Small Cap Value Report (Mon 26 July 2021) - SAG, CNIC, XLM, SUP, ATQT
Good morning, it's Paul & Jack here with the SCVR for Monday.
Timing - TBC
Explanatory notes -
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.
Agenda -
Paul's Section:
Science (LON:SAG) - decent H1 results out today, with profit about 4% ahead of recently raised guidance. Looks a very nice company, trading well, and still reasonably priced.
Supreme (LON:SUP) - This is an interesting recent float, with the high energy CEO with a 57% stake certainly coming across as an effective entrrepreneur, very much what I look for.
Attraqt (LON:ATQT) - Half year trading update. Seems to be slightly below expectations, which looks to be a little below breakeven. Not sure why it commands a valuation of £81m.
Sunday papers - a few interesting stories with relevance to investing caught my eye.
Jack's Section:
Centralnic (LON:CNIC) - revenue ahead of forecasts but profits to remain 'comfortably in line' due to ongoing investment. There have been a lot of acquisitions here, along with equity dilution, but the group is growing and its valuation is becoming more attractive.
Xlmedia (LON:XLM) - in line update. Casino vertical continues to suffer but registering growth in European and US sport. There's execution and integration risk in the turnaround strategy, as well as business model risk (responsible for previous setbacks in share price), so I'm happy to sit back and wait for more detailed results and management commentary.
Paul’s Section
Science (LON:SAG)
420p (Friday’s close) - mkt cap £173m
Science Group is an international, science-led services and product development organisation with a significant freehold property asset base. Following the Frontier acquisition in 2019 and the natural evolution of the services operations, the Group now comprises three divisions: R&D Consultancy; Regulatory & Compliance; and Frontier Smart Technologies ('Frontier').
[Paul: extracted from final results statement, issued 9 March 2021]
We last looked at Science Group here on 12 July 2021, when it issued a positive trading update, with H1 guidance raised to >£40m revenues, and adj operating profit >£7m.
Today’s interim results are slightly ahead of guidance, with H1 revenues of £40.7m (up 10% on H1 LY, or up 16% at constant currency, quite a big difference).
H1 adj operating profit is £7.25m (up 48% vs H1 LY), and nearly 4% of previous recent guidance.
Adj basic EPS is up 51% at 13.3p. Double that for a full year (assuming no seasonality), and that’s 26.6p, a PER of 15.8 - doesn’t seem expensive, given the good track record.
Many thanks to Liberum’s analyst Janardan Menon, who’s crunched the numbers, and is forecasting 25.9p for FY 12/2021, very close to my simplistic doubling of the interim actual results. He points out that Frontier has been turned around, and is now profitable, since acquisition by SAG.
Freehold property - an unusual positive feature, today we are updated as follows -
Science Group owns two freehold properties, Harston Mill near Cambridge and Great Burgh in Epsom. The Group's triennial freehold property valuations were undertaken in March 2021. Despite the timing in the midst of the Covid pandemic, there were only minor changes to the valuations with a range between £23 million and £35 million, the latter being a sale & leaseback model. The properties are held on the balance sheet on a cost basis at £21.1 million (30 June 2020: £21.3 million).
Acquisitions - it sounds like more could be in the pipeline -
With a strong balance sheet including significant cash resources, the Board continues to explore both add-on acquisitions and larger opportunities to increase the scale of the Group...
Balance sheet - NAV is £44.9m, less intangible assets of £22.8m, results in NTAV of £22.1m - which looks fairly strong.
Note that the cash pile of £29.0m, is partially offset by £15.9m borrowings. Although we could allocate the borrowings against the £21.1m freehold property.
Cashflow statement - looks as I would expect it to, so nothing of concern.
Outlook - nothing specific that hasn’t already been covered above.
My opinion - we like Science Group here at the SCVR, and have reported positively on it several times already this year.
It’s trading well, and has sound finances, and the valuation looks reasonable (assuming that increased profitability is sustainable). Hence another thumbs up for this share. Stockopedia is also very positive, with a high StockRank of 92.
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Attraqt (LON:ATQT)
41p (down c.2%, at 11:09) - mkt cap £81m
I remember visiting this company shortly after it floated on AIM, in 2014 or 2015. I was struck by its swanky London high rise offices (which turned out to be free, as a favour from a friend), and having a chat about the business with the CEO. It sounded quite interesting, and was a plugin to eCommerce websites, which delivered better product selections when customers searched for something, resulting in higher conversion rates. It had some big name clients, but it struck me as a bit small & niche.
Since then, the share count has exploded, from c.22m, to 196m, and the financial performance has been poor - rising revenues, but losses every year, as you can see. It’s expanded by acquisition. Given this track record, there are clearly much more positive expectations built into the share price. Let’s take a fresh look.
Consideration shares - more shares have been issued, in an announcement this morning, to do with a technology transfer. So the share count is now 201.3m.
Attraqt Group plc (AIM: ATQT), a leading provider of online search, merchandising and personalization solutions for ecommerce, is pleased to provide the following trading update covering the six-month period to 30 June 2021 (H1 FY21).
Financial performance for H1 was in line with management's expectations, with revenues of c.£11.1m delivered in the half.
Nothing is said about profitability though, although I suppose the above implies that profitability is in line with expectations, but it’s ambiguously worded. Although further down it seems to be saying performance is running a little behind full year expectations -
The ongoing pandemic related uncertainty has continued to result in the delay of some customer decisions, impacting new bookings and thus revenue outlook for the full year, which nevertheless remains broadly in line.
The StockReport is showing FY 12/2021 forecast of £23.8m revenues, and a small post-tax loss of £(0.2)m. That’s all I’ve got to work on, as no broker research is coming up on Research Tree.
Annual recurring revenues up 40% on last year, but it doesn’t say how much of that growth is organic, and how much from acquisitions. It talks about new contract wins, but without giving any context (size of deals, etc).
Diary date - late September, for interim results to 30th June.
My opinion - there’s more positive-sounding commentary in today’s update, but it’s too general to help me come to any conclusions on the numbers.
Overall then, the company has grown, seems to be operating just below breakeven, and is valued at £81m. That doesn’t make a lot of sense to me, so let’s move on. Mind you, technology company valuations generally don’t make a lot of sense to me. Valuations seem to be more based on multiples of revenue, rather than profits. I wouldn't invest on that basis myself, because it completely ignores profitability & cash generation. we're old fashioned here at the SCVR, we like profits.
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Sunday papers
Several very interesting articles caught my eye in the Sunday Times, which I thought might be interesting to discuss. Please don't post comments saying can't you discuss this somewhere else on a different thread, because that actually causes more disruption than the discussion itself!
“Virus infections halve in a week” - the most upbeat story on the pandemic that I’ve read for a while. A professor of medicine from the University of East Anglia is quoted saying that the drop in case numbers is “remarkable”. Although it warns the impact of so-called freedom day may not be fully in the numbers yet.
So I wonder if the recent market sell-off of re-opening type companies (hospitality, leisure & travel) might turn positive again? That looks to have already happened to some extent. The market really can’t make up its mind about what the most likely outcome is, and nobody knows, despite so many people having apparently certain & often strident views on this topic. The only honest answer, is that nobody really knows how this will pan out. However, I’m feeling a bit more confident about my positions in Revolution Bars (LON:RBG) (double jab requirement for entry directed by Govt from September? Why not do it now?), and Saga (LON:SAGA) which has been on a bizarre rollercoaster ride of late!
Another covid article in the News Review section tells the fascinating story of a Russian flu outbreak in 1890-1900, which came & went in waves, and apparently killed 125k people in the UK. I’ve heard of the 1918 Spanish flu, but not this one. The article argues that this time around in 2021, vaccines are greatly accelerating herd immunity, therefore covid-19 should rapidly turn into a relatively harmless disease, not requiring any further lockdowns. Let’s hope so.
The most important point in the article is some data about hospitalisations of people who have been double vaccinated in the UK: 29k people who had been double jabbed have tested positive in the UK for covid, and only 1,656 of those needed hospital treatment, only half of those needing an overnight stay in hospital (about 800 people).
Deaths in England of people who had received both jabs, are described as extremely low, at 224, of which only 4 have been under 50 (it’s not stated what other medical conditions they might have had).
Assuming that the S.Times data is accurate (no source is indicated), then this makes re-opening look sensible rather than reckless. It also strikes me that the doom laden tone of the TV news appears to have been wildly inaccurate in recent weeks, terrifying us with case numbers, but not mentioning that deaths of double vaccinated people have been extremely low. All deaths are a tragedy for a family of course, but we need to see this in the context of the enormous damage done to peoples’ lives by the lockdown measures. The damage to mental health in particular is enormous, and many people I know (including myself actually) have really struggled this year to keep our heads above water.
The reason I’m mentioning this, is not because I have any particular axe to grind, or any political stance on things, it’s more that the above leads me to believe the outlook for shares might be looking a lot better, particularly what’s been called the reopening trade. Hence I’m thinking about increasing some of my position sizes in shares that are likely to benefit from restrictions lifting, some of which came into buying range (i.e. fell in price to a more reasonable level) last week. A week or two I was very worried about the risk of yet another lockdown. That risk could now be easing? Maybe? We don't know for sure of course.
Everything could still change again, so I’m keeping an eye on the data and the newsflow.
Freight problems - some interesting short articles in the sunday papers about the cost & delays of shipping goods from the far east. Things seem to be getting worse, and it seems to me fairly likely that we’re heading for profit warnings in many sectors that rely on importing large amounts of bulky, low value items. $20k per container is talked about, if you can find one at all, and delays, as ships are re-routed to take advantage of more lucrative routes. Shipping companies must be coining it in, maybe that’s an area to look at investing in?
Loads of companies that we report on here are flagging up delays & increased cost of shipping, and raw materials. Where does it all end? Logically, demand and supply should eventually rebalance, but not before it could do some nasty damage to our portfolios maybe?
Let’s hope we see more on-shoring. I don’t think it’s a good idea to become so dependent on extended & vulnerable supply chains, particularly from a one-party dictatorship which is becoming increasingly hostile. As the CEO of Supreme (LON:SUP) pointed out in the video mentioned above, if the labour content is 10% or less (which can be achieved using automation), then it’s feasible to make things in the UK. It’s also worth thinking about the environmental damage of all these ships moving things around from high polluting countries, to consumer markets in the West. We’ve not only exported many jobs since the 1980s, but we’ve also exported the pollution, and made it worse by using huge, polluting container ships. Everything needs a re-think, if you ask me.
Finally, the other issue is the pingdemic, which has caused large numbers of people to self-isolate, and hence impacted their employers. This should be a fairly short-lived phenomenon, because so many people are now deleting the app apparently, and work arounds are being found (e.g. daily testing). But I reckon we could see some profit warnings from this issue too, at weaker companies where the CFO doesn’t have some fat on the balance sheet to use up when something bad happens (all good CFOs have a bottom drawer account, with some excess provisions squirelled away in a good year, to absorb any unexpected costs later, it’s just good financial management).
Overall then , I’m not expecting a smooth ride over the rest of 2021, but the longer term picture does seem to be more positive, possibly?
Jack’s section
Centralnic (LON:CNIC)
Share price: 89p (pre-open)
Shares in issue: 251,160,084
Market cap: £223.5m
Centralnic is a domain name and web services provider focusing on the corporate market, with a 25-year track record in the space. The group has developed its own proprietary software platforms for the global distribution of domain names.
Revenue has grown at pace since listing in 2013.
This growth has been at least in part due to acquisitions however and it looks as though net income growth has failed to keep up.
Meanwhile shares in issue have consistently increased, so all in all this is not the kind of profile that typically catches my eye.
Centralnic has certainly been active though. It has annually doubled in size six out of the past seven years through a combination of organic growth, winning new clients, and by acquisitions.
Here’s a brief rundown of the company’s activity so far:
- December 2013 - acquired DomiNIC Software (Germany) - domain management platform used by Telcos and large corporations to manage sales of domain names,
- June 2014 - acquired Internet.bs (Bahamas) - a Top 20 global domain name registrar with customers in nearly 200 countries,
- September 2014 - acquired 10% Accent Media Ltd (UK)
- July 2015 - Acquired dnsXperts (Germany) - a German software development company specialising in domain name management platforms for Telcos and large corporations,
- January 2016 - Acquired Instra (Australia / New Zealand) - ICANN accredited registrar and supplier of associated services to small businesses and corporations,
- December 2017 - Acquired SK-NIC (Slovakia) - the domain name registry for the Slovakian domain extension .SK,
- August 2018 - Acquired KeyDrive (Luxembourg / Germany) - a global technology business and leading domain registrar which managed nearly 6 million domain names,
- September 2018 - Acquired GlobeHosting Inc. (USA)
- July 2019 - Acquired TPP Wholesale (Australia) - Australasia’s leading reseller platform,
- August 2019 - Acquired HEXONET (Germany / Canada) - a global market leader in services for thousands of reseller clients,
- August 2019 - Acquired Ideegeo (New Zealand)
- December 2019 - Acquired Team Internet (Germany) - operates the popular domain parking service ParkingCrew that monetizes more than 20 million domains,
- November 2020 - Acquired Codewise (Poland) - including the monetization platform ZeroPark, the online marketing software Voluum tracker and the associated Media Buying platform Voluum DSP,
- January 2021 - Acquired SafeBrands (France) - manages the domain portfolios of leading French and Swiss brands,
- February 2021 - Acquired Wando Internet Solutions (Germany) - online marketing firm.
The company expects to deliver revenue for the year well ahead of market expectations through our significant investment in resources, restructuring and new business, resulting in profits we expect to be comfortably in line with market expectations.
Following its ‘significant investment programme’, the group recorded $90m of revenue, representing a 63% increase of reported revenue and a record organic growth of c.25% during the three months ended 30 June 2021.
As a result, Centralnic expects to report revenue of c $174m and adjusted EBITDA of c $20m for the first half of 2021, reflecting growth across all business lines. This would be a 56% and 32% increase respectively over the $111.3m and $15.1m results for the same period last year.
That suggests full year results comfortably ahead of the forecast $312m of revenue, so it could be worth a closer look here in case broker forecasts are too conservative.
Cash increased to $39.5m from $28.7m as at 31 December 2020, whilst net debt was broadly the same at $84m (compared to $85m at 31 December 2020) despite $13m spent on the acquisitions of Safebrands and Wando and the final deferred consideration payment for Team Internet.
Adjusted operating cash conversion was well in excess of 100%.
Ben Crawford, CEO of CentralNic, said:
CentralNic has enjoyed a very strong second quarter across both our digital subscriptions products and our privacy enabled online marketing technologies - achieving record organic growth of 25%, following 16% organic growth for the first quarter 2021 and 9% for the full year 2020… As our investment levels plateau, we expect future periods to benefit from increasing operational leverage.
Conclusion
The public markets are littered with empire-building companies that have grown in scale, diluted shareholders over time, and ultimately destroyed value. That would be my concern here. The company has undoubtedly expanded, but has this benefitted equity owners?
But then, on the other hand, it looks like there is a fair chance of continuing to surprise to the upside given the gap between broker forecasts and the company’s own guidance. Talk of operational leverage is important. Is Centralnic at a point where ongoing expansion will see a rapid swing from net losses to profitability?
Through the recent years of losses, operational cash generation has been more robust - but then it spends a lot on capex, so free cash flow to shareholders has been depressed.
The group notes a ‘significant investment programme’ that will plateau. This should hopefully drive organic growth in future and should also see profits rise over the next couple of years as the programme winds down.
I’m neutral on the stock for now but this update suggests Centralnic warrants a closer look. There have been a lot of acquisitions here, so digging into those acquisitions and the capital allocation skills of the management team is required.
But trading momentum is strong and the price to sales ratio has fallen dramatically over time due to the static share price. Brokers forecast an uptick in profitability on what look to be prudent revenue estimates. So on valuation grounds it is far more interesting now than it has been in the past.
Xlmedia (LON:XLM)
Share price: 54.1p (-0.73%)
Shares in issue: 262,586,405
Market cap: £142.1m
XLMedia is a global digital performance publisher, with verticals including online gambling, personal finance, sports and technology. It uses proprietary tools and methodologies to identify and target high value clients for platform operators.
Its informational websites earn commission payments by generating signups for advertisers. XLMedia was focused on the online gaming sector, but more than 100 of the firm’s casino sites were hit by a Google penalty early in 2020. It is re-focusing on North American sports as a result.
We can see the share price took a tumble in 2018, and again in 2019/20. Shares in issue are up since then, from 219m to 262.6m.
The group has an ambitious transformation strategy, which will enable it to ‘shape the future of the performance publishing industry’. It has two fundamental priorities:
- Create a balanced portfolio of websites to cover a range of attractive geographies with greater exposure to regulated markets. This means North American sports, primarily through targeted acquisition.
- Consolidate the online portfolio, concentrating on a much smaller number of publishing assets, and focusing its resources on optimising this core set of premium sites for its chosen markets.
XLM hopes that fewer, higher-quality websites focused on sports will enable it to build more enduring relationships with consumers.
… The company therefore reaffirms guidance as previously stated on 27th May 2021 of revenue for full year 2021 of between $65m and $70m.
For the six months ended 30 June 2021, XLMedia expects to report :
- Revenue of approximately $32m (H1 2020: $27.7m), and
- EBITDA of approximately $2.9m (H1 2020: $3.5m) and Adjusted EBITDA of approximately $7.0m (H1 2020: $5.1m).
Adjusted EBITDA is defined as ‘EBITDA adjusted for Share Based Payments and Transformation costs’. There’s not much guidance in this update on exactly what will be included in transformation costs.
Cash balances at the end of June 2021 were approximately $38m (30 June 2020: $24.8m).
XLM notes the consistent performance in the Personal Finance vertical, record organic growth in the European Sport vertical, and a positive impact from the recently acquired US Sports vertical. Marketing initiatives across its US sports assets continue, with increased levels of traffic reported across all sites since their acquisition.
However, this progress is partially offset by Casino's performance, where tail revenues continue to deteriorate and new revenue is being built from a smaller existing asset base.
This continues the narrative from recent trading updates of good sports verticals and a weak casino. Management is accelerating the move to reorganise XLM by vertical markets. Increased visibility on the performance of these various verticals will be a positive step.
The workforce is to be reduced by up to 15% and XLM continues to evaluate acquisition opportunities.
Conclusion
Casino was 63% of FY20 revenue while Sports was just 22%, so it looks like further acquisitions and organic growth are required to fuel this turnaround.
There is business risk here as well in that small changes in algorithms from internet giants like Google can cause a lot of disruption.
It could all change quite quickly in this space and I have some reservations regarding the longer term durability of profits. For now at least it looks like good money can be made if the new management team can execute this shift towards the US sports market. The jettisoning of non-core sites to focus on fewer, higher quality assets sounds like a smart step.
The profits and cash generation at XLM have at times been eye-catching - but are they sustainable? This is an important consideration as the company has had setbacks before.
Furthermore, total assets of $92.2m on the balance sheet are dominated by $63.9m of goodwill. It could all work out, but there's a fair amount of risk here. In order to fund more acquisitions, we’ll likely need to see evidence of strong cash generation or additional placings.
Revenue should be up this year to between $65m-$70m but this is on the back of two recent acquisitions. It’s quite possible that the strategy will come good, but in my view there’s still a lot to prove and I’d prefer to wait for more detailed accounts (rather than relying on today’s measure of adjusted EBITDA before transformation costs, for example).
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74 comments
Had an interesting chat with a friend this lunchtime that highlighted a few of the problems with the lock down and the long term costs on the nations health one was the death of a mutual friend who had died after trying to see his doctor for a couple of months his GP like quite a few others was only doing online consultations in the end he got so bad he went to A &E unfortunately he died with a month wether he could have been saved by an earlier diagnosis we will never know he was a very good man and I will miss him may he rest in peace
The other subject that came up was the hospital my friends wife who is a nurse works in has had a huge surge in young people with a range of problems from self harm, drug abuse , alcohol abuse and mental health problems
As a farther of young children and older children the way we sacrificed the young to protect the old leaves me sad i don’t believe we have done this before in my life time anyway I would never put myself before my children and find it hard to believe many on here would put them selves before their children and grandchildren
I think the balance here bullhead is that we have never had a pandemic like this in the last 100 years.
Also not to dismiss the sacrifices made by any but the whole population having to spend a year or so in the house compared to the tragic amount of youths that died in either of the world wars puts things in perspective to me ref sacrifices being made. hopefully now as things stand though the young can now start to get back to a semblance of normality.
Oh I’m not comparing the sacrifice of the young today to the world wars
But this time is different in that the media has done everything it can to terrify the young I don’t watch the news at all anymore and feel a lot happier for it the young can’t escape the constant barrage of negative views which leave them feeling isolated and afraid when really they have very little to be worried about from catching covid
Sad about your friend. What GPs have been doing has been triaging cases on the phone and only meeting face to face where that was clinically necessary. None I know have only been working online though I know that has been alleged in the media. A huge problem for GPs was being obliged to deep clean any examination room after each patient was seen so as not to cross contaminate other patients.
I understand what you are saying about the generations but, unless we accept a policy that we don't admit to hospital anybody extremely ill with Covid over a certain age, the major risk to all of us, at whatever age, is that we allow Covid to infect so many at one time that there are no beds available when we are in need of critical care for all the usual non-Covid reasons. My son is a Covid ICU consultant Anaesthetist and what he tells me about bed occupancy and staffing levels is very scary. We must all take all the care we can in the community to avoid wrecking the system we may then need at any age.
All I can tell you is what the guy who died told me a few weeks before he died and that was his GP would not see him face to face and he was forced to go to A&E and that’s the truth if you don’t want to believe that’s what happened then that’s up to you
I know a number of doctors and nurses too including one who works in ICU and they tell me a very different story than what you are telling me is the case at the moment maybe it’s down to different hospitals ?
Cases are falling over 90% of people have antibodies from either vaccinations or from catching covid over half of people in hospital with covid caught it in there
Spending your life cowering away hiding from the world outside is no life
Life is for living
Excellent pre-amble on "The Sundays".
TBH I don't mind what issues you raise here (whether it's Covid, Boohoo (LON:BOO), Next (LON:NXT) or some other random subject) it is always an interesting take on the subject.
Thank you.
Regards
Michael
Strongly agree with you MichaelFBS (about not minding about what issues Paul raises here). His views are always a great read and are often helpful from investment decisions angle too.
Apropos of no particular share or poster, the temperature of debate seems to be rising along with the weather. To avoid unintentional tetchiness and offence, could posters, ensure, if wanting to reply to an original post, that they start by pressing the reply button below that post and not unintentionally aim your reply at the writer of another reply to the original post or possibly a totally different topic. I find it better to view oldest post first, it seems less confusing but I'm 75 so need all the help I can get. Another option is to read replies threaded or unthreaded. If you are having difficulty knowing who or what a poster is referring to, read unthreaded in oldest first order instead of firing a salvo by mistake. My wife is of Mediterranean descent a couple of generations ago, I could write a book about misunderstandings and one day I might. Peace and goodwill to all.
Would love to hear a view on Fonix Mobile (LON:FNX) recent price slump - their interim results last week seemed completely acceptable. Any views on why the price has retracted so much over the last three months?
The 75% payout ratio made me sell out, just a cash cow really so shouldn't attract a high rating
It is an interesting perspective that Fonix Mobile (LON:FNX) is “just a cash cow” (i.e. ex-growth). You could be right. My take is that they have already built and developed their platform and growth will come from a) plugging new customers into that platform and b) geographic expansion (which they plan to do in conjunction with existing customers). If they can continue growing they are looking cheap but if they really are only a cash cow, then I agree, they wouldn’t deserve a premium rating. I hold and am backing the growth thesis.
Cheers
Simon
I believe I read late q4 but I can't remember where
Who are you replying to and which stock?
A lot of posts are not making any sense on here today.
Agreed herbie 47. It may sound pedantic but it takes very little effort to include the stock ticker preceded by the £ sign, as described in 'a Helpful Tip' immediately below the box for your initial post. Just because you knew exactly what you meant it doesn't mean that other readers do. If you see you have made a mess of it as your post comes up then it is available for editing for some time after you post.
Mpac (LON:MPAC)
Interesting announcement out on a contract win today in what appears to be a completely new market for them. Given it is in the clean energy / battery area could start to be given a more premium rating given the production options over planned gigafactories. Need to dig into this announcement a bit more I think
Afternoon all,
"Since then, the share count has exploded, from c.22m, to 196m"
Is there a metric on Stocko which tracks shares in issue over time?
Had a look thru the company reports/screens but nothing jumped out at me! If anyone knows, pls shout!
Which stock are you talking about?
Donna1 - its on the Stockreport. For the most up to date number though you need to scroll down further and find "Shares in Issue"
Tks
Can someone please explain to me in Layman's terms what happen to Templeton Emerging Markets Investment Trust (LON:TEM) today? Why the 80% drop?
There has been a share split. If you previously owned one share, you will now have 5 so the value of your investment is still the same.
There was a share split as outlined here.
https://www.temit.co.uk/invest...
Don't do what I've just done and enter the share split into a Stocko portfolio today. It magnifies the 80% loss by ×5! Looked like an £8000 loss on £1750 worth of (LON:TEM) . Hopefully will get back in sync tomorrow and can enter the split then.
Anyone got any views on results for Eco Animal Health (LON:EAH) They look good to me (I hold too many) but divi re-instatement hardly seems to be worth the bother at 1p
ECO Animal Health (LON:EAH)
Results looks great - the damage is probably done with this bit and the CEO hanging up his gloves.
Performance in our first three months of the current financial year ending 31 March 2022 has been solid with Group revenue marginally behind the corresponding prior year period.
The strength seen in our Chinese market at the end of the last financial year has eased significantly following the recent pork price declines.
Note the results today are miles ahead of the stocky numbers - not sure if there have been no brokers updates made for most of last year?
Ideally we need some handle on where they are going ref ye 31/3/2022 and beyond.
My investment here has performed very poorly (i bought back in 2018 before they hit any issues that have plagued them for 2019 and 2020) - these numbers are certainly enough to keep me here at these prices though . Some companies only ever come good after you sell - this may be one of those cases here i fear. The issue with this company as an invetsment is that they do seem like they are reliant on too many external factors that dictate how well they are able to do. They have come along way in the last 15 years so so well deserved retirement for CEO.
Smiths News (LON:SNWS) Interesting interview with the CEO organised by Edison Group. For those holding shares the CEO comes over very fluenty and very clear in the strategy and objectives.
This is the link: https://www.edisongroup.com/ed...
Paul
A good interview from a strong CEO. He is a man to back and he will continue to deliver. Happy to hold and add when possible.
Activeops (LON:AOM) FY21 presentation to analysts given last week. They are 'a leading provider of Management Process Automation (MPA) software for running complex and global back-offices,' They IPO'd in March, here we get more background to the product, market, business model & strategy; and of course the FY21 results. Video & Podcast.
Paul Jourdan's interview has been very well received. If you missed it, here again. Video & podcast. Covers inflation, and various companies mentioned including £Polarean Imaging (LON:POLX) Renalytix (LON:RENX) Dunelm (LON:DNLM) Grainger (LON:GRI) Saietta (LON:SED) Victorian Plumbing (LON:VIC) £AWE. Video & podcast.
Join us on Wednesday 28th July, 2.30pm for the Creightons (LON:CRL) FY21 results presentation and Q&A. Register here.
And Vertu Motors (LON:VTU) investor presentation on Tuesday 17th August, 4.30pm. Register here.
Tamzin - any chance of getting a presentation from Supreme (LON:SUP) Paul mentions their video above? Looks interesting but I struggled with the sound quality and for some reason full screen was not available which made the slides hard to read. I've never had this problem with PI World presentations.
Thanks for the comprehensive write up on CNIC Jack. They are a small fish in a vey big pond. The biggest being Godaddy at $2 Billion. Their acquisitions have given them a strong foot hold and they are are rapidly climbing up the ranks in this very hungry eat or be eaten sector. They have very large intstitutional holdings at 94%. The bulk of which appear to be partners and directors trusts and recently nearly 10% for employees trust. Pretty happy its moving in the right direction now with this update and as you say these acquisitions could well swing into good profits as suggested by 4 brokers targeting much higher Sp.
TP (LON:TPG) has quietly announced that it has dropped plans to sell off its naval division - the largest part of the business. Couldn't get a decent price for it. To judge by the price movements, the market knew this weeks ago. Probably a bit speculative for Paul's risk appetite, but we are looking at an engineering group with some interesting parts in it, revenues of over 60 million, tangible assets over 30 million, against an EV of 30 million. It is a least plausible that the new CEO could turn this into a more profitable set of businesses.
sunday trader
TP (LON:TPG)
tangible assets over 30 million, against an EV of 30 million.
At 31/12/2020
business current assets £28.7 mill
Liabilities £34.2 mill of which £4.7 mill is leases
so i get negative tangible assets - have things changed since 31/12/2020 or are you including the intangibles (32 mill) as tangible?
re TP (LON:TPG), you are quite right, guilty as charged of reading the balance sheet figures too quickly. Given the loss-making history, I would have thought it difficult to assign any value to the intangibles.
Another vote for last week's Dotdigital (LON:DOTD)
Sumo (LON:SUMO)
FWIW
"In Hong Kong, Tencent shares were 7.7% lower. It must relinquish its exclusive music label rights, China's market regulator said Saturday, after finding that the firm had violated antitrust laws." (Morningstar)
Phil
China looks to be attempting to break near-monopolies in a variety of sectors, not to mention curb the property market, which Russell Clark posits is a response to rising food prices. To mis-quote Russell: "When faced with prices they can't control, they look to manipulate prices of things they can control."
I don't think this puts the Sumo (LON:SUMO) bid at material risk.
Last week the Chinese authorities banned education companies that teach school curriculum subjects from making profits immediately knocking about 50% off US listed companies like Gaotu and TAL. It was an area Tencent and Alibaba were also getting involved in.
Today the FT reports that the UK is looking to remove Chinese company GCN from our nuclear power projects amid worsening relations between the UK and China.
So while it's very hard to see Sumo as strategically important, why invest subject to the whim of the Chinese authorities? But the best of luck to holders, I don't have any skin in the game.
Paul
Is it possible to look at Dotdigital £DOTD from last week please?
You mentioned you were planning on but sadly you ran out of time.
Thanks
Another vote for Science (LON:SAG)
Morning Paul and Jack. Be great to get your views on Science (LON:SAG)
Thanks
My morning smallcap tweet:
Newriver Reit (LON:NRR) Duke Royalty (LON:DUKE) Journeo (LON:JNEO) ATTRAQT (LON:ATQT) CentralNic (LON:CNIC) Plant Health Care (LON:PHC), Tinybuild Inc (LON:TBLD), XLMedia (LON:XLM), TP (LON:TPG)
NewRiver REIT (NRR) to sell pub div Hawthorn for £222m cf NAV £249m. [SP=86.9 Cap=266m]
Duke Royalty (DUKE) Q1(June) cash rev £2.9m, marginally above mgmt expectations. Guides Q2 £3.2m. [SP=40 Cap=143m]
Journeo (JNEO) wins tender worth £0.8m for real-time passenger information. H1 rev up 7%. In line? [SP=100 Cap=9m]
ATTRAQT (ATQT) guides H1(June) rev in line. Covid "has continued to result in the delay of some customer decisions, impacting new bookings and thus revenue outlook for the full year, which nevertheless remains broadly in line." [SP=41 Cap=82m]
CentralNic (CNIC) guides Q2 rev up 63% and 25% organic. Expects FY(Dec) rev well ahead of market expectations "through our significant investment in resources, restructuring and new business, resulting in profits we expect to be comfortably in line." [SP=89 Cap=223m]
Plant Health Care (PHC) guides H1(June) rev yp13$ (9% in const FX). Expects FY in line. [SP=14.27 Cap=43m]
In line: Tinybuild Inc (LON:TBLD) XLMedia (LON:XLM) TP (LON:TPG)
good morning guys. could i ask a question on SUMO. There was a takeover bid last week with an offer price of £5.13 per share but all last week and again this morning their has been big sellers taking prices below £5.00. Why would they be doing that and should i be selling my stock now as well? Just a bit confused. Thanks
I don't think there are any definite answers to this - I am playing through the options in my own mind too. One is essentially trading off the certainty of "cash now" vs "cash in the future" ... the future holds some uncertainty: another offer might come along or the deal could fall through due to regulation etc in which case the share price would most likely retrace quite a bit?
I think what makes it difficult is that to my knowledge we don't have a timetable yet for the Sumo (LON:SUMO) takeover? So that must be a factor too ... if one has an attractive idea for a new home for the cash, it might make sense to take the money now? Different investors will have different time horizons ... possibly there are other considerations that I am missing of course.
I always think the best thing to do is to convert it into a non binary decision by selling half now and waiting to see what happens for the other half. Sometimes takeover offers appear very high and someone else comes in to top them and other times they appear low-ball but fall apart and the share goes back down to less than before the offer. It's always quite hard to know except with the benefit of hindsight.
RE: Sumo (LON:SUMO)
There was a takeover bid last week with an offer price of £5.13 per share but all last week and again this morning their has been big sellers taking prices below £5.00. Why would they be doing that and should i be selling my stock now as well?
The share price movement is a bit odd. The Tencent bid looks like a fair price and they already held about 9% of the stock. A near 20p discount to the offer isn't just arbitrage.
Typically, if the share price falls below the offer price it's an indication that the market thinks the offer will fail. The only plausible reason I can think of for that is that there may be some government pushback against Tencent, as a Chinese company. But it's not like SUMO is strategically important to the UK economy or that Chinese ownership represents a threat to national security.
So it's not obvious, I'm afraid. How shareholders react is a personal choice. From my perspective either the bid goes through and I get a fair price for my stock or it doesn't and I'm left holding a valuable asset, albeit at a significantly lower price. Personally I'd prefer the latter, but no doubt that's a minority view.
timarr
these type of headlines for Tencent probably don't help either and may contribute to some nervousness re the Sumo (LON:SUMO) deal?
"The State Administration for Market Regulation on Saturday ordered Tencent to give up its exclusive music licensing rights and slapped a fine on the company for anti-competitive behavior."
https://www.cnbc.com/2021/07/2...
Paul, I have a quick question. Apologies if this is the wrong section.
I have been reading 100 baggers. Now I am not expecting anyone to come up with a list of 100 Baggers but I have seen various suggestions for 'Coffee Can' shares. As I hadn't read the book I didn't take much notice.
Which shares have you considered as 'Coffee Can' shares? I fully appreciate that doesn't mean you are recommending them.
Thanks
This isn’t meant as a disrespectful response. I saw it yesterday and it sprung straight to mind when seeing your post….
Let’s hope that his advice is better than his spelling.
I will never know as he blocked me when I gently pointed out last March 2020 that him carping on how clever he had been to do x y and z in the market was not exactly helpful to those who had been less fortunate!
Regards
Michael
Mark Miniverni trying to persuade us that we are 10 times more capable than we think we are strikes me as a recipe for disaster - certainly in my case.
Where does he get the figure 10 from? Number of digits on both hands? His house number? His bag of bingo balls?
Still it is gaurenteed so it must be true.
Bonitabeach
Perfect!
@CamRaid
SCVR readers hace previously suggested Boohoo (LON:BOO) Gear4music Holdings (LON:G4M) Keywords Studios (LON:KWS) Sdi (LON:SDI) Volex (LON:VLX) and Webis Holding (LON:WEB) as 100 baggers. I don't recall others, though there have been a few more, I think.(I hold BOO and G4M).
EDIT: Jarvis Securities (LON:JIM) (I hold) was another one mentioned as a coffee-can share.
I am not saying money will not be made on it, but if anyone believes that Boohoo (LON:BOO) will be a 100 bagger taking the current market cap from £3.54 billion to £354 billion that is a new definition of optimism! In general, if anyone is thinking of 100 bagger's over many years they would have to discount that for inflation although obviously I would not mind one or two!
doublelutz
I am not saying money will not be made on it, but if anyone believes that Boohoo (LON:BOO) will be a 100 bagger taking the current market cap from £3.54 billion to £354 billion that is a new definition of optimism!
Boohoo was flagged up here when it was in the 25p to 30p range - so £35 bilion would do the job for the lucky few who bought way back when. I was one of the lucky few purchasers at that price range but bottled it and sold out at 125p (have later bought back in poaying much more). You really do need big kahunas to fully run something all the way to 100* without selling.
Surely you need to consider today's price when considering if it is a 100 bagger, otherwise, I could select something that is a 99 bagged and says I hold a potential 100 bagger.
BSV
BSV
Surely you need to consider today's price when considering if it is a 100 bagger, otherwise, I could select something that is a 99 bagged and says I hold a potential 100 bagger.
If you look at what the op said it was with regard to previously mentioned stocks - so its pretty obvious to me that the context of that post was these were stocks on their journey due to the flagging date being in the past.
If you look at what the op said it was with regard to previously mentioned stocks - so its pretty obvious to me that the context of that post was these were stocks on their journey due to the flagging date being in the past.
What the OP actually said [directed to Paul] was:
"Now I am not expecting anyone to come up with a list of 100 Baggers but I have seen various suggestions for 'Coffee Can' shares ... Which shares have you considered as 'Coffee Can' shares?"
In relation to 100 baggers, however, the original concept, as far as I can trace it back, comes from Thomas Phelps in 100 to 1 in the Stock Market. As Phelps said:
It would be hard to find a worse slogan than ‘You’ll never go bust taking a profit’. Every sale is a confession of error ... the two reasons so few of us profit by 100-1 stocks are first that we do not try to do so and second that even when we are wise or lucky enough to buy one we do not hold on.
timarr
"It would be hard to find a worse slogan than ‘You’ll never go bust taking a profit’. Every sale is a confession of error ... "
Begging Mr Phelp's pardon, it would be hard to find a worse slogan than "every sale is a confession of error". Not only is it wrong, it's also dangerous and strengthens one of our most pernicious psychological biases.
When the casino loses a small bet, it is not an error, it's an intrinsic part of the strategy. Likewise, when anyone has a strategy with positive expectancy, it's generally a good idea to play it as often as possible, not as little as possible. The fewer times you roll the dice, the more random the returns will be.
If anyone wants a guaranteed 100 bagger, I suggest looking at the ishares MSCI World TR. I estimate it would take about 70 years. Not a bad present for your grandchildren.
Begging Mr Phelp's pardon, it would be hard to find a worse slogan than "every sale is a confession of error". Not only is it wrong, it's also dangerous and strengthens one of our most pernicious psychological biases.
Phelps is dead, having started investing in 1929, so I don't think he'll care :-)
Which psychological bias are you referring to?
The casino example isn't a bias, it's simply running the numbers in a game biased towards the house. In theory you can replicate that with stock investing or horse racing, but it's a rare individual that can implement a strategy to take advantage of that. Most people buy randomly and sell even more randomly.
timarr
I was referring to the bias that prevents us from selling a losing position. There is arguably more than one bias involved in this, but a key aspect of it is that it is hard to do because we are prone to look at the sale as an admission of error, so we avoid it. A slogan that reinforces this is not helpful.
I didn't say the casino was an example of bias. The casino example is one which demonstrates a successful strategy based on high turnover. The casino could adopt a "100 bagger" style approach of low turnover (e.g. a few big bets from whales) but they discourage the low turnover approach because they know they can only be sure of success with high turnover. They know they have positive expectancy so they want to play as many times as possible, rather than risking it all on one throw of the dice.
There is much to be said for adopting the same approach to our investments. The 100 bagger approach is akin to one throw of the dice, or maybe 20 rolls in a portfolio. Even if you had sufficient skill to give you positive expectancy, 20 rolls of the dice is probably insufficient to make your edge count, particularly as the base rate for 100 baggers is extremely low.
I was referring to the bias that prevents us from selling a losing position.
Ah, loss aversion. The Tversky and Kahnemann research into this - aka prospect theory - showed that it was due to an asymmetry in the way we view losses and gains. We hold losers because we don't want to crystallise a loss.
However, the other part of loss aversion is what we're discussing here - the tendency of people to sell winners to lock in a gain. By doing that, of course, you foreclose the possibility of a multi-bagger. That was really the point Phelps was making, if taken in context (which my quote didn't).
timarr
"We hold losers because we don't want to crystallise a loss."
Indeed, loss aversion ... but why? Why are we keen to limit gains but not losses? Where's the logic in that? The best explanation I have seen is essentially that we find it extremely difficult to change our minds. Selling a winner confirms we were right --> endorphins. Selling a loser threatens an admission of error --> cortisol.
Far better to adopt the approach of the casino. An individual loss is not an error. It is only to be expected. Reject any suggestion that "every sale is a confession of error". Accept the loss happily and play again. Only a failure of strategy would be an error.
Indeed, loss aversion ... but why? Why are we keen to limit gains but not losses?
The point is, I think, that we don't like taking a loss. We keep losers so we don't crystallise a loss and we sell winners so we're guaranteed a profit. The research in this area shows that losses cause physical pain and that losses hurt twice as much as gains give us pleasure.
It's a fundamental behavioural bias which spills over into all sorts of areas. It's also been seen with golfers putting for par or birdie, for instance. In the same situation they make more putts for par (avoiding the pain of a loss) than they do for birdie (achieving the pleasure of a gain).
The problem is that in investing it tends (on average, over time) to be the wrong thing to do. Loser stocks will tend to keep on losing and winner stocks will tend to keep on winning (albeit with lots of volatility along the way). And while you can only lose 100% your gains can go to infinity.
Broadly, selling a stock for no other reason than its made you some money doesn't make any sense. Obviously if something fundamental has changed about its business model then that's different. And, of course, most of us will sell when we see a market crash looming - but probably we shouldn't.
timarr
Indeed, I'm familiar with all this stuff, but again ... why? Why should losses be more important than gains of equal financial value? Why should crystalised losses count but not uncrystalised losses? Kahneman and Tversky didn't say (aside from some conjecture) and without that understanding you're not much closer to being able to cut your losses and run your winners because you don't fully understand your behaviour (for "your" read "one's").
There are no definitive answers, but the best explanation I've seen tied it to the same underlying mechanism that makes it difficult for us to change our minds, as explained above; and the way to beat that is to cast aside the automatic thinking that a sale at a loss is linked to a confession of error. Think like a casino instead.
Anyway, the same mechanism is also partly responsible for the fact that you can't persuade someone of something they don't want to hear. So I'll leave it there.
... the way to beat that is to cast aside the automatic thinking that a sale at a loss is linked to a confession of error. Think like a casino instead.
The "confession of error" concept by Phelps is a general thing. He's not saying you shouldn't sell. He's saying that if you do sell you've made an error in the purchase, because the ideal holding time is forever - aka a coffee can stock, to bring us full circle to the OP.
So work out what the error was, and try not to do it again.
Wouldn't work for me, but I thought it might be interesting for the board to know where the 100 bagger thing came from.
timarr
I agree with what you say.
As for Phelps; "He's saying that if you do sell you've made an error in the purchase, because the ideal holding time is forever ... So work out what the error was, and try not to do it again."
I disagree with that. The world is very random. You can make a faultless stock selection and lose the lot. Every year someone will lose 30% of one or other position, through no fault of their own. This is a far bigger factor than errors in stock selection for those of us who follow a method.
When I've sold at a loss, I've considered why I've lost. Sometimes there are lessons to be learned, but often I know that if I had rejected the stock due to reason xyz, then I'd have rejected a bunch of winners for the same reason too. Sometimes the risks materialise, sometimes they don't. That's out of my control.
That's reality for me ... and if someone else's holding period is for ever, 100 bagger style, then their exposure to sheer random chance is dramatically higher than mine.
I know it's completely irrational, but I find having to confess to one's accountant that I've crystallised a major loss (in a taxed account) is much harder than taking a loss in a SIPP/ISA.
Perhaps those with partners have a similar psychological block to fessing up to losses? (I've no idea how frequently people here discuss their performance with other halves, but several claim to manage funds on behalf of spice, parents, children, pet goldfish......)
OK, I understand my interpretation of what you are saying is ' here's something that has 10 bagged it might 100bag from some price in the past. '
I think my point was, if we are thinking about 100baggers today, we should probably discuss from a prospect of today's price.
I only have one great coffee can investment, it has been brilliant. I bought it a 8 years ago and I was not sure if it would work. What I really liked about it was 80% lower than its actual value. Most buyers would not buy it as they thought it was broken. Just the sort of investment I look for. I spoke to my other half about the investment and it took some convincing to gain agreement to make the investment. A few years later I was so happy. The coffee can I invested in is still able to hold the herbal tea we like.
BSV
BSV
I think my point was, if we are thinking about 100baggers today,
I got your point - it was as subtle as a brick and straight to the point. It was just not relevant to my point which was purely that the op was talking about the past and thats what i was flagging up to the first responder!
Your paragraph of gibberish about what i didn't say but you think i was trying to say i will ignore - i was responding to someone else and not you and i don't really care how you intrepret it - all i will say its thats its nonsenical gibberish to my eyes.
I thought the nonsensical gibberish was the best bit.
Anyway have a nice day.
BSV
I hold Boohoo (LON:BOO) from 37p (with a short hiatus last March) and think that while £37 might be a stretch, with a world apparel valued at around $1.5 trillion in 2020 and is projected to grow in value to about $2.25 trillion, Boohoo has a lot of headroom.
Boohoo's revenue last year was £1.75 billion. Could they capture 1% of world apparel trade? Perhaps not, maybe 0.5%? Inditex 2019 (pre-covid) revenue was €28.2 billion so about 13.9 times Boohoo (LON:BOO) and their net income €3.6 billion.
I have no idea but I think Boohoo (LON:BOO) will be mulitples larger than it is today and see no reason why BOO could not grow to that scale.
My apologies for the Boohoo comment. I know they are not meant to be posted here.
Regards
Michael
Morning CamRaid,
A few stocks i think are Coffee Can or 100 bagger candidates:
Sdi (LON:SDI)
Science (LON:SAG)
Gear4music Holdings (LON:G4M)
Intercede (LON:IGP)
Volex (LON:VLX)
But DYOR!!
Regards.
Watkin Jones (LON:WJG) (I hold) - hefty Director buy, NED spends £147k -
Watkin Jones plc (AIM:WJG) announces that Alan Giddins, Non-Executive Director and Chair-designate, bought 64,000 ordinary shares in the Company on 22 July 2021 at a price of 230.46 pence per share.
Subsequent to this purchase of shares, Alan Giddins now holds 64,000 ordinary shares in the Company, representing 0.025% of the Company's issued share capital.