Small Cap Value Report (Fri 28 April 2023) - NUM, TUNE, EXR, CGS, WAND, GETB, ZOO, CTA, TPX, MER

28th Apr '23 by Paul Scott

54 comments 8457 reads

Good morning from just Paul today!

Today's report is now finished, at 13:20

Tune in for tomorrow's next thrilling podcast instalment!

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.

A crazily long to do list today, but I've already done 2, just need to type up my notes - I'll focus on quick comments, to get through as many as I can -

Update at 11:38 - good progress so far, lots has turned blue, on the to do! I'll have to leave some of the smaller things, and hope to get up 2 or 3 more sections on the larger market caps below.

Good, most of today's list got done, please remember we can rarely cover everything. I've deleted a couple of micro caps from the list that don't look very interesting.

Quick comments:

Numis (LON:NUM) - recommended cash bid at 350p (incl 11p divis) - Paul - GREEN

Checking our archive here, Graham has reported positively on this investment bank/broker, marking it GREEN on 3 April, 7 Feb, and 8 Dec. Graham pointed out the short term headwinds from the weak IPO market, but good recovery potential, strong asset backing, and decent yield from Numis shares.

It’s surprising to me that Deutsche Bank is doing this £410m cash bid, given it has widely publicised problems of its own.

This is a recommended…

Unlock with Email

Unlock with Google

Already have an account?
Login here

FREng

28th Apr '23

Sutardja has made a remarkable series of large investments in Alphawave IP (LON:AWE) .

Monty Carlo

There are indeed, but recognisable names are hard to come by - there are alliances with the likes of Intel's foundry, and comments like "10 of the top 20 semiconductor...." but it is difficult to find blue chip names in the order book (non-disclosure may be industry standard, but doesn't chnage matters), or industry players who are willing to give a plublic thumbs-up to their product offering. Makes it very difficult to analyse their strategic position and value-added?

Paul Scott

yes sorry, I spotted that a moment ago & corrected it! Apologies for any confusion.

davidjhill

Yes - he has, and for that reason I'd argue the likelihood of fraud, which seems to persistently be mooted for some unknown reason, is actually pretty low. You don't own as many shares in a company and buy that many more if you know the walls will come crashing down. I think it is clear he believes in the long term business at least.

Yes but you could say that about many in the semi conductor industry, it is highly secretive in that respect. The problem is that with Alphawave IP (LON:AWE) people are looking for reasons to validate the short attack, which was highly effective but in reality based on very little. So until perception changes they can't get away from that and the only thing that will change perception is free cashflow and EPS numbers. In reality that's next years numbers if the business case is valid. So in my opinion at least, I see little change in the range trade until then. It is not helped by the absurdly low liquidity either.

Btw if you want to analyse their strategic position the Capital Markets day presentations on their website from a few months back are helpful.

illiswilgig

James Fisher And Sons (LON:FSJ) FY 22 Results (I hold). No more big surprises. always good. Results a little under expectations but broadly in line.

I agree that the turnaround is now well underway. It's the case that the rot sets in before things go south. And also the case that that a lot of the heavy lifting to turn things around has to happen before it shows in the results. Management is rightly being cautious, but in amongst all the detail on the hard work underway - the chairman commented:

'the business has performed well during the first quarter of 2023 with revenue and profit above our internal Budget and well ahead of the prior year.'

Too early for that to be reflected in any forecasts yet, but the potential for an upgrade is there already?

A recent press release on the Fisher Website - Subtech has signed a second vessel to longterm charter this season. A very significant commitment to increased capacity in the North Sea.

The markets in which Fisher operates are now growing strongly again and likely to continue while at the same time the energy price has fallen sharply from its peak, reduced freight and logistics costs, supply constraints and inflation falling are all likely to contribute to a tailwind for future results.

Net debt was stable at the balance sheet date - but since then £20m has been received for the sale of Swordfish and a futher £2.4m agreed for the sale of Mersey Fisher together with delayed receipts at JFD. There is always an increase in funding needed during H1 as the off-shore season gets underway - with current performance continued through a successful season there is potential for debt to start falling fast towards the end of the year.

The shareprice remains very depressed over understandable debt concerns, but revenue remains high and the company has avoided sellings its crown jewels or increasing the share-count. Not without risk still but the prospect for 3x or 4x multiple and more in the longer term is starting to emerge?

Finally starting to look good to me,

cheers

Mark

The Ox 2906

Surely it’s definitely Community Chest!

Lucky dip

interesting. thank you

bohenie

Well - As Paul said - I just don't understand how this can be put down to just one rogue employee - surely the CEO an CFO would have honed in on this - not just to put out the press releases but also to congratulate the guy for his efforts - or not.... And where are the Fraud Squad ? Sounds to me far worse than Pat Val and even rogue trader Nick Leeson

Wol

Thanks for the list. And yes this route is extra complicated and excludes some retail investors for no good reason

Stockade

...is it possible to introduce a "subject" field into this, please?

portugull

On the subject of WANdisco (LON:WAND) I just cannot believe the story.

The Fraud Squad need to be all over this case. When it is really hard to believe it is often fraud and I think this case has a long way to go. Lets hope the truth will out.

Yes, been there & done that.

As someone who used to meet Acorn & ARM management regularly I've got some familiarity with the industry.

It's not what Alphawave say about themselves that I'm primarily interested in, it is what competitors and customers say about them - and on that front it really is difficult to uncover much (blank looks and shrugs, often).

It is quite a niche area, and quite difficult to find perspectives from sources other than the company itself.

It's an interesting situation, but not an easy proposition to get to grips with from outside the industry.

Bouden54

Agree with all that - fund managers give a geared play on equity markets. I'd just note that Cenkos and Finncap are brokers not fund managers so quite different business models, although I suppose they would also benefit from a rise in markets.

On Polar, the key thing is to look at their main global technology fund (which I think makes up around a third of AUM so will always be a key driver) - performance is nothing special over 1,3 or 5y - mostly 3rd quartile over these periods and well behind the ishares tech ETF. If we do see a further rebound in tech stocks then not sure the Polar fund will be the one to gather the inflows. For that reason I'm staying on the sidelines with that one too.

I don't disagree that investors appear to be finding it very hard to understand & validate the Alphawave IP (LON:AWE) business and that's why I don't think it goes anywhere until next year (assuming they continue in-line with their business plan).

All I can say is that the business is now large enough, having spent the IPO proceeds on acquisitions, that given the number of employees if the revenues aren't genuine then the business would be bust in an instant as the cost base would be too heavy. Add to that the very heavy founder share buys and anecdotally that adds up to guiding me towards the story being one of genuine increasing revenues and profitability.

If that is indeed the case and the $350m revenue for this year goes to $500m next year (40% growth rate) and with corresponding margin increase to 40% (per CFO in capital markets day) then this share will appear very cheap indeed. Given the licence model it will probably trade on 25-30* so share price could happily treble or more.

Am I buying now - probably not because investors don't like it. Trades up to 120p and back again. If it dips a bit I might well buy some, wait for the rise towards the top of the channel and sell and then repeat over the next few months. Otherwise I'll wait till next year

Silver Moon

29th Apr '23

Edit: I couldn't understand how three quarters of the CEO's 2 million-pound remuneration comes from performance, perhaps Deutsche Bank sees this as one reason for the very low share price. Get rid of this and the company might flourish? Anyway, I have sold my share.

Hey-ho Silver

Samsgrandad

The fact that a lot of well heeled investors were supporting Wand time and again with fresh money is an example of a lesson the market taught me in the dot con boom.

There is more money looking for a good investment than good investments looking for more money.

Another little observation of life while working behind a bar in my twenties and watching people winning a jackpot on the bandits, was that they invariably put it all back in the machine apart from a round of drinks. Winners are playing with someone else's money.

Snazzytime

Alphawave IP (LON:AWE)

Add to that the very heavy founder share buys

Needs to be put into context with the approx £300m the 3 founders and Mr Sutardja collectively trousered at the admission to AIM.

JSLDUK

1st May '23

Hostmore (LON:MORE) very late results on Friday afternoon they look better than expected.

Small Cap Value Report (Fri 28 April 2023) - NUM, TUNE, EXR, CGS, WAND, GETB, ZOO, CTA, TPX, MER

Quick comments:

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

54 comments

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

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