Small Cap Value Report (Mon 21 Dec 2020) - FUL, BOO, SDG, ANG, UNG

21st Dec '20 by Paul Scott

89 comments 12207 reads

Good morning! It's Paul here with Monday's SCVR.

Timing - today's report is now finished.

** Newsflash! Reminder that Ed will be doing a presentation at 18:15 tonight at Mello Monday. The other speakers & company ( Gaming Realms (LON:GMR) ) are all really interesting, so this one is probably the best so far. I've been roped into the panel discussion (again, I hear you sigh!!) at the end. I'm going to focus mainly on investing ideas & themes for 2021, so it's not duplicating my recent PIWorld chat **

I'm hoping it might be a bit quieter for company news this week, as I need to take some time out to buy the food for Xmas Day from ASDA. Reports of logjams at channel ports, mean we could run out of parsnips any time soon. Obviously completely unconnected with Brexit negotiations! ;-)

Covid - we're getting bad news about case numbers & deaths, but good news on the vaccine. My mother had her first vaccine dose yesterday. She reported back that it was very well organised, quick, and completely painless - she didn't feel a thing. No side effects. The booster jab is scheduled for 3 weeks. You might like to pass that on to your relatives & friends, to reassure them that it's not at all daunting. Mum came out of the health centre a little later (they make people sit for 15 minutes, to ensure there's no adverse reaction), got into my car, and commented, "Everyone in there was decrepit! They must be doing the over-90's today!"

To start off on companies, here’s one I prepared earlier (!!!)

Fulham Shore (LON:FUL)

9.5p - mkt cap £58m

Half-year Report (published 18 Dec 2020)

The operator of Franco Manca pizza restaurants, and the smaller chain “The Real Greek”, both being casual dining formats. Both are excellent, popular, and nicely differentiated, i.e. not just copy-cat pizza restaurants like all the others.

Investors generally should look at least 6 months ahead, therefore we really should now be focused on how businesses are likely to trade post-covid. That’s why so many cyclical shares have rallied strongly in recent weeks. Therefore, FUL’s interim results during the covid period are only of passing interest. I’m more interested in balance sheet strength, liquidity, and the outlook.

The Directors of The Fulham Shore…

Unlock with Email

Unlock with Google

Already have an account?
Login here

mojomogoz

21st Dec '20

you didn’t send 5 pages and what you did had no real detail other than copy and paste. You still haven’t shown you understand the nature of revenues in the all important THG Ingenuity (platform tech bit).

Everything thing can tank. I didn’t own miners in 2010. I’d held cash, gold, yen, Japanese equity and short financials going into 2008 and made money. In late 2008 I started buying (early but after the massive Chinese stimulus and credit easing.) particularly with EM bias.

2010 was a different time tho so why would I do same thing today?

Technologies great and so are platforms. I own some, I’m just not a relentless unquestioning fanboy. Just Eat Takeaway.com Nv (LON:JET) may be as good and obvious as you say but curious that such a stock is not valued at more than 2x visible ebitda in current environment. Investors are usually quite observant of stuff like that for things that are defo on trend...as your maths is so good how do you explain? If you are correct and ebitda proxies cash flow then you’ve got a 25-50x bagger on your hands. Is that your expectations based on your knowledge of the ‘maths’? maths is certain stuff -right? - so this is astounding.

I haven’t looked at Just Eat myself ...do you want me to do that for you? Or will it be above your head like THG and you just return to spinning narrative from company?

GloucesterBob

Just back from ASDA, well I sat in the car while the good lady did battle.

Shelves fully stocked including Turkeys, so it sounds like more fear mongering in the red tops.

While sat in the car, did some spring cleaning off the portfolio, sold GYM (LON:GYM), and bought back into Revolution Bars (LON:RBG) for the 4th time, yet to lost money on this one, also topped up on Saga (LON:SAGA).

Then whizzed through a Mello session (my wife likes to shop) and I must say Paul, you do look a lot younger than I imagined and the picture on this page does not do you justice.

Helvellyn

Paul,

Otherwise, why put your money into something that could be a lobster pot, i.e. difficult to exit from?

i like the term 'Lobster Pot', a new one to me.

Thornabian

"you didn’t send 5 pages and what you did had no real detail other than copy and paste. You still haven’t shown you understand the nature of revenues in the all important THG Ingenuity (platform tech bit)."

Copy and paste from where? You have gone from baseless to just lying. I sent you information on every segment and how the distribution has evolved to leverage margins.

"Everything thing can tank. I didn’t own miners in 2010. I’d held cash, gold, yen, Japanese equity and short financials going into 2008 and made money. In late 2008 I started buying (early but after the massive Chinese stimulus and credit easing.) particularly with EM bias."

You are now claiming you were part of the cast of the big short? How hilarious. Japanese equity has been poor over 10 years and much of EM excluding China has been quite poor when including covid. The only market which has really outperformed is US consumer tech,

You stick to your Gold Gold Gold mantra to get some likes on here and I'll keep analysing growing companies and we shall see which one outperforms because growth and consumer technology has only outperformed massively for the past 10 years so far!

Safe to say we can agree to disagree. If you have nothing worthwhile to add I appreciate if you stop replying to all of my comments.

Gold miners up, US banks up strongly. Its a day, not proof by a long shot, but just FYI. But they are not platform tech rarara so probably just a dumb luck day for me (I don't have many banks actually as there's better growth with margin and value elsewhere in financials and I agree its hard to see through the capital cycle long bottom banks are experiencing....but history says that is the time to take risk in a sector so I have taken some).

This is great analysis that you may relate to:

Anyway, I think we are all bored of each other and I am about to be smothered in red thumbs for arrogance etc....behind the veneer there is doubt and humility....but I've done markets for a long time (admittedly more macro historically) and like a shark I know you got to keep moving and playing as you see....and lunch is better if you haven't arrived at the same spot as everyone else.

Bye!

I'll engage on Thg Holdings (LON:THG) since I've looked at it now. Best to put it in separate post so as we don't crowd this...obvs needs a lot of space for Boohoo (LON:BOO) ;-) ...and if I look at Just Eat Takeaway.com Nv (LON:JET) I might come back to you. I'm happy to learn

Thg Holdings (LON:THG) is up, Just Eat Takeaway.com Nv (LON:JET) is up, Boohoo (LON:BOO) is flat, Lloyds Banking (LON:LLOY) is down, £TSLA is down but US banks are up because of US stimulus and they have been allowed to buy back shares.

US banks are a very different beast to UK banks though, they have less competition from incumbents and half of their revenue comes from services (AWM/CIB), not commercial banking and NII.

Terry Dickens

G Bob

I was thinking the same thing, a lot younger. has he cut his hair or what, something has changed, I no not what.

Zipmanpeter

Timarr,

Thanks for link to the https://www.omnicalculator.com... Very neat except I didn't see if the estimates were for first of second jab per person.

You always seem to have good data sources. Do you have anything solid tool for the expected SUPPLY of vaccines as this seems to me the critical variable . I read initially 4-5mn doses of Moderna by end of year with Jeremy Hunt saying that runs out at end Jan. After again I read that Oxford has pre-made stockpile of 10+Mn but how much for UK by when, assuming it is approved in next 2 weeks and what is the ongoing approval rate. I leave out other vaccines as upside.

Combing, in hand we would have 14mn doses - enough vaccinate 7mn people ie roughly first 4 groups - over 75s, care homes and all front line NHS/Care Home workers. Remaining deaths would be v small and probably on a declining trend.

Putting when someone aged 65 can expect their injection, it projects between 28/2 and 17/3 for getting a jab - so ready to cruise or go out to pub from 1/4

From Times 11/11 "A million people a week could be vaccinated against coronavirus under NHS plans to ensure a jab can be administered as quickly as it is manufactured.

All over-65s may be able to get the Pfizer jab before Easter if it is approved, with officials hopeful that the Oxford vaccine could allow a wider programme during the winter if it is also successful."

(For what must be the UK's no 1 priority, I would hope we could surely administer not 1Mn/wk but 2, or even 3mn if we really set up to do it (bring out that April 20 NHS army of volunteers, commander polling stations etc. Surely taking screening info and giving an injection is not so hard - my Dad had diabetes and did it to himself twice a day so with say 1 day of training, supervised by skilled staff to check filled in forms and cope with any adverse reactions......)

I didn't say Lloyds Banking (LON:LLOY) was great...I just said I bet you a pint it outperforms Thg Holdings (LON:THG) in 2021. I push against you as you post ra ra stuff saying things are obvious and I think its dangerous and you've called me out in some dumb ways IMO...

...you might be a market genius but TBH not many are. I've met and interviewed/analysed some that are claimed to be by onlookers such as Nick Train, Joel Greenblatt, Bill Ackman, Jim Chanos, Steve Eisman, John Paulson, many ex SAC but never Stevie and I'd only consider it for Greenblatt of the famed investors I've met. Paulson is perhaps the most lauded in his moment of glory of the bunch I've mentioned and IMO he was a 'lucky fool' (he's not alone in that though...and he was very good at raising assets so got very rich!)... he doubled down so hard on credit default swaps during 2008 that he could have easily had volatility blow the implicit leverage in his fund (it was an insanity bet IMO)....but the market and leverage went his way and he was the guy that got famous for minting it in the crisis (before The Big Short made Michael Burry famous).

I consider myself a student of stock picking in that I have not done directly for myself with earnest focus for very long (I've made some howlers doing if for myself). So I often doubt myself (as well as others). But I do have other market knowledge and experience. In 2008 before the credit crisis peaked I seeded (with c.$75m) a large cap quality growth fund management business (very tech biased)...it did superbly as it was the time...that money came from taking away from a momentum-EM managed in early 2008. In 2012 I seeded small cap biotech business and it went on to make c.700% over a few years (nice!)...at the same time I also seeded an Argentine equity mandate (which also did very well...and very different from tech) and invested heavily in Japanese smid (a lot of tech). In 1999 as a whipper snapper investment consultant I did what I could to prevent my partners from sacking 'old and finished value investors' PDFM and GMO for UK pension funds and moving to large cap growth or even Amerindo (look them up they are 2000 equivalent of ARK...absolute effing nonsense, make ARK look respectable).

This time may be different...but that is not the low risk perspective. Today many are running on the fumes of a great mega bull run. Its like addiction...comforting whilst high on it.

Anyway, best you stop speaking to me now. Bragging rights over a day in markets is a bit silly so take my 2021 bet...then you can ridicule me in 2022 with justification. I really wont mind.

Like I've said, its not that Lloyds is in any way great...but you recommend THG (and other fashionable high valuation things) as surefire safe for 2021 and I'm putting up the junkiest of the junk no hoper against that to say that your rearview mirror investing certainty is bad timing and risk management. My experience tells me that markets tend to flow the way I'm playing it. I do have a small position in Lloyds (its in a basket of 5 comventional-ish banks that make up 5% of my portfolio...so equivalent to one full position). I feel nervous about it but instinct and experience tells me its time to look for those narrative 'unclean' risks.

Bye now. We really got stop talking for a bit. We are boring people. Take it to another separate post if you want to debate...I've put it here just in case https://www.stockopedia.com/co...

The consensus is actually for EUR 2.6bn and 380mio EBITDA in 2021 for Just Eat Takeaway alone. It seems like Q4 2020 will be 45% growth on a conservative estimate to assume EUR 250mio per Q, the same as Q3. That would put 2020 revenue just above 2bn. This put the company on track to hit EUR 2.6bn to EUR 3bn in 2021 even on a slow down in growth from that point to 20% for the year. Q1 2021 will also see strong growth with Europe locked down but let's assume it is the same as Q3 and Q4 and revenue is flat across the three quarters.

That puts expectations of revenue at $5bn (~$3bn Just Eat Takeaway and 2bn Grubhub) in 2021 and potentially 5.7bn in 2022. This has also been estimated by several of the biggest analysts with EBITDA of near 600mio 2021 and 860mio in 2022 and nearly 2bn in net cash.

Just Eat Takeaway.com Nv (LON:JET) + £GRUB would have a current combined market cap of ~$20bn.

That is a EV/Sales of ~3.5-3.8 and EV/EBITDA of 34-40 for 2021 numbers.

You can factor in what ever forward growth and guidance you want beyond that date to give all forward cashflows but it's not high for a company growing at even 20% p.a. and is not even particularly looking out far into the future or into what new markets they could stretch to.

The skier

Excellent Tamzin. These round ups are very informative. Thank you and a Merry Christmas.

I have never, ever, said I am or will be right or gloated. I have discussed promising companies and pointed out the market has a good impression of them now and it is increasing, you are the one who has levelled a number of assumptions at me (hyped, copy and paste etc.)

I want people to discuss Thg Holdings (LON:THG) Boohoo (LON:BOO) Just Eat Takeaway.com Nv (LON:JET) and others, so that if they do have information which I don't it will be good to know.

I don't want my every topic knit-picked as being BS hype because from my long experience of investing (which we all have and I don't claim exclusivity on) strong growing companies compound and outperform over many years. Whether they are a drinks company or a tech company, I just particularly like consumer tech.

Personally I have bought some cheap companies (like £BT. which I told you about) and that didn't go well so I realised what I was doing was wrong and cheap just got cheaper.

Now I buy growth at a reasonable price where I think they are solid and there is more upside risk for surprises in performance due to quality management, than potential skeletons in the closet.

That is not to say I never buy 'value', I bought 'value' (Barclays (LON:BARC) £EZY Taylor Wimpey (LON:TW.)) twice this year and sold again, just because I get uneasy in them and I don't see them as long term winners. That is just my personal view and experience.

joshwood976

Thank you for this. I have shot over those questions to their investor relations as it wasn't clear from their accounts. Will keep you posted

Paul Scott

I agree re Saga (LON:SAGA) and have been buying more. The current valuation doesn't make any sense at all to me, given that it has already refinanced, and the 2 new cruise ships are scheduled to resume cruising in April, which is in line with Govt guidance.

We should be told on 26 Jan 2021 that cruise bookings are booming, which is what Saga's head of travel said in a recent Telegraph interview. I also checked on Saga's website over the weekend, and saw that there's not much availability for the 2 cruises scheduled for April, for one of the ships, Spirit of Discovery.

I think this share could rebound really strongly, if the AstraZeneca/Oxford vaccine is approved, as expected, late next week. This one is easier to store & distribute, so could be rolled out much more quickly than the Pfizer vaccine, so I am told.

We saw a lot of kneejerk, irrational , large share price movements this morning. I think it's traders taking advantage of lower liquidity at a seasonally quiet week, to push prices around. It's always a good idea to keep a bit of cash on hand at this time of year, so you can take advantage of bizarre price movements when many market participants are resting.

Regards, Paul.

timarr

Do you have anything solid tool for the expected SUPPLY of vaccines as this seems to me the critical variable . I read initially 4-5mn doses of Moderna by end of year with Jeremy Hunt saying that runs out at end Jan

Sadly not. The variables involved in this are significant and there's global competition for access to vaccines. Allegedly the UK will have 10 million doses of the Pfizer vaccine by year end. Because it's manufactured in Belgium that's possible despite the delivery challenges.

Beyond that a lot relies on the Oxford vaccine - if it's effective then it can be rolled out quickly. Overall the UK has over 300 million vaccine doses on order, but not all may get approval. Where we are is a miracle of medical research. But 1 million a week looks realistic.

Delivering more than the 1 million doses a week will be a challenge. I doubt most people would want it to be admistered by anyone other than a heathcare professional and we're going into January and February, the worst two months of the year for general illness and hospital load. Healthcare staff are tired and rundown and they know the worst is yet to come.

This was always going to be the hardest part of the pandemic. It's going to be a tough few weeks.

Phuntt

Mojo, that tweet is pure gold. I’m off to buy Tesla

QARPY

I received the same £250 from AJ Bell to not pursue further. I have not accepted their offer yet.

eParo

22nd Dec '20

SAGA C-19 updates here:

https://travel.saga.co.uk/trav...

FYI (and as you mis-sell your recommendations as conservative) GARP may stretch to Boohoo (LON:BOO) - but that would be quite a modernist unorthodox redefinition of growth at a reasonable price. Boo is high growth and high valuation, its got to execute on high sales and earnings growth or there will be no reasonableness in the price. Its shown it can do that so far for sure so with Hindsight Capital goggles on expectations of it growth has been reasonable.

Electronic Arts is the only stock you've promoted that could fit into a GARP investor's portfolio without them choking on their hobnob.

If you believe that Just Eat Takeaway.com Nv (LON:JET) , Amazon, Thg Holdings (LON:THG) are safe-ish GARP like stocks then you are in a cohort of one (other than mad commentator on Bubble TV)....now such contrariness can pay but one should recognise one's hubris in being so unique and dissonant. I always feel hubristic when I take contrary positions....but I do it though rarely with super high expectation stocks (as implied by valuations) as the landing strip for my dissonant expectations is narrow and very high.

I get confused as to whether you are a trader or an investor (as you mention being in an out of stocks a couple of times in short period). I don't trade much and look for things that I believe can at least double over a few years with embedded optionality that can take me higher and longer if I'm lucky. Optionality is never a certainty so it is always partially luck if I get it... Tremor International (LON:TRMR) is my current (nervous) example.

If you are trader then by all means just play the narrative flow and to hell with the long term always bounded possibilities.

mojo out

Phuntt, he's a good follow on Twitter. Quite inane but in very current way for financial markets. Who knew finance was so good for humour!

Small Cap Value Report (Mon 21 Dec 2020) - FUL, BOO, SDG, ANG, UNG

Fulham Shore (LON:FUL)

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

89 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...