Small Cap Value Report (Mon 19 Aug 2019) - IXI, GNK, RBG, BVC, MTI

Monday, Aug 19 2019 by

Good morning, it's Paul here. I'll be looking after you this week.

HQ tell me that subscribers like it when I give a rough idea in advance of anticipated timings for each report. My plan for Monday is to write mainly in the afternoon, with anticipated completion time for this report of c.6 pm.

Tue, Wed & Thurs reports this week should be finished by late morning, because I have meetings lined up in London for the afternoons.

There's hardly anything to report on today.


Share price: 41.8p (up 23% today, at 15:48)
No. shares: 46.8m
Market cap: £19.6m

Trading update

IXICO plc (AIM: IXI), the data analytics company delivering insights in neuroscience...

The company description means this share is well outside my comfort zone!

As the +23% share price suggests, today's update is very good;

Given the performance in the period to date, the Board anticipates that the results for the full year ending 30 September 2019 will be materially ahead of current market expectations.

I usually assume that "materially ahead" means about 10% ahead.

  • Strong revenue growth in H2
  • New & expanded contracts coming on line
  • Increasing demand
  • Newly developed algorithms
  • Faster turnaround times

That all sounds encouraging.

Interim results - 6m to 31 Mar 2019 - these figures were published on 22 May 2019. Improved profitability, of £215k after tax (on £3.4m revenues in H1).

I focus on the after tax figure for any company that has a negative tax charge due to R&D tax credits (which I'm assuming is the case here). Since tax credits are a bona fide contribution to profitability (assuming the tax rules remain the same).

Balance sheet is notably strong, with almost £7.5m in cash, and no debt. That followed a placing, which seems to have raised more money than the company needs. Still, a balance sheet stuffed full of cash is very nice for investors, as it de-risks things considerably.

My opinion - this looks worthy of a closer look. I have no idea how to value it, as this is not a sector I have any knowledge at all on.

The very strong balance sheet, and good current trading, plus a strong order book, all look attractive.

Stockopedia is not impressed yet, with a low StockRank.


On the downside,…

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IXICO plc is a brain health company. The Company's brain health focus includes Alzheimer's disease, Huntington's disease, Parkinson's disease, behavioral health and adolescent mental health. It is a provider of clinical trials services to pharmaceutical companies. Its products include Assessa, mehealth, MyBrainBook and TrialTracker. Assessa is a decision-support tool for healthcare professionals looking to diagnose dementia and detect the underlying causes. mehealth is an online software for clinicians at the point-of-care to support decision making and improve the monitoring and treatment of patients. MyBrainBook is a digital platform to improve the quality of life and service delivery for people living with dementia and their supporters. TrialTracker is a Web-based system that allows users to track their imaging-based research study or clinical trial in real time. It is also collaborating with partners to develop companion digital health products. more »

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Revolution Bars Group plc is a United Kingdom-based operator of bars. The Company has a trading portfolio of approximately 60 bars located predominantly in town or city high streets, which operate under the Revolution and Revolucion de Cuba brands. The Company's bars focus on a drinks and food-led offering, and typically trade from late morning, during the day and into late evening. Revolucion de Cuba bars are characterized by their 1940s Cuban-inspired style, with dark woods, traditional bar counters, antique tiles, vintage furniture, Havana-style ceiling fans, and original Cuban artwork and photographs. Its bars are located in various places, such as Cambridge, Ipswich and Norwich in South East; Bath, Plymouth and Southampton in South West; Birmingham, Derby, Leicester, Loughborough and Milton Keynes in Midlands; Cardiff and Swansea in Wales; Blackpool, Chester and Huddersfield in North West; Sheffield, Sunderland and York in North East, and Edinburgh and Glasgow in Scotland. more »

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Greene King plc is an integrated pub retailer and brewer. The Company operates approximately 3,040 managed, tenanted, leased and franchised pubs, restaurants and hotels, including brands, such as Hungry Horse, Chef & Brewer, Flaming Grill, Farmhouse Inns and its Greene King locals estate. The Company's segments include Pub Company, Pub Partners, and Brewing & Brands. The Pub Company segment is engaged in the operation of managed pubs and restaurants. The Pub Partners segment is involved in the operation of tenanted and leased pubs. The Brewing and Brands segment is engaged in brewing, marketing and selling beer. The Company's ale brand portfolio includes Old Speckled Hen, Greene King IPA, Abbot Ale and Belhaven Best. The Pub Company segment operates approximately 1,820 pubs and restaurants across Britain. The Company's breweries include Westgate Brewery, which is located in Bury St. Edmunds, and Belhaven Brewery, located in Dunbar. more »

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  Is LON:IXI fundamentally strong or weak? Find out More »

42 Comments on this Article show/hide all

psin 19th Aug 23 of 42

Folks, this article really does bear repeating. If I have read it correctly it affects all of us.
Published by Reuters
The final five minutes of trading have become the busiest time of day for stock market traders in Europe.
Aside from an initial burst of activity after the open in the morning followed by a brief flurry when Wall Street opens, a growing portion of the daily equity volumes is now concentrated into the five-minute closing auctions at the end of the day.
The growing popularity of passive and index-tracking funds and tougher regulations are driving the shift, which is draining liquidity in the $11.1 trillion market and raising concerns about big price swings and possible disruption to price discovery.
The trend is also fracturing the industry as rivals look to take a slice of the action by launching their own post-close trading products. If sustained, it will likely stir the debate about whether there is even a need in the long term for an elongated trading day.
Products like exchange-traded funds (ETFs) and hedge funds typically use end-of-day prices set during the closing auctions for their daily pricing.
Equity ETFs in Europe have ballooned in recent years and are now worth about 500 billion euro. That's up more than 8% in the first half of the year and a whopping 38% from January 2017, according to Morningstar data.
With their rise, the five-minute window between 1530 and 1535 GMT each day is capturing a bigger portion of daily volume, which averaged about 70 billion euros in June.
Closing auctions across Europe's major bourses have on average accounted for 20% of daily average volumes in the first half of this year, and hit their highest on record of 23% in June, according to Rosenblatt Securities which tracks volumes.
That's up from just 13% three years ago. There is a similar trend in the United States, where activity is also clustering in the auctions.
Activity typically spikes in the final month of each quarter, as funds scramble to participate in the auctions that set the value of their investments for the quarter.
This year though, there has been a pronounced and steady rise each month as banks, brokers and asset managers find the auctions provide the deepest pool of liquidity.
"The rest of the day is meaningless and you can't see flow," said Andrea Vismara, chief executive office at Italian boutique investment bank Equita.
The jump has been particularly noticeable this year as overall trading volumes have slowed amid tighter regulation and rising costs and as investors have in general shunned equities even as prices have soared.
Onerous paperwork imposed by the EU Markets in Financial Instruments Directive (MiFID II), which came into force early last year, has also helped drive the shift. The reporting process for regulatory purposes is simpler if trading is executed at the closing auction.
The trend has drawn the scrutiny of the French market regulator Autorite des Marches Financiers (AMF), which warned last month that lower liquidity may distort price-setting mechanisms and increase price swings.
Closing auctions on Euronext's Paris blue-chip CAC 40 stock index <.FCHI> account for as much as 40% of volume, it found.
"The associated risks are a deterioration in price formation and liquidity during trading sessions, not to mention the operational vulnerabilities at the end of the day given the volumes concentrated in the closing auction," the watchdog said in its report.
Liquidity begets liquidity
While it's not clear if it has yet disrupted price formation, interviews with a dozen traders and senior executives at international banks, brokerages, wealth managers and exchanges show that the trend is upending how they do business.
For a start, liquidity begets liquidity - as more traffic goes through the closing auction, it has a self-amplifying effect.
"In many cases, volumes in the closing auctions are so significant they cannot be ignored," said Derek McCole, head of equity dealing for EMEA at Aberdeen Standard Investments.
He has adjusted to the new norm. He tends to place a percentage of an order at the settlement price in the closing auction and then opportunistically trade the rest of the order if a certain price is hit.
But some executives say it is getting more difficult to do big block trades during the day, forcing many to save large transactions until the end of the day. That leads to even lower liquidity during the remaining 8-1/2 hours.
"The market opens, nothing happens and then the U.S. come in. It's busy for the first hour and then it quietens down," said a senior executive at a global bank.
"People are struggling to get orders done. If people are looking for blocks, they wait until the closing auction."
Rare source of revenue for exchange operators like Deutsche Boerse and the London Stock Exchange , the rise of closing auctions provides a rare and much-needed source of revenue.
The exchanges often charge higher fees to transact in the closing auction compared with intraday levels. Each bourse has a different fee structure so it's hard to pinpoint an exact premium.
But signs have emerged that the financial industry is divided over the trend, with CBOE Europe and Aquis Exchange launching rival platforms to break the exchanges monopoly.
CBOE says it will not charge customers until the end of the year to use its 3C product, while Aquis charges a fixed 10,000 pound subscription.
Aquis Chief Executive Alasdair Haynes said he wants his company's Market at Close product to provide competition to the exchanges. He estimates the fees for closing auctions are costing the industry an extra 75-100 million pounds each year.
The product got UK regulatory approval a few years ago, but it has only seen volume pick up in recent weeks, a spokeswoman said.
That rise in interest has come as banks aim to slash costs due to razor-thin margins, which have been eroded by the burden of extra regulation and lower volumes.
"There is no doubt there is a correlation with banks trying to save money and the interest in our product where there's a serious cost reduction for the banks," Haynes said.
But the Aquis and CBOE foray has, in turn, stirred worries about drawing liquidity away from the main exchanges.
"There's a perception that the exchanges exploit their monopoly position for the closing auctions, so the lower fees offered by alternative products may be attractive for brokers," said Rosenblatt Securities' market structure analyst for Europe, Anish Puarr.
But "there may be a danger in fragmenting" liquidity in the auctions, which provide a vitally important official closing price, he said.
Investors like Equita and Aberdeen are also worried that alternatives could attract volumes away from closing auctions, distorting price creation.
"As these different ways of trading the close appear, that could potentially weaken the existing closing structure if liquidity gravitates away from the primary market onto these other mechanisms," said McCole.
(Reporting by Josephine Mason; additional reporting by Simon Jessop in LONDON and Inti Landauro in PARIS; Editing by Hugh Lawson)
Copyright (2019) Thomson Reuters. This article was written by Josephine Mason from Reuters and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to
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crazycoops 19th Aug 24 of 42

Hi Ken

I hope you are well.

I’m with you on UK focused companies - some (including those you mention) are looking exceptional value. Selectively, my current focus is to buy more of these, especially where the dividend outlook is strong. At some point, money will flow back into UK assets and high yielding shares in a low interest rate environment will be a compelling proposition.


Blog: Share Knowledge
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Lord Gnome 19th Aug 25 of 42

In reply to post #506006

Ken - Your thinking mirrors my own. Just re-introduced AV. and GFRD to the income portfolio last week. Valuations were just crazy to my eyes, come Brexit or anything else for that matter. Already hold several of the others that you mention. Didn't see the GNK bid coming though.
Sold my CNKS at 50p taking a very large loss. I think the dividend is in for a sever haircut this time around. Value at below cash means that it is still on the watch list - looking for signs of new life under big Jim.

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ken mitchell 19th Aug 26 of 42

In reply to post #506046

Lord Gnome.

I also didn’t see the GNK bid coming. Maybe some hope now that Revolution Bars which I’ve held at a loss for ages will also get bid for?

I’m heavily down on Cenkos too, and should have cut the loss, but at current price any hint of new life (as you put it) could see a decent bounce. And Crystal Amber’s Richard Bernstein is pushing for something but not sure what. Also sector ripe for mergers?

Simon. Good to hear from you. Encouraged that you and Lord Gnome (and maybe many others?] also think that there are so many shares on crazy too low valuations.

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Edinburgh Investor 19th Aug 27 of 42

In reply to post #506006

Where did you get the £FB p/e of 70 from?  

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ken mitchell 19th Aug 28 of 42

In reply to post #506081

Oops! I meant Amazon and not Facebook. Facebook PE is in the 20s.

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sharesurfer 20th Aug 29 of 42

In reply to post #506006

Nice reading your message but I think there is one thing you are forgetting. The stock market cares not for the past or what was but what will be. It discounts future cashflows not past cashflows. If a stock trades on a low PE then there is a reason for that. It is trading at a price that the market thinks is 'fair'. This is especially true of big caps which are better researched and have liquidity. Because a company has a high yield and low PE does not make them good value. In fact, often times, a basket of low PE stocks perform worse than high PE stocks.

In times of panic you can get value. What I mean by that is you can get temporarily very low prices that don't reflect the true intrinsic market value because everyone is panic selling. But hardly think nows that time. You could say that was the case in 2008 or after the Brexit vote.

What I mean is - take say Aviva which you mentioned. It has a low PE and high yield. But how can you say it's good value? How can you say the market (loads of institutions, intelligent investors etc) are all wrong? Do you know something they don't? What is fair value? I think the market (with all the news it knows) takes a dim view of future prospects hence the PE is low. Until Aviva can demonstrate earnings surprises to the upside, that dim view and low PE will remain.

I would just say to everyone - careful of using historic prices to predict the future because that's something the market does not do!

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Bouvier 20th Aug 30 of 42

"Let's take back control".
That was the war cry of the Brexiteers.
So we will leave the EU (or maybe we won't). But meanwhile we are busy selling off our businesses to foreign organisations. We are now seeing Greene King go to Hong Kong and BRITISH Steel has also just gone to Turkey. The only British owned car company is Aston Martin and there is the potential for the car industry to be wiped out.
The irony.

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ken mitchell 20th Aug 31 of 42

In reply to post #506106

I don’t understand your reasoning. Bombed out shares with successful business do recover when sentiment changes.  If they didn’t once down they would stay down. Buy low and searching out good value shares is a proven way to succeed if buying quality.

Note too the takeovers like Greene King yesterday. Intelligent investors (as you call them)are seeing great value Companies here in the U.K. A shame though that some bombed out great British Companies are sometimes falling to foreign bids. Rewarding for their shareholders, but otherwise sad. These bidders see value where perhaps you don’t?

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nicobos 20th Aug 32 of 42


I feel Revolution Bars (LON:RBG) is more the "ugly duckling" in the sector at the moment.

The only Corporate consolidator in the sector is Stonegate and after their approach for Revolution Bars (LON:RBG) was previously rejected (which I thought was a reasonable offer), they went on to buy Be at One (a far better business imho) instead and now have their hands full with integrating EI (LON:EIG). Revolution Bars (LON:RBG) is now far too small to move the needle on their returns so will probably be left on the shelf unless it gets into difficulties and they can pick it up out of administration.

So who's left to buy £RBG?

Private equity could be an option but any business reliant on discretionary spending with the current macro risks are out of favour. The PE pipeline of casual diners and multi-site retail roll-outs has well and truly been turned off. As one mid-market consumer focused PE house mentioned; they can't invest in the space as how will they manage to get a successful exit ?

I hope that something comes out of the blue but I feel you could be waiting a bit longer yet to get your Revolution Bars (LON:RBG) payday.


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Splode 20th Aug 33 of 42

In reply to post #506031

Interesting article from Reuters but of course the move to more auction trading mainly applies to large/mid caps stocks. It is worth noting that it does not apply to many (most?) of the shares considered by the SCVRs.

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sharesurfer 20th Aug 34 of 42

In reply to post #506171

Hi Ken, please don't think that I am in any way criticising you and your methods. Its just a different opinion.

My point was that in normal times (as opposed to panic selling), the market forms the view that these are fair prices. If the price is low its normally becuase prospects are bad. It could be because its a cyclical and demand is forecast down. It could be downgraded forecasts. I don't know much about these shares but just a cursory glance tells me with Aviva, BT and Galliord forecasts are down. Legal and General forecasts are up so don't know why thats down but theres probably some reason.

If you are buying true quality (sustainable and high OM's, ROCE/ROE), with bright prospects then these are mostly not on sale. I have a list of these that I want to buy. If there is panic selling, I might get my chance. For example, Experian, Hargreaves Lansdown, Burberry, LSE, Rightmove, Fevertree, Craneware, GB Group.

Like I said, no criticism intended at all. I enjoyed your post. Wish you all the best.

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tony axon 20th Aug 35 of 42

Hi Paul regards to builders,and Persimmon is in your report today. I have the great misfortune to live next to the new devon town of Cranbrook. I do mean next door ,this past year they have started in the fields next to my country lane way in. The relevance of my comment is to explain that they,and their close partner TW continue to build unabated,and only yesterday were suggesting upping the original 3000 dwelling idea to 18000 long term.I would further add,since they 'moved' in over the lane they have been working 6 SIX days a week,and sats are 7.30am to 4.30pm. So there is DEFINITELY no sign of any slowdown here. Tony

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andrea34l 20th Aug 36 of 42

In reply to post #506241

I hold Mitchells & Butlers (LON:MAB) which are well up in recent days, and up 6% today - they are another rumoured takeover target in the pub & restaurant sector.

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Edinburgh Investor 20th Aug 37 of 42

In reply to post #506091

Ahh, no worries.  I was worried my own data was off!

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djpreston 20th Aug 38 of 42

Ive been a holder/buyer of Marston's (LON:MARS) for some time now. Just as a solid high yield stock with a low PE and a strong brewing business. Underpinning are the high % of freeholds that they have (although they have quite a debt pile).

Been content to let the divis roll in whilst the brewing business grows.

The outer was, in my mind, a separation of the brewing business or the property angle.

Also held Greene King (LON:GNK) but not in such large quantity sadly.

As far as the general UK market goes, it is hugely under-owned by institutions on a historical basis and all the interest is in the international UK names not domestic. That sort of scenario always gets my contrarian nose twitching.

Fund Management: European Wealth
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Gromley 20th Aug 39 of 42

In reply to post #506386

Apologies, for being Off-Topic, but I just wanted to say 'wow' and hello.  djpreston - another ex 'TMFer', great to see you here (it looks like you have been here a lot longer than me, but I just hadn't noticed.

Without wanting to 'gush' too much, I think the quality of the clientele is  a great testament to Stockopedia.

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herbie47 20th Aug 40 of 42

In reply to post #506171

For foreign investors UK companies may well look cheap as the £ has fallen considerably since Brexit, also compared to many US companies they may look cheap, I can see many more takeovers and not just bombed out companies. For UK investors value may not be so obvious. Yes it is sad I agree but unless the UK can sort Brexit out then things won't improve for a while.

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djpreston 20th Aug 41 of 42

In reply to post #506391

Hi Gromley

I wasn't sure if it was you but yes, Ive been here essentially from the start but more as a lurker for the past couple of years. Lots of familiar names.

Best regards

Fund Management: European Wealth
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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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