Small Cap Value Report (Fri 30 July 2021) - TUNG, PDG, LOOK, GETB, EPWN

30th Jul '21 by Paul Scott

94 comments 10957 reads

Good morning, it's just Paul here today, with the SCVR for Friday.

Timing - I'm still plugging away, so intend finishing about 4pm today. Update at 15:39 - all done for today!

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to cover 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 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) - don't blame us if you buy something that doesn't work out. 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.

Agenda -

Paul's Section:

Tungsten (LON:TUNG) (I hold) - I review in line results for FY 04/2021. What interests me here is that cash burn has been almost eliminated, and this software company has big name clients, and 93% repeating revenues. Cheap compared with other software companies, and could attract a takeover bid in my view.

Pendragon (LON:PDG) - another car dealer chain reporting a trading bonanza. Although it's a one-off benefit, from a spike upwards in used car prices, which is bound to reverse at some point. Mentions similar uncertainties for H2 as Vertu did yesterday. The whole sector looks very cheap at the moment, even allowing for profits falling when this current bonanza ends.

Lookers (LON:LOOK) - to complete the hat-trick of strong trading updates from car dealers this week.

Getbusy (LON:GETB) - a quick look at interim results from this small, niche software company. It stays on my watchlist as potentially interesting, but there's nothing in the figures or commentary that gets my pulse racing.

Epwin (LON:EPWN) - a positive trading update from Weds. Looks good!

Tungsten (LON:TUNG)

(I hold)

38p (last night’s close) - mkt cap £48m

…

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Bluesky Ventura

30th Jul '21

The Forum belongs to subscribers so I think you discuss any stock you wish to.

BSV

Andyin

The clue is in the name, SCVR!

Roger Baron

Augean (LON:AUG) Recommended offer at close of play. Min £2.80. I'm afraid I can't remember who brought this to my attention, but if you are reading this, thank you very much for a 6 bagger!

gus 1065

Must confess to being slightly disappointed by the Augean (LON:AUG) recommended bid at 280p plus a tax claim rebate contingent note potentially worth up to another 20p per share. Felt there was a lot more upside in the company medium to long term and with a running dividend yield on my original investment price of over 5% I was happy to sit and wait. At 45% acceptances and with a board recommendation it looks to be a done deal unless another party (possibly a trade buyer) comes along and offers a minimum 7.5% premium over the Morgan Stanley offer. Still with the aborted Revolution Bars (LON:RBG) bid experience in mind, can’t be too greedy so have to be content with the bird in the hand.

Gus.

timarr

google can keep tabs on card income being booked by all businesses to a certain degree (this doesnt seem right from a privacy point of view IMHO - but pracicably spekaing they are working backover from non perosnalised data) they then sell this info onto hedge funds et al

Not just Google - the big card companies (Visa, etc) have a major slice of this data and there are other players in the payment ecosystem who have access as well. Remember Google only have a slice of online data, there are lots of other channels - in store, via app, via Apple etc - that they don't have.

But if you're a wealthy fund you can buy access to multiple sources, merge the data and get your elite university computer science graduates to run their algos to identify the next turn in the market. The idea that private investors can outsmart institutions with large companies is risible, to be honest.

Once a company gets on the major institutions' radars - over £1 billion, roughly - then you're fighting nuclear weapons with pitchforks. Private investors have two edges over institutions - the ability and willingness to invest in smaller companies and patience, lots and lots of patience ...

Michael Tee

Paul

Thanks for your comments on Epwin (LON:EPWN) which I flagged here earlier in the week.

I have a 1% position as a value/UK recovery /inflation play. Eroding the debt as trading improves would provide a nice extra bump to the figures. Additionally this a rather unloved stock by PIs which adds a little more if things go well.

Michael

Tonysaparito

What are you on about.. There are too many sensitive soles on here like you.. I read all that is written here and some of what is written are in my view GARBAGE.

I am not ramping but supporting a great British business, where the owners have skin in the game if you see that as ramping. Tough

Martin Verlaine

Read across on Augean bid for Gresham: House Strategic which holds 27% of its assets in the company. Outcome huge after recent wobble for the Trust Managers. No way could they exit this in the market given liquidity in the stock poor. Expect the price to rise strongly on Monday

Boon

+1 agreed.

On the surface, Boohoo (LON:BOO) is a no brainer. You can read through all the positive arguments for it. It is probably the most discussed share on Stocko, and also probably on many other investor forums. It was the top pick for the Stocko challenge I believe at the start of 2021.

Yet, with all that retail interest, and the "Buy" meter on Stocko never below 20% meaning PIs keep buying, the SP has persistently been drifting lower since Feb/Mar.

My finger has been hovering on the Buy button many times, but my investor-spidey-senses always tingle. Can't put my finger on it, but that sixth sense has served me well - I've held off investing in Boohoo so far.

There is usually no smoke without fire, and unfortunately there always seem to be smoke around Boohoo. Still not cheap enough yet for me, even if its trading at a "bargain" 20x, 25x PE.

I also had a look at Itv (LON:ITV) yesterday. It has gone onto my watchlist. Same as Martin says, they still get vast majority of profits from TV ad revenue, so having a view on that is critical.

Then there is ITV Studios. Growing fast, and wonder if potentially one of the big media streamers might make a play to buy it for its catalogue. The flip side, is if Netflix, Amazon Prime, etc decide to cut back their content budgets.

All the other stuff like Britbox is still too small IMO to see if they have potential.

I have set a buy target price myself which is quite a bit lower than the current share price.

Re. the read across from the confirmation of the Augean (LON:AUG) bid to its impact on the Gresham House Strategic (LON:GHS) share price, given the latest reported NAV of 1,749p per share was calculated on June 30th when the Augean share price was already at 290p there’s not much immediate upside from today’s bid confirmation as it stands. I agree it gives them a nice clean exit for their 5.8% holding in the company (roughly 6 million shares against an average daily traded volume of about 130,000 shares) but with Augean (LON:AUG) already in play I suspect a half decent broker would have been able to place the shares for them without too much of a discount. Accordingly much of the benefit from the takeover premium may well already be in the Gresham House Strategic (LON:GHS) price. I guess we’ll find out on Monday.

31st Jul '21

agreed

SubsCriber Voice Rally

Effortless Cool

Take care everyone, sensitive soles can be a symptom of type 2 diabetes.

https://www.thediabetescouncil...

peterg

Though if you read timarr's post on yesterday's Boohoo thread that appears not to the case. It looks like it's been retail investors who have been dropping out, and instis picking the shares up from them. Still a large proportion of retail investors in Boohoo (LON:BOO) though.

Rusty2

Stocko figures are not very accurate as they just count stocks on watchlists, does not mean subscribers are actually are buying/selling shares.

Retail investors can buy/sell much faster than institutions due to smaller amounts and quick decision making.

WarrantStar

Thanks for posting a very interesting link. But I firmly believe as follows:

Fund managers are unable to time the market because they are unable to trade at sufficient volume without creating large adverse share price movements. So they keep chanting the mantra that "It is time in the market that counts, not timing the market" This is because they want to continue to keep collecting fees from their customers without any nasty interruptions. However, it is possible for a skilled private investor to time the market because they are trading smaller volumes. To do this one needs to keep paying close attention to the markets, and be ready to sell everything in a hurry. It also leads to rather short term outlook. But it can be a very successful approach.

If you have a spare couple of hours this weekend (anyone else expecting to sit in a traffic jam on the A303 heading down to Cornwall?) you could do a lot worse than download Robbie Burns/the Naked Trader’s latest Freedom & Sunshine podcast for a listen. Entertaining chat (some of it shares related) and plenty of catchy tunes that will appeal to those of us of a certain age.

https://soundcloud.com/thenake...

dcon85

Cheers for the podcast tip, love the disclaimer at the start!

Shrubby

2nd Aug '21

The question here should be: where do i think this Company will be in 5 years time? Short term issues are short term issues, what makes them so attractive is long term travel.

Small Cap Value Report (Fri 30 July 2021) - TUNG, PDG, LOOK, GETB, EPWN

Tungsten (LON:TUNG)

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Paul Scott

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