Small Cap Value Report (Mon 25 April 2022) - MCLS, TLY, ZOO

25th Apr '22 by Paul Scott

25 comments 7650 reads

Good morning, it's just Paul here today. Today's report is now finished.

Agenda -

Paul's Section:

Mccoll's Retail (LON:MCLS) - as we expected, the company finally admits that existing equity is worth "little to nothing".

Totally (LON:TLY) - a positive trading update for FY 3/2022, with forecast EPS raised today from 1.8p to 2.0p. We like this share here at the SCVR, it seems to be performing well, growing quite rapidly, and the valuation looks reasonable, assuming nothing goes wrong in future.

Zoo Digital (LON:ZOO) - surprisingly, it's come out with another positive trading update, with FY 3/2022 forecasts raised again. I've generally been sceptical about this share, given poor performance over 22 years, but the bull case is definitely strengthening now that 78% organic growth, and a move into decent profit has been announced.

Mello Monday - the online investor event is tonight, starting at 17:00. Three interesting companies presenting, so this looks a particularly good one.

Mello Chiswick - the physical event is back! Details here, it's quite soon, on 25-26 May. It's going to be fantastic to see a lot of old friends again, after a 2 or 3 year gap.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to review 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 are analysing the company fundamentals, not trying to predict market sentiment.

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), and make your own investment decisions. Reader comments are welcomed - please be civil, rational, and include the company name/ticker, otherwise people won't necessarily know what company you are referring to

Paul’s Section:

Mccoll's Retail (LON:MCLS)

3.95p (pre market open)

Market cap £11m

Update

Trading has been mixed, but that’s irrelevant now.

This is what…

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Fool Hardy

25th Apr '22

I held for a while last year and I agree strong bull case given numbers and obvious nhs challenges, but I am concerned that private sector helping the nhs will always have political connotations and likely to always be a low margin business.

Tortoise investor

I think the bear case is the debt. The current ratio isn't very good and the debt is a senior secured four-year bond, maturing in July 2023 offering a coupon of 7% pa above three-month Euribor - not very attractive terms although an opportunity to change that next year maybe.

However, I am becoming more relaxed about that because the growth is so good and debt goes down quite quickly. Zeus have put out an updated broker note which upgrades FY22 expectations to around 13p EPS so currently this morning it trades less than 10x - far too cheap even with the debt I think.

I suppose the other bear case is that the online marketing growth might run out of steam at some point and is going through a boom right now as people switch away from those specialising in third-party cookie based advertising, but I don't see that happening anytime soon.

I think it looks very attractive. I hold a small position but would top up if I had the funds.

gmtrader

Broker Allenby have given a fair value price of 75p for £TLY

gwilli68

Here's a link to the Supreme (LON:SUP) presentation

Boon

Interesting on Spaceandpeople (LON:SAL) with the £0.5m FY21 revenue discrepancy, between the TU and the actual results!

But I note that H2 trading seems to generate a 1.6p EPS, despite still being impacted by lower COVID footfall (and Omicron in Nov & Dec). The business is more seasonal to H2 looking at historical patterns. But it seems plausible that FY22 full year EPS can come in between 2-3p easily, which on a current SP of 14.5p is a bargain valuation.

There is a bit of debt, and the company's own outlook/forward guidance is a bit woolly and not gung-ho optimistic, so there's that doubt that they have some risks in mind, but don't want to share.

In an optimistic scenario, I see these going to 30p+ within a year. In a moderate "improved" scenario, I see 20p as plausible by year end. Currently trading at 15p.

(I Hold)

sharw

For those who missed the Supreme (LON:SUP) presentation on Friday a recording is now available here: https://www.equitydevelopment....

[Edit - gwilli68 - you beat me to it but I would suggest you edit the gunge off the link address, some of which is personal to you]

I thought that it was really good - there was a frankness that you don't usually get in more formal presentations - a prime example being a question about a future MCap of £1bn (34m30s in) where the CEO really comes across as a fellow shareholder (he owns 57%) rather than someone with an over-generous bonus scheme requiring the sp to be talked up as much as possible then grab the bonus and run.

Revs8

A lot of red on my watch list today but I'm seeing it as an opportunity to buy (selected small caps) where investors are panic selling following the negativity in the American markets.

Somero Enterprises Inc (LON:SOM) a favourite amongst many PI's . Low PE of 8.9 and a dividend yield of almost the same at 8.8% Quality rank of 99 and Value rank of 75. Broker price target average of over 800p.

Somero's growth will slow this year but its operating margins are very good and it is hugely cash generative with a strong order book. Therefore the dividend looks a safe bet.

The share price has performed a head and shoulders top and a death cross on the 50/200 day moving averages. However, the price is now 30% off its peak and may have strong support at 400p. The RSI indicator leads me to believe this is a low point (at least in the short term).

Regardless of the chart indications, I see it as excellent value at this price so I'm happy to add to my holding at just above 400p. Happy hunting!

Berksbee

I would be interested in your views on LON:CTG Christies results which are pretty stellar IMO. Revenue growth of 45.1% to £61.3m (2020: £42.2m) Operating profit of £5.2m substantially ahead of original market
expectation for the year. Big chunk of pension paid off.

They are not looking very expensive but that can be said about half the market.

ls2g08

I am on the fence about topping up Somero Enterprises Inc (LON:SOM) - I have a fairly strict rule about never topping up losers, but very tempted to break it today!

I'm guessing that the market is concerned about the perceived cyclical nature of the business and inflation, which could possibly slow down construction?

Hi Is2g08

I have been trading this rising channel for over a year and it has done very well for me. I never sell out completely but the size of my holding varies dramatically. It has been at a low point since top slicing quite a chunk at the top of the channel.

You are correct that the market is concerned about the cyclical nature. Somero Enterprises Inc (LON:SOM) has already warned that it doesn't expect the growth to continue at the amazing pace of the past year. However, it margins are superb and in my opinion it may continue to take market share which could offset the slowdown in construction. There is an ever increasing demand for ultra-level warehouse floors that allow higher stacking of shelves and robotic operation.

I'm sticking to my strategy of trading this channel for now. If I'm wrong then I'll sit tight and be happy with the dividend.

turbo

In todays sea of red, there is one consolation in my portfolio; Taylor Maritime Investments (LON:TMIP)

I wrote about TMIP being a longer term solid investment, and for once I seem to be on track.

I usually end up struggling to hold long term, but with Taylor Maritime Investments (LON:TMIP) I might succeed...

Paul Scott

Hi Berksbee,

I've run out of time today, because I have to attend a family Graduation, and BBQ afterwards.

Just had a very quick look at Christie (LON:CTG) results, and they look very good. Well worth a closer look, especially now the pension deficit seems to have roughly halved.

With lots of hospitality/retail businesses likely to come unstuck this year, they should have plenty of work for that side of the business.

As you say, it does look cheap.

Regards, Paul.

wildshot

Hi Paul and the other writers here. First off many thanks again for the great work you do and the resource you provide.

If I may I'd like to provide an observation and suggestion which I've seen in recent times. Today's article talks about ZOO, MCLS and TLY. Yet the bottom of the article only tags Zoo Digital (LON:ZOO) which I guess is the reason why only ZOO appears in the right hand box of "Securities mentioned". It would be nice to have all securities mentioned in the box so I/we can quickly scan down the right panel for the close to latest pricing, see Stock report scores and the summary information such as Mkt Cap, Sales, Yield etc. This side panel I assumed was added as a feature to aid us readers rather than having to manually link click to just get the basics before deciding if to investigate further.

Thanks again.

DaviStoVest

I think, usually, they are all tagged. Paul under a bit of time pressure today, so it probably just got overlooked.

Thanks Paul, enjoy the day.

carmensfella

Centralnic CNIC are on the Mello virtual show tonight

The programme for the evening is as follows:

5.00pm Mello news
5.05pm David Stredder interviews Phil Ratcliffe and David Rock from Tandem plc
5.40pm Company presentation by RBG Holdings plc
6.10pm Michael Taylor Educational session
6.30pm Company presentation by CentralNic plc
7.00pm A review of the markets by Mark Chadwick of Dowgate Wealth
7.30pm Company presentation by Belvoir Group plc
8.00pm Mello BASH

If you would like a half price ticket, use code MMSTOCKO50. https://www.tickettailor.com/events/melloeventslimited/674618

Tommy H

Hi Turbo

This was also in David Stevenson's Adventurous Investor Friday email, he has talked about it before and was positive on all occasions that I remember.

I don't hold as I could not get it through the previous provider, and thought I could not through the current one, but thank you for the reminder as it seems I can. Some research to do tonight.

Tommy

Thanks for the pointer Tommy - reassuring to to see another investor aslo has a bullish view on £TMIP. He (David Stevenson) writes:

"The latest results came out this week and they were, as you’d expect, very impressive. But despite these positive numbers the stock trades at a roughly 20% discount. I think that will narrow to around 10% and you’ll also pick up a 5.8% pa yield along the way."

Harry Hindsight

I'm struggling Taylor Maritime Investments (LON:TMI) Taylor Maritime Investments (LON:TMIP) (don't use the full stop) with F-score of 2, zero revenue or earnings, perhaps I'm in an alternate investment universe. Was in Braemar Shipping Services (LON:BMS) for a while. China has closed trade so anything supplied from there will either not arrive or be expensive over the next six months.

What shipping winners there will be don't have a clue. Will look into insurers - they know how to monetise risk and will be in demand methinks.

Hi wildshot & DaviStoVest,

Oh dear, sorry some tags seem to have disappeared. I used to have to add tags (company ticker codes, so they come up in searches) manually. But some time ago a feature was added which put in the tags automatically. Occasionally the gremlins crop up, and tags disappear. I thought that problem had been resolved, but looks like it might have cropped up again.

I'll add the tags manually now. (EDIT: done)

It's really useful if you flag up any missing tags, as it prompts me to put them back in, if Jack or Ben don't spot it. Sorry for the inconvenience.

Best wishes, Paul.

Small Cap Value Report (Mon 25 April 2022) - MCLS, TLY, ZOO

Paul’s Section:

Mccoll's Retail (LON:MCLS)

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Paul Scott

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