Small Cap Value Report (Friday 9 July 2021) - COG, PMI, IKA, THS

@Paul Scott it would be great to get your updates views on Tharisa given recent progress and Ukraine etc.  Any chance of an update?

deleted wrong post.

Abtan

Thanks for your input, appreciated.

I don't think its a scam, but the audit doesn't really prevent that. All that says to me is that it verifies the judges are there on that day, they picked a location, and that the closest entry in the system has won prize - ie. they haven't allocated it to their friend who was miles off.

So in that sense, BOTB do not 'pick' the winners. If that Prash fella happened to successfully get it right 5 times in a row, the site would have no choice but to award him the 5 cars, no matter how implausible or fixed it sounds to everyone else.

Using a rough estimation if you played every week the expected win rate is 1 in 5000 weeks, or 1 in 2500 if you get your wife to play as well. So 3 in the current space of time and the Brandon Klayman example raises the possibility that people can raise their chances above the norm.

I don't think the audit would pick up a scenario where customers contacted judges, a provisional 'leak' of projected answer given, and multi-accounting used to bombard lots of entries around that spot. The audit would only care that the winner is the closest to what the judges say. So it's possible to have a situation where something passes an audit, but also is not legit.

To see two events of very large probability occurring is quite surprising; i just wouldn't be surprised at all if multi-accounting was in use. After all, it's not illegal, more entries make BOTB more money, I don't expect them to be very hard on it as most people won't do it.

I guess what I haven't been able to shake is how winners are reported. I would guess many people are like yourself, preferring to take the cash and not the car. Yet the winners videos all have the implication that the person has won the car.

The local press stuff is not persuasive to me. I've been a journo a long time ago, stories like these I suspect are already written. How else would a local rag know that someone has won? The stories all pretty much follow the same formula. Given one of the board members previous ties to News International this is no surprise.

I don't think press coverage is any indication of legitimacy. Recently Football Index was exposed as nothing more than a ponzi. But this had a load of features in respected publications, and people 'invested' as a result. The reason why those articles ran was because Football Index paid affiliate revenues for new business generated. The same kind of deal I think BOTB is doing with the Sun - a perfect target market.

So the biggest bugbear is the lack of any winner social media; I find the 'I don't have social media, so why should anyone else', not that good. To be sure not everyone has social media. It would be normal to Google one or two names and find nothing. But when that number goes to 15, 20, and they have nothing or virtually dormant accounts that is a bit suspicious.

I did find a previous winner with an active Facebook account, and very active - multiple posts per day, lots of photos. She posted the official BOTB video of the day she 'collected' the car - but since then, no mentions, no photos of it either. Prior to winning she re-posted BOTB communications like other winner videos, but that all stopped after she won. But you would think that winning would make her to have an even more favourable outlook on the company and enter/repost other competitions.

Combined with that other lifestyle winner who can post pictures of trainers but not of his £12,000 haul of electronics, I really sense that my suspicion of some kind of NDA is about right. But then again, much like the multi-accounting, is this illegal? Probably no, so as a shareholder it may not bother you.

Personally I think more regulation could come in. You could make an argument that for any gamble, punters should be given sufficient information of the probability of winning. For prize competitions online this could be as easy as a real-time counter of tickets sold; and/or a mandatory minimum prize payout ratio. So, there could be a cash top-up to bring that in line if the car is not sufficient.

For instance I regard some of those raffles trying to shift houses as a bit of a con. Omaze's charity structure means that most of the public won't criticise it: 80% of net proceeds go to charity. But I think a lot of us would know that net means that any number of large expenses could be thrown at it. Stuff like TV advertising must be running up the bills heavily, but all that gets paid before the charities get a cut.

The last set of results showed a large increase in turnover (amount of BOTB games played) yet also a bigger increase in profits - less tangible prizes given out per pound staked. Yet I bet virtually all players would have no idea whether implied value is getting better or worse. In fact it would be possible to drive down payout levels to very low levels (which then means profits are very high) and many players wouldn't have a clue.... they pay money every week, not really expecting to win, so are not very disappointed when they don't win, and still play again the next week.

With virtually all players losing, value is very diffcult to perceive. I think BOTB do a much better job than the competition here, with video content and consolation free bets.

But I guess for shareholders there must be some ambivalent feelings regarding this: increasing player fairness with regulations would be seen as a good thing by most of society but would be bad for BOTB business.
If these prize competitions become common, I think its inevitable that it'll happen as no doubt there will be more unscrupulous operators who wouldn't mind ripping people off.

Best Of The Best (LON:BOTB)

Thought I would have seen some pushback against my comments.

Looked into what I wrote a bit more on the weekend, so some other points.

Max entries per competition is 75. It was 150. It seems to me that an generous approximation of the odds of winning a competition if you buy maximum tickets is 1 in 5000. Thus the odds of winning 3 competitions comes out to 1.25 trillion.

For the Prash guy in practice it'll be less than that, as it may be safe to assume that he played in multiple weeks and didn't win, and also maybe also made multiple entries. But still on the face of it I think it leaves the odds beyond credibility. Combined with that Brandon guy (whose likely odds of winning so many competitions in that time must be around the same ballpark). I am quite unsatisfied with that considering these two cases are came in about the first 10-15 I looked at (only taking the unusual names).

Still haven't found any online presences of winners showing off their winnings. On the assumption that winners of cars suddenly turn into shrinking violets for fear of getting robbed, I looked at the other stuff. This guy won £12,000 worth of technology in April - he has posted some pictures of trainers he got, but not a hint of anything he supposedly has won. He is a bedroom DJ, with a Mixcloud, Instagram accounts but not Twitter?

I can only presume with the lack of reply the default position is that most people will agree that this doesn't look good, but will look the other way and give the company a pass on this. That is fine, but some of the plausible explanations for it I think are worthy of attention:

First case is whether it is possible to game the system by getting the judges general prediction in advance. If that could happen, naturally the odds increase. I don't view this as likely, although conversely I don't view the judges as high-profile enough. For instance if they paid for a current famous footballer or manager that would be really useful as he could front advertising campaigns as well. 

The more likely case is whether there is multi-accounting going on. I have some experience in the industry and most female accounts are suspicious, basically only created on behalf of a male in order to take bets or use bonuses that the male account is banned from. Thus multi-accounting is disliked, because those multi-accounts ultimately take value away from the book. I don't think there is the same motivation to go after multi-accounters in the same way here, because they would actually make more money for the company rather than lose it.

Another point on the winners; using people's real names puts out a lot of information. In the case of Prash and his wife, we can see where they live and their jobs and also their address. There could be something missing - ie a very rich relative in the family, or multiple houses - but on the face of it these aren't rich people to the extent that their prizes would make up a substantial part of their net worth. Using Streetview on the residential address given shows that none of the prize cars seem to be in there. I believe the logical thing to do would be to actually take the cash.

It reminds me that I went on holiday with a housemate that played BOTB in its retail guise at an airport - he loved cars and was attracted by the actual car being there. Yet if he won, he couldn't have kept it. For one, he couldn't drive to work in it. Affording the insurance would also have been an issue. He would also have to park it on the street outside our house where it would stand out like a sore thumb. Or he would have to pay to keep it somewhere else. The opportunity cost of holding a car instead of cashing it in is thus incredibly high, as he could have used the money to make a deposit to buy a house. Or if he owned a house, make some other investments which dont have such a high maintenance cost.

I think the above is true for a good proportion who win competitions, who didn't give thought to the practicalities of owning. But the winners list implies that nobody takes the cash, and they are pictured with the car. Is that really credible? Maybe I've missed something here, but if your total net worth is under £50k, and you win a car in excess of that, it makes no sense to keep it given the cash alternatives on offer.

I do think the reasons for the non-acquisition by betting companies are a few: the valuation is too high, and the barriers to entry low (the bigger books could simply add a 'Competitions' tab on their site if so inclined) but also that they might not be able to run the competitions in the current guise without attractive adverse attention either from their userbase or the regulators. For instance it seems possible that BOTB could list a Boeing 737 as a prize, even if they had no way of getting one, because they get to choose what the prize is every week.

There seems to be two primary defences against wrong-doing, one is that everything must be above board because its a PLC. This didn't stop Patisserie Valerie being a fraud, even though prior to that it, it looked like a superb company outperforming the market which had director selling despite a bullish outlook.

Second as mentioned before is that it would be hard to keep a secret. But a much bigger competition (McDonalds Monopoly in the US) was a fraud for years before it was discovered.

FWIW like I said before I don't think there is necessarily wrong doing, but what I think is happening is that most people take the cash. In the case of that tech bundle link I posted above, the alternative is £10k and many people would already own most of the items in that bundle. The site gives people the cash under condition of making a video pretending you are taking the prizes and an NDA from talking about it. 

That would seem to explain the lack of active Twitter accounts I've seen. After winning it may be that your acquaintances are quick to tag you in a conversation and ask about it, it may be better not to chance it and just not have Twitter for fear of letting something slip that breaches the NDA, or have the not good look of ignoring your acquaintances questions about the car. I do notice that the CEO at some point deleted his Twitter account; that many not mean anything on its own, but I would regard genuine winners social media as some of the best free advertising you could get - such as re-tweeting their interactions.

Why would they do this? I can think of a few reasons; if people suddenly realise that winning a car is more hassle than its worth, or that the cash prize is better value, the kind of 'impulse' element of playing goes, and if you are playing for cash, why not just play the lottery? Secondly there is a hard line in between prize competitions (no regulation) and lotteries (needs licence) so it makes sense to represent as as the former as much as you can. 

Genuinely interested to know if I am alone on these concerns.

”masterful inactivity” more or less the same as “benign neglect.”

Hi Pail.

You mentioned "The Art of Execution" yesterday and its advice to either sell completely or add on a large drop in the SP of any stock one holds. As a result I added more Jarvis Securities (LON:JIM) yesterday and today, at just under the mid-price... ...so thank you for that

I guess you should be applying this principal to Best Of The Best (LON:BOTB) ?

Premier Miton (LON:PMI) good write up Jack. One thing I would add is that they appear to be a good 30% undervalued compared to peers sitting at PE of 10 vs 13-15 range for others. I suspect this is a remnant of "growth" scepticism when they merged but the last few trading updates appear to be dispelling.

Mind the illiquid gap though - I already hold but tried to buy 7000 the other day and couldn't get anywhere near. Even when I put 2000 in the best they could muster an offer on was 169 shares at the price !! I wasn't going to chase it so I didn't investigate much further but worth bearing in mind.

Here's the much awaited PIWORLD interview with the very popular Richard Leonard. His views on markets, where we're at in the economic cycles, and those companies which he's been buying. His new picks include Made.com (LON:MADE), Devro (LON:DVO), National World (LON:NWOR), Synthomer (LON:SYNT), Wickes (LON:WIX) He gives an update on Reach (LON:RCH), Polar Capital Holdings (LON:POLR), Redde Northgate (LON:REDD) and of course Novacyt Sa (LON:NCYT) He's pretty clear what he's buying and selling, so you can assume he holds anything here. It's purely educational, to understand some of his thinking. Please do your own research on any stocks mentioned. Video & podcast.

Forthcoming PIWORLD events:

Vertu Motors (LON:VTU) Investor Presentation. We're delighted Robert Forrester, CEO and Karen Anderson, CFO will present to investors followed by a Q&A. Tuesday 13th July, 4pm. Register here. This has taken a long time to come to fruition, so I hope there will be lots of interest.

Exploring the listed private capital opportunity - Part 2. Listed private capiatl gives all investeors access to high-performing private equity and credit instruments. Presenting will be BMO Global Asset Management, CVC Credit Partners & £OCI. We had Part 1 earlier this week, and the funds are impressive, all achieved annual IRR of over 15%, sometimes much more. Not a class I was familiar with and it was rather interesting. Monday 12th July, 2pm. Register here.

Accrol Group (LON:ACRL) full-year results webinar. Thursday 15th July, 1.15pm. As part of the Group's financial results roadshow, Dan Wright, Exec Chair and Gareth Jenkins, CEO will present FY results. We'll get an update on the integration of the new acquisition and how business is shaping up.

Sosandar (LON:SOS) full-year results webinar. Wednesday 21st July, 11am. Another company Paul knows very well. They seem to have navigated CV19 very well. It will be interesting to get an update on trading once lockdown is relieved, and the advertising world returns to normal pricing. Register here.

Tekmar (LON:TGP) (virtual) Capital Markets Day. Thursday 22nd July, 4pm. Tekmar a leading provider of technology and services for the global offshore energy markets, is hosting a virtual Capital Markets Day events for investors. The events will provide further information on the Company’s strategic plan, and how, by building on the strong foundations of the business today combined with a robust growth strategy and attractive market fundamentals, the Company intends to deliver on its ambition to double organic revenue within 5 years and improve the financial characteristics of the business more broadly. Register here.

Seeing Machines (LON:SEE) (I hold) down c10%. Not sure why!

Hi Paul - you mention Best Of The Best (LON:BOTB) which is an interesting one I think. The reasons for the recent falls seem fairly clear, but the big question is at what level are the concerns/uncertainties  already 'in the price' and the risk/reward becomes favourable. There is no answer to this without a crystal ball of course, but to me it is looking attractive again at current valuation. Even in a scenario where growth is faltering a bit , it seems highly unlikely to not be growing at all (and even at this year current earnings its sitting on  PE of 12 now - almost certain to reduce materially forward for next year even with slower growth - which hardly seems demanding). This looks quite likely to look cheaper again in 12 to 24 months than it does now (or for the price to have corrected upwards) unless there is a real nasty lurking in terms of growth disappearing completely or some regulatory 'black swan'.  I seem to remember that in a recent interview with Tamzin (before the latest updates from BOTB) you'd  said that if it went back down to 2000 you might go back. Here we are now 20% below that level even. What are you thoughts on it now given the updates we've had since this time and have your views on it changed much?   Cheers,   BIACS

Premier Miton (LON:PMI)

Nice TU today - AUM up 8% for the quarter 2.8% of which is inflows. Seem to be finally making the merger with Miton work (which is how I hold) and new products proving their worth.

Stock report looks good and there is a Liberum Note on Research Tree raising TP to 210p

6% dividend looks good.

Phil

Would be interested in any comments from Open Orphan (LON:ORPH) from anyone, I hold - the RNS to me is fairly vague - no numbers unlike Cambridge Cognition Holdings (LON:COG) referred to above- which I don't hold.
It seems the RNS has been issued in response to the recent share price drop - it is up 8% as I speak but I would not be surprised if the numbers turn negative again.

My morning smallcap tweet:

Open Orphan (LON:ORPH) £DKN MJ Gleeson (LON:GLE) Bidstack (LON:BIDS) Cambridge Cognition Holdings (LON:COG) Chamberlin (LON:CMH) Senior (LON:SNR) Ilika (LON:IKA)

Open Orphan (ORPH) wins 'significant 'HRV & Influenza human challenge study contract. No £££. CO was "solidly EBITDA profitable in H1 2021 and we remain on target for a profitable and successful 2021." [SP=25 Cap=168m]
Dekel Agri-Vision (DKN) guides H1 significantly up on 2020's €15.4m rev, €1.9m EBITDA and €0.4m net profits. [SP=NA Cap=NA]
MJ Gleeson (GLE) guides FY(June) marginally ahead of market expectations and in line with 2019. [SP=870 Cap=507m]
Bidstack (BIDS) exclusive partnership with Belgrade-based Nordeus, best known for its flagship game, Top Eleven, the world's most successful mobile football management game. [SP=2 Cap=8m]
Cambridge Cognition (COG) £1m contract as the cognitive assessment partner for late phase cancer trial. [SP=163 Cap=51m]
Chamberlin (CMH) expects a return to profitability this FY as it recovers from BorgWarner contract loss. "We have already received considerable interest in our growing gym equipment range and now are preparing to launch a range of premium quality cast iron cookware for distribution across Europe." [SP=10.5 Cap=7m]
Senior (SNR) which recently rebuffed a 200p offer guides H1(June) rev down 13%, ahead of management expectations. Also expects FY slightly ahead of management expectations. [SP=160 Cap=671m]
Ilika (IKA) £24.7m placing and PrimaryBid offer at 140p, a nasty 30% discount, even though it's only 9% of capital. Needed to support the development of Ilika's solid-state electric vehicle pouch cells and to keep the lights on as it never make any money. [SP=200 Cap=278m]

In line: £

more good news from Cambridge Cognition Holdings (LON:COG) :

Cambridge Cognition Holdings Plc (AIM: COG), which develops and markets digital solutions to assess brain health, is pleased to announce that it has won a £1 million contract as the cognitive assessment partner for a late phase cancer trial. This is the second contract for a top ten pharmaceutical company with a strong pipeline of oncology products. The revenue from the contract is expected to be recognised over the next six years.

https://www.investegate.co.uk/...