Small Cap Value Report (Fri 23 Mar 2018) - Macro Thoughts, RBN, CNKS, BOOT, SPRP, QXT

Friday, Mar 23 2018 by

Good morning!

There was some discussion in the comment thread last night about the effect of reader suggestions on the SCVR, which I haven't had a chance to respond to yet.

If you do have any comments or suggestions for today, please fire away.

On the macro front, the FTSE-100 closed lower by 1.2% at 6953 yesterday, returning to December 2016 levels, and is set to open lower again today.

Small-caps on my radar today are:

There have also been announcements for the big-caps Next (LON:NXT) (which I hold) and £AV.A.


Macro Thoughts: The market is worried about trade wars after Trump announced $60 billion of tariffs on Chinese steel and aluminium. Do we care about this story at the SCVR? For now, I don't think so. The success or failure of individual companies is still more interesting.

Something I do care about is the level of the FTSE, so to the extent that jitters send the FTSE lower, I do take notice.

Personally, I've been keeping track of the FTSE All-Share Total Return Index against my personal portfolio since 2011.

I also watch the FTSE-100 Index as a measure of how invested I should be. Ideally, I will increase my equity weighting as the index falls. And if the falls become extreme, I would even be willing to take some leveraged long positions in stocks.

Stockopedia has helpfully saved the lines I drew on the FTSE-100 chart the last time I looked at it, during the big fall in early February:


The 7100 level provided support for a while, but is out of the picture now and from a technical point of view we look headed towards the 6600 mark.

If we drift deeper into the 2016 range, we would be headed to 5900 and then the 5500 low:


These are the fundamental stats for the FTSE-100, according to Stocko:


These metrics look fairly…

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All my own views. I am not regulated by the FSA. No advice.

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Robinson plc is a United Kingdom-based company engaged in the business of manufacturing plastic and paperboard packaging. The Company provides packaging solutions that specialize in injection, blow and stretch-blow molded plastic, and rigid paperboard. It serves the food, drink, toiletries, cosmetic and household markets. It operates through plastic and paperboard packaging segment. The Company has over five manufacturing facilities, which include Kirkby facility, Stanton Hill facility, Lodz facility, Chesterfield facility and Madrox facility. Its subsidiaries include Robinson (Overseas) Limited, Robinson Paperbox Packaging Limited, Robinson Plastic Packaging Limited, Robinson Plastic Packaging (Stanton Hill) Limited, Robinson Packaging Polska Sp. z o.o., Walton Mill (Chesterfield) Limited, Griffin Estates (Chesterfield) Limited, Robinson Industrial Properties Limited, Walton Estates (Chesterfield) Limited, Madrox Spolka Akcyjna and Walton Mill (Chesterfield) Limited. more »

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Cenkos Securities plc (Cenkos) is a United Kingdom-based independent institutional securities company. The Company's principal activity is institutional stockbroking. Cenkos provides corporate finance, corporate broking, research and execution securities services to small and mid-cap growth companies, and other companies, across a range of industry sectors, as well as investment funds. The Company offers its clients access to equity finance at various stages of their development. The Company's activities also include institutional equities and market making. It provides technical advice on all forms of corporate transactions, including initial public offerings (IPOs), fundraisings, mergers and acquisitions, disposals, restructurings and tender offers. The Company's subsidiaries include Cenkos Nominee UK Limited, Cenkos Securities (Trustees) Limited and Cenkos Securities Asia Pte Limited. more »

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Henry Boot PLC is a land development, property investment and development, and construction company. The Company sources and acquires land; promotes planning consents; acquires, develops, manages or sells investment properties and service constructors with plant; runs its Private Finance Initiative (PFI) project, and refurbishes and constructs buildings. Its segments include Property Investment and Development, which includes property investment and development and trading activities; Land Development, which includes land management, development and trading activities, and Construction, which includes its PFI company, plant hire and regeneration activities. Its subsidiaries include Hallam Land Management Limited, Henry Boot Developments Limited, Stonebridge Projects Limited, Henry Boot Construction Limited, Banner Plant Limited and Road Link (A69) Limited. more »

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  Is LON:RBN fundamentally strong or weak? Find out More »

37 Comments on this Article show/hide all

davidjhill 23rd Mar '18 18 of 37

In reply to post #344063

I am also long Sprue Aegis (LON:SPRP) and found the statement a bit bizarre. It strikes me that BRK are being they don't want to buy back the stock and believe it is cheaper to simply claim breach of agreement timed conveniently a week before the agreement finishes anyway, leave Sprue with the stock and walk away. Is this material - well we don't know!

Does strike me (ironically for a safety company) that they are accident prone, which is irritating me since I bought them for the opposite reason. I suspect the fall is well overdone given the horrid market conditions but an unquantified write down (which is presumably where the accounts delay comes in) is unhelpful.

Aside from being a management distraction and a one off hit to the cash pile I can't see that it has any real trading impact since they will have prepared for the termination in 7 days anyway and will now be in transition to the new arrangements.

What was noticeable in the announcement was that whilst strong language was used (ie breach not remediable etc.) there didn't appear to be a legal threat, though one can't rule that out. It sounded more like they were walking away and setting out their defence should Sprue try to take action. I would expect Sprue Aegis (LON:SPRP) to have insurance against lawsuits anyway.

hmmm.....a bit more colour would be useful

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pippasfan 23rd Mar '18 19 of 37

What a brilliant piece of research on the markets via trade war. I do wish certain CEO’s would speak and write as clearly.Thank you Graham.

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ed_miller 23rd Mar '18 20 of 37

In reply to post #344098

Re Sprue Aegis (LON:SPRP) quite possibly that's the scenario David, yes. I certainly hope so, though the lack of an immediate denial from Sprue Aegis (LON:SPRP) struck me as unusual as well as disappointing. Yes, if BRK's claim is without merit, the plaintiff will be Sprue Aegis (LON:SPRP) of course.

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davidjhill 23rd Mar '18 21 of 37

In reply to post #344113

yes, of course the key problem is we don't have enough damn information from the company!!!
I wouldn't necessarily expect them to refute until they've taken legal advice, and of course if they are playing by the market disclosure rules properly they have to report immediately the issue becomes known and not when it is quantified/understood, so let's see what they say next week.

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peterthegreat 23rd Mar '18 22 of 37

In reply to post #344038

Re: Sprue Aegis. Comment from threeputt and others.
I used to be a holder of Sprue Aegis shares but sold them over a year ago because it seems to me that the company is not in control of its own destiny and is vulnerable to unfavourable decisions taken by its Chinese supplier.

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browner 23rd Mar '18 23 of 37

In reply to post #344038

@threeputt. Small point of order. It was Newell that initiated the termination of the BRK distribution agreement, not Sprue, even if it will have most likely been welcomed by Sprue who seemed to have agreements with alternative suppliers ready to go upon the intial announcement.

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Graham Neary 23rd Mar '18 24 of 37

In reply to post #343878

Hi matylda, thanks for your suggestions (and all your output on this site!). Always look forward to reading your comments.

I've done Cenkos Securities (LON:CNKS) and am on Henry Boot (LON:BOOT) now.


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browner 23rd Mar '18 25 of 37

In reply to post #344043

@kenmitchell - Agree with much of what you say re #CNKS. On the dividend cut, the full year has of course increased by 50% from 6.0p to 9.0p, even if the 4.50p final dividend is slightly less than the 5.00p paid lasy year. Like yourself I have been mullng over possible reasons for the full year dividend not meeting the 11.0p consensus forecast. The company will of course been aware of this when setting the final payment. I wonder if it might signal the relatively new CEO taking a slightly more conservative approach to dividend payments than his predecessor? Or are they retaining some cash with an M&A target in mind? Or are they merely anticipating tougher times ahead? It would seem that Q1 2018 figures in terms of funds raised for clients will struggle to match those achieved in Q1 2017.

As an aside, I note they also closed their Singapore office in Nov 2017 & have reduced their headcount in Edinburgh.

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browner 23rd Mar '18 26 of 37

Hi Graham. Thanks for your write-up on Cenkos. One small query: in respect of dividends, how do you get "the yield is currently about 5%"? Full year dividend for FY17 will be 9.0p (interim 4.50p; final 4.50p) which by my calculations is 8.0% based on the current 112p offer price?

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sharmvr 23rd Mar '18 27 of 37

Hi Graham,

Big thanks for all the various analysis you do for us.
On the macro views - I tend to agree - and waiting for a real panic driven crash before putting new money to work.

I specifically wanted to express my gratitude for the report from 16th March - personally I think the PRA ought to make your analysis on CEDEX mandatory reading!

I got a cold call from what I would describe as a boiler room - telling me about low volatility crypto strategies (4% max drawdown with 3% per month returns) - I directed him to your report from 16th March and the insights to explain why I am avoiding the asset class.

Many thanks Graham.


Ps for those interested the company that called me was CryptoBit - maybe they are totally legit and I am unnecessarily cynical.

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matylda 23rd Mar '18 28 of 37

In reply to post #344173


Thanks for the kind words and of course the analysis - Which I am quite sure I look forward to reading more so than you do mine :)

Have a great one.

Blog: Briefed Up
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Graham Neary 23rd Mar '18 29 of 37

In reply to post #344198

Hi sharmvr, you're welcome! I appreciate your comments here.

Yes, the crypto-space is full of sharks and con artists at the moment. I don't blame everyone involved and I know that there are plenty of very smart and honest people working in it, but economically speaking it is primarily a wealth transfer mechanism from those with a little bit less sophistication to those with a little bit more.

In other words, it's an extreme version of the financial system as a whole, and with negligible underlying value creation.

Just my €0.02.

All the best


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Graham Neary 23rd Mar '18 30 of 37

In reply to post #344188

Hi browner, thanks for pulling me up on the Cenkos Securities (LON:CNKS) dividends. I simply used the figure on the StockReport, which I think in this case is the trailing twelve month yield (ttm). I'll see if I can update the article to put your numbers in. Cheers

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Catstycam 23rd Mar '18 31 of 37

Hi Graham

I am trying to improve my investment performance, which until these last couple of months has been pretty decent but has taken a bit of a kicking lately; probably like many. I find Stockopedia excellent, constantly finding other avenues of information hidden away to further my research. Ideally I am looking for stocks with high rankings but also "Super Stocks". Is there any way I can save time and find all the Super Stocks grouped together without dipping into many shares to see whether or not they qualify?. I would use this as an additional tool for my research and wouldn't rely on it totally.

Many thanks for your hard work and Pauls'.



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Nick Ray 23rd Mar '18 32 of 37

In reply to post #344248

Is there any way I can save time and find all the Super Stocks grouped together without dipping into many shares to see whether or not they qualify?

Go here:

Then click on "Style" and then click on "Super stocks" and there are all the super stocks in one place.

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Catstycam 23rd Mar '18 33 of 37

In reply to post #344263

Many thanks Nick. I thought there must be a way. Much appreciated.



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Andrew L 23rd Mar '18 34 of 37

Not sure I agree on Cenkos Securities (LON:CNKS). They made a serious of terrible mistakes with regard to Quindell if I recall correctly. Also I believe they floated the AA (LON:AA.) I think I read some Cenkos note that was very bullish on AA (LON:AA.) It is surprising to me that this poor track record hasn't hit them. It does look cheap but the companies it lists appear to be poor. Comptoir (LON:COM) is another one that is ending badly.

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ed_miller 24th Mar '18 35 of 37

Re Cenkos Securities (LON:CNKS) How is it they were not barred from being an AIM Nominated Advisor ('NOMAD') after sponsoring Quindell? How is it that Rob Terry and his friends (known fraudsters) can still, after all this time, be doing what they do a third time around, with Quob Park Estate? Why does the City of London and the London Stock Exchange etc not care about serious fraud (serious crime), its victims (the victims of con-artists), or even the City's own reputation? Rhetorical questions really, but it's truly shocking for those of us that came to investment from professions with high standards of integrity to witness how utterly devoid of ethics the City really is; how very highly paid financial professionals care only for themselves, are happy to get rich very probably understanding they are sponsoring fraudsters (and if not, through gross negligence) and then facing no serious sanction. And why do the fraudsters, after all this time, still have the proceeds of their crimes? And their liberty?

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Lion Tamer 25th Mar '18 36 of 37

Hi Graham

Re: Discussion on comments to the column.

I'm the guilty party who started yesterday's discussion on this topic in the comments.

My own plan is to choose some stocks myself each day (the ones I'm most interested in), and take requests for a few others. Your requests have been a rich source of investment ideas for me, and I welcome them.

Thanks for giving this thought. Hopefully taking "requests for a few others" will work. Either way I enjoy the main articles and really appreciate all your hard work, and as far as I'm concerned, having voiced my input, what you say goes!

Many thanks.

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fredericktug 26th Mar '18 37 of 37

Re Sprue Aegis (LON:SPRP), i wonder if this could be a bizarre attempt to drive down the valuation, and then bid - remember BRK's parent tried and failed in a bid that became hostile a while back. Highly opportunistic at the time, the acceptances came to virtually nothing, but it did galvanise the company, which moved from OFEX to AIM, prompting a major revaluation of the company and it's prospects. I believe the 29% stake is still held by BRK's parent.

If they have largely fallen out, then there is an issue of a potentially large overhand. It's all a bit baffling - and Graham rightly asks why a 29% shareholder would behave so aggressively when doing so is potentially loose/loose?

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About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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