Small Cap Value Report (Mon 7 Dec 2020) - GAW, TED, VTU, VP., M&A

7th Dec '20 by Jack Brumby

91 comments 11638 reads

Good morning, it's Jack and Paul here with the SCVR for Monday.

Although it’s too big to be a company typically covered here (with now a £3bn+ market cap), Games Workshop (LON:GAW) has released its half year update. It’s a particularly interesting company and many will already be aware of its fantastic performance over the past few years.

The group last updated with another ‘trading ahead of expectations’ announcement on a Friday afternoon in early November: unusual timing for an unusual company.

Now the group reveals that half year sales are c£185m (up 25%) and profit before tax is at least £90m (up 52.5%), with a 60p dividend declared for the period. Games Workshop continues to generate impressive growth as it takes its products to new markets. It looks like it will make more in first half profits this year than it did in the entirety of FY19/20.

The shares peaked recently at some £114.60 but have since fallen back to £98.75. If it can turn in a similar performance in the second half and bring in full year profit of £180m then the shares don’t look overly expensive. Apply a 20% tax rate to £180m for profit after tax, divide by the shares in issue and you get around £4.40 in earnings per share, which would make for a PE ratio of 22.5. Not bad at all given the rate of growth.

But the share price has been softer recently, so it will be interesting to see what happens to it this morning.

Anyway, onto the small cap news.

Ted Baker (LON:TED)

Share price: 141.21p (+5.38%)

Shares in issue: 184,605,541

Market cap: £260.7m

Interim Results Announcement for the 28 weeks ended 8 August 2020

The turnaround of Ted Baker (LON:TED) is probably one of the most closely watched stories in retail. If management gets it right, then there could be good upside - but there is plenty of work to do.

On first half progress, CEO Rachel Osborne comments that Ted’s balance sheet is ‘materially stronger than we had envisaged this early in the plan and operational cashflow will be positive for the full-year… and are on track or ahead of our operational KPIs for the first year of our plan.’

There are, however, some legacy issues that are ‘being amplified by COVID-19’,…

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iangrant22

7th Dec '20

Also hold with AJBell. Still no sign of divi. Thanks for bringing this up, as I normally just trust that divis will appear.

Chriskay

Hi Paul. Re UK M&A activity and the ‘urge to merge’ I did ask a few weeks ago if there were any aspects of the stock reports which would indicate possible acquisition targets and if so, maybe you could cover these in a posting? This received quite a few upticks at the time. Your contributions are hugely valued by a newbie investor like me and I absolutely appreciate you write about what you want, so of course this is only a suggestion.

55555

Daily mail on sunday

Berksbee

Confused by the votes down? What have I done?

timarr

As far as I can tell it's Jack alone today.

Sadly, if it was as easy as ticking off a checklist then we'd all be doing it. The range of M&A is interesting, though - Jack mentioned RSA and Codemasters, Imimobile and Countrywide but you also have the Aa (LON:AA.), Elementis (LON:ELM), G4s (LON:GFS), Goco (LON:GOCO), Hunters Property (LON:HUNT), Mccarthy & Stone (LON:MCS), Mulberry (LON:MUL), Nahl (LON:NAH), Talktalk Telecom (LON:TALK), William Hill (LON:WMH) and probably a few I've missed.

I think you'll struggle to find a lot in common there, but basically the acquirers see value that the market isn't taking into account. With sterling on its knees, the UK market a serial underperformer over the past 5 years and debt cheap as chips it's open season on the UK. You would imagine that once Brexit is either done or not and it's possible to figure out the future shape of earnings there'll be another burst of M&A.

Generally figuring out targets ahead of time is hit and miss - and investing purely on the basis of a bid is foolish. A lot of M&A works because the acquirer can strip out costs and drive up returns in a way that the target can't do on it's own - and that an investor can't predict.

Over time if you buy good companies that generate a good rate of return a number of them will get taken over. It's often a nice bonus (although not always, I'm still cross about Cadbury) but it's never anything more.

Appreciated Timarr. I am still smarting after selling Mccarthy & Stone (LON:MCS) just days before they were taken over so I share your pain.

General question for those who hold Sylvania Platinum (LON:SLP). Did you get your dividend on Friday, mine appears to have gone AWOL, but I am using AJ Bell.

Mine arrived sometime today. This is often the case with overseas domiciled companies, I'd assumed this was something to do with the stock being held as a depository interest. Other than Somero Enterprises Inc (LON:SOM) which was a special case due to their dogged persistence in using 18th century technology (i.e. sending out cheques) I find most dividends arrive within a couple of days of the ex-dividend date.

Although, to be honest, mostly I don't check the dates at all, I'm generally fine as long as they arrive in the correct quarter ...

Surrey Steve

I'm with AJB and my div has come through today

ACounsell

I detect a bit of a vendetta against £AJB! I have held the shares since the IPO and am very happy with their performance and the platform in general which I use on a daily basis though not as a day trader. It would seem from their recent results and the customer retention figures quoted that there is only a very small minority who are unhappy and take their business elsewhere. As regards the Sylvania Platinum (LON:SLP) dividend that was paid into my account today. For me receiving the dividend after the weekend is not a big issue. I guess if someone has millions of shares and wants to reinvest immediately on Friday or buy a big ticket item over the weekend (!)it might be but sadly I don't have that quantity of shares!

After closing....Dividend arrived from AJBell ! A chunky one it is too...

sharw

Possibly by showing that you had not read the earlier posts which had already answered your question. This suggests you are on the new site using one of the six combinations that made you not see the the other posts before writing yours.

In turn I got thumbs down for referring to posts one and eleven forgetting that they are not numbered on the new site so you need to set yours to:

Sort by Oldest Replies Unthreaded

and look at the first and eleventh posts to see what I mean.

This plethora of ways of viewing is a pain - people talk about posts "above" or "below" which is not how others may be viewing them and there have been many complaints about people not saying which company they are talking about (also causing thumbs down) because they are using "threaded" and think it is obvious.

doublelutz

I hold Global X Copper Miners that have done incredibly well. I buy them through Eqi. Quoted in dollars of course.

rmillaree

I must confess i chased my broker for my Somero dividend only to find it had been paid on time - i had simply neglected to realise that the dividend would be paid in dollars as far as my transaction history was concerned - there it was sat there when i checked my USD transaction history (after chasing them) . Note i bought Somero in GBP currency - so the currency in which you buy the shares won't necessarily match the currency you get your dividend in. I don't know if thats sop with Somero dividends or not.

dtang5

wow quite slp holders here. Not to rub salt in the wound but I too received my dividends. Another one using x-o

ridavies

Hello Tamzin. How do I get hold of the £Tekmar report please. Sorry, missed it. Doesnt seem to be on your site yet.

Thanks - have to say I was mystified by 1 & 11.

Albertos

Just seen on the Beeb:-

"Brexit: PM to meet EU chief in bid to save trade deal"

That's the problem isn't it - the PM (like it or not is the elected leader of his people) the EU chief is a bureaucrat - trying to please 27 elected leaders which probably won't agree on anything.

Its a bit of a binary situation but on the basis of "minimize regret" I've sold most of my UK-centric stocks.

GLA

Gromley

Similar to my thought's EJC - you can only do last minute haggling if you absolutely have the power to shake hands on whatever compromise is made. Although given how often the EU does do last minute compromises, maybe von der Leyen has more (pre-agreed) wriggle room than we think?

I'm certainly not confident of a deal (although I think at worst there will be some form of accommodation by March following a brief period of chaos). Personally I am not steering entirely clear of "UK centric" stocks - that is too broad a category imho - in my view many UK centric co.s will see no immediate impact and the second order impacts will be less than flagged.

It will probably look like I am (massively) underplaying this {maybe so} but for me economic bombshells are ten a penny and I think a lot of the risk is already factored in.

More than ever this is for sure not advice, but just my take on things.

8th Dec '20

Find it surprising that much of the world's trading disputes are driven by agriculture and fisheries - yet we're in the 21st century.

Personally agree with the the stance that we shouldn't give into the EU about fishing in our waters (are they never going to understand the vote was about taking back sovereignty -{ I did vote to stay personally}) . But surely this deal should not be 'hung out to dry' on Medieval industries - if it is (probably driven by France and Spain) then perhaps............

Small Cap Value Report (Mon 7 Dec 2020) - GAW, TED, VTU, VP., M&A

Ted Baker (LON:TED)

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Jack Brumby

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