especially if the expectation that regulations on energy efficiency will dramatically reduce supply comes true. In the meantime figures out next week.
I also have Vertu Motors (LON:VTU) but plan just to hold there. My view is that the demand driven by those who struggled with public transport during the lockdowns has pretty much gone. The chip issues for new cars also seems to be easing. So the good times are probably over but still a good company with long-term management and of course that asset base.
I've recently increased my holding in Qinetiq (LON:QQ.) to reverse some trimming at the peak. Whatever happens in the Ukraine, the west's militaries have a lot to think about the evolving technologies and that is likely to benefit Qinetiq.
And a small top up of £MACF. Sometimes tortoises do quite well in races (if you wait long enough).
There's something wrong today, my portfolio is slightly up.
This week though has been particularly brutal, or maybe it just feels worse for the false optimism of what I now consider a dead cat bounce prior to mid August. Naturally an optimist I'm forcing myself to feel bearish and therefore to hold off however cheap, and even where I'm under water am cautious about averaging down, fearing new lower lows that don't seem possible but are proving me wrong as time goes by. I'm also watching plenty of good businesses I own or watch bounce on a positive update and then sink back to where they were, (or even lower), and graphs that seem to have an ongoing consistent downward trajectory that you can draw a straight line through from top left to bottom right - I'm paying more attention to graphs and momentum as a consequence, and looking for signs of sentiment improving. Were I in a buying mood I'd be focusing on dividend bearing defensive stocks with value characteristics.
The macro picture doesn't have much going for it and the autumn and winter could be very tough with more bad economic and consumer news, more political crises, and the potential for profit warnings. Shares on my watch list are hitting targeted lows to buy and I'm simply lowering my target further still, trying to build up cash and not to risk adding to losses. Sooner or later it'll be time to act but the best I can say is that buying of late has been mostly short term negative, one can't time the market of course and it's the long term that matters, but none the less I'm more cautious as a consequence.
I hope I've not depressed anyone who's read this far; let's all hope we've reached rock bottom....
Hi Tien,
I hope that you have switched off and got something better to do.
Anyway girls in bed, but not asleep so today looks ok (all portfolios up) but then similar bad week at the office... well actually on holiday just left everything behind for a lovely week, and the weather in the Lake District was amazing, people were nice, local businesses overall very friendly and appreciative of the £££ got to love a traditional ice cream van run out of someone's driveway!
You are honest.
I think that most have had a hard year, I am majority cash on all but my daughters portfolios (JISA). I wish I had an answer, but going with the I did not sleep in 2020 and right now I can and that is important.
I am currently producing a simple spreadsheet for one of my mum's friends who is seriously worrying about the "cost of living crisis" but then her husband is now terminal in a care home, most of his money is abroad and she does not have the power to access it, and the company has said he has to turn up in person to authorise her to do it on her behalf! Got to love the personal touch, not just a UK bank after all :)
I have topped up some things, bought some new, see the comment on Redde Northgate (LON:REDD) below, and watched it all go very dark red. But I am going with small stakes (~1-2% usually) and companies I feel will be here no matter what, they have positives about them, and I am prepared to average down, but with summer holidays and I am so glad I have used 4 weeks of my annual leave to spend with the girls (7 and 9) I have been absent without thought, but very emotional.
My base one is, I am not living beyond my means. My wife and my basic salary covers standard costs. We are putting money into savings (cash and shares) and the girls future (shares) still. We have 1+ year of costs in cash should both of us be made redundant tomorrow, my wife starts a new job this month, having taken a massive pay cut within the NHS and retrained she is happy and in an area she wants to work and a chronic shortage of staff right now (mental health) though salaries pathetic, and I would not work for her managers.
If you cut to the essentials, are you ok for the next two years? Just pay the bills and the mortgage, meal out for birthdays, drinks from Aldi and all that? You are actually top 10% right now.
If not Rich Dad, Poor Dad, but focus on the "expenditure" bit, are you buying stuff you need or splashing the cash for the really why did I do that?
Sorry Random
Tommy
Hi Tommy,
Thanks for your perspective, there's more to life than share trades, and there's more to personal finance than a share portfolio as you've so ably described. Your base seems to be wise and rational, not investing today what you might need to spend tomorrow I've replied to your Redde Northgate (LON:REDD) comment also.
You mention 'Rich Dad Poor Dad', my favourite read/ listen of the moment is 'What Works on Wall Street', or perhaps it should be titled 'What Doesn't Work on Wall Street' depending on your Bear Bull sentiment!
TEIN
It looks as though 64 and counting are interested planetx, I certainly am and enjoyed reading your list of possible add to holdings.
I wish my list were as strong! Fyi we have more shares in Vertu than in any other company, imo their CEO is probably the best in the business, hopefully my faith will be rewarded one day. Thank you for the list, you've given me several to add to my buy list. We have been nibbling for the last two months after being heavily weighted to cash, sadly we've been catching falling knives and I don't think the falls have bottomed yet.
Definitely interested.
Boredom is my enemy. Had some spare cash sitting in an ISA waiting to invest, and ended buying a handful of shares (Redde Northgate (LON:REDD), Somero Enterprises (LON:SOM), ME International (LON:MEGP)) - cue the market taking another jump downwards yesterday...
In my head, these are all shares I'm willing to hold on to for a while, so I guess looking day to day is not valid, but do wish I'd held out. The bottom must be reached at some point, but who knows when.
I take on board what Paul says in his podcast at the moment - long term should be OK, who knows in the short term!
As for others, it is interesting to see people like the Slater fund taking significant stakes in things like Hollywood Bowl (LON:BOWL) .
From your list I also have Vertu Motors (LON:VTU) and Avingtrans (LON:AVG) - probably the only two shares in my portfolio that are currently in profit!
Sigh....
Dave
Hi Dave,
I too took a position in Redde Northgate (LON:REDD) then went on holiday for a week and found that I had given away 20% of it without even having to break into a sweat...
Frustrating, good business, now need to think on Tuesday when I have normal brain time again whether to top up or not. Still >50% cash so this is starting to take stakes for the 1-3 year horizon, good companies which will be variable in the next 12 months, being prepared to sell if goes up more than a years dividend (missed on Aviva (LON:AV.) ) and being prepared to change strategy, normally increase the initial position on a set % rise, or positive news, now it can be "averaging down" but basically buying into a theoretical long term yield.
Cheers
Tommy
You'd have lost the 20% whether holidaying or not so you were certainly better off with your family Tommy rather than watching in real time!
I'm no where near the 50% cash position you've taken, 16% currently but with aspirations for a higher cash position, but wary that cash is deflating at the quickest rate since I was a boy, meaning I try to console myself when I look at performance of my portfolio or individual positions by comparing my earnings/ loss with doing nothing, and at least with Redde Northgate (LON:REDD) you have dividend and potential for capital recovery and gain. Cash never gains and never pays a dividend (excluding the 2% you might get in a building society).
As for averaging down (which I know some readers have strong views against) I've learned to ask myself whether I'm doing so believing the company's performance is stable (or perhaps even improving) or whether I'm trying to fix a problem, (I'm too late to get out, performance is deteriorating or under stress) and my averaging down would be trying to dig myself out of a hole. This latter situation risks digging an even bigger one and compounding losses at least in the short term. But then we're not here for the short term, we just sometimes think that way!
Best wishes,
TEIN
Thanks Planetx, hold a few of the same Bloomsbury, Equals, Somero, and Sureserve. I have been topping up on Cerillion (LON:CER) , Telecom Plus (LON:TEP) , Cambridge Cognition Holdings (LON:COG) , ME International (LON:MEGP) , iEnergizer (LON:IBPO) , CentralNic (LON:CNIC) , SDI (LON:SDI) .
Too many bargains to mention right now, provided you have a long term horizon and not too bothered about short term volatility/weakness . Just to highlight a couple that have seen huge falls despite decent trading updates are Future (LON:FUTR) and Sanderson Design (LON:SDG) - I added to both in the past couple of weeks.
Thanks for sharing planetx.
I would like to add to my existing positions:
....and open new positions in
20% in BH Macro, 22% in Gold and 25% in O&G equities + calls on oil and puts on Ark Innovation saved me this year. I think things are going to get a lot worse as well. I also wonder how safe the O&G sector is from a political raid on profits. I hold Serica (SQZ), Energean (ENOG), Savannah (SAVE), Equinor (OSL: EQNR or NYSE: EQNR), Range Resources (NYSE: RRC), Sandridge Energy (NYSE: SD) and Devon Energy (NYSE: DVN). The funny thing is that the SPOG ETF would have captured most of the O&G gains without the individual company risk .... must be a lesson there.
I agree with you on National World .... crazy cheap. Lots of the small cap stuff is cheap.
I think on a 5 year view all will be fine. The next 12 months is anyone's guess, but being of a slightly eeyore persuasion, I think the risk is to the downside and small cap could get cheaper yet.
140 thumbs up including me says YES - thanks for posting your thoughts !
Revolution Bars (LON:RBG) - "We have not been immune to the widely reported inflationary pressures;
however, we continue to mitigate these wherever possible with a relentless
focus on cost management. Our industry leading sustainability agenda has
allowed us to reduce our carbon footprint and mitigate, in part, the widely
reported energy cost price increases. Our energy prices remain largely fixed
until spring 2023."
Not massively far out, but better than nothing!
Capital (LON:CAPD) - Today has announced the appointment of Peter Stokes as CEO. Therefore presumably Capital’s Executive Chair co-founder and key shareholder, Jamie Boyton is stepping away from executive responsibility.
This all takes me by surprise, as far as I am aware there has been no previous comment that the company was looking for a CEO. (I might have missed something.)
Boyton’s overriding influence on the company was not a good look from a corporate governance angle. Nevertheless, I struggle to see this news (to me coming out of the blue) as a positive.
I also see Peter Stokes’ location in Perth as odd for a London-listed, African-focused business. Admittedly, on a recent ImC Q&A, Boyton had said that the company was finding it was being encouraged by clients of its global MSAlabs business to bid for business outside Africa.
Interested in other views.
Hello Wimbledonsprinter
It is always interesting to see things from a different angle, isn't it?
My take on th CEO appointment was a very positive one. CAPD is growing fast. It has the base business which is winning big in Africa, but on the other hand, there has been talk about expanding beyond gold, and also out of Africa, given there may be a lot of potential business in areas close to NE Africa.
The business is also becoming very extensive. If you look at the individual businesses within CAPD, it is very complex. Jamie Boynton, I am sure needs more support and it makes sense to have a Chair/CEO / FD in the current situation. CAPD is on a roll and strengthening the senior management team is no bad thing to take advantage of the upcoming opportunities.
Then there are the investments and the links they bring to other businesses. I guess that quite a lot of these are in Australia, but may be wrong? If so, then to have a key guy based in Perth is not a bad idea? Some of the biggest mining businesses in the world have major operations in Australia.
Next, 'the investments' play a significant part in the valuation of the business from year to year. This last year they were written down, (a feature which has affected the valuation of many businesses); the previous year they were written up.
Also Perth is probably physically closer to some of the businesses in East/South Africa than North/West Africa.
Then there are the Labs which will play a bigger part in profitability over the coming year. They aree already outside Africa, into N America , with those.
What extra opportunities could be on the horizon? I am bullish about these, even with a world recession looming. Jamie talks much about dealing with Tier 1 companies and gaining their long-term contracts and support. It is good to see CAPD becoming a Tier 1 support, picks and shovels, group themselves. I have recently added to my holdings and they are one of my top 6 holdings now.
On the subject of hedging I had a meeting at Sheffiekd forgemasters the other month who clearly have a huge gas bill at the best of times.
They are of course owned by the MOD and thus the taxpayer .
I make a comment along the lines “Christ I hope your gas bills are hedged”
To which they replied “Well there’s an interesting one, we were hedged up to 2024 which was great , however the hedge was with Gazprom UK so we were forced to terminate the contract as the government clearly can’t have a contract with a Russian link “
I can’t recall the number exactly but it was eye popping for sure .
Sheffield Forgemasters that takes me back, thankyou planetx. In a previous life I used be a stockbroker in Sheffield. 3 of us emigrated from Huddersfield and set up the BWD office there. Initially struggled as 4 families ran Sheffield back then, including the Nicholsons and the Barbers. I was all for taking them over but in the end got frustrated and moved on. That was in the days of the "hole in the road" and the Socialist Republic of South Yorkshire.
”The Hole in the Road “ and 2p buses .
Have you heard the Everly pregnant brothers song about “hole in the road “
Find it on YouTube .
Btw Paul, in one of your podcasts you said you were nervous about Portmeirion (LON:PMP) energy costs. They have hedged their costs - this is from their March results: 'Extended our long term energy hedging programme to Q1 2024, insulating the Group against the current volatility in energy prices' - although I am unclear if that covers *all* their energy costs. (I don't hold).
Patrick - Was the point in the podcast that Paul was nervous in principle (its a pottery company with gas furnaces!) or he had specific concerns (which you are trying allay with the hedging he might not have known about?)
BTW I also wonder how much of their energy need was actually covered - 100% group needs, x% of of the one site, furnace needs only. I recall an impression - but cannot find detail in my notes - that the hedge was initially 100% coverage in say '21 but then tailed off, so 50% by '23 and 24% by '24 Figs made up for illustration) . The energy cost in '23 will thus be a blend of (presumably lower) hedged cost from '21 and hedged cost from a higher base in '22.
Really appreciate any insight on this.
You're right about the previous hedge and I note the most recent update wasn't specific whether the new hedge was for 'all' of their energy costs (and at what price?).
I think Paul's comment on the podcast was that he couldn't remember what Portmeirion (LON:PMP) had said previously.
my solution to the energy crisis is to go back to South Africa where I have a home in the Cape winelands. Problem there is load shedding so a long time ago I installed solar which powers the whole house .
Not such good news though for the wine merchant I own in London . Our energy usage is always higher than average , as we need to keep our wine cellar and shop air conditioned most of the year. Hard to pass on the increased costs to our customers, so unless the Govt provides help , we will close down .
That is very sad ... I am so sorry.
Paul "....list of the companies that have already told us that their energy costs are hedged..."
How about £PMP - It said in Nov 21:
"As a central part of our business, our ceramics factory in Stoke-on-Trent buys energy under long term contracts. In the first half of 2021 we extended those contracts until early 2024. As a result, we do not expect to be materially impacted by the latest rising energy prices."
Plus, normally you would expect a pottery/ceramics company to hit bad badly by rising energy prices and an inflationary cost of living squeeze but I think Portmeirion (LON:PMP) will surprise - lots of overseas sales helped by weak £; effects of recent good acquisitions especially in the US /Canada market (Nambe, JV in Canada, recent Aromaworks) where a sales re-organisation and scale are really helping; high levels of inventory already and shipping costs now falling ; finally, margin enhancing factory and people investments of last 2 years now in place to both reduce costs and enable more B2C direct consumer sales at higher margin, with quality of digital marketing looking as if it is improving.
Price has now fallen from >1000p 2 years ago, and from around 700p at the start of '22 to 350p now whilst IMHO the underlying business has got better. Stock is thinly traded and products are discretionary consumer focused so primed for overshoot whilst small investor sentiment is so negative.
I had hoped this year would be a v good year for the business, leading to a recovery in share price but now I think it will only be decent - but I will still get a good, well covered divi and maybe it can do some more good business, picking up more distressed complementary brands like Aromaworks for a song. the FD turned CEO is doing a very good job. On a 2-3 year basis, I am very happy to hold and hope to acquire a few more.
If only I shorted with the same conviction as I long :-)...a fundamental flaw of mine in such times.
Its Friday, its grim and markets are doing what they are doing. Im going to drift very off topic if you allow me. Into the murky world of Index linked investing ... not trackers .... inflation protected bonds. Why? Well I think its quite instructive on value of very long duration assets.
UK Govt issues IL bonds with v small coupons....the 2068 bond has a 1/8% coupon. So value rests in redemption value....much like an equity of negligible dividend. However this bonds redemption value adjusts for actual inflation along the way. All good so far. I was pretty surprised to learn this bond had fallen from about £330 to £118 yesterday...a fall of 64%. Staggered actually.
So for a few weeks I have been trying to work out what has gone on. If anyone can add colour to this please do. All I can add is that at the price £330 the price you were paying was the redemption value if inflation came in at 1.8%....this seems rather expensive to me. Now the inflation rate wrapped up in the bond is zero. So looking forward you will earn inflation as a return. ie If 50 year inflation is 1.8% the bond will get back to £330. So inflation protection was v expensive.....not helped by the tax break in the uk meant this asset was attractive to long term tax planning ie No income . Anyway having fallen 50% they seem only fair value... its an odd one.
Anyway im sure we have all made a few mistakes this year ....but in some ways I find the above story reassuring because this is a part of a portfolio I wouldn't have expected to lose 50%+ on...especially when inflation finally arrives. I feel a little better about some of my losses....since it illustrates if we can get a rather simple inflation protected bond price wrong by 50% ....then what about other assets. Whilst I can rationalise the implications of what's happened I have no idea why....why investors worried about inflation were happy to pay a premium for protection ...suddenly no longer were and dumped them. If anyone knows more Id be interested. When people sell weird things happen. Ruffer must be truly perplexed or believe we will one day have v high inflation. All very odd.
Just demonstrates how dangerous the world of investing can be. The issue with the linkers you mention is that their value is also determined by nominal rates of interest; as rates rise valuations fall. Then you have a concept called duration. Linkers are usually very long term assets. This gives them high duration so the movements due to rate changes are exaggerated.
Anyone investing in stocks should learn the basics of the bond markets. In my experience where the bond markets lead the stock markets follow…..
ZIRP laid bare for all to see.
Long dated linkers incrediblly sensitive to Interest rates and gilt yields have shot up recently - this explains the sell off this year. Big lack of understanding how linkers work - at least in the short to medium term, they provide very poor inflation protection as gilt yields tend to rise in inflationary environment. For me, the best inflation protection right now are probably the oil majors - I hold BP and Shell and they've really saved me this year!
Indeed, the loss in IL bonds has been high, but perhaps not as high as the 330 to 118 figure suggests. On top of this price is the accumulated inflation (at CPI or RPI, depending upon the bond) so you will have gained a tax free 5% in the 6 months you have held it.
I have a very simple rule for buying IL bonds. I only buy if the price is less than 100 (plus any accumulated inflation gains). It has served me well in the past
EDIT: I posted this before seeing the comments by Bouden54 and rpannell
@RDHOWARTH - I was pleased to see your post. You mentioned Ruffer who has held huge amounts of "Linkers" in his funds for many years, ever since Bernanke made his helicopter money speech. In his latest Investment Review Mr. Ruffer said: 'We hold, as a core investment position, a strategic block of inflation-linked bonds, which because of their long duration are extraordinarily sensitive to changes in the valuation basis. Over the course of the last six months, as the news on the inflation front has darkened, these long-dated bonds have roughly halved in price. How can this possibly be?' Unfortunately I don't think he answered the question! Others may disagree - in which case please enlighten me. Is it just "volatility"? Or is the fall because of an expectation that interest rates will go through the roof when the BoE eventually clocks that sterling is headed towards oblivion?
A number of things will help when thinking about linkers:
The issue date reflects the prevailing rate at time of issue, benchmarked to a non linker. In this case it was issued relative to the UKT 62 gilt in 2013. The subsequent price moves reflect in every case the movement in rates to the current rate ie as rates fell from issuance in 2013 the price moved higher to reflect this. As rates go back up the price moves down. Remember for linkers they are reflecting mkt real rates at all times or what is commonly known as real yields.
The inflation element is reflected in the coupon and redemption amount.
Focusing on the price change from one period to another is not really helpful without the context of the wider rates moves at the time too. They are a very different asset class to shares and it would be a mistake to infer from price moves something without a rates overlay context to appreciate the price move.
This bond is based to RPI, so the reset is based on every RPI update.
Demand for linkers generally outstrips supply. Pension funds love them and that makes them generally expensive. So buying them involves accepting that you are generally paying too much for the inflation protection you are receiving at any one time ie you need to have a strong conviction either way to allow for this market dynamic.
thanks for the feedback everyone. The rates versus inflation thing is interesting. Must be a little surprising to Ruffer as I think they would have sold a bond they expected to fall 50%… I would have. Yet they did not which suggests they didn’t expect the premium to disappear - maybe that makes them more interesting than I thought.
Hi Ruffer are a really shrewd bunch I forget how it works but they also have a hedging instrument in their portfolios from memory that protects them from drops in index linked bonds. I have met their team a few times and if I had to pick one fund to park my money in it would be them.
Phoenix
I also know Ruffer well.
They hope to make money in all markets, especially markets which we equity investors find difficult.
They are very clever and have a hedge against every position they run.
They are expecting high inflation and want to be positioned accordingly.
Michael
Paul, as it's a bit quieter today I would love it if you took a brief look at CentralNic (LON:CNIC) from earlier in the week - even just taking a look at its income statement and nothing else would be lovely! I know there are quite a few holders on Stockopedia and it was a favourite share of Jack when he wrote here.
I don't usually make such requests but there's something not quite right here. Half year revenue growth was over 90% and yet it's on a forward p/e of about 8 - potentially even lower given broker forecasts are for 50% full year growth which could get beaten.
On Twitter, someone has pointed out that there are very heavy adjustments to EBITDA, and once you reflect these then the p/e is more like 30. I am not sure how they have worked that out - the 'adjusted EBITDA' figure in the results is 'Parent, subsidiary and associate earnings before interest, tax, depreciation, amortisation, non-cash charges and non-core operating expenses.' I am guessing it's the 'non-cash charges' and 'non-core operating expenses' which is the dubious bit - but I can't see what the non-cash charges are from a quick glance! Edit: Non-core operating expenses are $2.5m so not insignificant but I think they can possibly be argued (rightly or wrongly) as 'one-offs':
Morning Paul / Graham,
Instem (LON:INS) published an interesting RNS this morning which might be worth looking at.
'A leading provider of IT solutions to the global life sciences market, announces a five-year agreement, worth over $12 million, with a leading global contract research organisation ("CRO" or "Client") to support over 2,000 users worldwide in their clinical trial analysis.
The contract is the largest ever received by Instem and will help to underpin management expectations for the current and future years.
"This agreement underlines the advantages of our long-term acquisition strategy in broadening our market reach, technological capabilities and client list while providing opportunities to introduce compelling new SaaS solutions that advance our mission to help to radically reduce the cost and time of drug development."'
I have been investing in Instem for several years as I like the sector tailwinds of the picks and shovels of drug development and have confidence in management and their strategy. In 2020 they raised £15m to scale and grow their platform and they have been executing their plan with several acquisitions. Instem know their competitors and say they only acquire the best company in a particular area of expertise.
Phil Reason (CEO) is based in the US as that is where many of their clients are. A lot of their revenues are in US dollars which is also a tailwind at the present time.
Investegate |Instem plc Announcements | Instem plc: $12m five-year agreement with Leading CRO
Hi Paul, RE: Energy costs.
This from Goodwin (LON:GDWN) recent results:
Energy
As initially reported in our 31st October, 2021 Interim Statement, over the
course of the year the most significant headwind that the Group has faced has
been the increased energy costs. Nonetheless, the Group managed to deliver
the more than respectable profits reported above, after having incurred a
total of £3.8 million of additional energy costs due to price increases
versus the year ended 30th April, 2021. Goodwin Steel Castings Limited and
Hoben International Limited were the most affected due to their energy
intensive operations, melting metal and high temperature treatment of
refractories. However, now armed with a multitude of short and long-term
hedges in place the Group is set to deliver substantially higher profitability
in the current year, partly as a result of not having to absorb the price
volatility of the energy markets that have been seen over the past twelve
months, irrespective of the improving performance.
Green Investments
We recognise the importance of adopting a strategy to transition to lower
carbon manufacturing. We have put in place a separate £10 million finance
line to fund a range of 'green' investments which were approved at the
beginning of the financial year ended 30th April, 2022. A total of 4.8 MWp
of solar panels have been installed and commissioned as at the time of
writing. Each individual system has been designed specifically to match the
power demand at each facility, subject to available roof space. The payback
of each system varies dependent on the size and roof configuration and all
were between three and six years; however, that payback was calculated prior
to energy costs more than doubling, so at current market prices the payback
time has halved from the original plan, with all the solar systems having an
insurance backed 20 year minimum lifespan. There are other solar projects
and plant control modification projects that, subject to us obtaining the
agreement from the Electricity Supplier ( District Network Operator ), for the
former we expect to bring on line over the next two years. This will provide
a further 7.8 MWp of green electricity generation and so further reduce our
consumption. Over the course of the year a total of £8.2 million has been
invested in green projects.
I hold
Cheers
Francis
The rising cost of energy might see more people going back to a warm office instead of working from home. Just a thought.
Depends on your commuting costs. If you live near to the office then definitely!
But what is going to happen to electric railways? Is there a bottomless purse to pay their electricity costs? London Transport used to have its own power stations for the Tube - at Neasden and Lots Road - both were closed long ago and I understand TFL now buys its electricity in the same way as everyone else.
Probably long term contracts, hedged. So they might be OK... for a while...
We'll be alright. The winter winds will make all those extortionately expensive wind turbines go round powering dozens and dozens of homes.
Do think it’s highly likely. A customer service rep I spoke to this week said exactly that. She was going to continue to work from home until colder weather, then go back to the office.
I found when I stopped working that the heating bill did not go up, will depend on what sort of property and which area you live in. Commuting costs would be far higher than any extra heating, unless you worked locally.
The energy costs for small businesses seem untenable. Is this what caused the profit warning at Cake Box Holdings (LON:CBOX)? Ie franchisees going under mean less fees payable to HQ?
Morning Paul,
So for the energy costs, Michelmersh Brick Holdings (LON:MBH) did an interview with Vox Markets in March which explained their position; (it has it's own section so you dont have to watch the whole thing)
www.youtube.com/watch?v=UFIB3n...
It seems that they really take a risk averse position and consider the impacts to the business on the energy cost (at least for one year), but even so, I can't imagine that they can mitigate the increase completely. I dont hold any more, I just saw the risk as being too high.
Enjoyed the podcast from last week ! I like to hear your opinions on the various global factors - to which I swing between strongly agreeing and completely disagreeing, but I appreciate the spirit with which you approach these topics.
Shoe Zone buyback significant and has caused a 20% increase price (this am) in price. And sensibly commercially thought out with a cap on purchase price of £2.00 . But may cause a short term overall cap on price (I hold)