Small Cap Value Report (Fri 26 May 2023) - ASC, MBH, XLM, KCT

26th May by Paul Scott

50 comments 5967 reads

Good morning from Paul only today, with it being Friday.

Today's report is now finished.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to review trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty. We are analysing the company fundamentals, not trying to predict market sentiment.

We stick to companies that have issued news on the day, with market caps up to about £700m. We avoid the smallest, and most speculative companies, and also avoid a few specialist sectors (e.g. natural resources, pharma/biotech).

A key assumption is that readers DYOR (do your own research), and make your own investment decisions. Reader comments are welcomed - please be civil, rational, and include the company name/ticker, otherwise people won't necessarily know what company you are referring to.

What does our colour-coding mean? Will it guarantee instant, easy riches? Sadly not! Share prices move up or down for many reasons, and can often detach from the company fundamentals. So we're not making any predictions about what share prices will do.

Green - means in our opinion, a company is well-financed (so low risk of dilution/insolvency), is trading well, and has a reasonably good outlook, with the shares reasonably priced.

Amber - means we don't have a strong view either way, and can see some positives, and some negatives. Often companies like this are good, but expensive.

Red - means we see significant, or serious problems, so anyone looking at the share needs to be aware of the high risk.

Quiet for news, and I have to finish a bit earlier today -

Quick Comments

XLMedia (LON:XLM)

Down 17% to 9.4p (£24m) - AGM TU - Paul - AMBER

This is a strange one. XLM makes money from directing people online to gambling companies’ websites. XLM says it continues to expect to trade in line with its (whatever those are) expectations for FY 12/2023. However, the shares have dropped 17%, from an already bombed out valuation compared with previous glories.

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Camtab

26th May

Kouremenous I don't think you have missed anything. Good business, smart management team, good margins and someone thinks they are worth 1925 a share. I continue to hold and have been adding because the story hasn't really changed.

kando02

Anybody know why Darktrace marked down today

peterthegreat

The Long Stop date related to the CMA investigation of the EMIS takeover is over a year away so I wonder if the two companies involved are playing a long game and hoping that there may be some changes in the manner in which the CMA views this deal byJune 2024 if, for example, the chair of the CMA changes. Perhaps this long timescale makes it difficult to predict what will happen so traders are sitting on the sidelines, hence the lack of share price response to the news that Emis and Optum appear to think that the deal could still go ahead?

Johnnycomelately

LONDON (Reuters) - Britain's departure from the European Union has accounted for about a third of the increase in food bills for households since 2019, equivalent to about 250 pounds ($316), researchers from the London School of Economics and other universities said.

Britain has been battling inflation for over a year, partly driven by its highest rate of food price growth since 1977, with food prices up more than 19% over the last year.

Although London and Brussels have an agreement allowing largely tariff-free trade in goods, barriers to exports and imports in the form of paperwork, known as non-tariff barriers, have caused delays and higher costs.

The Centre for Economic Performance (CEP) study compared price changes for food products imported from the European Union with prices of food from further afield.

Before Brexit these products had similar price trends but after Brexit, there was a relative increase for products more exposed to imports from the EU, it said, and that has continued into 2023.

The study found that between January 2022 and March 2023, the price of food products that were exposed to Brexit increased by approximately 3.5 percentage points more than those that were not.

When considering the impact on food prices since December 2019, just before Britain formally left the EU, they estimated the cost of Brexit to UK households at 6.95 billion pounds ($8.77 billion), or 250 pounds per household.

Between December 2019 and March 2023, it said UK food prices rose by almost 25 percentage points.

"Our analysis suggests that, in the absence of Brexit, this figure would be 8 percentage points (30%) lower," the CEP said.

Products with high non-tariff barriers, such as meat and cheese imported from the EU, saw price increases about 10 percentage points higher than similar products that were not exposed to Brexit since January 2021, when Britain's trade and cooperation (TCA) agreement with the EU started.

Last week Prime Minister Rishi Sunak's spokesperson said Britain's departure from the European Union had not been a failure, rebuffing criticism from prominent eurosceptic politicians about how Brexit had been implemented.

Overall British consumer price inflation hit a more-than 40-year high of 11.1% in October, according to official data. It had slowed to 8.7% in April.

Paul

Do you think the items in exceptional items in Boohoo's final results for end of year 2023 should have been put into exceptional items or elsewhere?

If elsewhere, then where and which items?

Anyone else have any thoughts on this?

Feta

ML negative note out I think

For Information - Boohoo's Exceptional items were £44.9m

The exceptional costs in these financial statements include: additional disruption costs associated with the installation of the automation in the Sheffield facility, restructuring costs and impairment of assets associated with the closure of a UK warehousing facility and at loss-making operations, set up costs associated with the opening of a warehousing facility in the USA, the reclassification to profit or loss of discontinued cash flow hedge contracts which has arisen due to the acceleration of the opening of the warehousing facility in the USA, and redundancy costs.

Additional exceptional costs associated with the opening of the warehousing facility in the USA are expected to be incurred in the next financial year.

Andy Sav

In July 2022, Ed wrote an article around the fact that a perfect stock doesn't exist (and produced a screen to prove it:

https://www.stockopedia.com/content/the-perfect-stock-does-not-exist-stop-searching-for-it-951719?order=createdAt&sort=desc&mode=threaded

https://www.stockopedia.com/screens/the-perfect-stock-does-not-exist-1321451?view=62e3c677c8e89

Interestingly, this screen now has one stock! Billington Holdings (LON:BILN) . Does anyone have a view on this one?

tom stokes

Don't see any bright side just ripping off shareholders.

Did hold, sold at big loss and would most definitely not return.

Tom

dereksp

I attended Mello and have taken initial positions in Velocity (VEL) Checkit (CKT)and Thruvision (THRU) I have holdings in CNIC who also presented. What I had not understood was that Michael, who has taken over from Ben as CEO, is the architect of moving into the markets side while Ben's expertise was in the domain side. I continue to hold CNIC. I have been in THRU previously and sold for CGT reasons. I am replying as I enjoy and appreciate your contributions here.

davidjhill

Thanks Derek that’s very kind. I do own Checkit (LON:CKT) which I also think is under appreciated, though not without some reason. Will take a look at the others as haven’t done any research on those.

Have a good long weekend

ridavies

Re Kromek (LON:KMK) no one has ever explained to me how, with such great products, sold into so many countries, they never make any money and their revenue is so small. Why are they on the stock market at all? It mystifies me.

Hello Harry, Re the sheik's comments, I think his final comment is wrong by several generations - too few!

cheeky_minnows

I dont know whether Quintessential Capital still has a short position, I was wondering how things would be going with Darktrace after Mike Lynch was escorted by US marshalls to prepare for his court case against HP.

TEIN

Maybe he no longer wants to be half a CEO?

Bank Of America brought out a note on Darktrace. See Research Tree for it.

Good point Tein !

Harry Hindsight

No insights on Billington Holdings (LON:BILN) - have no idea why structural steel would be in play at this time but the US also volatile with Steel Dynamics (NSQ:STLD) & Mueller Industries (NYQ:MLI) .

Weekly chart says maybe a cup and handle forming but inconclusive at this time. Traders have missed the boat and for mean revisionists then 340 looks good point to reconsider.

Julianh

27th May

Those really don’t sound like ‘exceptional items’ to me. A business of that size in such a dynamic market is going to bs opening things, shutting things, changing things around every year. It’s only exceptional if it doesn’t keep happening. If it keeps happening it is part of the business model and should be included in the p&l against which management report.

stpalm

30th May

Seems like they are deliberately rinsing it, depressing the shareprice to take it private on the cheap. Don't worry though they'll probably re-float it once everyone forgets!

Small Cap Value Report (Fri 26 May 2023) - ASC, MBH, XLM, KCT

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XLMedia (LON:XLM)

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Paul Scott

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