Small Cap Value Report (Mon 13 July 2020) - CMCX, GPH, YCA, NCYT, AVCT, MWG

13th Jul '20 by Jack Brumby

135 comments 13253 reads

Hi, Jack here - Paul is delayed in London so I'm taking over until he gets back.

With lockdown easing, I finally caught the train back from York to Oxford myself at the weekend. As much as it pains me to say it, the weather is a bit better down south…

Some quick news to kick off. CMC Markets (LON:CMCX) has appointed Brendan Foxen as its new chief technical officer. Foxen was previously CTO of Contino, a digital transformation consultancy, where he helped grow the consultancy from 16 to 400 employees. CMC says the appointment will ‘will support the accelerated development of the many opportunities that are in the pipeline’, which sounds promising.

Of course, the group’s shares have been tremendously strong given recent market volatility - but given the above, maybe there is more growth to come?

YGUFESjz9bPpL8_8yeCW-XO1cEjVgrkCo7TeP4ZC

On 12.3x forecast earnings, that still looks like a modest valuation for a high quality, growing company. The question is if the company can replicate this year’s (probably) bumper results or if they will normalise in time towards a lower level.

Note that broker forecasts have nearly trebled for FY21 but FY22 estimates are anchored at around 16p.

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If you treat FY22 as a more ‘normal’ earnings level though that still puts shares on a forecast year 2 PE of just over 20x. So if there are good company-specific growth opportunities here, it could be worth a closer look.

Anyway, onto some results.

Global Ports Holding (LON:GPH)

Share price: 68.98p (-11%)

No. of shares: 62,826,963

Market cap: £48.75m

This is an absolute dive bomber of a share price chart. Global Ports Holding (LON:GPH) has been a bloodbath for shareholders unfortunately, and COVID has ruined recent trade.

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Shares are down 11% today as GPH has abandoned its pursuit of a premium listing. This was an explicit ambition mentioned in the group’s IPO documents, so it’s a blow that three years later this has not materialised.

The group says:

These decisions have been taken in order to strengthen the Company's ability and provide flexibility to respond to challenges created by ongoing Covid-19 disruption to the global travel sector and the economies in which…

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SaarfLondon

13th Jul '20

Motley were good in the early days - '99 /2000 - this is where Paul Scott became famous ! I remember his posts as Pauly Pilot and thinking crikey this guys switched on.

Motley now look like a parody account ..recent tip "Rolls Royce but have a minimum 10 year timescale " what! ??? COVID 20 something might have got me by then !

rmillaree

IncredibleMosesLeroy

This statement might be technically correct, but misses the big issue: the positivity rate. In Florida the rate of positive tests has increased from 5% to 19%, which means COVID is exploding down there.

Is it known though that the testing is on lfl basis ? if its not are you just assuming that its exploding when it could be asimilar quirk of the statistics?

for example say previously they limited tests to key workers and did not test most people who likely had covid that did not require hospital treatmment - i would expect this would be mostly a negative return result as testing was more rubber stamping someone was ok rather than testing due to the fact that they were presumed positive.

If the increase in testing is now down to the people who think they may have covid being tested in addition to the above sample then it seems pretty obvious to me that we would end up with a much higher % of positives from this new sample pool than the original sample pool and a higher overall % than was the case previously despite the fact the overall number of cases could be level/down or only verty slightly up.

I don't know if this could explain the higher rate alone or not but it seems a plausible scenario which would mean that some factoring in the types of test being conducted would be needed to work out what the heck is going on - really you need to do an ongoing blind trial of the general population to see what the real result is and i suspect that data does not exist for florida. Even then you have to be careful you are using a reasonable sample - i wander if the uk are continuing the trial they started some time back that looked at a random sample of the population each week or so.

Richdogg

any idea of how to stop my browser automatically uploading to the .app page - I like search old value reports but can’t in this web based app version

HumourMe

Motley were good in the early days - '99 /2000

That is when the mission creep set in, after American management was parachuted in; the venture capitalists wanted to see a return. Cost cutting followed, community and writers were axed (just another cost). Monetization initiatives followed. However, internally there was general awareness that the prior business model wasn't working and something else needed to be tried. By any measure, that TMF(UK) encouraged be applied to assess other business models, we failed to measure up on. Everyone there should have been aware that they should keep an up to date CV, and most knew it was not a matter of if, but when.

timarr

Testing in Florida and elsewhere is subject to all sorts of inherent sampling biases, although mostly those would get rapidly called out if they were happening. However, hospitalisation rates aren't subject to sampling issues and as you can see from the raw data they're steadily growing. All things being equal that suggests quite strongly that the real underlying number of cases is also growing.

https://covidtracking.com/data...

It's highly likely that the data is pretty representative of the underlying situation - not good, and getting worse.

eltorero

Hi Aston,

Just looking at this myself. and get a slightly different NAV. Only thing I am unsure on is number of shares to use.

Regarding the supply deficit, could you point me in the direction of research in this area.

Cheers

My NAV calc

Number of shares 88,215,716

Uranium in storage 9,320,000

Spot price $33 per lb

£/$ 0.79

=(9,320,000*33)/88,215716 = $3.48*0.79= £2.75

23jez

Hi ckidcurrie23

I entered the site and then clicked on today in the lt column and typed "Technical Analysis " in the search box; the reference is not at the top of the list so you need to scroll to find it.

I consider myself to be a long term investor not a trader, so the minutiae of the various signals are not so important to me as they are for a trader. When I am buying and selling I use Level2. and play with/use quite a lot of the indicators in my decision making, particularly volume, and Bollinger Bands..

So for the current situation you will will find some share price fluctuations on minimal volume even though there are a lot of shares in circulation. If this persists it tells me that most investors do not intend to sell I might then look who is buying and selling .If owners/insiders are not selling and particularly if they are buying I assume they have confidence in the company.

These high level successful investors keep it simple but their decision making is taken at at a very high level of abstraction. This is where all the work comes in, reaching that level of knowledge to be able to do this.

Best of luck. If you need some help let me know I will try to help you.

PS I am 80 years old; having contributed a huge amount to the school fees I am now working to contribute to University fees and educating my grandchildren as they are going to need more than one income stream in the future. If they learn to invest successfully they will not need to be wage slaves

FREng

Chatter on ADVFN suggests there has been a short report and attack on Manolete Partners (LON:MANO) today, which would explain the sharp fall. Has anyone here read the report?

peterg

Also so much of the comment on BOO sees the writers seeming to think this just a UK online retailer, and unaware of their huge and fast growing sales elsewhere. Customers outside the UK are not likely to stop buying clothes from BOO because of the current spat here.

Perhaps not, but if they have to sort out other suppliers who pay minimum wage, or their existing suppliers are forced to start doing so, their costs wil go up. And that will impact sales and profits.

Tombholliday

manolete reads very badly take your loss sooner rather than later

Thanks for the link Howard very informative. I am a retired medical doctor. What some of the references have highlighted is the opportunity costs of the huge resource diversion to COVID 19. These costs as is pointed out cause suffering and has been causing early deaths in some cases and are reducing longevity in others. A medical colleague's university friend had his chemotherapy stopped, was responding but died a couple of weeks later. Screening programmes have been halted with no indication as to when or if they will be resumed. This is in addition to the educational deficit and the increase in poverty and its health consequences.

We are very fortunate in this country in that we rarely suffer from natural disasters to add to our woes.

On the plus side there has been an outpouring of community spirit and kindness. My family live in London and I live in Yorkshire. I pride myself on being self sufficient and independent but my neighbours have been so kind and helpful with their unsolicited support. Our wonderful and cheap communication systems have mitigates many of the problems which would have occurred if this had happened 20 years ago.

I have watched this share for many years.in Stoko parlance I would call it a sucker sock

Gromley

#COVID

I was aware of the possible significance of the T-cell response, but not of that study from Berlin

" It showed that in 34 % of people in Berlin who had never been in contact with the Sars-CoV-2 virus showed nonetheless T-cell immunity against it"

If that figure is reliably represents a wider population, then it prompts me to wonder : Do people who quash he illness with the T-cell response : A - also start to develop antibodies whilst the T-cells are doing their job or B - not produce antibodies because the T-cell response is so rapid.

The scientists probably know this, but I don't!

The reason to ponder this is that if it is A - then these people would test positive to the antibody test and that might go some way to explain the large number of totally asymptomatic cases.

However if the answer is B - then there are potentially many more people that have been exposed to/ infected with the virus than revealed by the antibody testing. Which would mean we are somewhat closer to herd immunity - still not very close to be honest and if herd immunity is only a short term factor then it may not be very relevant.

In a similar vein I read some interesting speculation (I can only recount it, not validate or critique it) a few days ago as to why the Japanese seem to have faired so well.

To probably slightly mangle the scientific description :

When we are exposed to a new virus for the first time, we quickly start to produce IGM antibodies which start to tackle it. At the same time we start to more slowly produce IGG antibodies to also tackle it.
Once we are "immune" to the virus but get exposed to it again, the IGG antibodies replicate more quickly and defeat the virus before the IGM antibodies really get going.
The study I saw (and now cannot find again) said that in Japan people were showing predominantly IGG antibodies.
If you are still with me, this implies that the Japanese may have been exposed to something similar in the past and have some degree of inferred immunity. I haven't got the detailed data to fully back it up, but I believe the young rather than the old in Japan have been disproportionally diagnosed with Covid (mortality in the elderly is still higher).
This has some echoes to Spanish Flu where the young were disproportionally impacted because the older population had experienced something similar before.

As I say, just something I read, not sure if it is proven. But if it is it would be a positive for potential herd immunity supported by a vaccine.

Flipping back now to T-Cells. One of the tricks Covid has up it's sleeve is to suppress T-cell production and therefore some of the remedies being looked into are about boosting the T-cells.

With the Berlin study above in mind, I wonder if that only benefits "the 34%" (which could still provide clinically significant results) or everybody.

Anyway, meandering finally back to investing proper; I personally think it is a bit of a mugs game at the moment to try to second guess the science and position your portfolio accordingly.

However, I do now recall that during the period of the GFC, having stabilised the rest of my investments; I had great fun (and quite a lot of success - it was a bit like shooting fish in a barrel) working out whether "the market" would next be bullish or bearish on Barclays (LON:BARC) . At the time I did not have the confidence to play this for big money but at least I enjoyed it.

I have not worked out at this stage whether the market (or individual stocks) are reacting predictably to predictable news. It might be something to look for - one of my "Mello buddies" who likes to hide in the background may have the answer - If you are reading, you know who you are!

PMs still work for me ;-)

The Amateur Investor

Do they come in as soon as they're released, or is there a delay?

GrahamF

Hi Francis

I hear what your saying.

During my career I had some involvement with environmental and sustainability issues and the terms are a bit vague sometimes. Companies also issue corporate social responsibility reports and so on.

But there are many measures that crop up regularly such as

Carbon footprint
Water footprint
VOC (volatile organic carbon) emissions
Heavy metal and hazardous chemical discharge
Amount of waste going to landfill
Amount of recycled paper and plastic used
Etc.

So, this is taken seriously by many of the major international companies. By improving their performance against these goals year on year they do indeed have a very positive effect on the environment. Some of them have made great progress.

So, this is the sort of thing that is generally meant by sustainability in the commercial world outside of finance. Fund and trust managers may take a different slant on it but I wouldn’t immediately poo poo it without looking under the bonnet.

MichaelFBS

maillot has not run its course and therefore you are not comparing like with like.

I suspect that when C19 has run its course the deaths in a year will be approaching a million plus.

Further the health consequences for some survivors. One hospital in the US has had to remove the entire gut of five patients, there have been lung transplants.

You don’t want to get this disease at least until there is a better treatment or something like Avacta (LON:AVCT) ACE2 blocking Affimer.

No it is not the flu.

Kind regards

Michael

Thanks Tim. Great comment.

Thank you for that I hadnt spotted it.

ckidcurrie23

14th Jul '20

Many Thanks 23jez for taking the time to reply.

Lots for me to learn in that stream.

Good Luck with your University Fees, totally agree if you can teach your children the benefits of investing they have the years to allow things to compound. I have ISA's set up for all 4 of my grandchildren to encourage that mindset.

Thanks Again

JonBirdy

15th Jul '20

Hi Andy, from your comments and experience of the industry, should we take that a cheap ‘made in the UK’ t-shirt bought anywhere is most likely made by an exploited workforce?

(Re: Boohoo. No position).

Small Cap Value Report (Mon 13 July 2020) - CMCX, GPH, YCA, NCYT, AVCT, MWG

Global Ports Holding (LON:GPH)

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Jack Brumby

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