Small Cap Value Report (Mon 6 Jan 2020) - RBG, GHT, ALT, AVAP

158

6th Jan '20 by Paul Scott

38 comments 8167 reads

Good morning, it's Paul here.

There's not much company news today, so I'm taking it easy on timings. After covering the small amount of company news, I'll chat about some macro stuff. EDIT - it's just not working today, so I'm drawing a line under this report.

Today's report is now finished.

Revolution Bars (LON:RBG) (I hold a long position in this share)

This is one of my big 3 largest holdings, and I believe a fair number of subscribers here also hold. Today's RNS tells us that the trading update for the 26 weeks to 28 Dec 2019 will be published on 15 Jan 2020. The wording, and timings, are consistent with last year, so there is nothing to be deduced from this announcement. Interim results will be out on 26 Feb 2020.

Incidentally, I find it's useful to compare the wording of trading updates with the equivalent announcement the year before, as subtle changes in wording can sometimes be significant.

Gresham Technologies (LON:GHT)

Share price: 127p (up 4% today, at 11:42)
No. shares: 68.3m
Market cap: £86.7m

Trading update

Gresham Technologies plc (LSE: "GHT", "Gresham", "Company" or the "Group"), the leading software and services company that specialises in providing solutions for data integrity and control, banking integration, payments and cash management, is pleased to provide the following trading update for the year ended 31 December 2019 ("FY2019").

Background - I last looked at this company here on 4 July 2019, when it issued an upbeat interim trading update. The valuation struck me as very high - a PER of 82 for 2019, and 55 for 2020 forecast.

This share has historically had patches of extremely high valuation, especially in 2003-2005. It subsequently lose those gains.

The two year chart below shows 2 profit warnings (the vertical, red bars), but also a nice recovery in recent months - something we're seeing a lot of at the moment. Catching falling knives has worked well for a lot of shares in the last year, which just goes to show that every investing "rule" (e.g. never catch a falling knife) only works some of the time!

Turning to the longer term chart,…

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Paul Scott

6th Jan '20

Hi Andy,

Re Plus500 (LON:PLUS) - it's way over my normal c.£400m cut-off for market cap, at about £900m. Also, it's got so much baggage, and dubious history, that I'm not interested in looking at it again.

Sorry about that.

Regards, Paul.

labbey1

That's a bloody good idea - we're not f'ing youtube!!

-2

Perhaps Paul should finish each report with ..and don't forget to smash like now!

davidjhill

Tremor International (LON:TRMR) looks a very interesting acquisition and whatever you might think of News Corp certainly adds credibility to the substance of the product offering. Good to see trading in-line too. Feels like a level of stability and growth returning (famous last words.....)

Mojo are you about? I know the two of us were the contrarians on this one when it fell below £1 and both were buying so interested to hear your thoughts on the latest acquisition too.

cmpeckham

Thumbs up and down has always seeemed slightly childish to an old fart like me. I would pay more attention to:

Qualitatively: comments - what do people say about the reports?
Quantitatively: page views - do they keep coming back for more over time?

I keep coming back because Paul and Graham do a good job.

p.s. Please give my comment a thumbs up

BClegg

I only started with Stockopedia a couple of months ago and remember thinking at the time, this might be a bit over my head and turn out to be yet another bad investment. Well, I'm happy I did subscribe. The videos were very helpful, I like the layout of the StockReports and am starting to get the hang of and have fun with the screening tools. But what I like most is the daily News Report on small companies. I find it very instructive to follow the way Paul and Graham go through these news items commenting on what they see as significant, and with their personal touches make it interesting and easy for people like me to understand. And what a shift they put in! Well done, I appreciate it.

john652

Altitude (LON:ALT) at least they are consistent is producing extremely poorly worded RNS’s. This RNS is, and I think the journalistic definition is, just a croc! The CEO needs some help, exiting preferably! Let’s hope she is far better at managing than communicating.

Lincoln Green Imp

Hello Paul, people who are good and have a lot of followers also have certain number who want to vote them down. I would be happy with 3 up - 0 down. 90 up - 5 down and I would be running around town in stockbroker braces!

I hold Plus500 and your comments have had me looking at it again. The share price seems to have recovered from this morning. I only have a small holding, I know it seems a riskier share. Stocko rating is good though.

AnonymousUser192020

Couple of trivial comments:

1. Thumbs up/down. I've long thought these are the wrong way round. More natural to have Thumbs Up on the left - perhaps some Downs are hit in error. Or just remove the Down option (advfn I think restricts it to superior posters).

2. When writing longer posts for forums I make it a habit to compose first in something like Word with autosave to guard against accidental deletion. Probably harder to implement when incorporating graphics though?

Apologies for cluttering up with trivia!

GrahamF

With regard to the thumbs down, could these be from rival bloggers? If perhaps they are then I would think they can be ignored. Anyway, the thumbs down group are such a small minority that in customer satisfaction terms they are effectively insignificant. If, however, someone were to post that they had given the report a thumbs down and stated their reasoning, that should be taken more seriously.

So, Paul, I think that you are according a level of importance to the handful of anonymous thumbs downs that is unwarranted. If you can, try to ignore them.

JTG

Quite frustrating. I am like you on this one, and whenever I find a company that I think I can forget about, confident they will be substantially bigger in 5 years' time, they get taken out for a 20-30% premium (although the share price was quite a bit lower when I started here). I'm struggling to find many businesses like Avation (LON:AVAP), so I hope, if there's a bid, it's at a premium to NAV. I don't think Jeff Chatfield would accept less for his shares. Of course, that means we should all bet the barn and buy all we can at 300p tomorrow. Thoughts?

spglet

Sorry Paul, I gave you a thumbs down by mistake! I was reading Stockopedia on my iphone (small screen SE) on one GWR's finest older train-sets and my finger slipped, when it lurched unexpectedly... I know this might sound a bit frivolous but I actually meant to give you an up-tick!

Simon

martinji

One of the reasons for having thumbs ups/downs is so you can sort a thread on popularity. If you haven't got a lot of time to read through a thread that can easily have 50+ posts on, you can just sort and *usually* the ones that contain useful information will be somewhere near the top. It's a shortcut to getting info quickly, which can admittedly be hit or miss.

I don't think the thumbs downs are needed for this though.

MichaelFBS

FWIW I think that thumbs down should be removed and changed (a la FT) to “recommended” and like the FT have the ability to remove the recommend if done by mistake.

So this would stick to Buffet’s dictum of “Praise by name, and criticise (in the comments! :-)) by category”

Really hope Ed takes note of this. Perhaps a survey amongst members!

Thanks for the great column today Paul.

wildshot

Totally agree on this point 2 and would recommend it to Paul (if not doing it anyway). When I ran a blog a few years ago I always drafted my text offline (I'd say in Word but I actually used Libre office instead) then once spell checked and re-read numerous times uploaded it to the draft post setting in Word Press. It saved a lot of anguish with poor internet connections or formatting.

DavidRoss

Hi Paul, As a newish subscriber to stockopedia and I, for one find your insights and musings very useful indeed. I cannot understand why somebody would give you a downvote, seems a bit foolish to me considering the amount of effort and time it takes. I appreciate your efforts

Gromley

7th Jan '20

Thanks Paul for another splendid job.

There was one line that particularly caught my eye :

I totally concur with this. I have seen a number of instances where a company issues an apparently positive (or at least on track) update when looked at in isolation, but when compared against previous updates the language is much more muted. These invariably seem to precede a subsequent disappointment. It is certainly something I now look carefully for.

I've only really noted this as a precursor to bad news, I guess if companies are doing unexpectedly well they are less shy about telling it as it is!

Anyway, tangential to this I noted that Paul had considered commenting on Reach (LON:RCH) today.

Their announcement was only a notice of results [date] and strategy presentation.

It did however contain a paragraph that seemed to mark a change in tone

In addition to reviewing the full-year results, Jim Mullen, Chief Executive, and Simon Fuller, Chief Financial Officer, will be joined by a number of the Company's senior management team to provide an update on the strategic plans for long-term value creation. The Group's growth strategy will ensure that through capturing customer insight and data Reach continues to build an intelligent and relevant content business for the long term, ensuring a sustainable future for its trusted brands.

Without really saying anything at all, that sounds a lot more proactive than previous announcements.

Whilst I really look forward to hearing what they have to say (did I ever mention that I hold shares here?) I don't read too much into it at this stage. The change of tone is really just a reflection that Jim Mullen & Simon Fuller are the new kids on the block replacing Simon Fox & Vijay Vaghela. - Fox & Vaghela did a great job imho, but never managed to convince the city that a PER in the range 1-2 was perhaps too stingy.

The share price is up over 100% in the last 12 months (but still enjoys a value rank of 97). Maybe a bit of a charm offensive will serve to manage the share price a little. (Just so long as they continue the good work managing the business, I won't grumble)

robin penfold

RE Avation, the greatest problem with selling part of the portfolio is that a smaller portfolio will lead to: less aircraft, less airline clients, reduced debt but potentially, lower Credit rating and hence higher funding costs, In recent times, Avation has done exactly what the rating agencies wanted, greater diversification of aircraft (narrow body /widebody plus turboprop), increased customer base ie airlines, maintained a young fleet and to an extent diversified its funding.

I can see the attraction of an offer north of 370p, given current undervaluation, depending on management appetite to continue growth over the medium term.

Super spot Gromley (and a reminder to self to pay more attention to language comparison next time!!)

I concur with your analysis that this seems to be a change to a more "front foot" approach on strategy. An acknowledgment of the need to convince the market and analysts that there is a sustainable future. As you know I have long been a holder but mainly on the basis that the discounted cashflow I expect the business to throw off is way beyond the sum of the market cap and pension deficit. I have been happy to remain patient whilst the dividend was high. Interestingly though I also started to notice the glimmer of light from the digital strategy in the last set of results. This made me reconsider future value and whilst previously I would have been happy to take 140p for my shares I am now looking for closer to 200p, possibly higher. I hadn't paid attention to the language change from the new CEO so thanks for the pointer. The capital markets day will be interesting.

tic_tac_toe

8th Jan '20

The nearest Revs to me (Central London) had to close early on NYE as police forced closure after a scuffle/fight. Staff tell me it wasn't a great night for sales-trade finished before 2am. But no refunds given. Let's hope the other bar's pull up this performance

*this was a refurb too*

Small Cap Value Report (Mon 6 Jan 2020) - RBG, GHT, ALT, AVAP

Gresham Technologies (LON:GHT)

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Paul Scott

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