Small Cap Value Report (Mon 19 July 2021) - BOOM, SUMO, INS, BOOT, MEAL, ACC, EYE, DX.

19th Jul '21 by Paul Scott

69 comments 10689 reads

Good morning, it's Paul & Jack here with the SCVR for Monday.

Timing - today's report is now finished.

Disclaimer -

A quick reminder that we don’t recommend any stocks. We aim to cover trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty.

We stick to companies that have issued news on the day, with market caps up to about £700m. We avoid the smallest, and most speculative companies, and also avoid a few specialist sectors (e.g. natural resources, pharma/biotech).

A key assumption is that readers DYOR (do your own research) - don't blame us if you buy something that doesn't work out. Reader comments are welcomed - please be civil, rational, and include the company name/ticker.

Agenda -

Paul's Section:

Two takeover bids today - a not very credible one for Audioboom (LON:BOOM) and what looks like a done deal for Sumo (LON:SUMO) at a lovely 43% premium - well done to shareholders of SUMO, it's time to put out your bunting!

Parsley Box (LON:MEAL) - H1 trading update seems OK, but the slowdown in new customer acquisition, and confusing outlook comments might have spooked a few people? Better outlook for H2, the company says. Difficult to value, as pre-profitability.

Eagle Eye Solutions (LON:EYE) - a positive-sounding year end update. Looks very expensive on conventional valuation measures.

Dx (group) (LON:DX.) - another positive trading update, but difficult to value without knowing the split of business by activity.

Jack's Section:

Instem (LON:INS) - two 'transformational' acquisitions bedding in at this life sciences software provider. Premium valuation but organic and acquisitive growth prospects, recurring revenue, and predictable cash generation do suggest potential.

Henry Boot (LON:BOOT) - ahead of expectations update with good pipeline of opportunities.

Access Intelligence (LON:ACC) - momentum in recurring annual contract value but continues to be loss making, with a large potential acquisition suggesting further dilution for existing holders.

Paul’s Section

Takeover bids

Two more are announced this morning. We’re seeing a tremendous flurry of takeover…

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Andy Sav

19th Jul '21

Me too! Stock Performance chart is showing a 23% portfolio drop since the start of the year and a 14% drop from mid June. I'm happy with my picks and not budging, but its hard going seeing a 1 - 3% drop on a day (and had a few of those now :( )

Boon

This is the Buy the Dip opportunity. Lots of small caps I'm tracking getting near my Buy target prices. In some cases, blowing through it and getting to my "no brainer" price.

I'm buying as currently on 50% cash across my SIPP and ISA. But not going to go crazy as also respecting the other rule: don't time the market and buy too much in one day or week. Better to spread out your purchases and sales.

Harry Hindsight

Been thinking about Blackrock Smaller Companies Trust (LON:BRSC) for a while to diversify the small caps and maybe same in mining but even the so called experts don't seem to get it right.

Paul Scott

Hi Indie,

Thanks. Several readers have also emailed me about Parsley Box (LON:MEAL) and why they find the products useful, so it's clear there is definitely a niche market for this product. All food for thought, I'll keep it on the watchlist, as a webinar from management a few months ago did impress.

Regards, Paul.

Lefty99

Slightly different, but I think Keywords Studios (LON:KWS) ( I hold ) is worth looking at. Jack did a write up on all the possible video gaming candidates last April, which is worth a look.

stegga1000000

Just as the Coinbase IPO marked the recent top in bitcoin, perhaps 'freedom day' will mark the top in markets? That would be delightfully paradoxical. The truth is nobody knows, but we believe caution is warranted.

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

Rusty2

Frontier Developments (LON:FDEV) is now up 8.9% today.

£TM17 is up 1.2%

fanmail

The whole show sounds like a dogs dinner and a deeply unappealing offer - I am a BOOM shareholder and they are going to have to reveal a lot more leg if I am to become interested. Currently it is little more than smoke and mirrors. Risible.

samg

We are fairly large users of carrier services and £DX (I hold) is certainly doing a much better job than its now PE held main competitor Tuffnells. Many of the DX directors came from Tuffnells before they sold it to Connect Smiths News (LON:SNWS) for a tidy profit about 4 years ago. Covid freight increased volumes by about 30% I believe so with a fixed cost network it should kick.

Cleeve

Well share price at the moment of #BOOM is £ 9.50 so taking away the £ 2.00 in cash leave £ 7.50, with 12.5 shares in #AAA meaning you are paying 60p per AAA share. AAA completed a recent fund raising at 80p a share so I think it is reasonable value, of course you have to like the AAA story otherwise you are best to sell into the market

Kevin Holloway

I've also topped up on Shanta Gold (LON:SHG)

abmo

Yeh I've noticed my investment portfolio started declining from the highs this year from June onwards. I am not too worried however as the companies I'm invested in have solid fundamentals, bright prospects and cheap valuation.

I will just hold out and if additional funds do become available, I will invest them back into the dips of high quality businesses.

Westway001

Very interesting link, thank you stegga

dcon85

Thanks Paul, re: Alumasc (LON:ALU) - I was just reading that report at the time! Certainly did look like a buying opportunity. I was almost tempted in the brief minutes of the dip, especially on no news - but having been only acquainted with the company for a few minutes I thought I'd better do a bit more research and be sensible!

Silver Moon

As things stand today shops may start closing due to lack of deliveries to them, oo-er, Boris you may have bigger problems than imagined.

Silver

mark1308

20th Jul '21

If one or two percent means a lot to you then i have to ask - should you be investing in shares as one/two percent is a regular occurrence !

Not on 150 companies all in one day it isn't, Mark, sure you get a seesaw but as I say, not all down at once.

timarr

Hope you are right timarr, minus one or two per cent all the way down my portfolio today means a lot to me.....

2% is nothing. Back in 2008 we had sustained falls of 5% a day for the best part of six months ... In normal times I'd reckon on a 20% drawdown every couple of years and a 30% to 40% drawdown once a decade.

Being equipped to buy when markets are collapsing and the end of the world is nigh is a critical part of a long term investor's armoury. Them's the times when there's big money to be made. Trouble is people tend to buy the stocks on the way down that made them money on the way up, which tends to drive them in momentum plays on the wrong side of the hill.

But these aren't normal times and the market pullback is clearly recognition that the reopening trade isn't going as expected - vaccination rates are falling in younger cohorts and in some conservative US states have completely stalled. There is perhaps a glimmer of recognition that normal isn't going to look like it used to, and that leads to uncertainty, which leads to volatility.

But as yet, this isn't even a dip, let alone a correction.

mwjackson

Small corrections of 1-2% in a day happen at LEAST once a year in my experience, nothing to worry about

The Phoenix

Wise words Timarr your normally on the money any thoughts on when you think we may get back to near normality 2-3 years if we do manage to achieve some form of herd immunity.

This also assumes covid doesn't mutate to something worse all be it my limited understanding was the odds were higher it should dilute as it mutates rather than mutate into a more dangerous form.

Regards Andy

Small Cap Value Report (Mon 19 July 2021) - BOOM, SUMO, INS, BOOT, MEAL, ACC, EYE, DX.

Paul’s Section

Takeover bids

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Paul Scott

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