Small Cap Value Report (Mon 19 July 2021) - BOOM, SUMO, INS, BOOT, MEAL, ACC, EYE, DX.
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.
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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 bids for UK companies this year. Private equity is said to be awash with cash, and overseas investors & companies seem to see the UK as cheap, with a lot of bids coming from America. This factor, and the strong V-shaped economic recovery (driving mostly positive trading updates from companies we're reporting on here), is why I’m personally staying 100% invested, despite the recent market correction in lots of shares.
Today we have -
Audioboom (LON:BOOM)
885p (Friday’s close) - mkt cap £139m
An announcement issued by All Active Asset Capital Ltd.
This one doesn’t look a done deal yet, as it’s still at the discussions stage, and apparently not agreed by Audioboom.
Also it’s mostly in shares, with a cash element - not a very good structure in my view. All cash deals are much better.
Any offer, were it to be made, would consist of 12.5 new AAA shares and 200p in cash per Audioboom Share (the 'Offer').
This creates a theoretical bid premium of 36%, valuing AAA shares at 80p.
AAA shares are currently suspended. This is ringing a bell in my head, I think we looked at AAA recently, with one reader thinking it looked cheap. I had a look and there was something wrong with AAA, but I can’t remember what. If you can remember the discussion we had about it, please post a comment below.
My opinion - this doesn’t look very good. Takeovers funded with shares are only of interest if the shares being issued are in something large, liquid, and high quality. AAA shares don’t meet any of those 3 criteria.
Audioboom has improved significantly (my notes from 23 June 2021 trading update are here). It reported strong revenue growth, although still no real profits, so it’s very difficult to value.
Before deciding what to do, I think Audioboom shareholders would need to research AAA, in particular find out what other investments it holds, and whether you would be happy to hold those investments too?
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Sumo (LON:SUMO)
358p (Friday’s close) - mkt cap £614m
This is a much more credible bid, from a huge Chinese group Tencent, listed in Hong Kong.
It’s a cash bid at 513p, a premium of 43%
Recommended by Sumo’s Directors.
Valuation is a multiple of 55.4x adjusted EBITDA - that’s a seriously punchy price! Stockopedia shows SUMO is priced at 40 times FY 12/2021 forecast earnings. Add the 43% bid premium, and that’s a 2021 PER of 57 times - I don’t think anyone can complain about being paid that sort of price! (although investors usually publicly complain that bids are too low, whilst gleefully snapping up the cash on offer!)
27% irrevocable undertakings to accept the offer, plus Tencent already owns 8.75%, therefore 33.4% is currently in favour of the offer, and that’s likely to rise.
My opinion - this is a very credible bid, in a different league to the one above for Audioboom.
What will be interesting, is whether US competitors might join the fray with a better offer? We previously saw something along those lines with another takeover in this video games sector.
It’s a pity to see decent UK growth companies getting snapped up by overseas bidders in a way, but a premium’s a premium. Investors can then use the money to buy up other interesting shares, and you can buy 43% more of them with the bid premium.
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Parsley Box (LON:MEAL)
139.5p (down c.17% at 08:58) - mkt cap £59m
Parsley Box Group plc (AIM: MEAL), the rapidly growing direct to consumer provider of ready meals focused on the Baby Boomer + demographic, today provides an update on trading for the interim period ending 30 June 2021 ("HY21"). The Group's half-yearly report will be notified on 7 September 2021.
Strong H1 2021 growth driven by repeat purchase rates and average order value
H1 revenues - over £14m, up 26% on H1 2020, and up 411% on H1 2019
Net cash - £6.5m cash (and no debt) at 30 June 2021, mainly from £5m raised at IPO in March 2021
New customers - growth rate slowing down (128.7k growth H1 TY, down from 154.3k growth H1 last year - probably to be expected, since H1 LY included boost from lockdown 1)
Repeat customer orders - rose 38% to 256k - that’s quite good, because the company’s stated business model is to acquire new customers, who then have a good lifetime value as repeat customers, and order in larger amounts (average order value is £22.98 for new customers, but rises to £43.30 for repeat customers)
Current trading/outlook - I think this is what might have spooked a few people into selling this morning, and in the strangely wobbly market we have right now, it doesn’t take much to slam a share price down a lot -
As Covid-19 restrictions ease, shopping behaviours are beginning to normalise and this has had some impact on sales growth. However, the Board anticipates that this effect will be short term and is confident that the accelerated shift in consumer behaviour towards our direct-to-consumer model is permanent and that the underlying growth drivers of the business and the favourable demographic trends, remain in place. The Board expects H2 revenue growth to be substantially ahead of H1, driven by product innovation and continuing progress in repeat AOV…. We look forward to delivering the first phase of our product innovation pipeline in H2 2021.
That doesn’t seem very well explained to me, it comes across as contradictory. As an aside, who decided to start putting an “s” on the end of behaviour? It’s funny how language can change - herd behaviour. If shopping behaviour is “beginning to normalise” then why would this effect be short term? That just doesn’t make sense to me.
Maybe H2 could see faster growth because the marketing spend could rise, using the IPO proceeds?
My opinion - I’m undecided on MEAL, and need to see a longer term track record of growth & a move into profits. Even then, it might be a bit too niche? I’m generally sceptical about companies that have clearly benefited from lockdowns, telling us that it’s permanent structural growth, and floating their shares on a toppy multiple of pre-lockdown profits (or losses in this case). Remember that’s what Best Of The Best (LON:BOTB) told us about growth, and then promptly warned on profits (just weeks after a large placing of Director shares) when the last lockdown was eased somewhat.
Hence my feeling is that, if a company has clearly benefited from lockdowns, then I’ll completely ignore everything the Directors say about it!
Also, I’m not keen on business models where the valuation rests entirely on splitting the customer base into supposedly highly profitable existing customers, and the losses all coming from marketing spend to recruit new customers. Similar to what Naked Wines (LON:WINE) does. Whilst there is some logic to that, the numbers are not audited, as far as I’m aware, and there’s considerable scope to define KPIs any way you want to, as there aren’t any binding accounting standards on KPIs - businesses can make up any definitions they want.
My other reservation with MEAL is that the product really isn’t very good, based on two orders I’ve placed with the company. The pieces of meat were almost microscopic, and nothing like the pictures in the brochure. Would customers be surprised & delighted on receipt of the product? Not if they ordered the fish pie, that's for sure. Although the half bottles of red wine were fantastic quality.
Why would anyone need ready meals that can be kept in a cupboard for months? Surely people have fridge/freezers? Edit - several people have come back to me on this point, and it's fair to say that there clearly is a niche market for these products. What the total market size is though, I'm not convinced it's that big, but time will tell. End of edit.
Overall then, I remain a bit sceptical about MEAL, but am happy to change my mind if it continues growing, and moves into profit. So one to watch for a while, I think.
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Mello reminder
David Stredder has just been on WhatsApp asking me to remind readers here that it’s Mello Monday again today, the last one until September. I'm looking forward to Ed's section on the Stockopedia share picking competition. Although the way the market has been in the last few weeks, those end June numbers are probably already considerably wilted.
Eagle Eye Solutions (LON:EYE)
547p (up c.1%, at 11:41) - mkt cap £140m
Eagle Eye, a leading SaaS technology company that creates digital connections enabling personalised, real-time marketing through coupons, loyalty, apps, subscriptions and gift services, is pleased to provide an update on the Group's trading for the year ended 30 June 2021 ("the Year").
Exiting the year with positive momentum
The financial highlights show the arguably misleading EBITDA profit. I say misleading, because this ignores heavy development spending (which is capitalised onto the balance sheet) and also ignores amortisation of previous development spending, so it’s a bogus measure of profitability in this case, in my opinion.
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Looking back at the interims, here is the split -
Revenue - H1 £10.8m, H2 £12.0m, so a decent uplift there
Adj EBITDA - H1 £2.1m, H2 £2.1m - no change
Net cash - £0.1m at 31 Dec 2020, £0.8m at 30 June 2021
At the interims stage, the highlights section also included a line for operating profit, which was a paltry £0.2m (from adj EBITDA of £2.1m). I see that row has mysteriously disappeared from the highlights section in today’s update, clearly because they only want us to see the nice numbers! Correction - sorry, I got this wrong. The company doesn't put operating profit into trading updates, but it does put it into interim & full year results statements. My apologies & am always happy to correct factual errors.
Commentary/outlook reads positively, it needs to, to justify the market cap, e.g.
· Multiple new customer wins, including Pret a Manger in the UK, Woolworths in Australia, and Staples US Retail, providing a strong platform for further growth in FY 2022 and beyond
· New business pipeline continues to grow at record levels in all regions
With a growing customer base and record sales pipeline the Board looks to the future with increased confidence.
My opinion - I can’t make sense of the valuation of this share. However, the market seems to like it, and the share price has been resilient in a really tough market at the moment. There's been an upgrade to broker forecasts today, I am told.
People must like the gradually building flow of recurring revenues, sticky big name customers, global reach, and positive outlook comments.
It’s a nice company, but how on earth do you value it?
I think it’s far too expensive, but it doesn’t matter what I think, the price keeps going up!
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Dx (group) (LON:DX.)
32.5p (up c.2% at 12:16) - mkt cap £187m
Jack looked at this specialist freight business here in May 2021, on publication of a positive update. He noted Director buying too, suggesting the turnaround looked credible.
Today we get a slightly extended 53-week year end update -
DX, the provider of delivery solutions, including parcel freight, secure courier and logistics services, is pleased to announce an update on trading for the 53 weeks ended 3 July 2021.
It’s good news again, this company seems to be on a roll!
This is the most important bit in today’s update -
... the Board now anticipates that DX will significantly exceed existing market forecasts1 for adjusted profit before tax for the financial year ended 3 July 2021.
Note 1: Adjusted pre-tax profit excludes share-based payments and amortisation of acquired intangibles. Prior to this announcement, the range of market estimates for adjusted pre-tax profit for the current financial year was £10.0m - £10.3m.
Significantly exceed. What do we reckon that means? Maybe £11-12m adj PBT now?
Net cash also sounds healthy, and is above expectations at £16.8m
The commentary talks about new business wins, efficiency gains, new depots opening, which all sounds like a business on the front foot.
My opinion - not really a sector that interests me personally, but it’s good to see DX coming back from a pretty awful situation a few years ago.
I don’t think they’ve ever explained where the profit actually comes from though? The structurally declining DX service for solicitors (mainly) used to be highly profitable, but as it’s being replaced by emails, then who knows what the future holds?
Without a proper split of profits by activity, as opposed to bundling things together into divisions, then it’s not possible to forecast with any certainty. The only people who really know, are the Directors, and their buying has been fairly steady over several years now. Not massive amounts, but it looks more than just for show.
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Jack’s section
Instem (LON:INS)
Share price: 750p (+1.35%)
Shares in issue: 21,780,699
Market cap: £163.4m
Instem is a provider of IT solutions to the global life sciences market. The group came to market in 2010 with strong recurring revenue, a good market position, and solid cash generation. It has continued to grow sales since listing.
Market conditions have been tough at times in Clinical but, following a slide in 2017 and 2018, the group’s shares have rerated aggressively, from a low of 145p in 2018 to some 740p today three years later.
The strong performance means that Instem shares are not obviously cheap but as is often the case with software companies, the question is whether today’s ‘full’ price actually disguises a well run scalable company with the potential to be much larger in five years’ time.
Instem’s solutions allow clients to collect, analyze, report and submit data to regulatory agencies and help them discover new insights from public and proprietary data. It enables these companies to create safer and more effective drugs and chemical products. The group is focused on the early development stages, from late discovery and lead optimisation through to Phase III clinical evaluation, and regulatory submission management.
It has grown organically but also by acquisition - seven in the eleven years since listing - so could be able to expand steadily in future assuming a sufficiently large market.
Instem performed well across all areas of the business despite the ongoing backdrop of COVID-19 and continued to execute its acquisition strategy
- Additions of The Edge Software Consultancy ‘The Edge’) and d-Wise Technologies (‘d-wise’),
- H1 2021 revenues increased by approximately 45%, including a four-month contribution from The Edge and a three-month contribution from d-wise,
- Like-for-like revenue growth (excluding contribution from the acquisitions) was approximately 8% which translated to 15% growth on a constant currency basis,
- Strong operational cash generation and closing cash balance of £17.9m
A Progressive Equity note helpfully points out that the cash balance is up to £17.9m after the initial acquisition costs for The Edge and d-wise, growing by c£3.9m on the £14m balance disclosed in the wake of those purchases.
Instem says the d-wise and The Edge acquisitions have ‘transformed the scale of the business and further broadened the Company's offering across the drug discovery and development lifecycle, increasing recurring revenues and strengthening relationships with clients’.
Like-for-like growth of c8% is encouraging over the Covid period and goes some way to justifying a premium rating; in fact Instem notes ‘favourable market conditions’. That and the cash from recent placings paint a confident picture.
The company must continue to grow though - and on that point it notes increased visibility of revenue and ongoing opportunities within new and existing client bases.
Outlook - Trading continues to be in line with the Board's expectations and the company is well placed to grow organically and via acquisition.
Conclusion
Growing recurring revenue, strong cash generation, scope for margin expansion, and ongoing organic and acquisitive growth opportunities. There is a lot to like on the face of it here.
As above, the main stumbling block is valuation after a multibagging performance over the past 24-36 months or so.
Instem does operate in a space that provides the potential for strong shareholder returns over time, so I’m not writing it off as too expensive, but it does need to justify its rating with attractive growth prospects.
Some of that depends on the ambition of the management team. The Director Dealings page shows only director sales so far (made during placings as part of retirement plans) but then on the Major Shareholders page we can see institutions increasing their holdings.
They would presumably not be doing that unless they sense a substantial opportunity from here. The group has a small pension deficit which looks to be under control. Very little in the way of debt.
All in all, Instem continues to flag itself as a company of interest.
Henry Boot (LON:BOOT)
Share price: 276.98p (+6.12%)
Shares in issue: 133,293,982
Market cap: £369.2m
Henry Boot has been successfully operating in land, property and development for over 130 years, which suggests at least that the company can continue to operate as a going concern for the foreseeable future.
It looks like a frustrating hold for longer term investors however, with no real capital appreciation for five years or more. This was the central concern flagged in the last SCVR write up - perhaps today’s positive update will address that.
There are three segments:
Land promotion
- Hallam Land Management - strategic land and planning promotion, well into its third decade of acquiring, promoting, developing and trading in land,
Construction
- Henry Boot Construction - construction contractor to public and private clients,
- Road Link (A69) - which has a 30 year contract to operate and maintain the A69 trunk road between Carlisle and Newcastle.
Development
- Henry Boot Development (HBD) - dealing with more ambitious developments,
- Stonebridge Homes - builds and sells family homes in Yorkshire,
The group also has Banner Plant, which offers a range of products and services for sale and hire.
Henry Boot PLC announces ahead of its interim results that, as a result of strong trading across the Group, performance for the full year is now anticipated to be ahead of the Board's expectations.
Trading has been strong across the group, with HBD performing particularly well. Here, growth in both occupier and investment demand within the industrial and logistics market, has led to an investment portfolio valuation in excess of half-year forecasts. Further improvement is expected in H2 due to the planned retention of several assets that are currently under construction.
Boot has made acquisitions in both the industrial and logistics market and urban residential market continues to have a ‘significant development pipeline’ moving forward. The company has returned to a small net debt position of c.£13m as it gets to work on these new development opportunities.
Henry Boot Construction continues to trade ahead of expectations on an already full orderbook for 2021. Banner Plant's trading levels are back to those experienced in 2019 and are now trading ahead of budget for the year. Road Link (A69) continues to benefit from an increase in traffic levels which are exceeding initial expectations.
Hallam Land Management and Stonebridge Homes are trading in line and continue to benefit from a buoyant housing market.
Conclusion
Perhaps soon Henry Boot’s shares will comprehensively break through that all-time high c300p barrier. It’s a prudently run company that is currently benefiting from a supportive market and its own initiatives, with a healthy looking pipeline of future opportunities.
The group’s mix of businesses is unspectacular but in demand and has provided ongoing opportunities for more than a century. There is value in its solid mix of property development, land promotion, construction, plant hire, housing and Road Link.
A disrupted 2020 should ultimately prove to be a bump in the road for such a company and at present the PE ratio is set to fall from 17.6x in FY21 to 12.2x in FY22. Pre-pandemic, normalised EPS hit 32p back in FY17. Given the strong outlook for construction and surrounding industries, perhaps Boot is looking to recover to that type of level, in which case there could be further upside from here over the next couple of years.
It’s certainly worth considering that scenario at least, because here we have a prudent, modestly valued company, with a solid balance sheet, that relentlessly pays dividends while keeping a lid on shares in issue.
As such it could be a good long term hold candidate for patient investors - but the share price has lacked momentum in the past.
Access Intelligence (LON:ACC)
Share price: 119.5p (unchanged)
Shares in issue: 85,891,053
Market cap: £102.6m
Another software company here but, unlike Instem, Access Intelligence is not profitable.
Despite that, it is valued at an even higher premium on a price-to-book basis and at a similar multiple of trailing twelve month sales (5.38x vs 5.71x). Perhaps this is partly due to eye-catching forecast revenue growth, with FY22 revenue expected to be multiples of those seen in FY20.
The group provides software to the global marketing and communications industry.
- Annual Contract Value (‘ACV’) base increased by £2.7m (25% annualised) to £24.7m (H1 2020: growth of £1.1m to £19.1m) and H1 revenue increased by approximately 17% to £11.0m (H1 2020: £9.4m).
- Adjusted EBITDA loss of £135,000 (H1 2020: loss of £147,000), reflecting additional investment in sales and marketing to drive global expansion.
- Blue chip customer contracts won in North America, with this region contributing 23% of total ACV growth in the period.
- At 31 May 2021, cash balance was £8.8m (helped by placing of 12.5m shares raising £9.6m in net proceeds).
Adjusted EBITDA is adjusted for share based payments, share of losses of an associate and non-recurring expenses relating to the proposed Isentia transaction, in addition to the acquisition and integration of Pulsar in the prior period.
Post period end, in June 2021, the group announced the terms of a recommended acquisition of Isentia for an equity valuation of approximately AUD$35.6m (£19.4m).
This will be funded by an oversubscribed conditional placing of 39,847,658 ordinary shares and a conditional subscription for 1,819,009 ordinary shares to raise aggregate gross proceeds of £50.0m. The proceeds will also be used to repay Isentia's gross debt of approximately AUD$45 million (£24.6m).
So the dilution continues apace. Such a large acquisition on the back of sustained net losses strikes me as risky. Why not focus on proving the profitability of the core business first? Unless proving profitability is a tough ask and management hopes a large acquisition or two will be the boost it needs.
Conclusion
After however many years as a listed company, continuing to make losses at the adjusted EBITDA level is not particularly promising. Admittedly, this comes after investment in sales and marketing. Momentum looks to be picking up in terms of annual contract revenue.
There’s a poor track record here though from a shareholder’s perspective, so Access needs to convince us of why the future will not resemble the past. It’s racked up a lot of net losses, and that makes me slightly skeptical about the shoot-the-lights-out revenue forecasts.
Meanwhile shares in issue have been steadily marching upwards as investors fund the company and slowly get diluted. Shares in issue are even higher than the below chart suggests - now up to 85.8m rather than the 72m reported in FY20. This should end the year higher still after the Insentia placing.
High profile partnerships with Twitter and Amazon do show product quality and industry awareness, with some high profile clients including Google, Spotify, Verizon and Twitch.
It’s certainly possible that a company of real, enduring value is being assembled here, and the addressable market is probably large. Some extra research might be rewarded if there does prove to be a promising company approaching some kind of inflection point behind all the losses. It’s my first look here, so I can’t comment on that.
But with so many profitable growing software companies out there - Instem being one - I’d much rather start my search there.
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69 comments
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.
Mello tonight......Here is the link to the show...
https://www.stockopedia.com/content/mello-monday-and-a-halfway-review-of-the-2021-stockopedia-stockpicker-competition-838384/
Didn't the market fall on the last "freedom day" we had? Interested in what other investors are doing here with everything falling. Sitting tight, selling up, drip feed or wait for an upturn?
Probably a lot of people waking up on "freedom day" to either isolation notices or messages from friends who've been told to isolate. I didn't initially pick up on the wider market dip so I sold a couple of things that had gone a bit flat. Bought a couple of things on the watchlist that looked cheap.
And generally thinking about stocks that aren't about to announce their recent gains are all down to lockdowns, and yet have either made structural changes that could cope with another one / are well positioned to weather an uncertain period.
But maybe those are the shares to buy as many are going into isolation, so more online, more deliveries etc. Maybe shops closing due to lack of staff etc.
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
Possible we should change the name to lock-up day, with the three big offices of state locked up and every person and their dog being pinged to be isolated, LOCK-UP day would be a more accurate description of the day.
With some industries reporting worker shortages of 10-15%, government policy seems to be counterproductive.
Still, this looks like a buying opportunity as everything is ok or the government will have to reverse direction soon.
BSV
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/...
Very interesting link, thank you stegga
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.
Volumes look light to me. Lots of things being marked down by 5-10% on very little trade volume.
something like Tremor International (LON:TRMR) down 9% on £1.5m share value traded. That's an £85m market cap move!! Given they now have circa £220m in net cash on a market cap of £900m and I expect them to do EBITDA of around £100m+ this year that's now on an EV/EBITDA of sub 7.....looking cheap again all of a sudden.
Lots of other examples too today.
Interestingly I have noticed over several years now going back to around 2011 (irritatingly should have kept notes) that almost every summer between mid July and August we seem to have at least one of these wobbles. Whilst we have known the school holiday effect for a long while, it feels as though the city has got considerably quieter for longer over the last decade as finance has become less entrepreneurial and I suspect this effect is exacerbating the illiquidity moves, particularly in the UK.
Good point about keeping notes- I was thinking the same. I have a reminder in my calendar which says "market will fall for a few months" in May. Tremor International (LON:TRMR) is odd in that a lot of activity happens once the US opens due to the additional listing
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.
Hi Paul, you wondered, Why would anyone need ready meals that can be kept in a cupboard for months? Surely people have fridge/freezers? One example - I know of a grandmother that bought her student granddaughter about three dozen Parsley Box meals, knowing that in a flat of 5 there wouldn't be room to store that much food in the fridge or freezer but that she would have the space to store them in her room.
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.
The problem I have is HK companies bidding for UK cos is actually a Chinese Co bidding for a UK Co and increasingly I see a problem with this. Political I know but quite relevant in this case, in my view of course.
Especially since Hsbc Holdings (LON:HSBA) is so flat. I do fear for it and as for Ganfeng's intentions in the world of lithium, for instance Bacanora Lithium (LON:BCN) China's greed is overwhelming.
Silver
Anyone know what's going on with Alumasc (LON:ALU) ? I was doing some research on it and saw its down 27-33% today, I can't find any news from today? glitch in the matrix?
I got my broker to ask a market maker what was going on with Alumasc (LON:ALU) and why it was down by a third today. MM replied it's just an illiquid stock, in a rubbish market, no news, stop losses, that kind of thing. So it looks like a buying opp to me, but who knows - there's always a chance the seller knows something we don't. But it did issue a positive trading update last Thursday, which I reported on here. Mentions supply chain problems, as so many importers are saying at the moment.
P.
Paul, I did look at buying some Alumasc (LON:ALU) but I was too late and the spread was around 15%.
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!
Yes noticed that as well. A big spike down.
Paul I plead guilty to mentioning #AAA before and a reader gave a strong analysis as to why he felt the stock had issues around it, I did respond on some of those points but Maybe many hours later so the thread died. AAA has a market cap of half a billion at 53p ish and from memory Boom’s is around 100 million, there are some cross over owners of shares in both parties so they probably are all happy with this deal. AAqua owns shares in Boom and AAA owns shares in AAqua which could itself become an interesting social media play, they have certainly hired some smart people. My understanding is that AAA will re-list in the USA probably in the autumn which will sort the liquidity issue out. AAA main asset is Sentiance which is a pure AI play and is being used by insurance companies to help predict all sorts of eventualities. I have been in AAA since 2p and have bought at least 30 times since so clearly I am talking my own book but They have significant shareholders including David Von Rosen who founded Lottoland and Nick Candy. Anyone that likes the story can buy #ASLR which I also hold which has shares in AAA and #DEV which I also hold and is an online education portal that also has legs. It is a bit of a spiders web with so many companies owning stakes in each other and that may be a concern to some but my prediction is that AAA, ASLR and DEV will all go much higher but all 3 have been under attack by TW who seems to have a beef with them. I don’t own Boom although if this deal goes through I guess I will. Hope that helps.
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.
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
Instem (LON:INS)
Jack, thanks for your excellent write-up.
"The strong performance means that Instem shares are not obviously cheap but as is often the case with software companies, the question is whether today’s ‘full’ price actually disguises a well run scalable company with the potential to be much larger in five years’ time."
This is exactly what its all about. Instem have an excellent track record for acquisitions and say they may well complete another this year. Phil Reason (CEO) has been with Instem for over 20 years and is passionate and highly motivated. The recent acquisitions of D-Wise and The Edge are providing size and scale and the plan is to grow revs to £100m-£150m.
I have been invested for 2 years and so far Instem have achieved the goals they have set and allowed me to grow in confidence. As an investor it is also pleasing to invest in a company which improves people's lives.
I hold
Seem to be a sea of red again today. Wonder what’s caused this significant spiral down. Likes of £saga £boo £vlx and others seen a significant fall over last few weeks…
FT points to concerns on Delta variant sweeping the world, driving rising cases. Travel being hit especially hard.
For Boohoo (LON:BOO) probably a combination of rising rate expectations hitting highly rated tech companies, and the ASOS update last week. Slowing sales, increased costs.
I suspect news like this is also impacting on commodity prices such as Sylvania Platinum (LON:SLP) and Tharisa (LON:THS) - https://www.spglobal.com/platt...
Seem to be a sea of red again today. Wonder what’s caused this significant spiral down. Likes of £saga £boo £vlx and others seen a significant fall over last few weeks…
Markets don't go up forever, although that may come as a surprise for people who've only started investing recently.
There are a range of concerns but probably the main one is that the market has finally caught up with the scientific reality that CV-19 isn't going away on Freedom Day just because our Prime Minister promised it would. Normality is probably two to three years away, so the surge in value stocks is dissipating.
When you see the likes of Apple and Alphabet hitting all time highs again you know there's either a sea change in progress or a lot of uncertainty around. It's noticeable that VIX has spiked upwards again - although it's still way below previous highs.
On top of that you have the school holidays which are typically associated with lower volume and higher volatility. So that will exaggerate moves. But, in the end, worrying about the tiny changes we're seeing at the moment is pretty pointless. In the greater scheme of things this isn't even a bump in the road.
timarr
Hope you are right timarr, minus one or two per cent all the way down my portfolio today means a lot to me.....
Silver
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.
Silver
Small corrections of 1-2% in a day happen at LEAST once a year in my experience, nothing to worry about
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.
timarr
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
I guess when looking from a short term point, that on 8th June 2021 I almost got back to the previous high of 7th January 2020, well within 1% anyway.
Yes there are downward moves on the days, and last month, today does not look great, and in my head is this the start of what is described as a stage 4 chart? Though not sure how that works for a whole portfolio, but probably is for some holdings.
Yes there are holdings at are "in the red" now from the last few days, and others that are green just not as green e.g. Begbies Traynor (LON:BEG) £REDD ?
There are a couple that are coming to my "checklist" exit point of -20% (from peak and from purchase) Saga (LON:SAGA) Tharisa (LON:THS) Sylvania Platinum (LON:SLP), but I need to get my head into sorting out a delivery schedule for a construction project after I have finished this coffee break.
But as a fundamental, the shares that I hold are all companies that I believe are good, I bought following the checklist, now would be a case of saying it is the point to exit some positions to protect capital which is the checklist point on falls, and brought in last year when it became a theoretical rebuild process, and obviously is just more of a rebuild against a valuation that was not real as I was not prepared to cash everything in on 7th January 2020.
Though on the positives, this is all cash purchases, there is no leverage, spreadbet, credit for difference, so this is real money, but is not money that I need today, tomorrow or next month, this is all about a long term process of making sure the family and I are as secure as we can be, and what is the worst, instead of retiring in 21 years, I work for an extra year? Or I get to leave 5 years early, but that is a decision for another day when out in the sunshine with a beer!
As well as points already made, the number of new investors - the so called 'generational investors' who have recently flooded the market might well account for some of the downward trend. I think IG were taking them on at the rate of 7,000 a day at one point and whilst some might be patient for the long haul, many might be spooked by the sea of red and just abandon ship. Also there is an increasing list of headwinds on the economy and one wonders if there will be anyone around to do anything if the self isolating pinging trend continues or any materials for them to work with due to supply chain issues. I hold Sumo (LON:SUMO) so a happy day for me, but this was immediately countered by a huge fall in Shanta Gold (LON:SHG) (I hold) Hey Ho time for another coffee.
what are your thoughts on Shanta Gold (LON:SHG), I hold and I am tempted to top up on the drop. As far as I can tell the market has reacted badly because the 5 year plan appears to be an attempt to mask poor current performance and an increasing ASIC, denting whatever confidence was left in management
I can understand why some investors avoid mining shares as the list of generic bear points must be the longest for any sector. I seem to have accumulated 7 holdings (all the usual ones) Time for a review me thinks.
Chriskay, I have added to myShanta Gold (LON:SHG) by way of selling another small gold miner where I was in profit. I don't want to be a Day Trader but sometime it may be the right thing to do.
Silver
I've also topped up on Shanta Gold (LON:SHG)
Three of my biggest holdings, I'm sure that's the case for a few on here.
My ISA Portfolio has taken an absolute hammering this month.
Hi Breakout Trader,
Mine too!! 10% down since July began...
The logical thing to do is just sit and wait it out, have some cash on the side for some bargains that will invariably come up. Easier said than done though!!
Very similar, I'm down 9% in my ISA this month.
It may not sound catastrophic, but I was on +10% for the year overall in my ISA, I'm now on a small loss for the year.
It's extremely frustrating, when your account creeps up maybe 1-3% per month for 6 months, then in 2-3 weeks those gains get wiped out.
That's part of buy-and-hold investing, but it's really not enjoyable. Feels like a fools errand at times. Hope we get a strong recovery when the selling is done, but it could take months.
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.
It is not a good day, and not been a good month at all. I was really pleased to see the news about Sumo (LON:SUMO) but the sea of red in the rest of my portfolio is taking the shine off it. Using all my mental strength not to bail out, stick with it, and to learn from past mistakes. Down 6-7% this month so probably got off lightly.
My approach has been to sell out of a few weaker holdings, where I had lower conviction and/or minimal gains or losses - basically raising cash to increase my higher conviction holdings if and when they show signs of moving up again.
I still believe in the long term opportunity for Saga, Boohoo and Volex in particular, but I'm aware that they may drag their feet for a while after this recent sell off.
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 :( )
Sthree (LON:STEM) H1 overview with CEO & CFO. As previously announced, a very strong H1 and today they announce that they anticipate to be ahead of expectations for the full-year. They are an ambitious management team, in a strong sector (Recruitment in science, tech, engineering and maths sector). We'll have the analyst presentation from this morning, which we'll share in due course. Video & podcast.
Morning Paul and Jack
H1 update from Instem (LON:INS) (MCap: £161m )which operates in the double high growth area of Life Sciences / SaaS.
Instem performed well across all areas of the business
H1 rev growth 45% in line includes 4 months from The Edge, 3 months from D-Wise.
Phil Reason (CEO) says: "We have a proven model, increased scale and buoyant market conditions, and look to the future with confidence."
With almost £18m cash Instem are well-placed to take advantage of further acquisition opportunities.
There is a note on Progressive.
I hold.
Investegate |Instem plc Announcements | Instem plc: Half Year Trading Update
My morning smallcap tweet: BOOM offer may be a damp squib
Audioboom (LON:BOOM) Sensyne Health (LON:SENS) Sumo (LON:SUMO) Ruffer Investment (LON:RICA) Eagle Eye Solutions (LON:EYE) Naked Wines (LON:WINE) Henry Boot (LON:BOOT) Futura Medical (LON:FUM) Taylor Maritime Investments (LON:TMIP) Palace Capital (LON:PCA) APQ Global (LON:APQ) Blackbird (LON:BIRD) £BOX DX (Group) (LON:DX.) All Active Asset Capital (LON:AAA), IQGeo (LON:IQG), Netcall (LON:NET), Curtis Banks (LON:CBP)
Audioboom (BOOM) possible offer worth 1200p, a 37% premium. 200p + 12.5 All Active Asset Capital shares. Note offeror is planning to delist from AIM so what;s the offer worth then? [SP=887.9 Cap=139m]
Sensyne Health (SENS) update on strategy may dual-listing on Nasdaq. Co continues to explore strategic opportunities, including making acquisitions. [SP=140.5 Cap=232m]
Sumo (SUMO) rec offer by Teccent of 513p, a 43% premium. [SP=358 Cap=614m]
Ruffer Investment Company (RICA) guides FY(June) NAV 281.32p/sh, up 15.3%. Investment outlook: "A new inflationary regime" looks worth a read. [SP=287 Cap=593m]
Eagle Eye Solutions (EYE) guides FY(June) rev up 12%. Adj EBITDA up 28%, ahead of market expectations. [SP=533.05 Cap=141m]
Naked Wines (WINE) trading starts on US OTCQX Best Market, ticker "NWINF". [SP=820.12 Cap=600m]
Henry Boot (BOOT) guides FY ahead of mgmt exp after strong H1. [SP=261 Cap=348m]
Futura Medica (FUM) US over-the-counter approval a step closer as FDA has agreed to the design of the non-clinical, Human Factors Study for its erectile dysfunction treatment. [SP=41.25 Cap=118m]
Taylor Maritime Investments (TMIP) $75m placing at $1.15, a 2% premium, to acquire up to six Handysize vessels. [SP=84.65 Cap=NA]
Palace Capital (PCA) £3.7m property sale at 6% premium. [SP=272 Cap=123m]
APQ Global (APQ) book value $0.3389 = 24.53p/sh. [SP=13 Cap=10m]
Blackbird (BIRD) will trade on OTCQX Best Market from 28 July. [SP=30.54 Cap=103m]
Parsley Box (BOX) recent listing guides H1(June) rev up 26%. "As Covid-19 restrictions ease, shopping behaviours are beginning to normalise and this has had some impact on sales growth. However, the Board anticipates that this effect will be short term and is confident that the accelerated shift in consumer behaviour towards our direct-to-consumer model is permanent." [SP=NA Cap=NA]
DX (DX.) guides FY(July) adj pretax significantly above market forecasts of £10m - £10.3m. Cites outperformance at DX Freight. [SP=31.9 Cap=183m]
All Active Asset Capital (AAA) nomad resigns. due to a conflict of interest. It just made a rec offer for BOOM. [SP=53 Cap=546m]
In line: IQGeo (LON:IQG) Netcall (LON:NET) Curtis Banks (LON:CBP)
Henry Boot (LON:BOOT)
Trading ahead of expectations Release today from boot ,Note the current numbers showing up on stocky for 2021 are still significantly below pre covid earnings, so although things are trending very nicely in the right direction its simply regaining lost covid ground practically speaking. Note this company does appear very conservative with most aspects of its business. Current valuation seems very modest here at present with share price showing no signs of returning to pre covid levels - YET.
Finally I get a bid for one my stocks! Sumo (LON:SUMO)
RE: Sumo (LON:SUMO)
Finally I get a bid for one my stocks! LON:SUMO
Ditto. 513p from Tencent, compared to 358p on Friday and up from 180p a year ago.
Having been through this with Codemasters previously it's worth hanging in there in the hope of a higher offer, games companies are unique propositions, so once they're gone, they're gone.
timarr
>> games companies are unique propositions, so once they're gone, they're gone.
this is the aspect that leaves me with somewhat mixed feelings - nice to have the cash realised from this offer of course; but definitely wanting longer term equity exposure to the sector, it has me in a bit of a quandary as to what to replace my Sumo (LON:SUMO) holding with.
Would be interested in others' thoughts/ideas!
Team 17 seem to be delivering nicely at present - I don’t hold - the problem is they are not cheap on p/e metrics
this is the aspect that leaves me with somewhat mixed feelings - nice to have the cash realised from this offer of course; but definitely wanting longer term equity exposure to the sector, it has me in a bit of a quandary as to what to replace my Sumo (LON:SUMO) holding with.
It's both enjoyable - I recycled my Codemasters cash into Sumo - and frustrating as another long term winner disappears. Of what remains Team17 (LON:TM17) is probably the standout - possibly expensive, but in a race for digital content, does it matter?
£ESGB gives broad brush access to the sector but it's not quite the same as the unique IP content provided by home grown companies.
But this is the nature of investing in tech led UK companies - if they're any good someone overseas comes along and pays up. Whether that's because the UK market undervalues them or overseas markets overvalue them is a moot point - but if I'm a tech entrepreneur why I am I going to list in the UK?
Avast (LON:AVST) is likely to go as well and these are just the lastest in a long list of UK listed tech companies that will be taken out. Buying decent UK tech companies on a market correction has always been a guaranteed ticket to long term wealth.
However, if the UK government doesn't think a company as strategically important as ARM is worth protecting we can be pretty sure it won't do anything to stop this kind of deal. But as someone who prefers to buy and hold it's infuriating.
timarr
took a punt on recently listed Tinybuild Inc (LON:TBLD) largely due to presence of Nick van Dyk from Activision Blizzard (Call of Duty) which was a multi-bagger for us
Frontier Developments (LON:FDEV) maybe ? Tercent already own 10%, or my personal favourite Team17 (LON:TM17)
One thing about £tm17 is Debbie Bestwick's 22% holding which makes it harder for tm17 to be taken over like cdm and sumo. Interesting tm17 is only up 6p today.
david braben holds 33% of Frontier Developments (LON:FDEV) so similar issue there
Frontier Developments (LON:FDEV) is now up 8.9% today.
£TM17 is up 1.2%
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.
Time for another Big Thanks to Stockopedia! Sumo (LON:SUMO) (I hold, but just because I attended Mellow Monday just before Xmas)
hi Paul. Would appreciate your thoughts on the trading update from Parsley Box (LON:MEAL) this morning please.
“The Board expects H2 revenue growth to be substantially ahead of H1…”
Looks quite good from Parsley Box (LON:MEAL) (I hold), although not unexpected. It’s a shame marketing spend isn’t included to put the top line growth and £6.5m net cash balance into some perspective. The money could disappear rather rapidly! Still heavily loss-making so a long way to go…
FR
Parsley Box (LON:MEAL)
Looks like the latest 6 month sales total is up less than 10% compared to 6 months to 31/12/20 - not sure if their sales are somewhat seasonal ? But it does appear that the slowdown in sales growth rate between these 2 latest periods seems quite noticeable (drastic?).
Morning Simmo1a,
Yes I'll look at Parsley Box (LON:MEAL) next - it intrigued me on floating, but I wasn't convinced about its shares in the end, due to being underwhelmed by the actual products, and wondering if the float was opportunistic due to lockdown boom, same risk as with Virgin Wines Uk (LON:VINO)
Section should be up in about an hour.
Regards, Paul.