Small Cap Value Report (Mon 20 Dec 2021) - Preamble, SPE, FA.

20th Dec '21 by Paul Scott

81 comments 9162 reads

Good morning, and welcome to the first SCVR of Christmas week! Just Paul today. Today's report is now finished - very quiet for news.

Over the next couple of weeks, every day the UK stock market is open, then there will be a SCVR here. I've got a very quiet Xmas planned, so distractions will be few and far between.

Agenda -

Paul's Section:

Sopheon (LON:SPE) - this software company expects to comfortably meet expectations for FY 12/2021. The trouble is, that's barely above breakeven. A very poor trend in growth (none basically in the last 3 years) and profits (which have disappeared) since 2018. Does it matter though? That's up to you.

Fireangel Safety Technology (LON:FA.) - a trading update that seems muddled, and doesn't give enough information. This company has performed badly for several years now. It might be able to execute a turnaround, but that's not something I want to punt on. Why take the risk?

Preamble from Paul

Looking at the futures, it seems we're heading for more market turbulence - hardly surprising I suppose, with omicron spreading incredibly quickly. I've been keeping on top of the covid news through health analyst Dr John Campbell's youtube channel. He's got a good track record of explaining covid in simple terms, coming from a teaching background. His daily videos run through published material from reputable sources, and he always provides a link to the research papers, etc, that he's explaining.

Anyway, his latest videos have been explaining how omicron is incredibly contagious, and therefore the world is at the point of a huge new wave, that probably can't be stopped. However, data from South Africa shows that it's milder than previous strains, and a recent study suggests that it doesn't move down to the lungs as readily as previous covid, thus being less deadly. Also cases apparently seem to peak after just 3-4 weeks, then we could end up with herd immunity here at some point in Jan 2022. But obviously nobody knows for sure.

In the meantime a lot of people are going to be off work, mainly with cold or flu-like symptoms (the symptoms have changed from previous strains). Therefore we can expect another month of disruption to businesses (especially hospitality, travel, retail, etc) - you know the drill. After that, who knows, it's…

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JohnEustace

20th Dec '21

The lady surgeons are Miss/Ms./Mrs.

I've noticed that dental surgeons have switched to calling themselves Doctor. It's all a mess:

https://www.ncbi.nlm.nih.gov/p...

GrahamF

The trouble with John Campbell is he talks as if he is qualified to interpret COVID results/data from different sources, compare these and reach appropriate conclusions. He isn’t.

It is not that the sources are poor. And it is not that he doesn’t identify them because he does.

The problem is that we cannot rely on his understanding and comparisons of that information. His intentions are most likely honourable but I would give him a wide berth.

Speaking as someone with a BSc, I also think that he should introduce his videos with a clear statement that he is not a qualified medical doctor, as referring to yourself as Dr in this context is potentially misleading.

peterg

I used to use the title when I was a lecturer, it was also effectively a title that went with the job. Students expected to address you as Dr. However, I rarely used it otherwise, and not since I retired. I remember being advised early in my career not to have it on my passport, as it could lead to emabarrasment if another passenger on a flight needed uregent attention, and your name came up on the passenger list.

ridavies

At last, Iain1234, well done. Someone has finally mntioned that in S Africa it is actually summertime!!!!!! and its winter here....... and the population density of Africa is far far less than the N hemisphere and Europe especially.......so much more rural living and outdoor living? Huge generalizations I know but huge differences too.

Richard Goodwin

Better not be a Killer Queen

But Dr. Campbell isn't a layman. His qualifications and experience are in medical training for nurses. He has written standard textbooks to that end.

If I fell ill on a plane I definitely would want his help. So would most doctors, medical or otherwise.

timarr

His qualifications and experience are in medical training for nurses. He has written standard textbooks to that end.

Quite.

timarr

Davidcox

What are your thoughts on Boohoo Paul. Its starting to look a bargain I think.

rogerh

Hi Abtan,

You're very far from being muddled. I wish I could research and analyse shares as well as you.

Yes, my son ordered a bed which arrived a couple of months ago. Unfortunately part of it was damaged. They can't send out replacement parts so he was offered either a refund or a new bed. He opted for a new bed, which should arrive around February. It has been delayed because of the supply chain issues.

We both sold out of our Made shares at a significant loss a few weeks later. I remember you doing a very comprehensive analysis of Made some time back. Perhaps it will indeed come good in the end.

Thanks for the Revolution Bars video. It seems a nightmare for them.

WDWombat

Sopheon SPE looks hopelessly overpriced conversion to SaaS or no. There are a lot of very small listed software companies in the UK but this model change is really only about getting customers to commit to a 2-3 year payment deal, isn't it? One accepts that this reduces initial revenues as the change takes place and produces a steadier income stream but it is not a bullet-proof one. Customers can still drop you if they get a better product down the line so rollover is one simple good indicator. There surely needs to be something very special to justify this price, a probable overseas breakthrough, tob candidacy due to a unique product or indeed a new potential maket. What am I missing?

Investornot1

Age segmented data is available from South Africa I think so modellers could use that as a proxy rather than keeping up the pretence that nothing that happened in South Africa applies to here

Paul Scott

There's a separate thread on Boohoo (LON:BOO) (I hold) here, which myself & other members here have posted our thoughts recently.

The short version is: I can see why it's fallen, because revenues in EU & USA have declined, but UK is still growing strongly. I think it's dropped far too much, so am buying more.

Anthony Ashworth

I can assure you that holding a PhD does not equate to being a "pretend Dr".

bryans1311

In Italy all you need for the title “Dottore” or Dr, is a standard 3 year degree!

mojomogoz

Covid is real and dangerous as it’s a new bug ans we have some trouble handling it…but dealing with it has descended into a viscous political and morals game propelled by frightened leaders and media keen to frighten for the clicks.

Ivermectin doesn’t cure or prevent covid…it may with many other known, tested and safe drugs help treat some of the symptoms and prevent many more people from becoming critically ill. There has been real research to show this. When we look back it’s absolutely clear to me that we will be amazed we didn’t use medical tools to attempt to moderate a disease that accumulates and builds and overwhelms the body gradually early in its progression before people end up in ICU.

The vaccines are a massive experiment. Deaths and illness may result from them too. For example, teenage boys and young men seem to be at risk of heart problems and this may accumulate if taking repeat vaccines.

Disinformation, fear as a policy tool and resulting mass hysteria is our state. We need to move to a collective coping footing.

Let’s be honest. None of us really know or understand …yet we are all strangely willing to panic as instructed. This is a dark time…and covid isn’t the darkest thing. There’s some sign the media is becoming a little more questioning. My hope is that good deep dive mainstream journalism starts digging in. I believe we have become covidiots (and sort of subconsciously know it) and need an escape route and some people/processes to blame

abtan

Hi Rogerh

That's a very kind comment. Sadly all the research and analysis I've done hasn't prevented me from slipping into the red this year :(

Thank you for sharing your experience with Made.com (LON:MADE) and sorry to hear about the loss. It's certainly been a difficult period for the company.

Fingers crossed for profitable holdings for both of us going forward.

Cheers

jwebster

21st Dec '21

So far, the official stats show covid cases have spiked to levels notably higher than last winter. So it seems, as reported, Omicron is highly infectious. The stats on hospitalisations are quite flat. Of course, this is a lagged statistic, but there are some tentative signs Omicron might be less lethal. The fear from the government is the Omicron spike is so large, it swamps the NHS regardless, and HMG is seen by the public not to have taken necessary action, in the face of European action on lockdowns.

The virus will propagate regardless, looks like a large percentage of the population will come in contact with it. What that means, is those with vulnerability, will sadly pass away, but with each wave, the population is becoming more resistant. I recall seeing a chart of the Spanish flu which came in four deadly waves from 1918 - 1920 then evolved into a more benign seasonal flu.

I also suspect, this winter the general populations of the western world will have become covid lockdown weary. Many states in America will largely ignore any new measures anyway. In the UK, the government is split between two groups, supporting either no lockdowns or prioritise public health at all costs. Also, public finances would struggle with another round of covid support, the country is up to its eyeballs in debt.

As for your dystopian points, yes, governments have long favoured big national events. It tends to divert the media from domestic issues like the rising cost of living.

As an investor, I'm thinking this winter is the last, or at least second last round. So, I suspect we are getting close to peak gloom on retail, F&B stocks. I bought a few yesterday, bottom fishing. I've noticed the US financial press is more focused on inflation and interest rates now than covid. These are bigger drivers for equity valuations 18 months out.

All seems reasonable jwebster. May not be right and I don’t believe we will have persistent high inflation even tho energy pressure likely persists as we have orientation that discourages more hydrocarbon as we have a magical (hysterical!) view that we can just magically replace it’s importance v rapidly. But could be right. I’m in minority believing we haven’t set scene for persistent inflation.

But I enjoyed the non-hysteria based view. If we carry on with ‘hammer and dance’ we’ll collectively suffocate ourselves. This is darkness. Ongoing self harm that will become chronic if not stopped. Fear and paranoia rather hope and confidence. I feel optimistic that we’ll come to our senses.

But I’ve been wrong re trajectory of covid stuff since the start so maybe I need to just adjust to fear based living like my fellow countrymen. My 3 nights out to pub in last week should probably be fined…maybe a short custodial sentence

Doug2b

How can Royal Mail be good value when its net tangible equity has actually shrunk over the past 5 years. This means that the dividend is not covered, regardless of what the easily manipulated earnings figures may say - tangible equity growth tells the real earnings story - and Royal Mail is consumer sahreholder wealth not creating it - how can it be doing anything else if its net tangible equity is shrinking.

Wol

Paul

Lots of thanks for introducing me to Dr John Campbell’s YouTube channel (link above in your preamble). I watched the interview with Professor Hoiby and was so impressed by the information and the balanced, scientific way in which the discussion took place. This is such a contrast to the shrill partisan approach adopted by so many pro and anti-vaxers. Given the difficulty in finding rational and reasoned information in this divided world, Dr Campbell’s channel feels like a gold mine.

For those who are interested, Dr Campbell’s discussion with Professor Hoiby concerns Professor Hoiby’s work in re-introducing aspiration as the first part of an intramuscular injection. Aspiration is the process of checking that the injection is really going into the muscle rather than a vein. Aspiration was standard practice in all intramuscular injections until maybe 15 years ago when (based on limited information) it was deemed unnecessary. Following Professor Hoiby’s recommendation, Denmark has now reintroduced aspiration in all applications of Covid vaccines and serious side effects from the vaccine are now ⅓ of the level experienced in neighbouring Norway where they do not aspirate.

Small Cap Value Report (Mon 20 Dec 2021) - preamble, SPE, FA.

Preamble from Paul

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Paul Scott

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