Small Cap Value Report (Thu 12 Nov 2020) - SNWS, VLX, NWF, NXR, IDEA, TTG, CLG

12th Nov '20 by Paul Scott

116 comments 13260 reads

Good morning! It's Paul & Jack here with the SCVR for Thursday.

Agenda - this is what has caught our eyes today;

Smiths News (LON:SNWS) - Jack covering its preliminary results (Jack holds, done)

Volex (LON:VLX) - Half year report (Paul holds) - webinar today at 11am on IMC platform (Paul holds, done)

Nwf (LON:NWF) - shares unsuspended, update on cyber-attack (Paul, done)

Norcros (LON:NXR) - Interims (Paul, done)

Ideagen (LON:IDEA) - Trading update (Paul, done)

Tt Electronics (LON:TTG) - Trading update (Paul, done)

Clipper Logistics (LON:CLG) - Trading update (Paul, done)

Timing - looks like it will be an all day job, as lots of interesting stuff to cover. Today's report is now finished.

NB. Jack writing this section

A changing of the guard or too soon to call?

This has been another defining week in the markets, with Monday’s vaccine announcement flipping 2020’s winners and losers more or less on its head. Is this a changing of the guard in terms of stock market performers or just a premature celebration set to fade?

I’m thinking about this carefully and am curious to hear what others make of recent developments from an investing perspective.

For a month or so now I’ve been looking for a bit more Value-Momentum - the idea being that we will at some point return to normal life (say on a two year view), and so those companies with bombed out share prices, promising strategies, strong management, and good upside potential might offer attractive risk:reward.

But cheap companies are never perfect and do tend to come with higher risk such as large pension funds, so DYOR. The below are not recommendations but might spark a bit of conversation.

I’ve held one Leisure stock through thick and thin: Fulham Shore (LON:FUL) . I did hold Marston's (LON:MARS) but sold on the spike up to 65p or so after the Carlsberg JV announcement. Now, with tangible (albeit preliminary) news of a vaccine I would buy back in if we saw some selling pressure there in the weeks ahead. I’ve also repositioned into Reach (LON:RCH) , Redde Northgate (LON:REDD) , and Smiths News (LON:SNWS) (but a…

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laurie

12th Nov '20

Ienergizer (LON:IBPO)

Here are two RNS from several years ago which I found interesting.

I do not hold.

17 August 2015

iEnergizer Limited

("iEnergizer" or the "Company")

Placing and Director dealing

Result of AGM

iEnergizer Limited (AIM: IBPO.L), an international and full service business process outsourcing business, is pleased to announce that it has raised 1.1 million by way of a placing of 22,000,008 new ordinary shares of 1 pence each ("New Ordinary Shares") with EICR Cyprus Limited ("EICR") a company of which Mr Anil Aggarwal, Non-executive Director of the Company, is the ultimate shareholder (the "Placing") at a price of 5 pence per Ordinary Share (the "Placing Price").

The Placing Price represents a discount of approximately 78.72 per cent. to the closing price of 23.5 pence per share on 14 August 2015, (being the last practical date prior to the announcement of the Placing).

RNS Number : 3061S

07 July 2015

7 July 2015

iEnergizer Limited (AIM: IBPO.L), an international and full service business process outsourcing business, is pleased to announce that it has raised GBP2.12 million by way of a placing of 15,120,000 new ordinary shares of 1 pence each ("New Ordinary Shares") with EICR Cyprus Limited ("EICR") a company of which Mr Anil Aggarwal, Non-executive Director of the Company, is the ultimate shareholder (the "Placing") at a price of 14 pence per Ordinary Share (the "Placing Price").

The Placing Price represents a discount of approximately 49 per cent. to the closing price of 27.5 pence per share on 6 July 2015, (being the last practical date prior to the announcement of the Placing).

Anil Aggarwal, a Non-executive Director of the Company, is the ultimate shareholder of EICR and as such is a related party for the purposes of AIM Rule 13. The independent directors of the Company consider that, having consulted with the Company's nominated adviser in relation to the Placing that the terms of the Placing are fair and reasonable insofar as the Company's shareholders are concerned.

Dojosan

here is some info on Mitchells & Butlers (LON:MAB) - I dont hold

https://thecollective.finance/2020/10/mitchells-butlers-100-upside/

ISAallowance

Sure. In the last few months I've bought Natwest (LON:NWG), Lloyds Banking (LON:LLOY), 1pm (LON:OPM), Newriver Reit (LON:NRR), Redde Northgate (LON:REDD), Just (LON:JUST) & Hargreaves Services (LON:HSP) in the value catagory. The unifying feature of all of these was (and still is I believe) a discount to tangible book value, in some cases really significant (< 0.5 TNAV). I recognise that most of them are leveraged to some degree or other, and hence that TNAV can be impaired more greatly than the actual capital impairment, but personally I think the discounts are overdone...

The banks: Apart from the insurers, these are the most leveraged, but so far COVID impairments at the UK banks have been covered by operating profit for the period and the lack of dividend, leaving tangible book values unchanged. COVID impairments made already have been greater than actual COVID defaults, so there is scope for upside surprise in future (and downside of course if it all really goes to sh%t!). My thesis is that if we get through this with TNAV largely unscathed than the banks will re-rate to close to TNAV, even in a lower interest rate environment.

Just (LON:JUST) - this is a life insurer, and a bit of a special case, they've been out of favour even prior to COVID due to scrapping the dividend due to regulator intervention over capital requirements for their equity release mortgages. I don't pretend to understand life insurance companies, but if Just (LON:JUST) are on 0.2 x TNAV whilst LGEN are on 1.4x ish then I see some possibility of convergence.

1pm (LON:OPM) - less leveraged from the banks.

Newriver Reit (LON:NRR) - Already have very cheap rents, so don't see them as affected as other shopping center REITs. Alternative use possibilities. Less leveraged than the banks.

Redde Northgate (LON:REDD) - Second hand vans are going at a premium at the moment. Even I've finally bought a van this year!

Hargreaves Services (LON:HSP) - Land. Probably all horrible contaminated brownfield so could take a while for the value to out.

I don't have anything against Norcros (LON:NXR) and have held it in the past, but I don't see any real catalyst for a re-rating, whereas for some of the above I see exit from COVID as a catalyst to re-rate back closer to tangible book value.

Sorry, probably written far too much. Obvs all IMHO, DYOR etc.

OldSchool05

I suppose one risk is an integration risk due to the recent merger. They have also made a purchase of a nationwide repair business (out of administration) in the last few months. So lots going on at the moment (and therefore risk of not delivering on plans).

I'm quite comfortable from reading recent RNS about the work being done to drive down costs from the merger. So although this is a risk they do seem to be managing quite well post merger.

kgb1953

I'm with you Jack. Have a look at their site and then go to the Top 50 internet sites - there's a couple of sites that do this. No way they are fifth.
Their top site is at No 39 - the truly gruesome Daily Express. They miss out the BBC, Daily Mail and one other one called Porn Hub that Ive heard of but never visited.

Their other problems is the print works and the pension fund.

greenhat2

They’ve a seasoned management team now to be fair

I really admire what Avril Palmer did with BCA marketplace £BCA

Martin Ward knows the industry

And they are being very careful with the balance sheet by degreasing the fleet and removing risk

Tommy H

Hi Nick

Duke Royalty (LON:DUKE) used to be one of the shares that Graham covered and held, I think that it was one of the ones he sold to fund the house purchase/wedding but would need to go to Cube to check.

I think that Graham had some concerns over the nature of the business being invested in and the long term implications of these e.g. recruitment companies from memory.

I think there is opportunities, but no longer hold.

Tommy

I used to hold Hargreaves Services (LON:HSP) a few years ago and sold out, when I sold everything to fund the family house.

It would be worth listening the the Castleford Tiger interview on PIWorld as it is one of his holdings from memory.

https://www.piworld.co.uk/2020...

samg

Clipper Logistics (LON:CLG) are doing a lot of the Government/PHE/DHSC distribution for PPE supplies and I suspect that this has kept their results well up whilst the stores they normally supply have been depressed. Difficult to know if it was a well timed political donation or savy business or both

Gromley

National newspaper

Local and regional newspaper

Accrington Observer
Anfield & Walton Star
Barking & Dagenham Yellow Advertiser
Bexley Mercury
Birmingham Post / Birmingham Mail / Sunday Mercury
Bootle Times
Bracknell Standard
Brent & Wembley Leader
Bristol Post
Buckinghamshire Examiner / Buckinghamshire Advertiser
Chester Chronicle
Chronicle Extra (Newcastle upon Tyne)
Colne Valley Chronicle
Coventry Telegraph
The Crawley News
Crewe Chronicle
Crosby Herald
Derby Evening Telegraph
Dover Express
Ealing Gazette
Ealing Informer
Ealing Leader
Ellesmere Port Pioneer
Enfield Advertiser
Enfield Gazette
Evening Chronicle (Newcastle upon Tyne)
Evening Gazette (Teesside)
Express & Echo
Formby Times
Fulham & Hammersmith Chronicle
The Glaswegian
Gloucester Citizen
Gloucestershire Echo
Haringey Advertiser
Harrow & Wembley Observer
Harrow Informer
Harrow Leader
Havering Yellow Advertiser (Romford)
Heywood Advertiser
Highdown Books
Hinckley Times
Hounslow Borough Chronicle
Hounslow, Chiswick & Whitton Informer
Huddersfield District Chronicle
Huddersfield Examiner
Hull Daily Mail
Ilford & Redbridge Yellow Advertiser
Irish Daily Mirror
Irish Daily Star (50% ownership) ^[4]
The Journal (Newcastle upon Tyne)
Kensington & Chelsea Informer
Leicester Mercury
Lewisham & Greenwich Mercury
Liverpool Echo
Loughborough Echo
Manchester Evening News
Manchester Metro News
Maghull Star
Middleton Guardian
Mid Devon Gazette
Mitcham, Morden & Wimbledon Post
Neath Guardian
North East Manchester Advertiser
North Devon Journal
North Wales Daily Post
Nottingham Post
Oldham Advertiser
Ormskirk Advertiser
Paisley Daily Express
The Press (Barnet and Hendon)
Prestwich Advertiser
Reading Post
Rochdale Observer
Rossendale Free Press
Runcorn & Widnes Weekly News
Salford Advertiser
Slough Express
Stockport Express /

(Macclesfield Express / Wilmslow Express / The Sentinel (Staffordshire))

Surrey Advertiser
Southport Visiter
South Manchester Reporter
South Liverpool Merseymart
South Wales Echo
South Wales Evening Post
Staines Informer
Streatham, Clapham & West Norwood Post
Sunday Sun (Newcastle Upon Tyne)
Surrey Herald
Surrey Mirror Advertiser
Sutton & Epsom Post
Tameside Advertiser / Glossop Advertiser
Uxbridge & Hillingdon Leader
Uxbridge Gazette
Walton & Weybridge Informer
The Wharf (Canary Wharf)
Scotland

Scottish and Universal Newspapers)

Digital online Brands

Reach has launched websites under the Live brand:

Belfast Live
Dublin Live
RSVP Live
Examiner Live (Huddersfield)
football.london
Glasgow Live
Edinburgh Live
Wales Online
Gloucestershire Live
Plymouth Live
Leeds Live
Hull Live
Somerset Live
Buzz.ie (50% owned)
Cork Beo

one_eyed_jack

Thanks for digging Greenhat, but that is a hugely diverse portfolio. I think @Ed posted a link to Ben Thompson's 'Stratechery' a while ago and Ben has done a lot of work on the power of Aggregation Theory. The link is quite old (2015), but the right side of the paywall and still relevant.

Reach (LON:RCH) is not going to unseat Facebook or Google as things stand (IMHO), so they need to add something different; and ultimately that will lie in execution. They need to be able to execute a local, specialist, or perhaps UK wide internet presence better than Facebook or the others do. After trawling their sites I did not build that confidence. Being an also run doesn't really count in this space. Which is the 5th biggest auction site? I have no idea, but who is a player in used car sales, a specialist such as Autotrader. They carved a niche (I don't hold).

I’m sure there is money to be made, but unless they can control the space (become the aggregator) not for the long run.

Somewhat tangential, but my daughter lost her cashcard in town (sleepy old Nairn), and got it back the next day from the local police station all through the power of Facebook. Its already hyper local.....

Graham was pre-empting a recession. At the time he was reviewing it - SP I presume was in its mid-40s. However, SP at close of day was 26.5p - so much of the bad news of a recession already factored in at this discounted SP

luckystrike23

13th Nov '20

thanks

abtan

Volex (LON:VLX) (no position)

Does anyone have a Investor Relations contact email address for this company (their website only has one for Link Asset Services)?

Or even better can anyone help me with the following:

Why has the company increased "other loans" by £2,584k? They have so much cash, and made almost exactly this amount in the period anyway. Why borrow? Are there restrictions on their cash balances?
Have there been any disclosures on customer concentration? I couldn't see anything in the report this week. I'm interested to see whether a large chunk of growth is coming from either 1 or a handful of customers.

Thanks in advance

15th Nov '20

Redde Northgate (LON:REDD)

Apologies for replying to my own post asking whether there were any negatives for this company. It's 1am on a Sunday morning so naturally I thought of nothing better to do than read about fleet management in the UK.

I came across the below article (published on 5/11/20) on vehicle registrations in October and YTD. It doesn't really paint a very rosy picture of the industry so far this year.

Some snippets:

"New figures from the Society of Motor manufacturers and Traders (SMMT) show that 80,523 new cars were registered to fleet and business, compared to 83,067 in October 2019."
"Year-to-date, fleet and business registrations (728,462) are now 34% lower than the 1.1 million new cars registered in the first 10 months of 2019."
"Overall, the industry recorded 140,945 new registrations last month, making it the weakest October since 2011 and 10% lower than the average recorded over the last decade."

Now I'm not saying that there isn't value for this particular company, but I'm a tad more sceptical on the short term outlook, which I thought would have been booming.
Is:

all the short term benefit therefore expected to come from used car sales, and
is this really enough to offset what seems like weak 2020 new fleet/business registrations?

What do others think? Have I misinterpreted what this article is saying?

https://www.fleetnews.co.uk/ne...

Thoughts as always appreciated.

ps - no position

Small Cap Value Report (Thu 12 Nov 2020) - SNWS, VLX, NWF, NXR, IDEA, TTG, CLG

NB. Jack writing this section

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Paul Scott

116 comments

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