Small Cap Value Report (Mon 8 Aug 2022) - ADF, JOUL, WRKS, MCON, BIDS

8th Aug '22 by Paul Scott

68 comments 8472 reads

Good morning from Paul & Graham!

Episode 6 of my weekly SCVR summary podcast went up on Saturday lunchtime. I rambled way past time, longer than ever (hitting the 32Mb upload limit!), but it's all relevant I think. As well as reviewing the key announcements of the week, I also talk about how I'm coping with heavy losses in this brutal bear market for small caps. It's important that people talk about this, rather than bottling up the anguish.

Renold CEO interview - In case you missed it, I interviewed (over the phone) Robert Purcell, CEO of Renold (LON:RNO) on Friday, an interesting small cap I think (no position personally at the moment).

Agenda -

Paul's Section:

Facilities by ADF (LON:ADF) (I hold) (£47m) - I had a look at its last trading update over the weekend. Looks a good business, although I'm wondering if the boom in UK TV/film production might have have peaked?

Joules (LON:JOUL) (I hold) (£37m) (no section below) - confirms the weekend reports re discussions with Next (LON:NXT) . Given the market cap is currently £37m (at 33p per share), then a £15m fresh raise from Next would imply Next ending up with c.29% of the company. Sky News reckons Next is aiming for 25%, which would equate to a price of c.40p per new share to raise £15m. This would certainly be preferable to raising money at a discount from the stock market, and would address worries about Joules' solvency. Then we need a new CEO & a proper turnaround strategy. So it's early days for a recovery, and it's still risky. Very disappointing to date.

Joules, the premium British lifestyle group, provides a statement in response to recent media speculation.

Joules confirms that it is in discussions with Next Plc ("Next") about adopting its Total Platform services to support the Group's long term growth plans.
Additionally, in conjunction, Joules confirms it is in discussions with Next about a potential equity investment raising proceeds for Joules of c.GBP15 million at no less than Joules' current market price, which would result in Next becoming a strategic minority shareholder in the Group. The equity investment would be subject to approval by Joules' shareholders.

There can be no certainty these discussions will lead to any agreement. A further announcement will be made…

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eParo

8th Aug '22

Talking about large director buys, Saga (LON:SAGA) director buy of £1,000,000 last November.

On a fcst p/e of 5 and peg of 0.1. Chart turning up here.

Albm7

Hi Paul,

Thank you for the Renold (LON:RNO) (I hold) interview I found it interesting.

trader45

Many thanks Dicktrade. Old age has crept in

Phillip Arghebant

Dear Discodave4

FacilitiesbyADF (LON-ADF)

Cenkos is the house broker and its research can be found on the ResearchTree website for which there is a charge. Alternatively, I believe you can log on to the Cenkos website and obtain research there as, unlike many brokers, Cenkos does not charge for its research capability.

I think the answer to your question is that the EBITDA figure on which earnings are eventually calculated for 2021 is £5.1 million (after deducting £2.6 million of IPO and exceptional costs) versus the £7.8 million that is forecast for this year.

Kind regards

Phillip

ridavies

Where to find podcast RDHOWARTH please?

RDHOWARTH

its available on apple podcasts - Zeus Capital A different perspective is the title - episode 6 - or poss try Zeus capital website if u don't have apple

Silver Moon

I'm thinking that in the past companies were often buying back their own shares when their shares prices were at a high level. Today many mid-caps are buying their own shares back at a low level but, could not this low become the new high without anyone realising it?

Silver

Watched a woman interviewer on last nights BBC Nine O'clock News who persisted in winding up a Middle East representative over the Gaza Strip debacle. She should have been stood down.

Boon

They will, eventually. As producers start to reduce their herds, then eventually there won't be enough supply. But when and how is the key question. And it seems like quite a boom/bust scenario. In 2019-2020 there was foot and mouth, and huge herds were culled. Then the pork price skyrocketed, and leading to early 2021s being a boom time where every Tom, Dick and Harry in China started breeding pigs. Then a major glut towards the end of 2022, persisting until the earlier part of this year. Then demand got hit, due to all the covid lockdowns, sapping business and leisure eating out. Now increased feed prices.

I do know that sometime in the next 3 years we'll probably get undersupply and a bit squeeze upwards in prices. But will it be sustainable or rapidly swing the other way? Or remain high?

ECO Animal Health (LON:EAH) will be interesting when they have a more diversified portfolio of products that target more animals, and different use cases. Also when they've diversified more away from China (hard, due to them being the world's largest pork consumer).

I still think it is a sound business, but valuation-wise I'm not sure it is good value for money yet. Need to re-do my analysis in the next few days, with the latest trading update.

eParo, are you sure Saga (LON:SAGA) won't follow the direction of Mccoll'S Retail (LON:MCLS) instead of the Chart instead plummeting to a value of zero eventually? :)

After all there were big director buys in McColl's too! And about the same time... last Sep? So not much longer for Saga to follow the same trend? :)

(I hold Saga in the Boon Fund)

I've topped up recently, so expect worse from here

Discodave4

thanks, got it!

Gostevie

This is a really good one, especially the macro/market thoughts in the second half. Much to think about there.

Steve

55555

Yes ... this attracted my attention and after looking into the company I bought in a few weeks ago. Down at the moment, but hopeful.

GloucesterBob

Paul, thanks for the weekly recap and using your own time to interview the Renold (LON:RNO) CEO, I now hold from today.

Did enjoy the part where you said you would let us know in a future podcast how to cope with losses, only to spend the next 15 minutes telling us, had to take the long cycle home.

Paul Scott

LOL I know what you mean, but sometimes we have to be spontaneous! Those are usually the times when interesting things happen! Wouldn't it be boring if everything was scripted?!

yiannos1

Thanks for the podcast Paul.

I have really enjoyed it your comments and analysis on ScS ( especially the blah blah blah and the crowing bits ).

Paul2148

9th Aug '22

Litigation Capital Management (LON:LIT) (hold) non execution chairman (J Moulds) has made six purchases since Oct 21 now totalling just under £2 million and 1.7% of the company, four of the purchases being this year. Previously a COO at Barclays and head of European business for BOA.

The sp has dropped after the last update. Even though profits expected to be higher the length of time for cases to run has increased so I’m guessing some holders just losing patience with this one?

jimrog64

11th Aug '22

Maybe Richard Crow's judgement wasn't misplaced on this one? Another director buy today .

The Company has been notified of the following acquisition of ordinary shares of 1 pence each in the Company by Kate Morley a Person Closely Associated with Harry Morley, Non-executive Director and Person Discharging Managerial Responsibility:

Director	Position	Date of transaction	Shares acquired	Total shareholding following acquisition*
Kate Morley	Person Closely Associated with Harry Morley, Non-executive Director	10/08/2022	75,000	75,000

Shares back up another 5% today following that news.

Rusty2

12th Aug '22

Down 8% today.

Small Cap Value Report (Mon 8 Aug 2022) - ADF, JOUL, WRKS, MCON, BIDS

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Paul Scott

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