Small Cap Value Report (Fri 20 May 2022) - EYE, SAA, WRKS, WIN

20th May '22 by Paul Scott

70 comments 8071 reads

Good morning! Friday, and it's Paul & Jack here to round off the week. Looking at the futures, it looks like today will be a bounce-back day, which is always nice for a Friday - less worrying over the weekend. Today's report is now finished, have a lovely weekend!

In case you missed it, lots of people were asking me to review Shoe Zone (LON:SHOE) results, so I did in yesterday's report here. It looks potentially very good, although I'm a bit wary of the household spending squeeze, which is impacting lower income households the most (due to energy & food being a higher % of their outgoings).

Agenda -

Eagle Eye Solutions (LON:EYE) - a strong trading update, with FY 6/2022 profit (well, EBITDA anyway!) guidance raised 10%. It's wildly expensive on a PER basis, so not for value investors. However, it seems clear that there's something special with EYE's product, given it is building recurring revenues with major retailers around the world. So it appeals to my more adventurous investing side.

M&C Saatchi (LON:SAA) - a surprise twist to the story here, where Vin Murria has been trying to force through a hostile takeover bid - not something you expect from one of SAA's own Directors! Today we're told that a better deal has been agreed with £NFC which looks a good outcome for SAA shareholders. There could be an 11% profit on arbitraging this deal, if I've got my figures right, at 220p per SAA share in the open market.

Works co uk (LON:WRKS) - a superficially positive trading update, but it's not as convincing once you dig into the detail. Tiny market cap, so could be worth a punt, but of the smaller retailers, I think SHOE wipes the floor with this (I hold neither).

Wincanton (LON:WIN) - a thumbs up from me, despite my dislike of its weak balance sheet. This logistics business is performing well, and open book contracts mean that it can pass on most increased costs to customers, reducing risk of a profit warning. Good order book. Low PER mainly due to large pension deficit recovery cash outflows, but that could be a receding issue now, possibly? I think this is a good share to own long-term, and with not much short-term risk apparent either.

Explanatory…

Unlock with Email

Unlock with Google

Already have an account?
Login here

ridavies

20th May '22

I am not currently a shareholder, waiting for a suitable entry point, if one ever comes! As a long time Saga (LON:SAGA) watcher and regular user - for our needs in the upper age range, their what I might call 'sedimentary' holiday offerings - flight & hotel; flight and tour; sometimes flight, hotels and boat (eg Adriatic) - are superb value and ver7 satisfactory quality.

We have looked at their cruises on the new liners, and some months ago tried to get a good stateroom on their Christmas 22 cruise to the Canaries. No deal; full up,

Interestingly we were offered a range of staterooms yesterday after being told we were on the end of a long waiting list at the time we enquired. Symptomatic of a significant level of cancellations in the economic circumstances? Who knows?

In the meantime, even if there were rook on the liner, we reconsidered the prospect of spending a significant time at sea in December, much of it in the Bay of Biscay, and decided to fly to Madeira instead - another sedentary holiday, with Saga of course. Looking forward to it, though taking thermals, especially after last holiday in Lanzarote in Feb 2019 when they would have been most welcome!

Boon

Bloomberg app shows the Futures pricing for indexes (FTSE, S&P500, Nasdaq, etc). Think it will show for even Free users.

JimMcLad

Ridavies, grumpy5 et al.

Sorry, just noticed I omitted the link to the RCS which gives details of the study and answers a few points.

https://www.stockopedia.com/share-prices/angle-LON:AGL/news/rcs-angle-plc-prostate-cancer-uk-funds-new-study-using-parsortix-urn:newsml:reuters.com:20220520:nRST1779Ma

The CEO has been as open as he can be. If you look at the recording of the prelims of 28 April on the Angle (LON:AGL) website he mapped out the way forward and was questioned by analysts. Doubt you’d get any more at Mello.

From memory the previous UK based work on Prostate cancer was with Barts Cancer Institute (Queen Mary University of London). who are involved in the new trial. As it will be following patients in 'real time' the trial could last a few years though could be shortened if very positive results results are shown early.

Now wrestling with what appears to be a Stocko fault – my portfolios were entirely GREEN this morning. I think they’ll have it fixed soon.

Re Angle (LON:AGL), thanks as ever Jim. From the detailed reference which I have picked up from another source, I found this to be a particularly telling comment from the guy leading the research at Barts (which I remember now was where I believe the original work was done some years ago, Right treatment for individuals, best results for patients, less cost to he NHS, so looking forward to the results - and to the FDA, please give the green light so that more institutions throughout the world can apply this appropriate, life-changing, process to cancer treatment - whether it be breast cancer (which the FDA is now considering specifically) prostate, and other types of cancer where Angle (LON:AGL) and Parsor nd Professor of Molecular Oncology
at Barts Cancer Institute, Queen Mary University of London, commented:

"If our hypothesis is correct, we hope that this blood test will become the
future standard of care for these patients. Patients with localised prostate
cancer will be treated more efficiently and in a more personalised way, rather
than surgically removing the prostate and just waiting to see what happens.
Doctors will have more information about whether the cancer has really spread
or not, based on this test meaning patients won't be over or under-treated."

and Dr Hayley Luxton, Research Impact Manager at Prostate Cancer UK, commented:

"We are delighted to support this trial which has the potential to inform
treatment decisions and improve outcomes for men living with prostate cancer.
Prostate cancer is the most common cancer in men, killing 11,500 people each
year in the UK. Being able to identify aggressive cancer beforehand will help
to ensure that men are receiving the right treatment at the right time."

Paul Scott

Thanks ridavies!

Incidentally, I follow the RNSs from Carnival (LON:CCL) and they recently sold out their new ship in record time. There's little doubt that affluent pensioners have huge pent-up demand for cruises, and the means to pay for it.

For that reason, I'm taking a very positive 2-year view of SAGA. Cruise should do well this year, but tour less so - that seems to be needing more time to rebuild.

Some headwinds in the insurance division, but again that's all known about.

I think it's just a question of being patient, with lots of bombed out shares.

Generally speaking, aAs long as the balance sheet is OK, then I'm trying to ignore the share price altogether. I'm not an owner of this year's earnings. as a shareholder in many companies, I own all future earnings. This makes a downturn (likely in many cases) this year a blip, rather than a permanent loss of shareholder value.

Regards, Paul.

Hey "Norfolk", just the ticket, a Friday afternoon giggle!

I think you out-punned even Austin Powers there, outstanding effort! :-)

Best wishes, Paul.

TheFloatingInvestor

K3 Capital (LON:K3C) today (I hold) just about sums the whole pantomime up..lol :-)

Or did i miss an RNS?

DAZZA64

Thanks for this Paul, I think Richard Goodwin has summed up AEP well about the main issue of one individual owning 51% and the miserable dividend. I do hold AEP and given the general outlook for palm oil and the barriers for entry into all cooking oils, AEP are likely to hold there current full market cap in cash within the next 15 months unless the Indonesian government throw a spanner in the works. In terms of ESG then AEP are not ripping up forests to grow palm oil (although this will have happened many decades ago) and palm oil production is very efficient in terms of land used, when compared to alternative cooking oils.

It sounds like central London hasn't gotten the message. Every restaurant I've been to last week and this week has been packed, with almost every table occupied.

Hence my caveat that it depends on the competitive environment :)

I know several European markets where there are just two or three dominant supermarkets. Those would be the ones to invest in. However, UK, USA, and Germany.... probably not!

Wimbledonsprinter

Paul thanks for your write up on Eagle Eye Solutions (LON:EYE) - although I normally am put off by sky high P/Es, I do hold Eagle Eye (and have been buying over the last few weeks).

It is also worth pointing out one negative today, in that founder and CTO Steve Rothwell exercised low-cost options and sold the resulting >£1m of stock today at 455p. While any director sale is a negative - it should be pointed out that Rothwell has been an intermittent seller of shares in the past, when other directors have been buyers. Also despite being the founder of the company, Rothwell is not the public face of the company, with CEO Tim Mason and CFO Lucy Sharman-Monday facing investors. The key director shareholders are long-standing NEDs, William Currie (13%) and Sir Terry Leahy (9%), who was Tim Mason's old boss at Tesco.

timarr

Re Anglo-Eastern Plantations (LON:AEP) - sorry, we tend not to cover overseas companies that list in the UK. The reason being, to quote Mark Slater, "There's usually something wrong with them!" Note usually, so I'm not saying anything specific about AEP.

Looking at its StockReport, I see AEP has been listed in the UK for a long time, which is a key positive (frauds don't tend to last more than 5 years or so).

Anglo-Eastern Plantations (LON:AEP) has been listed since 1985 so if it's a scam it's a slow burner :-)

The history is interesting: https://www.angloeastern.co.uk... Anyway, the elderly Madam Lim Siew Kim has a controlling interest but no apparent involvement in running the business which goes its own sweet way. And the moment the business is very sweet indeed because crude palm oil prices have rocketed due to the Ukraine conflict restricting the supply of sunflower oil.

AEP had $218 million on the balance sheet at the end of the last financial year. Despite the various issues, including the temporary ban on exports by the Indonesian government which has just been lifted and an increase in taxes, it's hard to see them making less than the $137 million they made last year.

For reference crude palm oil prices were averaging around $850 per ton last year, this year they look like being around $1,300 (they've been a lot higher). So at the current rate cash will soon exceed the market cap - or the market cap will be a lot higher.

It won't last, it never does, but in the meantime it looks like a decent place to keep some money as a proxy for agricultural commodities.

Revs8

Recent strength might be a read across from Begbies Traynor (LON:BEG) in my opinion.

I'm splitting my time between Surrey and West Cornwall at the moment.

In Surrey the restaurants are packed, the bars are spilling out onto the street, the footfall through shopping areas is significant and all of the supermarkets are busy (although as noted previously, Lidl seems to be enjoying a boom).

In West Cornwall it's dead. The pubs are empty, the restaurants are empty, there's very little footfall in the shopping areas. Lidl is reasonably busy, but not overly so, the other supermarkets are less busy. It was unbelievably quiet at Easter. My friends and relatives down there are restricting their spend on everything, including petrol. No one is going out, it's all pizzas and cheap wine at home.

We need to be careful not to draw too many conclusions about the general state of affairs, especially if we live in affluent areas. As the ONS data shows, cost increases are biting.

A quick look at various Saga (LON:SAGA) cruises this summer shows good booking rates already, albeit nothing sold out of 90%+, and I do see they are still running discounts and promos on some summer cruises, which they won't if demand was exceptionally strong.

Will be very interesting to see, in about half a year, the profitability from their cruise operations. As no figures available from pre-covid to extrapolate from. However, even then we won't get the full potential. Increased fuel costs, staff wages, food costs... margins will be depressed. On the other hand, I'm hoping they're selling more cruises at sticker price rather than discounting.

Insurance will keep throwing off cash. And with QT happening, hopefully less money going into the sector and driving down premiums as has been the case.

(I hold in the Boon Fund)

Helvellyn

No RNS

But I would guess one of the reasons for recent weakness and very recent strength is a seller clearing .

I experienced similar in the Lake District for the May Bank Holiday.

My take is that people dont want to Staycation anymore , they want to go abroad .

sharw

In another place the rise of K3 Capital (LON:K3C)has been attributed to this:

https://www.linkedin.com/feed/...

Caper4

8th Aug '22

wonder what Richard Crow thinks of the Works co uk (LON:WRKS) trading update Paul, as he was certainly very bullish in the podcast you did with him , released on the 22nd July !! He has such a good track record, that I am inclined to think this maybe a good buying opportunity. Like Saga (LON:SAGA) I think it’s a case of just being patient with bombed out shares !!

ignore as posted on wrong thread !

Small Cap Value Report (Fri 20 May 2022) - EYE, SAA, WRKS, WIN

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

70 comments

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

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