Small Cap Value Report (Fri 30 June 2023) - BOTB, GLE, COST, DPP, ANP, REC, LTHM, VARE

30th Jun '23 by Paul Scott

65 comments 7521 reads

Good morning from Paul, and happy half-year's eve! The card manufacturers are missing a trick not making cards for today, and half-year's day tomorrow!

Today's report is now finished. Podcasts tomorrow!

Half-year comments

This weekend I'm hoping to do a half year review of my 2023 watchlist ideas, which have done quite well in a lousy small caps market. Here's an overview -

Top 20 main value/GARP ideas - as of last night, 14 were up YTD, 6 down, average +6%, vs AIM All Share down 10% YTD, which is a creditable 16% out-performance. One takeover bid out of 20 shares, Best Of The Best (LON:BOTB), a 32% gain. I forgot to put Warpaint London (LON:W7L) on the list too, which is up 48% YTD, so if I'd remembered, the overall gain would have been higher.

Hence it does seem that value/GARP small caps have been a relatively safe haven in a difficult market so far this year. Although we could see it as more bumping along slightly above the bottom, given that 2022 was really bad for UK small caps. The recovery will happen, it always does, we just don't know when! Plus no doubt we'll see more upside from takeover bids, which help demonstrate that the market is cheap right now. This spreadsheet tracks performance with live prices.

"Runners up" - 12 more value/GARP ideas for 2023 - 7 up (not the drink!) and 5 down. Average is also +6%, also 16% out-performance against the AIM All Share index. Boosted nicely by the car dealers, with a + 56% gain on Lookers (LON:LOOK) (which I've banked in the market, due to deal risk worry), and also a nice +28% from VTU.

Cyclicals (Reach, Eurocell, and Headlam) are the 3 worst performers so far (Reach also got embroiled in renewed phone hacking legal action from Prince Harry). Here's the spreadsheet for this selection of 12 shares (same spreadsheet as above, but a different tab).

A lot of the above shares also pay divis, so the total return is higher than +6%.

How has my own, real world portfolio done? I got lucky with the 200% premium takeover bid for Seraphine in January, which was by far my largest position at the start of the year. So that's heavily skewed things into a large % gain YTD.…

Unlock with Email

Unlock with Google

Already have an account?
Login here

yiannos1

30th Jun '23

Yes but , 3.67p dividend means they have to match that in pension contributions.

I do not expect that high dividend. Perhaps 2p maximum.

jonno

How do you know when its reached the bottom?

Wolf of Small Street

Don't know if other have seen this but if you want a laugh at the expense of RBG Holdings (LON:RBGP) this is funny. Who would employ these absolute clowns to represent them.

https://www.rollonfriday.com/n...

Lucky dip

Housebuilders. I agree . All housebuilders are good value looking in 2-3 years time. A new element is the entry of the big boys into the rental market. Legal and General and Lloyds are acquiring a large parcel of housing stacks for rental. This is positive for the market. The housing market relative to earning is still high and I expect it to adjust (if inflation is 10% and average house growth is 0%) , it means 10% drop without anyone noticing it!

I am picking up gradually regardless the price going up or down. I expect there will be a headline news in the next few months saying: transactions are down, mortgage approvals are down, and average price down will follow. that is when I buy more!

Dragon

Best Of The Best (LON:BOTB) Looks a done deal, Slater have sold their 8%.

TEIN

Ah, that's easy. Each time the index hits a new low it's reached the bottom....

Dear Mr Wolf, you need your own column. Please can I ask the floor to second the motion?

Where do private housebuilders stop being so and become contractors for social housing?

MJ GLEESON (LON:GLE) sell at the value end of the new homes market, so when they sell property in bulk to social/ private landlords then unless they replenish supply they simultaneously reduce the number of (more) affordable homes for private buyers. I know this is an over/ very simplistic observation and bordering on political/ social observation (so in danger of breaking one of my rules here), and accepting the builders will do what they must if demand from private buyers is suppressed (I noticed recently Gleeson have a lot of deals on individual properties/ sites).

It occurs to me that Gleeson and Barratt Developments (LON:BDEV) will have been selective on which properties, available now and later, to make available to this sort of sale, and so will have covered their own backs at what seem like reasonable retail prices per property. Every shopkeeper likes a big order, you can't blame them for that, and as mentioned by others there will be economies of scale on the deal anyway.

[I hold MJ Gleeson]

Paul Scott

Hi Wolf,

Great link, that was very amusing. Also, one of the click-through links is an even funnier (shorter) article - https://www.rollonfriday.com/f...

Have a lovely weekend!

Regards, Paul.

tom stokes

Hi Cantab

I totally agree with you re Costain. I spoke to owner of major contractor recently and he told me some disturbing information. He was not aware I was a shareholder but I immediately sold my holding, at a loss.

This is not investment advise just sharing information I received privately He said that since the collapse of Corillion that banks are extremely cautious about contractors.

This man's company does not have any buisness dealings with Costain.

DYOR

TOM

topvest

I see that Record (LON:REC) have also released their PDF annual report today. Good! Why can't all companies do the same? Speaking as an ex-auditor, there is really no excuse for releasing 2 or 3 weeks later as many companies do. The annual results announcement is audited...the document should be ready!

The Boon Fund

Hence why I say that the minimum div cover ratio that is probably possible at Costain (LON:COST) is 3x div cover (to account for paying out 1x to the pension).

And even at 3x cover, its likely to still be able to pay 3.67p dividend, a 7.5% to 8% yield.

TB_Investor

I'd also add what build standard have they agreed - Built to the latest Part L efficiency standard or to Future Home 2025, both come with complete different materials and labour costs meaning Gleeson's margins will get squeezed. From an investment perspective you'd want the house built to the best possible standard as its a selling point - lower energy bills, greener tech etc.

Surely they haven’t made an announcement that they have arranged to pay less pension contributions and then pay a dividend that will have to pay more contributions on what they have agreed.

Other than that , a very very good value share that should have been trading at a higher price but with minimal growth potentials.

RJS89

i must say, it does grate seeing companies 'change' their logos for a week or a month - it's completely performative behaviour!

instead, refusing to conduct business in countries or states that are e.g anti-LGBT+ would be an actual stance but ofc we know that won't happen!

anyway, politics rant over - back to the usual daily reading of reports and financial statements ;-)

Springfield Properties (LON:SPR) also looking spicy at the current levels!

milnerz4

In relation to the Part L Building regulation change, any house which foundation has been excavated and poured with concrete, then signed off by the NHBC before June 14th will not have to be built to the Part L regulations.

No doubt Gleesons, as have other housebuilders will most likely have already put in the foundation for the majority of these plots to minimise the uplift in cost which is estimated to be upto £4k/plot.

Roger Baron

Yes very sad. I am fairly sure the trouble started when the founder, Johnson, didn't raise enough cash in the first placing to fund the new factory. Reason I think that he was reluctant for his own holding to be diluted too much. A real shame because now I doubt if he's going to have much left even if the company does survive.

Someone's going to make a killing picking this tech up for peanuts I think.

Very kind of you to say TEIN. Not many takers tho, so my "Trade like an idiot" column will have to wait for another day

KevinS1

I know we don't normally cover small O&G exploration companies, but was wondering why Orcadian Energy (LON:ORCA) jumped up by 52% today.

52% isn't a lot when you are down 98% but it would be good to know. I only keep the stock in my PF as a reminder to never invest in small explorers.......again!!!!

Small Cap Value Report (Fri 30 June 2023) - BOTB, GLE, COST, DPP, ANP, REC, LTHM, VARE

Half-year comments

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

65 comments

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

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