Small Cap Value Report (Mon 10 Oct 2022) - RFX, BOWL, LINV, QTX, MADE, JOUL, BKS

10th Oct '22 by Paul Scott

46 comments 8428 reads

Good morning from Paul & Graham!

Podcast - the summary for last week went up on Saturday, on podcast platforms, and here on my website. Last week's "mystery shares" (i.e. 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.

CEO Interviews - I enjoy doing audio interviews, and am planning on doing more. This week I've got 2 planned, both on Thursday, both are shares I hold personally this time (they're usually not), being -

Beeks Financial Cloud (LON:BKS) (reporting today)

XP Factory (LON:XPF)

So if readers here have any clever questions that you want to suggest, I'd be happy to hear them in the comments below. I would stress that my interviews are fairly high level, so trying to understand the businesses generally, not usually drilling down into minute detail. So I can't promise that I'll be able to ask your specific question (that's more suitable for the excellent webinar formats run by PIWorld, or IMC, and others), but it would be good to hear what topics you think are most interesting for me to ask about.

Agenda

Paul's Section:

Hollywood Bowl (LON:BOWL) - another positive trading update, ahead of expectations for FY 9/2022. Although I can't crunch the numbers accurately, because there's not enough information provided, and no broker notes available to me. The balance sheet is strong, with lots of net cash driving a self-funding roll-out of new sites. The dividend yield is now 5% and growing. So the fundamentals look great. Will the boom continue though? That's the big unknown, and the key to determining if the shares are cheap, as they seem, or just enjoying a boom that might fizzle out eventually?

Beeks Financial Cloud (LON:BKS) (I hold) - Results FY 6/2022. Just to let you know, I'm currently working on this section, it should be up between 1-2 pm. Update: see tomorrow's report, as this section missed today's cut-off.

Made.Com (LON:MADE) [no section below] - a quick update from last week. As previously reported, this heavily loss-making online furniture company is up for sale, in a last ditch attempt to avoid running out of cash & insolvency (it has previously…

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Camtab

10th Oct '22

Hi Paul, thankyou for the podcast. Becoming my Monday morning go to. Given Beeks have said "We have the potential for considerable additional growth given the size of the sales pipeline, however these types of discussions will take time to flow through into contracts and revenues" I would be interested to hear their thoughts on how the pipeline is affected by the macro environment in particular the falling markets which clearly impact on investment companies profits.

simoan

Does anyone know what is happening with Indivior (LON:INDV) today (I hold), figures look wrong ?

As a holder you should know about the 1 for 5 share consolidation.

cheeky_minnows

Interactive Investor shows as price £0.00 in my account, and no messages... I obviously missed this one.

The Boon Fund

While the Intercede (LON:IGP) management commentary says "trading in line", it looks like on constant currency basis they are poised to do maybe £12.2m FY22 revenues, which is higher than the £10.9m average broker forecast in Stocko.

Also, H2 should see higher reported GBP revenues, as their main revenue currency is USD. So assuming maybe a 12% FX benefit, that would mean close to £13m FY revenues. Quite a beat on £10.9m forecasts. Most of that beat will drop straight to the bottom-line (fixed costs mainly GBP), so profits should see +£1m boost from current forecasts, which is +1.7p extra EPS. Much more than the current 0.4p EPS in Stocko FY22 broker forecasts?

I also believe many AIM shares have been oversold; it was nuts that Intercede's market cap before today was £22m, and net cash (before acquisition) was £10m, almost half! I am kicking myself for not buying more, as I had my buy trigger at 37p, and the shares came close (39p ask) before today.

I'm still digesting today's acquisition, so don't have a view yet. But you can see that trading is going quite briskly; £2.2m positive cashflow in H1 demonstrates how reliable and solid the revenue flows are here at Intercede.

(I hold in the Boon Fund)

planetx

Good point . Would have been nice if they had included that detail in the update .

Looks cheap but definitely not for me .

johnmhughes

Sold at the top and buying at the bottom. Another IPO failure for shareholders.

cazulas123

Hi Paul, thanks for your podcast and write ups. I thought I would let you know that the non Stockopedia subscription subscribers have been able to see your mystery shares this week as the top section of your write-up appears in the emails if you subscribe to them. Therefore, if you want them to stay hidden, it might be a good idea to put them at the end of your write-up.

andrewdb

If used carefully..

I have subscribed since '15 and the real performance of all their buy tips does comfortably beat the FTAS (like SimonT in the IC there is often a surge when published, I count from 2 days post publication). They do tip some losers - there is a v.big variation in returns.

I use it as a filter - their tips and F Score > 5 and SR > 60 and I start reading / looking for myself from that shorter list.
Is it worthwhile - not sure, I think the SNAPS portfolio type approach may be beating the SCSW GP3 - probably as it holds bigger companies.

SCSW's commentary on macro issues is a bit delphic, but pretty incisive .

bertendeltrude

Unless you are a shareholder buying at the bottom ;)

tic_tac_toe

Hi Paul, very grateful if you did manage to sumamrise your thoughts on friday's £JDW. Always appreciate this, and certainly, only if you felt you had the time. no stress.

Note that the share price isn't a lot higher than when it floated in 2016. Yet the business is considerably bigger & more profitable now.

Worth remembering there have been at least two placings since 2016 (7.5m shares in April '20 and 13m more in March '21). I make that ~14% dilution. You need to take that into account when viewing the share price.

All the best, Si

yiannos1

Hi Paul ,

Quiz plc had an update today but I haven’t seen it being covered in the small cap value morning report ( unless I am missing something ).

Are you still a holder of 2% of the company as you have previously stated?

Thanks

Yiannos

Paul Scott

Hi Yiannos,

I had most of my small cap positions (including QUIZ) in a leveraged account with Spreadex (BIG mistake!) so this bear market has multiplied my losses on those positions by typically 4-5 times. I did downsize a lot of the positions in stages, but more recently (as mentioned here, and in my podcasts), I capitulated on lots of positions, due to mounting, geared losses.

So I'm not actually holding many of my previous positions any more, to protect what's left of my capital.

In that context, I did hold onto a smaller position in QUIZ at Spreadex until a month or two ago, but had a final clear out and that one had to go unfortunately. My view on the company's fundamentals is unchanged, I basically had to sell most positions, rather than actively wanting to sell them.

So as things stand now, no I don't hold any QUIZ any more. Pity, as I'm sure my analysis was right all along, but everything's getting beaten up in current markets.

The agreement I've always had with Stockopedia is that I have to disclose whether or not I hold each share, when I write about it. But in between reports, I'm free to buy or sell as I please. In practice, I transact very little, as I think longer term, but of course there was a complete mismatch between that investing stance, and using a geared account. Normally it worked well, but in a sustained bear market, it's been disastrous. Plus my hedging strategies last autumn went horribly wrong too. All a bit of a tale of woe. So going forwards, I'm not going to put long-term positions into geared accounts, but instead will focus on putting the long-term holds into the accounts where I own the shares outright. No more shooting for the moon, I think slow & steady is going to be the way forward for me.

Regards, Paul.

Yes, good point Si.

Hollywood Bowl (LON:BOWL) had 150m shares in 2016, which has risen to 171m, about 14%, as you say. Not too bad actually, over a 6 year period that included the pandemic. But you're quite right, it needs to be taken into account when looking at the chart.

Thanks for flagging!

Hi tic_tac_toe,

Yes, I do want to look at J D Wetherspoon (LON:JDW) but there are too many other things taking priority right now, hopefully we can cover it later this week.

I think it's a very interesting, unique business, due to its value for money offering.

Good question Camtab, I shall ask Beeks Financial Cloud (LON:BKS) in my interview on Thursday. Had something in mind already, but you're reinforced it, so thanks!

Hi cazulas123,

Oh no, schoolboy error from me there, thanks for flagging it! I'll have to put the mystery shares right at the end in future.

11th Oct '22

https://www.youtube.com/watch?...thanks

I do not think you should hold any positions ( short or long term ) in any geared account. This is a friendly advice (based on multiple clients I have seen in the past losing everything). Leverage is just gambling your money and hard work away. But I am sure you have realised this by now.

12th Oct '22

Yes, you're completely right, I agree.

Small Cap Value Report (Mon 10 Oct 2022) - RFX, BOWL, LINV, QTX, MADE, JOUL, BKS

Agenda

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Paul Scott

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