Small Cap Value Report (Fri 5 Nov 2021) - ELTA, MORE, SNWS, PURP, NICL, GATC
Good morning, it's Paul & Jack here with the SCVR for Friday.
Agenda -
Paul's Section:
Electra Private Equity (LON:ELTA) (I hold) - update on valuation. Recently demerged Hostmore (LON:MORE) looks excellent value to me at 118p. Price dislocation in the first few days of the demerger could be providing a buying opportunity?
Smiths News (LON:SNWS) (I hold) - additional comments on the FY 08/2021 results, which Jack covered yesterday. This looks a strikingly cheap value share, with big dividend income in the pipeline, now that historic issues have been largely resolved.
Purplebricks (LON:PURP) - profit warning from yesterday. I'm tempted to buy back in, but am worried about potential legal case, and cash burn. New strategy doesn't seem to be working.
Gattaca (LON:GATC) - in line results for FY 7/2021 were published yesterday. Recent share price sell-off looks to have brought it down from an inflated valuation, to something much more reasonable. I would consider a purchase at 177p.
Jack's Section:
Nichols (LON:NICL) - owner of Vimto, with some attractive quality metrics. The company has been in business for over a century and it remains financially healthy, so a potential buy and hold candidate. Today it announces an 'ahead of expectations' update and the shares have derated recently, so it's a better time to look now than it has been at other times in the past.
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.
Paul’s Section:
Electra Private Equity (LON:ELTA) (I hold)
Following my recent criticism here of the demerger of Hostmore (LON:MORE), I’m hoping to speak to the company, and its advisers next week (both have kindly offered to speak with me). My main concerns are the outrageous level of fees, of £11m, and the apparent failure to line up buyers for the new Hostmore shares. Also of course that Numis produces excellent research, but then hides it away from the reach of key market participants - private investors. Hopefully I can persuade them to re-think this approach, I'll try anyway!
It’s important to give a right to reply, where I’ve been critical, so it will be interesting to see what they say. There are always two sides to any story.
Timing has been unlucky too, with restaurant stocks selling off a fair bit recently.
Looking at the valuation of Hostmore (LON:MORE) (hopefully new ticker now working on Stocko), either I’ve got my analysis wrong, or it’s an excellent bargain at 118p. I think it’s worth closer to 200p, and a similar figure is targeted by Numis, at 211p. I've seen the Hostmore note from Numis, and it confirms everything I've previously written about Hostmore. Although I think the Numis forecasts look modest, and set up to be beaten.
The current prices of ELTA and Hostmore equate to a price of 488p for old ELTA. That doesn’t make sense, because it had been around 550-600p (and was too cheap at that level, on fundamentals). The demerger hasn’t changed the value of the underlying businesses whatsoever, hence we clearly have some irrational market dislocation currently in the prices of the individual shares. That should correct itself over time.
New ELTA (which is just Hotter Shoes, and will be renamed Unbound) looks an interesting business, and the current market cap of £41m (at 105p) looks about right to me at this stage, so I’m not rushing to buy more, but am happy to hold long term.
The strikingly cheap valuation to me, is Hostmore at 118p. That’s a market cap of £149m, or an EV of about £180m, for a business that should be generating £30-40m p.a. EBITDA. It’s very cash generative, and is self-funding a roll-out of 2 brands, with lots of good sites available on attractive deals. I think this could prove an excellent entry point, but am happy to listen to other views too.
The usual negative comment is that TGIs is a tired brand. There’s some truth in that, but it ignores the work new management has been doing to revitalise it. Bottom line, it doesn’t matter what we think about the brand, the sites are busy, and generating substantial cash inflows, which is what matters more.
Smiths News (LON:SNWS) (I hold)
39p - market cap £96m
Jack’s excellent review in yesterday’s report covers the main points.
I looked through the numbers for FY 08/2021 last night, and am delighted with the way this turnaround is progressing. It’s unusual in that it’s playing out exactly as planned, whereas usually there are at least some bumps in the road with turnarounds.
Adj EPS of 10.8p is excellent, so the PER is a ludicrous 3.6 - that’s clearly the wrong price for such a reliably cash generative business that has now fixed all its legacy issues (Tuffnells, pension scheme, excessive debt).
As Jack correctly points out, net debt is still too high at £82.6m daily average throughout the year, but it’s rapidly falling from cashflows. Also, post period end cash receipts of £6.5m from Tuffnells and £8m from the pension scheme surplus were confirmed yesterday. There’s another £9m due from Tuffnells I think. Put that together, and it means net debt is rapidly reducing, and getting close to the targeted level of 1x EBITDA. When it reaches that level, the brakes come off for dividends, which could easily soar into a double digit yield. Hence this share looks very attractive for future incomes.
Yes it’s true that newspaper/magazine distribution is structurally declining, but the costs are variable, or semi-variable, and are managed down on a 3-yearly cycle, to match declining revenues. Cover price rises offset some of the circulation volume decline.
There’s also the wild card that some other activity could be bolted on to SNWS’s rapid overnight delivery network.
It’s not a share I want to hold forever, but purely on vauation/yield terms, it looks highly attractive at a price I consider irrationally low. Edison put out an excellent recent note, saying SNWS shares are probably worth about double the current price. I think that’s correct. Very much one for value investors, who are prepared to be patient.
.
Purplebricks (LON:PURP)
34p - mkt cap £104m
I don’t currently hold this one, as a recent MailOnSunday article about potentially large legal action spooked me into selling. Then it issued a profit warning yesterday.
New instructions - have “slowed significantly” in recent months down 38% - that’s a big problem, because PURP earns fees up-front, on signing new instructions.
Cash pile has reduced sharply, to £58m (from £75.8m a year ago), implying substantial cash losses. Expected to “stabilise” in H2.
Adj EBITDA to be “below previous guidance”
Medium term guidance unchanged.
Legal action not mentioned.
My opinion - the market cap is looking really low at £104m, for the best-known online estate agent. Half of the market cap is supported by net cash too. Although how much of that cash might be absorbed by legal costs? The issue seems to be over the status (employed, or self-employed) of its staff. It has switched over to employed status now, but there could be legacy costs if courts decide to overturn the previous self-employed status. It’s a material uncertainty at least.
Also, I swallowed the strategy update from the company in a webinar a while ago, but it has clearly not worked. The money back guarantee (with lots of conditions attached) was supposed to stimulate new instructions growth, but the opposite has happened.
Hence I think there are big question marks over strategy (and management). Also the company should have said something about the legal case, which is a risk.
That said, I’m finding the £104m market cap very tempting. Will give it some more thought. I’m tempted to buy back in, but need to think it over some more.
.
Gattaca (LON:GATC)
173p - mkt cap £56m
Preliminary Results - issued yesterday
Gattaca plc ("Gattaca" or the "Group"), the specialist Engineering and Technology recruitment solutions business, today announces its unaudited Preliminary Results for the year ended 31 July 2021.
Improvement plan complete; well positioned for growth
The numbers don’t look very good, e.g. underlying (continuing ops) EPS is down from 11.7p last year (FY 7/2020) to 8.4p for FY 7/2021. However that’s ahead of Equity Development’s 6.7p forecast. Liberum also says in a new note that the figures were in line with expectations, with no surprises. Therefore I’m puzzled as to why the share price has sold off? Maybe there’s something negative in the outlook comments? No, doesn’t seem to be anything untoward here -
Outlook -
Given the current market conditions, our clients are finding it more challenging to identify and secure specialist talent, which plays well to Gattaca's expertise in delivering critical skills and talent for their businesses. With strong demand for STEM skills, and our investment in our people and technology, we are well positioned for growth.
Notwithstanding evolving pandemic and macro supply chain factors, the business continues to trade in line with market expectations. We continue to invest to ensure sustainable growth over the long-term in our chosen markets.
Valuation - forecasts are for a substantial rise in earnings, as follows -
FY 7/2021 actual: 8.4p
FY 7/2022 forecast: 13.6p
FY 7/2023 forecast: 20.7p
Those are aggressive uplifts in forecast earnings, which might be a challenge to achieve. I’d need to know why brokers think it can drive EPS up that fast?
With the share price at 173p, the current year PER is 12.7 - which looks quite good value, if earnings do rise as forecast.
Legal case in USA - is ongoing. Could be a risk? Costs have been high in the past.
Balance sheet - looks fine to me, with a strong net cash position.
My opinion - if you like the company, then the sell-off in recent months looks to have brought it back down to a reasonable valuation. I would consider a purchase, if I could build up conviction that forecast earnings are likely to be achieved.
Jack’s section
Nichols (LON:NICL)
Share price: 1,220p (+8.44%)
Share in issue: 36,924,219
Market cap: £450.5m
There’s a lot to like about some of these Beverages companies in the Consumer Defensives sector - profitability, financial health, free cash flow generation, margins, returns on equity are all good and contribute to strong Quality Ranks.
For all this quality though, the share price of Nichols has done little over the past decade. There’s a real opportunity cost to this type of holding if you’re not careful.
This lack of progress is backed up by limited revenue growth. There were some signs of this changing more recently, but FY20 was a step back. More growth is required to drive the share price in future, given the 20.6x forecast PER.
Still, these are good companies, often with strong brands (Nichols has Vimto) with international potential and scope to expand margins, so I would never outright discount them.
Group revenue for the period was ahead of the Board's expectations, increasing by 17% year on year to £107m.
Vimto has continued to deliver a strong performance across all of its markets. In the UK, Vimto brand value has increased by 4.5% YTD, according to Nielsen. In Africa, the Middle East, Europe and the US the brand continued to see progress year on year, with International revenues increasing 36% versus the prior year.
The group's Out of Home (OoH) route to market continues to recover from the impact of the pandemic and has seen growth of 29% year on year.
Cash generation has continued to be very positive through 2021. Cash and cash equivalents at the end of the period were £55.6m (30 September 2020: £45.4m).
Outlook - Uncertainty remains but in light of the strong trading in the year to date the board now believes that adjusted full year PBT will be ahead of the current market consensus, most likely in the range of £21m - £22m. Applying a 20% tax rate to that suggests an adjusted EPS range of 45.5p - 47.7p or a PER of 25.6x - 26.8x, which still seems pricey.
Revenue momentum is expected to continue into 2022 but the outlook for the next financial year ‘is adversely impacted by inflationary pressures including logistics, labour and materials’, therefore profit expectations for 20224 remain unchanged.
The next trading update will be on 12 January 2022.
Conclusion
Nichols is classified as a Falling Star but it’s hard to say anything too negative about this company. The clear thing that makes me hesitate is the lack of historical revenue growth, the PE ratio, and relatively static share price.
This could all change with the right strategy and top line growth. The group has remained profitable, cash generative, and financially sound throughout that time, so it has a stable platform from which to grow. And, while revenue expansion has been lacking, Nichols has been able to make more progress in terms of earnings per share for its shareholders.
I’m assuming here that the group can fully recover from the 2020 dip but I don’t know it well, so that assumption needs checking.
Brokers are forecasting a recovery in EPS, from 24.7p in FY20 to 42.3p in FY21 (now potentially more like 46p) and 56.8p in FY22. Over the past few years the group has averaged between 60p-70p in EPS, which would return the group to a PER of 17x-20x if reached.
These forecasts have been revised down recently but will likely be nudged up once more after this update.
Nichols was founded in 1908 and is now available in countries around the world. It has done particularly well in the Middle East and Africa. So it probably warrants more research but it needs to realise the global growth potential.
It’s got the characteristics of a buy-and-hold candidate but, despite the quality metrics on offer, I’d need more signs of long term growth potential before paying up. That said, this is an ‘ahead of expectations update’ (balanced against inflationary pressures in the coming year) and the shares have derated recently.
If it can navigate the developing challenges well, then there could be scope for further upgrades, so I can see the logic in spending a little more time on this one.
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92 comments
Article in Retail Bulletin which gives an update on future strategy for Hotter Electra Private Equity (LON:ELTA) including this sentence half way through thru "Hotter is investing in motion mapping tables, providing an immersive digital experience for customers to interact with products" which indicates that the company believes its target audience of 55+ are both tech savvy and prepared to engage in new experiences. Let's hope they are right. (disc: I hold)
Hotter continues experiential shopping store roll-out
3 November, 2021 | by The Retail Bulletin
Footwear brand Hotter has opened its first pop-up store in the Trafford Centre as the retailer re-fits an existing high street store as part of its experiential shopping focus.
The business, which sells over 1.3m pairs of shoes a year, is continuing to .roll out its Retail 2.0 strategy in response to changing high street and consumer needs. Hotter’s strategy is to offer bespoke shoe fitting experiences using the latest precision fit technology in-store, online and within its app. The first of Hotter’s high street stores to be redesigned to become more experiential – holding less inventory and maximising expert advice available – is its 1,000 sq ft Solihull store, which will be fully operational in the coming weeks.
In addition to opening a pop-up unit in the Trafford Centre, Manchester, over the Christmas period, Hotter has also partnered with nationwide garden centre group Notcutts, and plans to open digital kiosks in selected locations. Hotter accelerated its digital-first transformation in 2020 and now 90% of all new customers are acquired through its digital channels.
Victoria Betts, Chief Commercial Officer at Hotter, said: “Around 40% of in-store orders are now ordered directly from our warehouse and we expect this to rise with the continuation of our Retail 2.0 strategy.
“The transformation of our physical store network, alongside opening up pop-up units and garden centre digital kiosks, is about adapting the way we interact with customers as they continually seek more from in-person shopping experiences.
“Change in the retail sector is happening at a phenomenal pace and we’re continually innovating and refreshing. This strategy perfectly complements our digital-first approach, which has been embraced by customers and staff, allowing us to deliver high quality products direct to doors and support Hotter’s growth even through the Coronavirus lockdowns.”
As part of the Retail 2.0 strategy, Hotter is investing in motion mapping tables, providing an immersive digital experience for customers to interact with products. It is understood that Hotter is one of the first UK retailers to invest in this technology.
Stores which are re-fitted will have new layouts designed to encourage customers to use the technology, including several seating areas with iPads and large touchscreen pods; as well as industry-leading Footprint Footprint™ 3D Scanner machines, which offer precision foot measuring via 3D technology.
Hotter’s Trafford Centre pop-up will be available throughout November and December to offer customers the chance to accurately measure their feet on Footprint™ 3D Scanner, supported by trained technicians. Customers will then be able to purchase items online, for delivery to their home.
Leading the market in comfort, Hotter has reported a strong trading this year, with an overall global sales growth of 25% in the first six months of 2021 (Source: Electra RNS), despite the tough retail conditions. Its parent company, Unbound Group PLC, also announced it will list on the AIM market in Q4 2021.
I'm a regular McDonalds customer, I think it is an incredible business but I really can't figure out how they turn a profit when their products are so cheap. Admittedly the food is not the best but the value, consistency, customer service and convenience are unrivalled.
Very good note from Numis on Hostmore - I spent a few hours going through it on today's flight back to the UK. What a pity this research, which clearly relies on privileged access to the company, is denied to ordinary investors.
I suppose the argument is that we're given something similar from Edison. I've not gone through that yet.
Anyway, MORE shares are clearly worth 200p+
This is a lovely buying opportunity, in my view. The valuation numbers in the Numis note do completely stack up.
DYOR as usual, but this seems to me a very good buying opp at 118p in Hostmore, having crunched the figures several times. I could be wrong, but the risk of that being the case seems quite low.
Regards, Paul.
Thank you for letting us all know what you found in the Numis info
I sense an IFRS16 rant from Paul re Hostmore (LON:MORE)
Hostmore (LON:MORE)
I have been looking at the whole demerger with a lot of skepticism and I have really struggled to understand the bull case for TGI Fridays i.e. HOST.
While back in 1990s-2010 it used to be one of 'THE' places to go to for a great dine out, almost a household restaurant name in US and UK, they have definitely not been able to maintain that brand dominance in the last 10 years with the change in dining preferences and less resonance of TGIF with the current generation.
And as you go through the note published by Edison's - The opportunities highlighted in are mostly focused on cost and expense management rather than any strong fundamental growth opportunities . And their Strategy is at par with the evolution of offerings in hospitality following the pandemic - but nothing that supports a strong case for growth.
As a 28 year old working in the city - I definitely don't even remember the last time me or any of my friends even considered going to TGIF - even though I live right next to one of them in London.
Just some personal thoughts on HOST . DYOR.
I largely agree with that assessment and on balance think current valuation looks about right, especially given likely cost pressures from higher wages and difficulty finding staff. I do think Electra Private Equity (LON:ELTA) got a bit ahead of itself a couple of months ago.
I looked briefly at the cashflow exhibit of the Edison research not on Hostmore (LON:MORE) and it doesn't sound like there is a compelling bargain on offer.
It talked about operating cashflow forecast of £45M for 2022 but this is reduced by £11M of capex and £26M of interest. There is also £5M of "other" cash outflow. Is this the royalty payments for use of the American brand?
I presume the large interest payment is mainly the interest element of premises leases.
Am I missing something here, as the next predicted cashflow of £3.5M would suggest an enterprise value at (say) a 20x multiple of £70M.
With closing forecast debt of £26M (before lease liabilities) that could make the equity worth under £50M.
TBH I feel like I must have made a mistake on these back of the envelope calcs, but cannot see what it is.
I agree Mark L. - this latest research note for £MORE does seem to make the value much less attractive (if Im reading it right). As per my comments below, I dont think we'd properly seen - atleast not so clearly - what their true cashflow is, nor these extremely high "Net Interest" payments, in previous research notes. I, too, feel I must have made a mistake with my calculations. Or the wool has been pulled over our eyes with previous research notes, steering us clear of what the true final cashflow numbers actually look like, and guiding us more towards using EBITDA which excludes cash outflows that were much higher than I would have (probably naively) imagined.
Maybe Paul you'd please be able get some clarity from them if / when you speak to them about this, and what the net interest payments are for?
I have no position in Hostmore (LON:MORE) (nor the Hotter Shoes business, nor have I ever looked at either), but the "Interest" below the EBITDA line will include lease payments, which I imagine will be significant here.
EBITDA doesn't really tell me much for high lease companies since IFRS16 came in (a standard that I actually agree with) - I prefer to look at gross margin trends and the cash flow statement anyway.
On a related note, I experienced difficulties this week trying to interrogate and model Ten Entertainment (LON:TEG) cashflows (I hold) and struggling to come to a firm conclusion as leases have been all over the place in the last 12-18 months.
In the end I decided to hold as I like:
I'm certainly finding it tricky valuing some of these high lease companies at the moment, but hopefully things will become clearer in the near future.
Good luck whatever you decide to do with your holding.
A
Hi Nixster,
I do not own a Tesla , nor have I ever driven one , but its share price is flying.
Regards
Hi Yiannos1,
Unfortunately I don't own a tesla car either, but I definitely do aspire to own one at some point.
With TGIF - I don't believe it would be a choice of place to have a meal for me. Again, back in the days I did go there with my parents and had a great time, but with all the options available these days, i definitely can't see myself or people in my circle going there.
I walked past one this evening around 8pm, it was running at 30% occupancy. Reaffirmed my view.
Again, just my personal way of looking and analysing opportunities beyond a companies income statement, balance sheet and cashflow statements.
Hi nixster ,
I do not know how can anyone can count the actual occupancy of a restaurant , unless you go and sit inside (although this is not the issue).
However, I had a Big Mac and chips last night , and I have noticed it was running at about 25% occupancy the restaurant.
Then I went to have a Starbucks coffee but I have noticed that was running at about 25% occupancy as well.
Both terrible companies I suppose. Look at their share price over the years-terrible performance!!!!
Anyway , have a great weekend.
But McDonalds and Starbucks are actually the top two brands in quick service restaurants. Hence the share price and the market cap for both the companies.......
Again, I have got nothing against TGIF - I just dont see I would ever have a meal there, but I definitely do know - I will pick food / order in from Mcdonalds and pick a coffee from Starbucks every once in a while.
https://www.statista.com/stati...
But you are not everyone. So we should not invest in a stock just because you don't want to eat there?
I would never eat at McDs or Starbucks, out of choice, so what.
I may eat in a pub, but I'm not going to buy shares, in that pub company or brewery. I may drink certain breweries products, but does not mean it a good investment, IMO.
Hi Nixster,
Who cares if you don’t eat at Fridays????!
I did say to you in the beginning that I do not own a Tesla , but you still do not get it.
The share price of Hostmore is a great opportunity compared to all its peers.
Regards
Hi Rustbucket and Yiannos1,
I ended my first post in this thread with "Just some personal thoughts. DYOR". Neither I can, nor I am in trying to influence any buying or selling decisions for anyone here; But merely expressing a "personal" perspective - which is why we have this comment section.
I will be stoked for you guys if the stock plays out. Again, I got nothing against TGIF. Good luck.
Agree TGI’s is a tired brand and their new concept 63rd &1st has only opened in cobham recently. Although I do suspect most hospitality brands will be doing well post COVID if there aren’t further lockdowns, with business rates relief, grants from councils, resructured leases or rent relief from landlords and customers who have been locked inside for too long with cash to spend.
"As a 28 year old working in the city"
TGI is defo not targeted for you - Nixster. I hold MORE.
TGI IMO remains focused outside London or at the very least suburban London and it's for the mainstream who want a night out, seek comfort food but do not want to stray too far from what they know. It's a "middle of the road" choice for families / friends / a larger party. It has its place, just like how Wetherspoon or an All Bar One has theirs. Old? Yes Doesn't mean it's the end of the road, a few refinements as what can be seen with management and they might refreshen a "mature" brand. Oh yes, and I would not be their consumer at TGI but it does not rule me out of believing that they can dominate their niche and dominate it very well.
Hostmore (LON:MORE)
I have been looking at the whole demerger with a lot of skepticism and I have really struggled to understand the bull case for TGI Fridays i.e. HOST.
While back in 1990s-2010 it used to be one of 'THE' places to go to for a great dine out, almost a household restaurant name in US and UK, they have definitely not been able to maintain that brand dominance in the last 10 years with the change in dining preferences and less resonance of TGIF with the current generation.
And as you go through the note published by Edison's - The opportunities highlighted in are mostly focused on cost and expense management rather than any strong fundamental growth opportunities . And their Strategy is at par with the evolution of offerings in hospitality following the pandemic - but nothing that supports a strong case for growth.
As a 28 year old working in the city - I definitely don't even remember the last time me or any of my friends even considered going to TGIF - even though I live almost right next to one of them in London.
Just some personal thoughts on HOST . DYOR.
Atalaya Mining (LON:ATYM)
I nearly missed this so just as a heads up/reminder for other holders of Atalya Mining shares that you will need to submit a tax exemption (non Cyprus residents) before 11th November. Instructions and link below from SecNewgate in response to my email:
You should fill in the appropriate tax form on the home page of the website at this link INAUGURAL DIVIDEND - Atalaya Mining and return it to corporate@atalayamining.com. In addition, you have the option to receive your dividend in sterling or euros instead of USD but you need to inform your nominees (Broker) of your preference. If they have any issues, they should contact the company’s registrars, Computershare Investors Limited.
Thanks for the heads up. Presumably if you hold through a broker (AJ Bell in my case) wouldn't they take care of this? If not more admin I guess!
Previous experience with withholding taxes on dividends for European companies (specifically Belgium & Denmark) is that AJ Bell not interested in handling the required admin. For Belgian & Danish listed companies this means any dividends suffer 27% and 30% deductions rather than the significantly reduced rates due to double taxation relief treaties (15% in Denmark, 10% in Belgium unless in recognised UK pension scheme when no deduction). With the latter can’t recall if an AJ Bell SIPP counts . AJ. Bell does provide W-8BEN (USA) and NR301 (Canada) forms on their site so the investor can submit and get a reduction in dividend withholding tax.. I guess they only do it for these markets as less complex/more established and UK holders are more likely to hold US & Canadian listed shares.. Finally not sure how an individual with a holding in an ISA or SIPP through a platform such as as AJ Bell could get any joy contacting Atalaya Mining (LON:ATYM) directly in a personal capacity given the shares will be held in a nominee A/C.
To add to my previous comment I contacted AJ Bell and much to my surprise they said that they had completed the necessary paperwork for their shareholders and all dividends will be paid in GBP. I await the receipt of the dividend to see if this actually comes to pass! Still not sure why they won't do the necessary admin for Belgium & Denmark though.
Thanks Skweeka, had you not said then I would not have known about this. I hold Atalaya Mining (LON:ATYM) and have just emailed my details to the company, I imagine II could not attend to this on my behalf, what do they know? I'll contact II to see what they will say now.
Silver
Is this still a requirement if ATYM is held within an ISA?
My holding is in an ISA and I believe we still have to do it. It seems crazy in 2021 having to print out a form fill it in, scan it and email it to the company, not to mention the form is really poorly thought out, almost as if they never heard of private investors. I phoned IG and told them I wanted the dividend in GBP not USD, presumably if you don't you will get dollars and have to pay a conversion fee. Better to do it than say goodbye to nearly 20% of your dividend methinks.
If I'd known about this I would have sold before xd date and bought back. Really can't be doing with this sort of hassle.
Atalaya Mining (LON:ATYM) Anyone filling in the form for tax exception on the divi and wondering where to find 2. Company Registration Number; its here: https://cyprusregistry.com/com... HE 152217
I wrote to Jarvis about this and their reply was:
a) the XO trading account can only hold and trade UK listed stock and you will not need to complete a Cypriot tax form as the ATYM shares are UK listed
b) All dividends received into the XO accounts will be in sterling as the accounts can only hold GBP.
Paul, I commented in some detail on Gattaca (LON:GATC) yesterday. As you've covered it today I thought I'd remodel my thoughts with reference to the points you picked out:
Given the current market conditions, our clients are finding it more challenging to identify and secure specialist talent, which plays well to Gattaca's expertise in delivering critical skills and talent for their businesses. With strong demand for STEM skills, and our investment in our people and technology, we are well positioned for growth.
In theory yes - but there is little evidence in the performance over the past 18 months characterised by red-hot demand for STEM skills that Gattaca actually has any expertise - witness the glaring contrast in performance with other listed competitors. We have only their word that they've re-organised in order to better address those markets in the future - indicating a historical absence of market strategy - and hired a huge number of trainees (headcount up 23% -suggesting large scale damage to the experienced cohort of employees) who are going to come up against hard-bitten expert consultants from the large number of genuine specialist consultancies who form the vast majority of the STEM market - no matter what SThree, a decent competitor but ranking behind the top boutiques would have you believe. At least 75% of those trainees will leave within a year finding the market too competitive.
Valuation - forecasts are for a substantial rise in earnings, as follows -
FY 7/2021 actual: 8.4p
FY 7/2022 forecast: 13.6p
FY 7/2023 forecast: 20.7p
Those are aggressive uplifts in forecast earnings, which might be a challenge to achieve. I’d need to know why brokers think it can drive EPS up that fast?
Because they don't understand the industry. A persistent story that plays out within the recruitment field is of private equity buying up recruiters, imagining that they can simply scale by increasing headcount and introducing target-driven activities (as if sales people don't have targets already), when the way to scale is to increase client count by raising the productivity of time-served expert consultants. It always ends in disaster for the private equity firm as any decent consultants leave the new KPI-driven environment and the new recruits simply sink. Brokers seem to have fallen for the same myth that headcount equals earnings.
With the share price at 173p, the current year PER is 12.7 - which looks quite good value, if earnings do rise as forecast.
I agree. If.
One of the issues here is that the firm operates in a lower wage, more cyclical segment of the STEM market. We've seen a big cyclical-driven boost to recruiter SPs in the last 12 months. With that behind us I think it's possible that the market will move on from anything not considered quality making it harder for any impressive results to deliver a re-rating. I could be very wrong on this because I understand recruitment companies much better than I can forecast the behaviour of the market.
Legal case in USA - is ongoing. Could be a risk? Costs have been high in the past.
I believe the expectation is for lower costs in the future - but the firm is not driving the process.
My opinion - if you like the company, then the sell-off in recent months looks to have brought it back down to a reasonable valuation. I would consider a purchase, if I could build up conviction that forecast earnings are likely to be achieved.
Aye. And there's the rub.
Thanks for this insight. Always good to get an opinion from inside the industry as it helps to really better understand whether the business is truly performing or whether its just market hype.
You're welcome. I only rate Robert Walters (LON:RWA) and Sthree (LON:STEM) as listed entities* in the sector. The former for long term growth record, excellent leadership and Asian exposure, the latter for their market focus and high proportion of the more profitable contractor segment. Pagegroup (LON:PAGE) used to be a high quality, well-focused business but now it resembles Hays (LON:HAS) more than it does its progeny RWA.
* The best performers by some margin are the privately held and highly specialised boutiques which exhibit more focus and can plan more flexibly and effectively, not having to march to the market's tune. I've founded/run both (listed and private) over decades - but I'm just an investor in listed securities nowadays.
if one were to invest simply on Stockranks Gattaca (LON:GATC) would be a no brainer (especially after yesterdays drop) ... how ? why ? can anyone explain for a relative newbie ? as I'm growing a little cynical on the ranks already...
The best answer I can give you is that successful investing is flipping difficult. If all the data legitimately points one way, then the price will already reflect reality and there’s no alpha to be had. If the picture is more nuanced then you need to work out who has got it right and who wrong. In the example of Gattaca, the market is thoroughly unconvinced by the company, no matter the apparent value on offer. That presents either an undervaluation to profitably exploit or a costly value trap. The value investor has to decide on which side they fall. Meanwhile the long term quality investor will find little of appeal here (and may miss a great bargain).
Deleted.
FYI - Marks Electrical Group IPO'd (MRK) today at 110p valuing it at a market cap of £115m. Interesting points to consider:
Current Trading & Outlook (snippets from admission document):
Strong start to FY22, with revenue growth of 78 per cent. to £37.5 million in the first half of FY22 (April-September), compared to £21.1 million in the first half of FY21.
Whilst the strong start to the first half of FY22 is pleasing, the Group faces a tougher comparable in the second half of the financial year and hence the Directors expect the revenue growth rate, whilst remaining strong for the year as a whole to moderate somewhat from the 78 per cent. as experienced in the first six months to
30 September 2021.
Targeting an Adjusted EBITDA margin of greater than 9 per cent. in FY22 and thereafter, as it generates operating leverage over the investments made in overheads.
With respect to cash flow, the Group is focused on working capital management and inventory days and has made improvements in its stock turn in the first six months of trading in FY22 and expects this to continue in respect of the full year.
Its market share of the £5.3B domestic appliances market has grown from 0.41% (in 2014) to 1.22% in the past year.
One I'll be looking at closely over the weekend. Is it just another Ao World (LON:AO.) ? Let's find out
@mginvestor
Paul looking forward to hearing the feedback on your conversations next week with Numis, Electra Private Equity (LON:ELTA) (I hold)) & £MORE (I hold))
It will be very helpful if you can get a fix on net cash/debt levels in the 2 companies as there seems to be some confusion as to where the Sentinel disposal proceeds have ended up. This obviously impacts the relative value of the separated entities but not their combined value.
My assumption is that the Sentinel funds remain in Electra Private Equity (LON:ELTA) and that gives the following values:
Would it be possible for the company to provide the Numis research note on its own website?
Having read the latest Edison note for Hostmore (LON:MORE) Im starting to wonder about valuing it based on EBITDA or net operating cash flow. If we look at 2022, net operating cash flow of £45.5m, is then reduced by £11m capex, £26m net interest (is that mainly lease payments??), and £5m Other. Giving £3.5m net cash flow. I fear Ive been hasty in how Ive valued things up to now, and the net interest payments in particular Id been wrong to forget about. The research notes talk about EBITDA based valuations, Im now just wondering if that's the right thing to do. Appreciate comments / thoughts? Thanks.
Does anyone have any tips on how to access Hostmore (LON:MORE) on Stocko?
I can see the share in the search drop down but, nothing happens when I click on the name. I have also clicked on the Hostmore (LON:MORE) hyperlinks within this discussion but, again, Stocko just opens up a new blank page? Logout; login again do you reckon?!
Thanks
Re Hostmore (LON:MORE) I also could not understand the £26m net interest line in the Edison report. Assume 5% interest and it implies £520Mn debt! (There is also a chunky £5M Other in the cashflow as well but lets leave that.....!)
The October Hostmore Roadshow presentation to potential investors separated out £12-14Mn for net interest & bank charges over 2018-20 from bank debt of £66-64Mn. Again this implies 12/66 = 18% interest!
So much for the key purpose of Accounting I recall from my Uni days being to be to help mgt & owners understand the business! No doubt it makes sense and adds up but not obvious (to me) from the slides
And don't forget the other thing to factor in for Hostmore (LON:MORE) is the 4% of revenues ‘franchise fee’ to TGI Fridays Franchisor LLC. For FY19 the fee was £8.5m.
This is why I am particularly interested in the post-tax profit figures to try and work out a p/e ratio. In FY19 profit after tax (statutory I have assumed) in the prospectus was £7m which would put this on a punchy rating of c.24x. However, others have pointed out to me that the FY19 figure included £10m depreciation, and £4.9m exceptional items although we weren't given enough detail from memory about how exceptional those items were.
I think the franchise fee for Hostmore (LON:MORE) is included in the EBITDA numbers (I think!). But I agree, now that Ive seen this latest research note from Edison, that the PAT numbers are a bit of a concern, in particular the net interest numbers (which Im reasonably sure I hadnt seen in past notes though I may well have missed them). These amounts are:
2019 - £26.2m
2020 - £17.7m
2021 - £18m
2022 - £26m
Anyone know what these are for? It cant just be the interest on their debt.
"the PAT numbers are a bit of a concern, in particular the net interest numbers (which Im reasonably sure I hadnt seen in past notes though I may well have missed them). These amounts are:
2019 - £26.2m
2020 - £17.7m
2021 - £18m
2022 - £26m
Anyone know what these are for? It cant just be the interest on their debt."
The Bank debt & interest numbers have been inflated by lease liabilities as per IAS16.
The actual Bank debt is £64.7m & interest on this debt in the 6 months to end June was £1m as revealed in the prospectus:
By contrast, the Bank debt is dwarfed by an outstanding lease liability of £152m on which a lease liability charge of £5m was incurred in the 6 months to June.
The positive news is that Hostmore is throwing off cash, with FCF similar to EBITDA.
The 184 page prospectus was released on 15th October & can be found here:
https://www.electraequity.com/...
Not sure why the 21 PE is relevant at all to be honest - the numbers for this year are recovering from COVID.
The 22 no is ahead of 19 reflecting rent renegotiation etc... plus some revenue growth .... so you have £30m EBITDA gives PBT £16.1m EPS 10.8p.... at 120 this is not a punchy PE (11) at all. The important year is 23... the investment case will hopefully improve for 23 next year. I would hope plans for the new brand are accelerated ... if so...then the PE should expand to reflect better margins, better growth.... the 14p of earnings should be beaten. If you put that 14p on 15x .... you hit the price target... I don't see this as demanding at all.
Re the franchise fee you are right, if you don't like the restrictions this places on the business then its not for you. Mathematically it holds back margins but not in the new brand. It isn't new information but no doubt puts off buyers in M&A. Given all the change off the last year or two obviously exceptional have been high, I wouldn't worry about that at all.
FYI Friday pay 4% on the new brand too. 63rd & 1st.
OK Apol I didn’t realise, in a way though that’s encouraging as presumably Hostmore (LON:MORE) is under less pressure to expand TGI and can satisfy the franchise agreement through 63rd & 1st.
Hi gwilli68,
Your post is such a mess! Just abandon that line of thinking. You're totally wrong on everything.
In your shoes, I would just start again, and use Edison's latest note as a good way to learn about Hostmore (LON:MORE)
Regards, Paul.
"Your post is such a mess! Just abandon that line of thinking. You're totally wrong on everything."
Would anyone whose taken a look at the research please be able to help me understand why Im thinking about this wrongly? Ive no doubt Im wrong but I cant see why. Here's the cash flow statement from the Edison Hostmore (LON:MORE) research. The columns from left to right are 2019 to 2022. The net cash flow line (for example, £3.5m in 2022) was much lower than Id been expecting. Thanks.
gwilli68
I had a go at explaining this at 20:04 yesterday.
In essence due to adopting the accounting standard IAS16, the net interest line now includes lease payments in addition to interest on Bank debt.
The actual interest on Bank debt in 2022 will be around £2m, rather than £26.5m. Adjusting for this makes a huge different to the Net cash flow line.
The October prospectus (180+ pages) is a much fuller source of information than the Edison note.
Thanks Jesse, I appreciate the helpful response. I suspected it must have something to do with the leases but I hadnt thought that that would play a factor in the Cash Flow statement. The Edison statement does show a line "Closing Net Debt / (cash) excluding IFRS16 lease liabilities" but that amount only drops by £3.5m between 2021 and 2022 (from £29.5m to £26m), tying with the net cash flow amount for the year. I obviously dont understand it correctly, thanks for your help.
Hostmore (LON:MORE) (no position)
Hi gwillis68
Curiosity got the better of me so I decided to take a look at the Hostmore (LON:MORE) demerger prospectus.
---
For something a bit more detailed than the Edison cash flow report, may I suggest the cash flow statements on page 86 (slide 89.)
https://www.electraequity.com/...
I looked at 2018 and 2019, which in my opinion gave an overview of how the company performed pre-covid.
Adjusting out working capital movements and banks loan repayments gives me approximate pre-covid cash generation of c£10m per year.
My understanding is that the market cap today is £136m + c£30m non-lease debt = c£166m
That looks expensive to me given the industry this company operates in, but having said that, a lot has clearly changed since 2018 and 2019.
I have no opinion on cash generation in 2021 or in future years.
----
Onto your question about net interest (which is primarily rent leases) jumping to £26m in 2022, I imagine that this is to to do with Rent deferrals:
"Payment of certain of the costs of the Group over the periods affected by the Covid-19 pandemic have been deferred and, subject to further negotiations in the case of rent deferrals, will become payable during financial year 2021 and financial year 2022.
As at 27 June 2021, these included £18.7 million of rent deferrals (some of which have subsequently been paid) and £5.8 million of VAT deferrals, which is payable in monthly instalments from July 2021 to January 2022."
I think I saw that annual leases are c£12m (it's late, so I don't feel like checking and I'm happy to be corrected), so the deferred rents noted above would be relatively quite material.
However, once these deferrals are cleared, I imagine annual cash generation will look significantly better than the £3.5m that Edison is forecasting for 2022.
Cheers
A
Thanks Abtan, that's very helpful, I appreciate it. I recognise the £10m per year pre covid. It looks like most of the VAT deferral will be paid in 2021 (so will have an effect of £0.8m on the 2022 cash flow if they are equal payments over the 7 months from July 21). And I dont think they give details on the rent deferral and how much of that has been paid already, and how much is paid in 2022. I guess its knowing that number that will help understand how much better the £3.5m cash generation in 2022 would really look. Thanks again.
Its fun Friday
Stanley Gibbons (LON:SGI)
I'll be "investing in" the junior tranches of the CDO of the securitised stamp loans used to finance these new liquid philately vehicles. Above the adhesive but below the ink. I'll blog out the analysis...
PS it could be a good idea (I'm sceptical)...nevertheless its funny
What are the odds they'll NFT each piece of the stamp? Makes it instantly worth a bazillion pounds.
Note: sarcasm, not investment advice :D
Genius....I'm in
Beautiful - have the franklin mint started selling NFTs yet? I for one can't wait to purchase a one off digital plate that commemorates the death of my parents in a timeless depiction of the four seasons and the joyful play of kittens all inside a giant carriage clock.
Wow Leebod! I'd like to manage an ICO (Initial Coin Offering) for you. My head spins regards wtf sort of biz it could be...but that's irrelevant as the meme based valuation of project should make us Winklevoss bling...
What about my Lilliput Lane stuff? Could they make a ‘bank’ ceramic perhaps to store the tokens. Got to be a store of value there.
Dial them up and put yourself forward as Director, Tokens. Ask to be paid in kind. Monetise your crazy!
RE: Somero Enterprises Inc (LON:SOM) they seem to be consistently buying back shares themselves, which in this case I approve of.
True, it would be better if they'd started in the depths of the pandemic, or at least earlier than they did, but it's still a fair price and not a bad use of cash IMO
Here is a link to today’s Edison research piece on Hostmore (LON:MORE) via the Hostmore Investors page. Saves a few clicks ….
https://e6b88485-f139-4997-aee...
Usual caveat that Edison research is commissioned by Hostmore (LON:MORE) so not necessarily impartial.
Gus.
Argo Blockchain (LON:ARB)
Cowboy outfit:
https://www.investegate.co.uk/...
Hilariously, in the official RNS they backtrack on what they hyped to Mr Coyle...clearly ARB were caught out by someone getting carried away and tweeting their bs.
Hey, but ARB and crypto...its a rocket ship to the moon babe
...rocket ship to the moon - is that a reference to its energy consumption?
Haha...could be!
I'm also entertained by the disclosure that new Texan 'mine' is a $2bn venture. But hey, bitcoin will replace the USD as global reserve currency so superb garbitrage to raise/borrow crappy $$$ to get future BTC payback.
Love some analysis here from the hypers.
"Love some analysis here from the hypers."
Mojo, they're too busy in the tabernacle, in front of of the algo-altar, dreaming up ways of telling you that the reason that you don't 'get it' is because you simply haven't done enough research.
You mean you don't take this seriously?
What happened to Theresa May coin? Unfortunately it's now only worth $0.00062 a coin.
The more research I do into bitcoin the more I think the whole thing should be outlawed as a criminal waste of the planet's resources.
800MW? And basically all it does is nothing most of the time.
Parts of the world are facing existential crisis due to a surplus of energy usage and pollution and the coiners want to waste ever more of our power producing something of only questionable value to non-money launderers and fences.
River And Mercantile (LON:RIV) (I hold) have published their results this morning, which look good to me. They have a market cap of £235m (last night) and are selling their Solutions Division for an enterprise value of £230m. I understand that the rest of the business is very small, but for the market it's worth basically nothing. Any views on this?
P. S.: this is my first comment here, although I've been using Stockopedia and reading this blog for a while. Many thanks to Paul, Jack and all the other commentators for their amazing job, from which I'm learning a lot.
River And Mercantile (LON:RIV) (I hold) have published their results this morning, which look good to me.
Welcome aero79!
Yes, the results look good and the Schroders sale makes for a very interesting situation. It's hard to work out the precise value of the remaining business but a very finger in the air guesstimate says about a fifth of the overall value - so say about £50 million. They expect to return the majority of the Schroders money to shareholders and there's a 7.8p dividend to come.
I also look at the presence of Martin Gilbert on the River And Mercantile (LON:RIV) board and note his position at Assetco (LON:ASTO) and wonder how long the rump of the company will stay independent.
Interesting situation.
timarr
Hi timarr,
Many thanks for your comment. It is an interesting situation as I think the remaining business is growing nicely, although from a small base. Also, as you said, I wouldn't rule out a buyout of that, too.
Best regards,
aero79
Hostmore (LON:MORE) There's need to put distance between personal perceptions of brands and what their target markets think of them. I've visited a TGI once and thought it a ghastly experience. However, I'm not their target market and they do hit it off with those customers. Hapy to remain a shareholder.
Dear Paul,
Edison produced a detailed note yesterday on Hostmore £MORE (I hold) which may be of interest to you and other holders. As you have recently stated, it will take time for the shareholder base to settle down and, once it does, I agree with you that the company’s strong cash generative characteristics will shine through and be recognised.
Kind regards
Phillip
Thanks for sharing that Phillip, I'll head over to get it.
The volume seems to be increasing and today there are a lot of buyers on the trade list. Might be starting to move now more people can access it.
Morning MrC.
Love the commentary about Argo Blockchain (LON:ARB) and had the same thought about the Stanley Gibbons (LON:SGI) partial virtual stamp ownership. Whatever next, a new asset class with no intrinsic value that we hype up to the rafters and sell to the gullible ….. let’s call it ….. crypto currency!
In terms of the ins and out of Hostmore (LON:MORE) , I got so fed up with the shenanigans over the demerger and the processing of the share entitlements that I’ve notionally sold my holdings as of last Monday at 550p from my portfolio list for cash and will buy them back in their constituent parts based on the same valuation in about a month’s time when the dust has settled. The shares are still in the account but I don’t feel there’s a stable market at the moment so I’m taking the ostrich approach for the time being and not looking at the daily gyrations. Look forward to Paul’s update once he has spoken to the company/Numis.
Gus.
If you use google finance to track prices, Hostmore (LON:MORE) is now included and can be added to watchlists.
I can’t get the Hostmore (LON:MORE) link to work on my mobile. Will try laptop later.
Re: Nichols (LON:NICL)
"I'd rather lick Neill Ricketts' feet"
Well I'm glad I've finished the morning Weetabix before reading that, MrC. Although, I believe there is a school of thought that said breakfast cereal is none too appetising either.
It conjured up a picture of Mr Ricketts feet in a Vimto foot spa! Yuck. But then I remembered I would have to wade through the considerable quantity of his BS to get there and also that he's knee deep in the magic graphene powder that Versarien (LON:VRS) have hawked round for some years now but is so good that almost no one wants to buy it.
Not the greatest fan of Vimto but it's not that bad Mr C. Just seems a lot is in the Nichols (NICL) price even after the good news today. Long way back to 70p EPS.
Weight of money in small cap stocks.
Several very good companies have been sold off recently despite reporting good results. Somero Enterprises Inc (LON:SOM) and Sanderson Design (LON:SDG) are 2 of note and there are many more.
In my opinion The degree of selling (supply of shares) is too large to simply be panic selling by PI’s. I believe there must be institutional involvement. The supply of shares into Somero Enterprises Inc (LON:SOM) at circa 500p is being very carefully controlled which says to me that a savvy fund manager is setting the price.
This is not hard to explain if investors who buy funds rather than individual stocks are moving money out of small cap funds. The managers will have to respond by liquidating stocks. Assuming they are only invested in quality stocks then it might explain what we are seeing.
I don’t have evidence for my hypothesis but many wise commentators have been struggling to explain certain share performance. Is it simply due to the “weight of money” in the small cap market? Can this be verified?
Hi Revs8,
Yes that's definitely right I think. People seem to imagine (wrongly) that the market is all-knowing, and that it correctly values companies all the time, hence there must be something wrong if the share price is falling.
In my experience, that's often wrong. The market price is just whatever price buyers & sellers are currently transacting in, often in small volumes, and it can detach from a realistic valuation (too high or too low) all the time. That's what provides us with opportunities to make money in UK small caps - buying when they're too cheap, and selling when the prices get irrationally high.
It's a waste of time trying to work out why a share price is falling, it's just short term negative sentiment. People sell for all manner of reasons, often completely detached from a fundamental valuation.
It's interesting that plenty of companies are reporting strong trading, and shares are rebounding strongly. Why were the shares in a downtrend then? Who knows, just more sellers than buyers.
It's all background noise. I stick to the fundamentals, and ignore short-term market sentiment. There's that famous saying about Mr Market that everyone probably knows - with his wild mood swings.
It's essential to reverse the natural emotional reaction to falling share prices (panic, sell!), and instead focus on buying opportunities from falling share prices, I think. If the fundamentals are good, then being able to buy cheaper is a good thing.
Regards, Paul.
Thanks Paul. It is comforting to know I’m not barking up the wrong tree and yes I’m using these dips to buy more of these super stocks.
It's essential to reverse the natural emotional reaction to falling share prices (panic, sell!), and instead focus on buying opportunities from falling share prices, I think. If the fundamentals are good, then being able to buy cheaper is a good thing.
The phycology of investing summed up in a nutshell!
Hi turbo. Agree. The key part of the phrase is “if the fundamentals are good “. I.e if the reason you bought the share is the same then but some more.
There is also the question of knowing when you be made a mistake! The eternal dilemma of the private investor.
Somero Enterprises Inc (LON:SOM) is only down 12% from 52W high, hardly sold off. I see this as typical small share movement, good news share price goes up, then some holders take profits, share price drifts down, then consolidates. If you check the chart you will this has happened in the past.
Hi Rustbucket.
Ok not a sell off but The degree of consolidation for £SOM is high this time (almost 100% on the last bounce depending on what you take as the starting point). Which means we can buy shares at the same price as they were before their announcement 2 months ago.
Given this is such a highly rated stocks it looks like a lovely buying opportunity with a price target over 600 (analyst consensus is 745p)
No, it was 460p then shot to around 560p, now down to 500p. Most shares that go up almost vertically come back down again. I hold Somero Enterprises Inc (LON:SOM), I may top up, if they fall back to around 450p.
Yeh that’s what I meant by “depending on what you take as the starting point” the dip to 460 was a one day blip. Anyway it’s all semantics around chart watching. It’s not black and white. Personally Somero Enterprises Inc (LON:SOM) is one of my favourite stocks and I think 450 is optimistic but either way I believe it is going higher.
Revs8
Ref somero and Sanderson I dont really agree with your assessment , Paul’s summary to me sums it up - stocks go up and down like yo yos for no reason no silly conspiracy theories needed. Both the stocks you mention have been on an amazing upward run recently that really did have to end sometime as it has done - pretty simples. The future direction could be either way with future news probably being the deciding factor. I hold both and would say they are both in the reasonably priced zone - happy not to sell but not companies I would want to be going overweight in when I already have a holding.