Small Cap Value Report (Mon 2 March 2020) - Virus, BKS, MWE, JSG, AIR, CSSG, DISH

2nd Mar '20 by Graham Neary

65 comments 10059 reads

Good morning!

Despite the continued spread of the coronavirus over the weekend (13 new cases in England, and hundreds of new cases in Italy), the FTSE Index is currently trading near 6700, having gained 150 points versus this time last Friday.

I was checking IG's "Weekend FTSE" yesterday afternoon. It briefly dropped below 6500, prompting me to drip a few more funds into my account there, just in case we had another spike lower.

Dripping more funds into the account was also in line with IG's advice to customers. Unusually, it wrote a message to customers on Friday, asking them to "prepare for high volatility" and advising that there was a "risk of gaps" over the weekend.

But for now at least, bulls on the index (such as myself) are enjoying some respite.

I wonder if it has anything to do with the sharp drop in new cases of the coronavirus in its Chinese epicentre, Hubei.

Or it could just be old-fashioned opportunism. I bumped into an experienced private investor yesterday evening, who said that he had spent the entire Sunday afternoon trawling through the index for bargains, because of the "great value" on offer at the moment. Time will tell if he is right. For my sake, I hope that he is!

Companies which issued noteworthy announcements this morning:

Beeks Financial Cloud (LON:BKS)
MTI Wireless Edge (LON:MWE)
Johnson Service (LON:JSG)
Air Partner (LON:AIR)
Croma Security Solutions (LON:CSSG)
BigDish (LON:DISH)

Timings: Finished at 13:30pm.

New article - I've written a special article for Stockopedia, outlining my reaction to recent news flow at Tesla ($TSLA). Here's the link.

Beeks Financial Cloud (LON:BKS)

Share price: 101.24p (+1.7%)
No. of shares: 51 million
Market cap: £51.5 million

Interim Results

This is the cloud computing company which runs data centres near financial exchanges, to give institutional clients the fastest possible execution of their orders.

Key points here:

H1 revenues +23% to £4.3 million
annualised monthly recurring revenue +37% to £10.2 million
unchanged gross profit margin 49%
adjusted EBITDA +30%…

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Ken Lowes

2nd Mar '20

Think of the Virus as being the laxative- Think of debt as being the problem- Think of QE as being the cause of the problem. the laxative used to be inflation, it got rid of the effects of debt- not today because we have deflation which compounds debt- now bring in collapsing currencies--we really could do without the laxative. I have been hoarding gold for such an event, now tell me what happened on Friday?

leishylegs

Thanks for everyone's interesting thoughts again today. I do appreciate the quality of this board, with some well reasoned posts that make me reflect on my own position.

I see that Hussman Funds have put out a special newsletter today giving their view that we are likely to experience something of a wild ride on the markets - in both directions - over the coming weeks but their longer view is one of a significant correction. The newsletter link is: https://www.hussmanfunds.com/c...

Jeremy Grimes from Sharepad/Sharescope also put out an article today suggesting that it may take some time for this all to work through the markets and not to expect a quick resolution. The link to that article is: https://download.sharescope.co...

My own take is that I haven't a clue where this will end! As I am not overly comfortable being fully invested when feeling at the mercy of something I don't fully understand and have no idea on where it will lead I have taken some risk off the table this last couple of weeks. I also recently closed an XUKS short which had hedged some of the decline in my portfolio but like many the portfolio has taken a beating!

Still, reducing my exposure has meant I have been able to sleep more easily and have some cash to reinvest at some future date when things have hopefully settled down.

Like Mammyoko above, I feel it is way too early to be bottom fishing. There's a way to go yet to see how the path of the virus develops in Europe and the US.

Richard

zipstuck

MWE has a good cash balance and paying nearly 5% divi. Seems to be in the right areas for growth.

MichaelFBS

"The main areas with exponential growth currently are Wuhan,..." All the information I can find indicates that the case in Wuhan are tailing off. I don't no if that is the opposit of exponential but I am pretty certain growth in the numbers of people whohave contracted the virus is not exponential:

"The main areas with exponential growth currently are Wuhan," 02 Mar 2020

https://www.channelnewsasia.com/news/asia/coronavirus-wuhan-closes-makeshift-hospital-china-cases-drop-12490222

Michael

I still think it is going to take a long time to get to 49 milliion (75% of the population) the figure positted my Prof Neil Ferguson.

I don't want to trivialise it but the few people I have spoken to think we have got to the point of a sort of mass hysteria. We do need to get a sense of proportion on this.

Thx herbie47 you are more on it than me. Where do you get you figures from.

I was in Milan mid Feb for a couple of days but so far so goo!!

Yes three boys at my son's school have been tested and the tests were not back after three days.

Rusty2

It was on the BBC site, I think.

Yes I tend to agree, reading some comments on twitter there is a lot of hysteria from people.

The numbers are still small, only 90,000 cases so far, it could fizzle out in a few months, just like SARS did.

Nick Ray

All the information I can find indicates that the case in Wuhan are tailing off.

You are right. I should have dropped Wuhan from the list (which is quite a significant development in itself.) I think it is true to say that China is no longer a source of imported infections into other countries either.

jonesj

Even fewer people raise their head and say excess population growth is a contributor to hunger in certain countries and is also a severe additional pressure on the environment.

xcity

"It will be interesting to revisit the threads in a year and check what we believed the corona virus impact was going to be versus the reality."

At least, for those of us still here it will be.

I've been waiting for a market fall for some time. There was always going to be a trigger - maybe this is it. So no bottom fishing for me; I'll start to think about it when we are below 5500. Might do a bit of buying and selling on the way but only trading to better holdings.

timarr

"Excess" population growth - or at least parents having large numbers of children - is a direct function of childhood mortality. Rates of population growth slow dramatically as the numbers of children surviving to adulthood increase. The reasons for that are fairly obvious - if you think your children will survive you you'll less likely have less of them and the more of them you have the more hands you have to feed yourselves.

It's at least as true it is to say that hunger is a cause of parents having large numbers of children as to say the opposite.

There's a ton of stuff on Gapminder on this, but the following is a simple explanation of the effect:

https://www.gapminder.org/answ...

Basically ... the more lives of poor children in poor countries we can save the faster the world's population growth will slow.

And while it's true that childhood mortality is still stubbornly high in some countries it's generally dropping across the world. To take Bangladesh, as an example quoted earlier, it's dropped from 146.3 deaths per 1000 births in 1974 to 25.1 per 1000 in 2016. Still far too high, but hardly evidence of an utter failure.

https://data.worldbank.org/ind...

And, to put Bangladesh's current child mortality rate in perspective, it's now at about the level that the UK was in 1960.

timarr

shanklin100

Re Mti Wireless Edge (LON:MWE), it is quite difficult to think of an Israeli company, listed in London, that has consistently operated to the highest ethical standards. Indeed, I cannot think of any. At least profitin,g by operating as a broker on your own stock, is quite a sensible thing to do... ...presuming its allowed.

Mark Carter

Snoo

US looking strong, over 1000 points. What a rollercoaster!

Boon

You've just disproved your own sanguine view!

The purpose of a log graph is to show when the line is straight and upwardly sloping, the actual number of cases is increasing exponentially!

"Rates of population growth slow dramatically as the numbers of children surviving to adulthood increase."

I'm not sure about that, Ethiopia the rate is higher now than in the 1970s yet far more children are surviving into adulthood? Niger is also higher now than in the 1980s. Nigeria growth rate is 2.6% this has been fairly constant for the past 40 years. There are other factors also such as contraceptives.

Maybe you mean birth rate?

Hi herbie47

A decrease in birth rate is what you need to bring about a drop in population and ultimately a decrease in rates of population growth - but there's a lag.

People won't stop having large families until they see evidence that children are surviving into adulthood ... while that's happening you'll see a burst of population growth indicative of larger cohorts of surviving children reaching maturity. And of course, the better healthcare that's needed to make this happen also means that older people will live longer. These changes mean it will take a while for the population reduction effects to show up.

Sri Lanka is example of this in action: look at the size of the under 15 population:

And now look at the mortality rate decline:

You don't need to run a correlation to see what's happening there. Look at the increase in people surviving to 65 and beyond:

Or, if you want, the average life expectancy of a Sri Lankan:

This data scales across the world, although there are exceptions due to war, disease or large scale corruption. However, those examples are no reason to stop the effort because, by and large, rates of increase of population are falling across the world:

Gromley

3rd Mar '20

And the right on cue comes a potential pandemic whose demographic target range might serve to "address the issue" of a population age curve that becomes too skewed to the "top end".

Certainly nothing I think any of would wish for; but I think it is hard to have looked at the projected population statistics without wondering how a (proportionately) decreasing working age population can support a (proportionately) increasing post-working age population.

Is Gaia applying a correction?

Small Cap Value Report (Mon 2 March 2020) - Virus, BKS, MWE, JSG, AIR, CSSG, DISH

Beeks Financial Cloud (LON:BKS)

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Graham Neary

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