Small Cap Value Report (Mon 4 Jan 2021) - ENT, SFOR, SAA

3rd Jan '21 by Paul Scott

72 comments 11153 reads

Good morning, it’s Paul here with the first SCVR for 2021. I trust you had a relaxing break over Christmas & New Year, such as it was. Plenty of repeats to watch on TV anyway, we were spoiled for choice!

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Trading updates in January

Out of curiosity, I looked back at last year’s SCVRs to see what companies I wrote about in the first half of January 2020. It was mostly Xmas trading updates from retailers. Given that, late last year so many non-essential shops were forced to close, plus the hospitality & travel sectors were largely locked down again too, in many parts of the country, then I’m not sure how things are likely to pan out this year.

Newsflow is likely to be short term grim, but the market is already looking beyond covid, since the positive vaccine news came through, rightly so I think. Will the big rally of late 2020 hold? Answers on a postcard - I haven't got a clue, as it's not my role to guess at short term market sentiment, anything can happen.

Some things (especially companies perceived as growth shares) do look pricey now though, and have maybe gone up too much? Tesla & Bitcoin, plus plenty of other areas of the US market are clearly now in euphoria or even mania, bubble territory. It's only a matter of time before things go pear shaped in the frothiest part of the market. We've seen all this many times before, and it always ends the same way.

xbEeErQZr5dG8DYtzR7ujmYJzE5I3q6kZewq4MHSHvdpXaKy2f__kJ2MFYDBYVuB61Pf7ntFBJXIBLENM-gAuaXqnlr4QRTdZqdCY4FSViP5_TC7jA3luqjsXhWlsvQoVpOgTDIZ

Given that short term company trading is likely to have been awful in some sectors, then balance sheet strength is the most important thing to me. Can companies survive, without having to do another placing, until conditions return to something like normal (best estimate on that seems to be some time in April, once enough vulnerable…

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MiserableJacktPotato

4th Jan '21

Whilst we’re in danger of rehashing old arguments here, I will add one more comment then drop it.

I find it interesting you offer no criticism of MPs standing on pro Brexit tickets and then voting against those manifesto commitments, some would say misleading voters, but offer criticism for the PM for using powers in his gift which got taken to court to resolve a clear judicial interference in political matters imv, despite the Speaker offering Remainers unprecedented access to set the governmental agenda against 400 odd years of parliamentary precedent. Those MPs could’ve collapsed the government on any day Parliament sat, that they chose not to because they knew the electorate would bin them is the antithesis of democracy.

I guess both sides see their own narrative and I accept that I see the world though my own prism. Thank you for your courteous and considered response .

timarr

You're welcome. I'd note I don't see Brexit in itself as either good or bad. I'm not convinced the disruption was worth the pain, but it is what it is.

Zipmanpeter

The decision to leave the EU was a democratic decision - and the new PM (May) was then a Remainer who consistently tried to deliver this and work through parliament. This is not directly meant to be a party political or Brexit outcome comment

Indeed, most of my complaints related to the current Johnson administration who consistently shows a reluctance to face scrutiny (remember him a hiding in a fridge in the GE campaign, the ban on Ministers appearing on Today radio, parliament's perogation). The COVID laws have resulted in much loss of scutiny/debate and led to (poor) govt by decree. Independent bodies sidelined (Patel's bullying, House of Lords appraisal committee). Statistics bodies writing public letters about misleading use of data; slow and incomplete release of data. Internal Markets bill overturning elements of international law. - I could go on.

Why all this on an investment not a political column? Having seen how it impacts business and prosperity elsewhere and trying to see where the UK has a competitive advantage in the future, keeping society rules based and transparent is a critical point of difference and advantage - never more so now we have chosen to leave the EU. Most of my international contacts thought Brexit was a mad/bad idea. We need to attract retain trade and investment. Democracy and the rule of law was one of our strongest cards. All these actions work against us and help explain (in part) why the UK stock market remains relatively poorly valued.

It takes a lifetime to build a reputation; much less time to lose it.

Silver Moon

If I held I would run a mile. Such a small float, such a large percentage owned by Mr Aggarwal. The dividend will be Christmas all over again for him. I have seen this kind of situation before now.

Silver

Gromley

I suspect that what it actually happening is reporting and whistleblowing are becoming more common / newsworthy and that public expectations and tolerance of wrong doing are lower.
I find it almost impossible to believe that skullduggery is higher now than in the 1970s and 80s

Not sure which direction you are arguing in the middle there IGPJ - surely 'expectations' and 'tolerance' are not both lower?

It does seem to me though, that in the past greater efforts were made to conceal the skulduggery. Perhaps this is the result of spin-doctory.

Why bother to conceal stuff that the electorate appear not to care about?

The polls suggest that Boris would win an election tomorrow and a significant proportion of Americans (including some Democrats) believe Trump's delusions.

I often despair, but then console myself that I chose not to go into politics. It is political suicide to imply that the a significant proportion of the electorate are a bunch of impressionable idiots.

bad England.

I think the electorates expectations for standards of behaviour amongst public officials is higher, and that the tolerance level of what is seen as unacceptable is lower. That sounds like the same thing phrased in different ways but it’s subtlety different - they would expect less bad apples in a barrel and that standard which constitutes whether an apple is good or bad apple is made tougher.. Not seen any research, it’s gut feel.

The reason I say this is the democratising power of the internet which makes it easier to shine light into dark corners.

I take your point about the electorate, political apathy is reported to be rising amongst the young and they’re less likely to have a negative view of the Chinese system according to a BBC show I listened to this morning (might have been the Amol Rajan one).

I'll give you the benefit of the doubt and think of "bad England" as a bon mot ;-)

I actually thought you were pointing in the opposite direction to your clarification, and would probably have agreed, but actually you have made me think there might be a different thing going on :

Propensity to express public outrage :

Expectations Up
Tolerance Down

Likelihood to impact voting intentions :

Expectations Down
Tolerance Up

On reflection though there may well be a causal link to propensity to use social meeja.

Yes, the socials are definitely a double edged sword - good for exposing genuine grievance, abused for petty political point scoring over trivialities.

‘Bad England’ comes from a film, but I forget which one. One of my friends used to use it all the time :)

ANDY1861

I hold Ienergizer (LON:IBPO) brought in few weeks ago as looked solid business with growing revenues but cant seem get my head round such a large divi funded via debt.

Dojosan

Hi Andy

You will know if Kape Technologies (LON:KAPE) is covered if you type "KAPE" into the search function and then click onto Discussion link.

UK_Investor_8888

****! LOCKDOWN III

Like a bad cliché movie franchise, here we go again.

Pop Quiz:

A. Big sell off.

B. Small sell off and short term bear market.

The key reason I ask is, is market history going to repeat itself?

My biggest concern: there is no certain end date and many businesses are now definitely going to lose money, furlough, take emergency handouts, effectively killing 2021 Q1.

To sell off or to sit it out?

Exactly - Anil holds 83% - he can literally do what he wants - pass all ordinary / special resolutions.

In the shorter's pocket.

Case of following the money - did research during weekend - found out that Sir Chris Evans + Richard Griffiths - 2 prolific investors had invested into the co. This news was probably spread around.. Was busy with jostling with my positions during morning due to news of tighter lockdown + S.African strain....come to investing time - SP had shot up 15%. What to do :( Decided to sit it out.

****! LOCKDOWN III
Like a bad cliché movie franchise, here we go again.
Pop Quiz:
A. Big sell off.
B. Small sell off and short term bear mark.

Personally I would go for C minor market bounce.

The only people who did not already know that this was the outcome were :

(A) Boris Johnson.

The market negative would have been if he prevaricated and pretended for a further day that this was not going to happen.

Pineapple Power (LON:PNPL) - is this where we are heading? First list a vehicle that investors perceive as hot (SPAC) then find an even hotter area to invest the IPO proceeds (renewable energy) and voila - SP spikes up nearly 80% in a few trading days. That's was easy wasn't it!!! (I don't hold)

ThumbsUp

This isn't true, actually. There is an agreement that Anil does not exercise the voting rights of his shares for as long as he holds 30% or more of the shares.

2ShedSam

Think you will find Boris knew all along... Nation been sleepwalking into lockdown for a while now. As with the first lockdown, people now ready. Brexit queues at the Ports? Don't think so. Canny fella I think...

peterg

5th Jan '21

I find it interesting you offer no criticism of MPs standing on pro Brexit tickets and then voting against those manifesto commitments

You presumably would include the ERG and hangers on in that? Those who supported Brexit but blocked the detailed solution worked out by their party leader, and in doing so blocked Brexit. The mess and delays were inevitable once Cameron decided it was smart to go for a yes/no referendum with no serious prior resolution of what Brexit would mean (Jacob Rees Mogg got it right at one point in 2016 where he suggested a 2nd referendum might be needed on an actual deal - though he changed his tune on that one!). And of course it was all made far worse by May's insanity in signing art 50 before anyone had agreedwhat sort of deal the UK wanted - given it was already clear that Brexit had as about as many meanings as voters.

Graham Hacker

Trading Updates - Sorry I missed this yesterday & only just catching up but.....! By far the biggest bug bear and totally unacceptable is the term ???? “with market expectations!” How is a private investor expected to know, yet alone calculate, “market expectations.” These should always be qualified with numbers as it feels the company is speaking only to a restricted group of investors I.e. excluding private investors! Totally agree with cherry picked waffle Paul. There should be an agreed general format IN TABLES (yes, meaningful tables). Adjectives (above, below etc) replaced by numeric ranges!

Thank you for listening.....

Small Cap Value Report (Mon 4 Jan 2021) - ENT, SFOR, SAA

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Paul Scott

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