Small Cap Value Report (Fri 7 Oct 2022) - WIN, STEM, MSLH, CGS, SDRY, BWNG

7th Oct '22 by Paul Scott

30 comments 7059 reads

Good morning from Paul, and thank goodness it's Friday! Today's report is now finished.

Podcast - the summary for this week is now up on podcast platforms, and here on my website. This week's "mystery shares" (!!) for Stockopedia readers only, which are my best ideas from the week, are;

Victorian Plumbing (LON:VIC) - see Thursday's report

Castings (LON:CGS) - see Friday's report, and

Wincanton (LON:WIN) - see Friday's report.

Agenda -

SThree (LON:STEM) - this staffing company is a firm favourite here at the SCVR (no position personally, but it's on my watch list). So I asked management if they would do an interview with me, which we recorded yesterday here it is (audio). Management seem bullish about the outlook, and made lots of interesting points, which definitely deepened my understanding of the business. Also, I nagged them about doing webinars for private investors! I'll try to do more CEO interviews, but I'm highly selective and only do interviews where I think there's a good buying opportunity in the share.

This is what I'm planning on reviewing today:

Wincanton (LON:WIN) - a solid trading update, in line with expectations. Net debt has largely been paid off, and the pension scheme looks close to being fully funded, although current deficit recovery payments are still substantial at c.£20m p.a. Open book contracts are allowing increased costs to be passed on to customers. With a low PER, and a decent dividend yield, I think the recent unjustified share price fall is presenting a longer-term buying opportunity. Thumbs up from me, more detail below.

Marshalls (LON:MSLH) - this cropped up on the top fallers list today, and I think it looks quite interesting. It's a mild profit warning, due to a sharp slowdown in the largest division in Q3. I look through the last balance sheet, and find a rather ill-timed and large acquisition, but the funding position still looks OK. It's going on my watch list, more detail below.

Castings (LON:CGS) - an in line with expectations trading update. The most impressive feature, is that higher costs are being immediately passed on via surcharges. Castings has a fantastic balance sheet, and a remarkable long-term dividend paying track record. So it looks ideal for income-seeking investors. More detail below.

Superdry - better than I expected actually. Although EPS is…

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UK pub operator Wetherspoon's annual loss narrows

J D Wetherspoon

News7:11 amBritain's J D Wetherspoon JDW.L annual loss narrowed compared
with a year ago when sales were dented by COVID-19 lockdowns.

The pub group, often referred to simply as "Spoons" by its
younger customers, reported a loss of 30.4 million pounds
($33.96 million) for the 12 months ended July 31 compared to
154.7 million loss last year.
($1 = 0.8951 pounds)
(Reporting by Radhika Anilkumar in Bengaluru; Editing by
Saumyadeb Chakrabarty)
((Radhika.Anilkumar@thomsonreuters.com; +91 8067490824;))

I don't hold.

RNS link to report here
https://www.investegate.co.uk/...

Report here
file:///C:/Users/Howard/Downloads/Annual%20Report%207%20October%202021.pdf

EDIT: it's SCVR now at Mkt Cap of £563m

Regards

Howard

Antehelion

7th Oct '22

I've not rechecked, I seem to remember Polymetal International (LON:POLY) has a mix of 'in-russia' and 'outside-russia' operations, thus it sees high risk and difficulties with sales of its products. I don't believe the same applies to £STCM - however I concur on the proximity being a risk factor.

Personally, I'm thinking there's unfortunately a large amount of rebuilding that will be taking place in this part of the world in coming months/years. This will presumably drive the price of building materials up locally and Steppe Cement (LON:STCM) would presumably be well placed to aid in the rebuilding bonanza..

I'd personally settle for 76% of 20% :) equally, waiting hopefully a few months for the extra 5% divi doesn't seem a terrible thing.

If the 20% payout comes as a buyback instead, equally that is totally fine with me - I'm not looking for the cash explicitly and share count reduction and purchases in-market at that extent would do me just fine!

Snowbum

Re Polymetal International (LON:POLY) , the issue for me is that the POX plant is in Amursk region (Russia). This was previously a key driver in their business plan to deliver increased gold recoveries via refractory gold. Could still be a good investment over the longer term but this was the reason I sold out. (No position).

JASVFS

I've enjoyed reading your market thoughts RDHOWARTH, I've been drawn into modest investing over the last few months by significant falls in seemingly strong companies, for the most part I've been catching falling knives. I don't think we've seen the final capitulation yet and without wanting to get into politics, imo until our Government get real about who and how we do most of our business, with sensible policies those who fund us believe in, we will not see a sustained rally. Your thorough summation left out one man who could make things even worse very quickly -- Putin. Some sort of endgame in Ukraine would give comfort to most markets.

Silver Moon

Granted!

Silver

dscollard

great to see you are still riding the waves and doing your thing.... well done sir!

Paul Scott

Morning Bristolian!

Yes I spotted Marshalls (LON:MSLH) on my trawl of the biggest % movers early on, and decided it looks interesting, so I've just published a review of it above.

Best wishes, Paul.

Helvellyn

An 'endgame' in Ukraine would bring a lot of comfort to Ukrainians and their near EE neighbours and would help markets supplied by Ukraine, corn, wheat, cooking oils, iron ore, although the timing of the ' endgame' and seasonality of harvest etc would effect the situation BUT i don't see the West being keen to be seen to be buying oil or gas from Russia unless Putin has gone or a complete regime change has taken place. So the West and maybe the ROTW has probably got to find a way to carry on without Russian energy for the foreseeable future.

Bristolian

Brillant, thanks so much Paul, and very much appreciated ! I've taken a small punt today to keep it on my radar and will keep a watching brief along with Watkin Jones (LON:WJG)

Camtab

I agree, really like this company. The old balance sheet (2022) was strong with £165m assets and £33m liabilities, no goodwill or intangibles (which always pleases me and plenty of cash. No reason to think this will have changed significantly. The main problem I have with the shares is being able to buy them in any quantity. In this environment you can end up holding shares which you cannot move.

I found this quite an interesting tool. So I pass it on. Historical Investment Calculator | financial-calculators.com I used it to look at the period 66 to 81. Largely because that was my childhood time and I recall it having similarities to now. Interestingly cash outperformed shares (the calculator doesn't include dividends). Anyway I thought it was interesting.

FREng

I have a Stockopedia fundamental alert set [ EPS Upgrade FY1 1m > 1%] for Quiz (LON:QUIZ) (I hold) . I was notified today and indeed there seems to have been a broker upgrade. Has anyone seen details?

Strong numbers, market selling off immediately…

Howard Adams

J D Wetherspoon (LON:JDW) up over 14% (as I type).

Much smaller loss .....

TamzinPiworld

Here's the Vertu Motors (LON:VTU) H1 presentation from earlier this week with an extensive Q&A video & podcast. Their expectations for the full year have just been upgraded putting it on a PE of 5.5, and with net tangible assets per share of 71.2p (28.2.22: 66.8p) and a progressive dividend, currently, just over 4%, perhaps one is being paid to wait, and who knows will someone make a bid at some stage?

Next Tuesday Eneraqua Technologies (LON:ETP) release interim results, we have a webinar with management at 12 noon, register here to attend.

The Boon Fund

8th Oct '22

Something quite miraculous is happening at Oxford Biodynamics (LON:OBD)

Placing today of £9m and 45m shares; current share count is only 100m, so this is c45% new shares being issued. The fascinating thing is that the placing is done at a PREMIUM, and a massive one: 20p placing price, compared to the 12p undisturbed price a few days ago.

The company was fast running out of cash but it has a promising test: CiRT which can tell whether a specific cancer treatment will be successful. The test is now fully signed off in the USA (and UK), as well as all hurdles cleared for it to be adopted by insurance companies as a reimbursable test.

I am surprised in this market that a company has managed to raise such a huge funding, at a 67% premium.

Directors have also chipped in a total of £70k-ish. Small change.

(I hold in the Boon Fund)

Hi Boon,

How interesting, thanks for flagging. Getting a big (relative to the mkt cap) fundraising away now, at a premium, is pretty remarkable, they must have a good story.

The RNS says it's a 33% premium, not 67% as you say. But even so, it's an impressive announcement.

Regards, Paul.

Thanks Tamzin. I listened to your audio only podcast version of the Vertu Motors (LON:VTU) presentation, whilst taking a long walk in the sun today. I do hope you continue the audio versions, as I find them a very good way to listen, whilst doing something active.

The CEO is so impressive at VTU, he sounds on top of all the issues. CFO comes across as competent. It'll be interesting when some of the manufacturers change over to agency contracts, as revenues should drop a lot, but margins rise a lot in % terms, so the accounts should look quite a bit different. Also it should free up a lot of working capital. He doesn't sound at all concerned about that upcoming change.

Thanks for providing such excellent content, it's really helpful.

9th Oct '22

It is 33% to the closing price the day before... But if you look at the chart, the news has been leaking for a few days, given the rise from an undisturbed price of 12p.

Ah I see what you mean, thanks.

Small Cap Value Report (Fri 7 Oct 2022) - WIN, STEM, MSLH, CGS, SDRY, BWNG

Agenda -

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Paul Scott

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UK pub operator Wetherspoon's annual loss narrows

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