Small Cap Value Report (Mon 28 June 2021) - NAPS, COG, LOOK, ESC, CPC

28th Jun '21 by Jack Brumby

49 comments 9282 reads

Morning, its Paul and Jack here with today’s SCVR.

Agenda

Paul:

Cambridge Cognition Holdings (LON:COG) - new contract win for cognitive testing group, with Finn Cap raising its price target to 175p.

Lookers (LON:LOOK) - strong current trading as with other car dealers, but delay to audited results is a concern.

City Pub (LON:CPC) - looks to be a well managed pubco with lots of freehold assets. As with others covered today though, dilution limits potential upside.

Jack:

Napster (LON:NAPS) - heavily loss-making MelodyVR changes its name to Napster (acquired in December 2020) but doesn't yet give any financial data on the Napster business. This plus track record of heavy losses and equity dilution makes it an extremely risky and speculative investment.

Escape Hunt (LON:ESC) - encouraging post-lockdown trading momentum with organic growth opportunities. Shareholders have been heavily diluted here in the past, though.

Disclaimer -

A friendly reminder that we don’t recommend any stocks. We aim to cover notable trading updates & results of the day and offer our opinions on them as possible candidates for further research if they pique your interest. We tend to stick to companies that have news out on the day, and market caps up to about £700m. We avoid the smallest, blue sky type companies, and a few specialist sectors (e.g. resources, pharma/biotech).

A central assumption is that readers then DYOR (do your own research) and discuss in the comments below. The comments, incidentally, sometimes add just as much value as the articles. We welcome all rational views, whether bull or bear!

Paul’s Section

Cambridge Cognition Holdings (LON:COG)

(I hold)

144p (up 7%, at 08:05) - mkt cap £46m

New £2.2m contract

I only mention contract wins if they’re significant financially. Often companies trot out contract win announcements to ramp the share price, and conveniently forget to mention that they have no material impact on forecasts because they were already baked in.

COG has had clever technology & an extensive track record in cognitive testing for a long time, but it never seemed to establish a consistent growth track record, with too many contracts turning out to be one-offs.

It seems to me that, in the last year, things have significantly improved, which is why I’m taking a close interest in…

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Bullion

28th Jun '21

I've held M&S for what feels like an eternity (probably 6 months in this market) and it's up around 2/3% as I write. I bought it after being impressed with their clothing offering. Plenty of nice looking coats and jumpers around the same price point as Next (LON:NXT) (from memory). If I went into a town centre and didn't know much about either of them I don't think I'd be able to tell the difference. I suppose the difference is that next is a much smoother machine. Their online offering is second to no other clothing retailer I regularly use and their range is seemingly endless. -(This endlessness is a bit of a fault in homeware for example try buying a bespoke couch from them: 50 different legs, 50 different material types, 50 different styles of sofa etc etc simply too much choice)-. They have clear strategy and seem to execute very well. They also have excellent metrics across the board ROCE/ Margins etc.

The above must be why Next are on a pre-covid normalised PE of c.14.5 whereas next are on an equivalent PE of c.4. (as reported on here: the disparity between this and reported earnings is chiefly as a result of their recent and failed endeavours to restructure ). I think the Ocado JV strengthens their food offering which almost runs itself I feel. If they can get their restructuring and online clothing offering right then surely it could be a bit of a bargain?

MattH

Thank you, I will look at XO. They’ve already transferred across but luckily it is (currently at least) 2 separate isa accounts so it looks like I’ll be able to transfer one across.

johnmhughes

Paul, re Lookers, where did you get this info from please?

Logical David

Hi Tim,

I might be wrong and I don't mind if you correct me but if my memory serves me correctly, didn't the FCA step in finally and cover the administration costs whilst the mess was sorted??

As a result of the above, customers didn't lose out in the end despite there being a big huh-arh about the administrator wanting to raid the client funds.

timarr

I have been told that Lookers (LON:LOOK) shares are about to be suspended again. I have sold mine today on this knowledge.

Well, if that's correct it's inside information and trading on inside information is a criminal offence. Probably best not to publicise it if you're going to do it.

Food for thought Timarr. I've got approximately £100k in my AJ Bell Isa and am now sufficiently worried. I'll set up a new one in the next tax year I think.

This all arose as an unintended consequence of changes made after the banking crisis in 2008 - the Special Administration Regulations. However, despite this becoming public knowledge because of the Beaufort Securities scandal there's been no change to the law.

I believe that a small number of HNW customers did lose money.

The point being that any future broker problem might not lead to such a good outcome because the BS outcome didn't create any legally binding changes:

https://www.thisismoney.co.uk/...

There comes a point where you have to make a choice - I decided back in 2008 and 2009 to only use the very largest brokers as I figured they have the best finances and would cause the government the most serious issues. So I'm happy with AJB, interactive investor and Hargreaves Landsdown.

Of course a lot of people here dislike these platforms because they tend to fall over when the market gets excited. I consider this an advantage :-)

Paul Carter

I made a call to someone who I thought would know more and that is what they told me.

He has shares in the company but said he would be hanging on to them.

It could be that shares aren’t suspended, but I was told that was the rumour.

BurglarBill

I used to split my holdings bewteen two brokers - Interactive Investors and SVS Securities (who went into administration). The administrator's fees for SVS were eye watering, however client losses were covered under the Financial Services Compensation Scheme up to £85k. I got everything back, but the collapse of SVS came pre Covid, and I was unable to make any adjustments to the SVS portfolio before or during the Covid collapse of Feb / March 2020.

Moral of the story is don't put all your eggs in one basket, and avoid the weaker players in the stockbroking market.

I now ony have one broker, Interactive Investor, so I'm aware I'm now breaking my own rule.

Gutty

I heard on radio 4 last week relating to packaging companies, not specifically MPAC, Shortage of raw materials also relying on recycled cardboard. Which seems to be contaminated. Rising costs could well be an issue

Silver Moon

Sorry to interrupt but wasn't EQI being moved into ii last Saturday? ii had warned its Investors not to do any work on folios.

hi, yes that is right. It has moved now, but I’d like to move it out again to somewhere else.

j69rotten

Think they normally release results 1st week of july

Tony Drew

My ISA’s are with Halifax and Natwest, both considerable funds, I hope they are more secure being with big banks.

Saga, speaking as a user is brilliant, I also hold the shares and have made enough to go on a couple of cruises!

mark1308

Not sure who has the job of putting the shares mentioned on the right hand panel BUT they have fallen down badly today as only City Pub is shown. Yes I know I can look them up but it is a very handy service usually to have them on the right all together. A very tongue in cheek complaint but worth a mention. Many thanks.

Very very odd as tipped over the week-end !!!!!!

Paul Scott

29th Jun '21

Sorry mark, looks like the ticker tags dropped off, which occasionally happens.

I'll ask Jack to fix it in the morning.

Regards, Paul.

If they don't meet the 30 June accounts filing date, then Lookers (LON:LOOK) shares would presumably be suspended again?

Small Cap Value Report (Mon 28 June 2021) - NAPS, COG, LOOK, ESC, CPC

Paul’s Section

Cambridge Cognition Holdings (LON:COG)

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About the Author

Jack Brumby

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