Small Cap Value Report (Mon 29 Nov 2021) - BMK, MMH, AMGO, BAG, CRC

29th Nov '21 by Jack Brumby

59 comments 10619 reads

Good morning! It's Jack & Roland here with the SCVR for Monday.

Agenda -

Jack's section:

Benchmark Holdings (LON:BMK) - quarterly results showing an improvement in revenue and stabilisation in its markets. The company seeks to improve animal health, productivity, and welfare while reducing environmental impact. A noble aim, but the fact remains that the share price has barely moved in years, while shares in issue continue to increase, so there has been a cost to holding so far.

Amigo Holdings (LON:AMGO) - sub-prime lender that finds itself in a life or death situation just three years after listing. Placing to materially dilute shareholders and the sanctioning of a new scheme is 'increasingly urgent' in order to stave off administration. Uninvestable, in my opinion.

Circle Property (LON:CRC) - property company specialising in regional city centre office assets which it actively manages. Currently trading at around 0.75x net assets, so scope for that discount to close but the shares have already recovered to pre-Covid highs.

Roland's section:

Marshall Motor Holdings (LON:MMH): A blowout 400p per share offer for this car dealership group from the owner of BCA and WeBuyAnyCar.com. I think it’s a savvy acquisition, but I’m not sure it’s a template for other similar deals.

A G Barr (LON:BAG): Irn-Bru maker Barr’s has delivered a modest upgrade to profit guidance for the year. Management cites strong out-of-home trading and some successful recent product innovations. I remain a fan of this family-owned business, albeit with some reservations about long-term growth potential.

Preamble

So it was a fairly brutal end to last week which, in truth, caps off a tough period in the markets stretching back over a couple of months. The indexes don’t seem to reflect the reports I’m hearing from a few private investors of a slightly steeper sell off.

On top of a general souring of sentiment driven in part by supply chain disruption and inflationary pressures, we now have the developing situation of the new Covid variant, which is rattling markets and the media. Covid-sensitive travel and leisure stocks took a bath on Friday and remain exposed to shifting sentiment.

The extent of the threat posed by this new variant is unclear though. Hopefully, we are better equipped to deal with such newsflow than we were back in early 2020,…

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Paul Scott

29th Nov '21

Very interesting to see that Marshall Motor Holdings (LON:MMH) has had a takeover bid. We've been saying for a while here at the SCVR that the car dealer sector looks ripe for bid approaches - because of the freehold property backing, combined with super-normal profits due to strange market conditions at the moment. Private equity has an opportunity to do sale & leasebacks on the property, and load them up with bank debt, thus allowing them to acquire the equity for practically nothing.

Also, many traditional car dealers are matching the online offerings of supposedly (but not actually) disruptive new entrants like Cazoo.

It'll be interesting to see how this pans out. I'm wondering whether I should buy a basket of car dealer shares, in order to get increased exposure to takeover bids, or stick to my existing favourite (due to its extreme balance sheet strength) of Vertu Motors (LON:VTU) (I hold).

Everyone knows profits are going to fall, normalising, in future. But remember that a period of bumper profits leaves behind a stronger balance sheet, and cash, which can be used to pay special divis, do buybacks, fund acquisitions, etc. The way double entry bookkeeping works, is that the bottom line (profit after tax) is reset to zero each year, and the other side of the entry ends up as increased NAV on the balance sheet - permanent increase in shareholder value.

Regards, Paul.

andrewdb

what mojo said *and* if you have a long memory, cast your mind back to the various chinese AIM frauds that happened a few years ago, it looks like ST takes a position that information issued by a company to the market should be taken at face value (believed) whereas other commentators were not so trusting.

Also, the wording of my apology is precisely my own words. I refused to allow any amendments to it.

That is the end of this (trivial) matter.

bryaz

surprised that no one has mentioned AJ Bell "s foray into commission free trading using a new app called dodi

Revs8

Please tell us more. I’m an AJBell customer. Going to look this up now.

Barry Addison

Hi Paul/Jack,

Re AMGO (LON:AMGO). Paul I agree with Jack that the company looks investable but wouldn't one expect the Stock Ranks to indicate that. Instead we have

Quality 23

Value 75 ????

Momentum 41

Ovarall Stock Rank 41

I've always been wary of the Ranks. At the beginning I thought they were a bit gimmicky and I appreciate there will always be a lag but surely the ratings for this company should all be in the red ( and Value Rank at 75 - surely not)

I’ve just looked up the FT article on the new AJBell app. It’s Not out until spring.

https://amp.ft.com/content/560...

Can anyone tell me what is the catch? I.e. how do they make money? Is it like the zero commission travel money firms that rip you off on the exchange rate?

I’m currently very happy with the AJBell platform.

Wilbraham

Off topic I know, but nice to hear Paul's sis/sis-in-law (I forget which) had a track played on Scala Radio just now.

Patrickmylnetrade

I don't know him but Jack seems a smart and measured person, I listen to what he says , and believe you'll be in good hands with his advice :)

yiannos1

Firstly you called me some names that I am embarrassed to repeat , then I get an apology and then you comment further that the matter was a TRIVIAL one.

The matter was not a trivial one , the matter was very serious indeed. I have my opinion and you have yours. I personally cannot just insult people because they have an opposite opinion. Most of the times listening to different opinion make us wiser.

My comment was that many of the suggestions or recommendations here were looking like they were heading for that magic word STOP-LOSS ( or margin calls ) something very very very common in financial markets , especially when an enormous amount of retail is involved ( and something that I have seen with my own eyes on countless occasions ).

A couple of days ago you have confirmed this by writing that you had to sell HEADLAM ( you actually used the word ‘ culled ‘) in order to cover margin calls for other positions falling.

The funny thing though was that I did not mean only your suggestions or opinions , ( and certainly I meant different suggestions expressed here INCLUDING MY OWN!! )

I was just expressing an honest and valid opinion , one that you have confirmed yourself.

Having worked in the industry for 20+ years ( as an investment advisor) , and having retired 5 years ago , it is right for me to say that your analysis is one of the best I have ever read ( simple and straight to the point ). Whether I agree with your timing on certain calls , this is a completely different issue and it is here that everyone should and must do their own research. Your analysis is HONEST and is a CREDIT to you , and indeed very helpful to people with no financial or accounting background.

Keep up the good , honest and hard work Paul.

We move on.

Some of that is true, some is not.

Anyway, as you say, we move on.

Sorry, didn't notice in time to edit but, obviously, "investable" should read "uninvestable". My sincere apologies.

dodge1664

Did you actually read any of the messages concerned before throwing in that insult?

Db47

I think the commission free platforms make their money by increased spreads but might be wrong ?

EVERY SINGLE WORD

Enjoy your evening.

DaviStoVest

Got to agree. FREng clearly decided it was up to him to say something nice to Paul ... and reading the messages and thinking about their content just didn't come into the equation. Well done, FREng!

No.

I do not use stop losses on individual shares.

That has been your main point all along, and it is categorically UNTRUE.

You seem to have misinterpreted something about HEAD - which I chose to close, on a portfolio trim, which is routine, in my margin account. There was no stop loss, because I don't use stop losses.

Maybe in future, you could just ask a question, instead of throwing untrue accusations out, cunningly concealed as a non-specific accusation (which doesn't fool anyone, by the way).

Do you think that I'm feeling more or less likely to discuss things openly, having been subjected to your snipes (and from others too, quite regularly)? The answer is obvious - it's no. I'll say less, and be more private in future.

This is a strictly unofficial 'cool it or lose it' message beamed out on behalf of everyone who abhors useless and unproductive conflict.

Ten deep breaths please before any posting. Better still ... leave it until the morning.

I do not know nor have i any interest in what you do with your investments , and it is not my place to anyway.

I said STOP-LOSS ( margin calls ).

And I was referring to different opinions , recommendations and/or suggestions.

INCLUDING MINE

Cunningly concealed???

Who do you think I am???

Spider-Man????????

i will not answer to any other comment or any other insult coming from you.

Keep up the good and honest work.

OVER

Logical David

Is it just a coincidence that the new variant

OMRICON B is an anagram of NO CRIMBO??

Small Cap Value Report (Mon 29 Nov 2021) - BMK, MMH, AMGO, BAG, CRC

Preamble

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Jack Brumby

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