Small Cap Value Report (Mon 12 Dec 2022) - TLY, ARB, TSTL, CNIC, EXR, AGFX

12th Dec '22 by Paul Scott

66 comments 8609 reads

Good morning from Paul & Graham!

This week should be interesting. We had snow yesterday, and then rail strikes kick in from tomorrow. So I imagine most of the country is likely to be in chaos. Here's our back garden in London yesterday - rather lovely, especially as it's so rare here. It normally looks the same, but without snow.

Podcast - went up on Saturday, covering loads of companies. The mystery shares (my best ideas of the week) will follow further down in a short section below. I've got to work out a better way of doing this, but I tend to make it up as a I go along, and structure follows later.

Mello Monday - it's the last show of the year, online today, starting at 5pm. Paul Hill is doing a presentation with some stock ideas, he's always brimming with interesting ideas, and has a fantastic personal investment track record, so well worth listening to. Also there are 3 company presentations.

Agenda

Paul's Section:

Totally (LON:TLY) [quick comment] - announces a big contract win, for £66m, over 5-8 years. Totally looks an interesting company I think - providing outsourced services for the NHS in specific areas (this latest contract is to operate urgent treatment centres, to relieve the pressure on A&E Depts, which sounds extremely useful). Although Totally has a good growth track record, it’s not made anything much in the way of profit - this seems low margin work, won in competitive tenders. If the company can raise margins, then the shares could become more interesting. EDIT: Thanks to StrollingMolby, who points out in the comments below that this is replacing existing contracts, and we're not told if it's on better, or worse terms. So impossible to tell if this is good news or not. (no section below)

Tristel (LON:TSTL) - an encouraging update from this niche medical disinfection products company. A decent H1 performance suggests that it might be heading for a full year beat against expectations. Cash is fine, with £10m on hand. Valuation is the tricky bit - it still looks over-priced to me.

CentralNic (LON:CNIC) - a positive trading update, the CFO steps up to become the new CEO, and it suggests share buybacks are on the cards - which seems a strange decision considering…

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planetx

12th Dec '22

Hold a big position in equals which is similar. I also know the CEO of argentex from long time ago and errr, well I prefer Equals .

Portmerion I do like and will look again .

Ricardo is out as I’m not keen on consultants

Gyugyu

Invinity Energy Systems (LON:IES): just read the RNS on the 1st of December, there are no secrets.

topturkey

Both look good but for a Retail business faced with the well published headwinds (even if 10-pin entertainment is still decent value and very popular which I agree) isn't a high single digit P/E about right, i'd be wary of buying anything much over 9ish. Could be short term upside on positive trading updates though so good call.
Just don't think it's going to have a high % return potential unless takeover or holding for many many years.

PJY5

How on earth does ENGAGE XR Holdings (LON:EXR) get a 'High Flyer' Stock Rank style and an Altman Z2 score of 59.9 (ie 'safe' from bankruptcy risk) when its never made a profit and losses appear to have been increasing year on year?

carmensfella

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Berksbee

I wish I was an interested bystander - unfortunately I am a long term holder of LON:KMK who is not very good at deciding when to jump. I am however with you in your thinking. There seems to be a steady stream of positive news about orders in the last few weeks and the forecasts are for a 50% revenue growth which I suspect may be beaten. Unfortunately the forecast for Net profit is still -£3.5m and they seem to have burnt through £15m in the last few years. Even at this bombed out price it is at 2+* revenue so a lot of optimism baked in . Find it very difficult to recommend to others but I am starting to think cash burn will come to and end and if revenue growth gets repeated we may have lift off!

davidallen77

bowling places also a nice place to stay in the warm for families rather than home bills.

The Boon Fund

in-line trading update buried an announcement by Accsys Technologies (LON:AXS) today that the CEO is stepping down. The CFO stepped down in summer, so it looks like a nice clean sweep out of the old management, who have presided over a factory construction fiasco.

Here's hoping new management now start to make good on Accsys potential and be able to ramp up manufacturing without any further issues!

Silver Moon

Surely planetx, if your heirs are looking for a windfall you might be prompting them to give you a new car and couple of foreign holidays to encourage you to chase after the IHT AIM Cos you worry about.

mammyoko

Are you already a holder of Eneraqua Technologies (LON:ETP) ? Good, growth prospects with market tailwinds, winning contracts and management with significant skin in the game.

BnB

I like the story and the valuation on this one but the liquidity (or lack of it) keeps me on the sideline.

MIK

Hi Paul,

Hope you're keeping well! Just a short note re CentralNic (LON:CNIC) (I hold) following your write-up; the large amortisation charges are I believe related to acquisitions and the CFO (now CEO) has explained them as spreading out of the purchase price(s) paid and do not correspond to cash/cash flow in the given period or any future period. So for example amortisation of customer databases and trademarks etc. These are not assets that would not need to be purchased again. They've said this is why they take EBITDA as a more useful metric to value the company. If you're interested there are several presentations on Investor Meet Company. They also go into what they term as organic and non-organic growth. The net debt position also seems resonable c. $63m at half year and most recent udpate and less than 1 x EBITDA. Cash conversion ususally over 100% and the graph looks encouraging. I'm sure as you mentioned that a cleaner set of accounts would make things easier for investors to see the business/metrics more clearly.

Best wishes,

Michael

Volution (LON:FAN) - rumoured bid for this on Betaville apparently, hence the spike this afternoon. I bought this at the recent lows having missed out back in 2020. Good capital allocator producing strong ROICs and FCFs in a sector with strong regulatory drivers. Well diversified between UK, Europe and RoW.

I still see value if the rumour turns out to be just that and good upside if it proves well-founded.

FREng

Paul,

A busy day I realise, but if you can find the time to look at Coral Products (LON:CRU) this evening or tomorrow, I too would be grateful.

Sosandar (LON:SOS) is reporting tomorrow, I believe, so that will take priority, I expect!

(I hold both)

Whitbourne

An extraordinary statement from Argo Blockchain (LON:ARB) this evening:

...certain draft materials were inadvertently published as a test page on the Company's website. The inadvertently published materials, which implied that the Company was filing for Chapter 11 bankruptcy, led to the suspension of trading of the Company's securities on the London Stock Exchange and Nasdaq on Friday, 9 December 2022. Shareholders should note that the Company has not filed for bankruptcy at this time.

The Company has requested that the UK Financial Conduct Authority restore the listing of its ordinary shares and that is expected to happen as soon as practicable.

It's good to understand what lay behind the suspension, but the explanation hardly inspires confidence.

This was also notable on the StockReport page - ARB's peer group. All indicators flashing red.

Rusty2

Just had a look at Coral Products (LON:CRU), under share holder activity it has directors have sold 7% of the shares, but I can't see any directors sales. Any ideas?

Ridley1966

persistent selling by Fidelity & Amati. Everdura is largest award to date , 15MWh- grid resilience for Taiwan. Revenue forecast for 2023E fully covered by existing contracts. Some expectation about further awards before 12/22 Y/E & significant contact award anticipated by 1Q23( UK LODES competion) which Canaccord say likely to be larger than Everdura

Effortless Cool

Hi Rusty2,

You are correct, there have been no director sales at Coral Products (LON:CRU) . I expect the issues arises from Stockopedia incorrectly attributing shares released from Treasury as director sales.

13th Dec '22

Suspect we may see a secondary placing by management to improve liquidity. Only Slater with a disclosable interest ATM

Small Cap Value Report (Mon 12 Dec 2022) - TLY, ARB, TSTL, CNIC, EXR, AGFX

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Paul Scott

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