Small Cap Value Report (Mon 3 August 2020) - HMSO, DISH, TGP, PURP, SEE, BYOT, INCE | Paul Scott

3rd Aug '20 by Paul Scott

63 comments 11821 reads

Good morning, it's Paul here with Monday's SCVR.

Please see the article header for the companies I'll be reviewing today, which have issued trading updates or results.

Estimated timings - I lost the section on PURP, so had a re-create it from memory. Hence running a bit late. Should be finished by 3pm. Update at 15:42 - today's report is now finished.

Hammerson (LON:HMSO)

Share price: 58.3p (down 9% today, at 10:45)
No. shares: 766.3m
Market cap: £446.8m

Response to press speculation

Considering a rights issue.
In advanced discussions to sell its 50% stake in VIA Outlets.
Approved for£300m loan from Bank of England (CCFF scheme)
Q3 rent collection improved to over 30% (still sounds awful)

My opinion - this share looks finely balanced, so I'm watching from the sidelines. I held it recently, but sold out once it became clear that the economics of its shopping centres don't work unless footfall returns to normal, and tenants can pay rents that are far too high for market conditions. Nobody knows what the new normal will be though. Hence I feel it's almost impossible to value this share at the moment.

Bigdish (LON:DISH)

(I'm long)

Another day, another operational update!

TGI Fridays has joined its ordering app, as have 500 more M&B sites. Therefore the 1250 new sites announced recently, has become 1850. Seems to be gaining traction in terms of restaurant recruiting. The platform is free at present. Needs to raise more funds this autumn.

Tekmar (LON:TGP)

Share price: 110p (down 3.5% today, at 10:56)
No. shares: 51.3m
Market cap: £56.4m

(I'm long)

Final Results

Tekmar Group (AIM: TGP), a leading provider of technology and services for the global offshore energy markets, announces its final results for the year ended 31 March 2020 ("FY20" or the "Period").

I did some research on this company earlier this year, and like the look of it. It's a profitable supplier of niche products mainly for the offshore wind farm sector - cable protectors. It's also diversified into other subsea markets (oil & gas, less than 20% of revenues), and growth is both organic and by acquisition. This is a good growth area. Performance was dented by covid, but the figures overall look quite decent to me in the circumstances.

Our trading update stated we expected…

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sharw

3rd Aug '20

XP Power (LON:XPP) - as a long term holder I agree that it has done very well. However, that means it is hardly small cap now - it is in the 250 index.

davidjhill

Byotrol (LON:BYOT) trading statement looks interesting this morning. Surprised not to see it up considerably more to be honest.

they are doing £1.2m p/m at present. order book is same as it was in April at circa £2m so that implies to me that demand is consistent. Brokers have significantly upgraded targets and now have 2021 at revenues of £11.5m but that still looks light to me and I expect the earnings upgrade cycle to continue. At present run rates are closer to £15m so there is a lot of margin for error factored into forecasts. Somehow I can't see demand being the problem given the products they are selling and the obvious advantages. you'd expect it to be more a function of how much they can grow/capacity.

andrea34

"And why shouldn't Apple try and lower their rents?" - because Apple have more cash on their balance sheet than the GDP of smaller European countries! It is utter greed to ask for such reductions in rent when so many individuals and companies are already struggling due to the Covid crisis.

kgb1953

Of course service is their model. But they are as entitled as anyone else to challenge the rent if footfall goes down.

thepomisback

I suppose that people are bringing their political ideas into this. Some believe that companies and individuals who haven’t run their finances prudently should be subsidised by those who have.

pj8

An interesting philosophical point, andrea 34. If rents are down across the board, the question becomes: why should Apple pay a premium on their rent compared to their retail neighbours? Should means-testing for companies apply? I suspect probably not.

rhomboid1

Means testing already exists ...stronger covenants pay lower rent as they’re less risky

All we are seeing is an acceleration in trends where the number of flagship retail locations where landlords are in the driving seat has declined....massively...only Q is how temporary/permanent this shift is

Paul Scott

How interesting. I'm really surprised that Foxtons (LON:FOXT) shares remain stubbornly low. It's below the recent placing price still. (I hold)

Silver Moon

Just don't mention China, I hold with fingers crossed.

Silver

Did you mean the LSE?

Casino_Winner

"Granny/Grandpa goes to Apple because they get customer service in a store from a nice young person who is paid to help them read or delete an email or open a web link."

LOL

JamesS

Hi Paul, thanks for the great updates, so helpful to a novice like me.

Considering the new operational update from Big Dish it would be interesting to hear your views on how this differs from another company that releases regular operational updates Optibiotix Health (LON:OPTI) as I know you're a big fan. (Jokes) Both companies have small revenues and are pre-profit so on the surface quite similar from that perspective.

UK_Investor_8888

There is responsibility within the freedoms of capitalism.

Do the the right things:-

Report clearly and fairly.
Pay your suppliers on time.
Pay your fair share of taxes on time.
Spread risk fairly and equally, not disproportionately against certain demographics, sectors and parties.

* You being corporates of course.

Because if they don't, eventually a counter-political party (Labour/Democrats) gets power and they then try to arbitrarily impose this through legalise which rarely works well.

Boon

Proof in the pudding will come in a few months time... will the restaurants start paying for Bigdish services?

doublelutz

It has changed until we have a vaccine. I think I was one of the first people in the country to use the internet when it took about ten minutes to dial in and subsequently we have bought almost everything that way. However, a lot of people like to go shopping and Apple are presumably in prime locations. The one I know is at the Trafford Centre and their shop and the whole centre was always heaving and often difficult to park despite having over 10,000 parking spaces. It is a destination that people want to visit. I know people who go just to walk around even if they don't intend buying. Once we have a vaccine this will come back quickly. So it depends on where the stores are. I am confident that in 5 years time there will be no 50% off rents in the Trafford Centre.

Haha, nice try, but you're not going to suck me into that particular black hole!

Just noticed, and a major mistake of mine costing me -21%.

Stagecoach (LON:SGC) has now been downgraded to Value Trap and shows a 5% drop on today alone, StockRank downgraded to 53.

Had the Lock Down gone the other way, Stagecoach shareholders would not be feeling so miserable today, but its clearly obvious that buses and passenger trains are not going be profitable businesses for the short to medium term, with their revenue coming from Government grants principally.

I'm selling my corporate holding and using the loss to neutralise some tax. Yuck. Personal holding also gone.

abtan

Holding quite a large position in Purplebricks (LON:PURP) I thought it would be worth sharing some of my thoughts from today's results.

As I scanned the results first thing, my initial reaction was actually disappointment , but the more I look into it, the more optimistic I am.

Note that the results published today include the Canada business, which is now sold off, so all the comments below relate to the UK business only.

+5% Year-on-growth in H2 pre-covid (which is Nov-Feb)
+ve EBITDA in the same time period (+£0.2m) vs a -ve EBITDA in the same period last year (-£0.1m)
Gross margins have been slyly increasing over the last year, from 61.4% in H2 FY19 to 64.7% in H2 FY20
c.£6.3m of revenue has been deferred due to timing lag to completions (revenue is not recognised up front). This additional revenue will likely fall into H1 FY21, a nice boost to an already strong July.
Plenty of cash in the business (c£66m vs Market Cap £143)
It looks like they own at least 14% of Homeday (need to confirm this, might be more, probably not less), which is a fast growing equivalent over in Germany. It could be worth nothing in the long run, but based on the limited published figures (€1b instructions between FY15 and FY18, and then €2b instructions in FY19 alone) this could potentially be worth a lot in the future

If there was 1 negative to take away it was the Year-on-Year decrease in H1 (so up to October 2019). This was a relatively long time ago now, and it's not clear what happened here (Brexit-related uncertainty perhaps? - I saw a comment saying UK listings were extremely low in this time period), so the revenue growth at the start of H2 is one to keep an eye on.

VALUATION

It's probably also worth noting that the first 10 months of the year generated EBITDA of £5.7m and the last 2 months of last year generated £1.9m EBITDA. Combine these together gives a pre-covid Last 12 Months EBITDA of £7.6m.

Underlying capital expenditure (including capitalised development costs) have been <£3m for the last 2 years, so an underlying positive cash flow of c £5m.

The current EV of the company is £77m.

Given the operational leverage a company like this will have, this still looks cheap to me.

If only the share price knew that.

Lee Brown

I agree this should be a winner in this space. The key for me is two things. One, having enough good local property experts and two, offering top notch customer service throughout the transaction. If they can do this then the model should be able to disrupt the space to a huge extent. I guess the trouble is there is not much evidence of good management in the business so far so they could probably do with some more talent at the top!

Haha, it was a genuine question, the fireworks that would have resulted would have been a cherry on top.

Thanks for the reply though, keep up the great, informative work

Small Cap Value Report (Mon 3 August 2020) - HMSO, DISH, TGP, PURP, SEE, BYOT, INCE

Hammerson (LON:HMSO)

Bigdish (LON:DISH)

Tekmar (LON:TGP)

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Paul Scott

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