Small Cap Value Report (Thu 14 Jan 2021) - WINK, CAY, SIS, RNO, BOO, BOTB, G4M, PMP

14th Jan '21 by Paul Scott

164 comments 18017 reads

Good morning, it's Paul & Jack here with the SCVR.

We're hitting the ground running today, with 3 backlog sections that Jack & I wrote last night. We've split the report into two parts, so it's hopefully clear which of us is writing each section. The idea is to get some work up early, so that I can concentrate on the trading update from Boohoo (LON:BOO) today (my largest personal holding, and the most popular share in the 2021 stock picking competition here).

Just as an aside (not applicable to BOO of course), the main problem with stock picking challenges, is that people tend to pick speculative stuff that could multi-bag, as there's no downside if you get it wrong. That's what I usually do too, to be fair!

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ed_miller

14th Jan '21

I think that some have more concern over the Pfizer vaccine because it relies on messenger-RNA co-opting our cells' genetic machinery to produce spike protein, and a theoretical concern with this new type of vaccine is a mooted cancer risk should these mRNA genetic instructions go awry. Those in vulnerable categories because of their age or underlying health conditions should certainly consider the potential mortal threat to them from Covid - as well as the point that vaccine safety issues have been thoroughly investigated - and they should joyfully accept whichever vaccine they are offered.

john2

I imagine that the problem today was that many people had invested in Xaar (LON:XAR) with the expectation of achieving rapid share price growth. The trading update was not of the shoot the lights out variety, so many of these investors were disappointed.

Trading was in line with expectations, the balance sheet remains strong. I agree with you, today's price action was over the top. I would hope that the price will rise tomorrow.

rmillaree

Ref vaccine rollout
there is one really bit of good news If the linked story in the daily mail can be relied upon (we all know daily mail aint always a good source of the truth!!!)

According to their article there are now 21 million doses of vaccine on uk soil - this is most excellent news if true.
Note the article is clear that a high % of these doses still need to be put in vials and then they will need to undergoe regulatory checks but it is pleasing that what is probably the hardest part of the full delivery chain is probably done for enough doses to give most vulnerable people an initial shot.

https://www.dailymail.co.uk/news/article-9144509/21-million-reasons-hopeful-Huge-number-Covid-19-vaccines-UK.html

UK_Investor_8888

Its the local distribution that's the weakest link, not the central supply.

Let's hope that the pilferage rate is also low and that corruption is limited.

Hydro31

RE: BOO. Great notes Paul much appreciated. Ive held BOO since 2017 and my tactic has been to ignore the noise and add when it’s cheap. Seems to have worked a treat as I’m over 100% up. I can never understand the reasons why we see the dips on good news and whilst they are frustrating the general trend is up, it won’t be down for long with earnings upgrades. When you think about the challenges we have seen and overcome this year, to be expecting 70% growth in earnings is quite amazing. I wonder what can be achieved next year when restrictions are over and higher margin products like dresses are back in favour. I was concerned that the pe might start contracting at some point if growth couldn’t be maintained but with the expected 9.3 eps this should support higher PE valuations we have seen in the past. As you say it looks cheap to me when you consider future earnings and the potential we have for further acquisitions.

Gromley

Yeah, I think it is really poor communication.

If they had wanted to they could have presented the results as : "we have no evidence that immunity decreases over time and we have no data to suggest that post infection immunity is not permanent"

That would be equally true, but equally unhelpful.

I have no influence whatsoever with PHE, but I will be pursuing this nonsense with them.

simoan

Re Saga (LON:SAGA) 'Concerns about having Brits walking around their port cities' - well if the Brits have been vaccinated then I guess that other countries will be delighted to start up their tourist businesses again!

I think you're maybe missing the point. I'm not sure if the borders are still closed that people will be able to disembark from a a ship, regardless of whether they have been vaccinated or not. The risk of doing so far outweighs the reward to the host country. And we haven't even considered the effect of Covid nationalism? Even if the government of a country allows entry, the local population may not be happy or receptive. I'm sure I have detected strong signs of such nationalism between the English, and Welsh and Scottish devolved governmenets over the course of the past six months, or maybe I was just imagining it?

There have also been instances of nationalism in Switzerland where Brits allegedly left a ski resort and fled the country when they were supposed to be isolating. And then the world famous Lauberhorn downhill was cancelled supposedly because a British superspreader caused an outbreak in Wengen. Reality and perception are very strange bedfellows. I would say the perception of us is already not great, and who wants to go on holiday somewhere where they are not made to feel welcome.

All the best, Si

Tommy H

I would raise it through to the admin team, not a lot that they can do but others want to get credit for something that they have not done, it unfortunately is a part of life, whether here or at work...

Tortoise investor

When Graham wrote on this blog he noted that from a regulatory perspective Best Of The Best (LON:BOTB) relies on Spot the Ball being classified as a 'game of skill'. There's always a risk HM Treasury could decide it'll tax such games more highly or someone challenges whether this classification in Best Of The Best (LON:BOTB) case is correct. Note the lifestyle game does seem to be more obviously a game of skill and I have sometimes wondered if they have trialled that out in case they suddenly needed to switch away from Spot the Ball.

Fair to question what its moat is but I would now say it is the user database and the number of prizes it has on offer. Plus the website is very easy to use and they have built up a great digital marketing team.

Also important to remember that each £1 in revenue almost entirely feeds through to the bottom line. Hence the stellar revenue growth today has resulted in massive EPS gains.

I hold and topped up at 1900p today.

Boon

"less competitive market"

I take a contrarian view to Whitbread (LON:WTB)

While many hotels might be going bust, all the big chains have survived more or less intact. And when a hotel goes bust, the building usually can't be easily turned into apartments, offices, shops, etc. So the landlord has no choice but to find another hotel tenant. So I don't think capacity is coming out of the market anytime soon, as those bust hotels will just be bought by existing chains (of which there will still be many) or hoteliers, who will get super cheap rents, and/or rent-free periods.

Arguably with softer inner-city long term rental market, more landlords, unable to sell at the valuation they desire, and long term rents not covering mortgage & operating costs, will maybe see no option except go to the short term, AirBnB market when travel resumes. Thus maybe more competition.

Wasn't Xaar (LON:XAR) heavily tipped by some "guru" investor as a top pick at the end of 2020? I vaguely remember reading or watching about it.

You only have to look at the ADVFN bulletin board to see which shares are full of private speculators.

Boohoo (LON:BOO) is an example too. Upgraded revenue forecast for the FY by a good margin, yet the SP is down! You look at the ADVFN boards and its one of the most active. Way too many private speculators = share price is probably artificially too high atm.

Dojosan

Xaar (LON:XAR) - The "guru" investor that you referring to is no other than the Cockney Rebel who I've seen is a also a member of stockopedia ....if only we had a crystal ball!

Laughton

Re Saga (LON:SAGA) I've never been on a cruise and have no desire to do so but wonder if ships would fill up anyway with people more than happy to go on a floating hotel where they experience good weather, seeing a few different coastlines, being pampered, eating and drinking as much as they want and don't really care if they can't get off the boat to mingle with the locals.

I rather suspect enough might to make Saga (LON:SAGA) shareholders happy.

Portmeirion (LON:PMP) Primarily execution risks - I recall from the CEO's interview with Paul that they have not entered the Chinese market yet. Big big market there.

In the 1980's it was the Japanese who were intrigued with the British culture (from music, to our culture and clothes (I had many Japanese friends) , let's hope that it is the Chinese' turn to be fascinated with our fish and chips, our pint of beer and last but not least our Portmeirion (LON:PMP) dishes particularly our Botanic Garden series!!!

Momoko Miyamoto

I'm highly sceptical of these "gurus" talking their own book especially when the stock has already had a very strong run. They'll always drone on about how "there's much further to run" etc. Classic ramping so they can further pad out their profit. Xaar (LON:XAR) was a value/recovery type situation so inevitable that a profit taking peak was coming.

Of course, one of the main issues will be the availability of travel insurance for the age group attracted to cruises. Once you get into your 70's and have even quite minor underlying health conditions I have been told it's hard to get cover in normal times. In a world still reeling from a pandemic it could be virtually impossible. Given they have an insurance arm this could be a real advantage for Saga i.e. providing customers travel insurance with their holiday.

Purely on personal experience, I don't know anyone among friends and family who is even thinking of booking a holiday currently. So I'm a little sceptical about the Beeb report today.

back2value

15th Jan '21

I've been back invested in Boohoo since the last substantial pull back, buying a decent-sized chunk (by my standards) at 288p. It's going well so far. I sold out my original holding - bought at 47p - when the shares first passed 200p, foolishly deciding to re-invest the profits elsewhere, including in Sosandar at around 30p, which seems a long, long time ago. In retrospect, that was an obvious mistake. Doing nothing would have been a much more profitable course of action. The same applies to the other shares that I was selling in the first quarter of 2020 - namely Treatt and XP Power. Both rebounded from the initial Covid Shock a lot more strongly than the shares that I opted not to sell...

Moral of this story? If it ain't broke, don't fix it. If it's making money and growing, leave it alone. Will I, though?

Thanks and a belated Happy New Year to Paul, Jack and all readers here.

B2V

shanklin100

Given they have an insurance arm this could be a real advantage for Saga i.e. providing customers travel insurance with their holiday.

Excellent point re £SAGA.

On a separate tack, I imagine travel insurance for anybody over 50 who has not had the vaccine will be either very expensive or unobtainable.

I think that would be a reasonable assumption. Only last night I was reading about a care home that was prepared to take in Covid patients that could not get indemnity insurance renewal for a policy that runs out at the end of the month.

Re Saga (LON:SAGA) and insurance. They already do.

From their website:

We’re working hard so you can travel with us again soon. Our award winning holidays and cruises now offer more peace of mind:

Our optional included travel insurance for over 50’s is on all overseas holidays and includes up to £5m emergency medical and repatriation cover for coronavirus.

Small Cap Value Report (Thu 14 Jan 2021) - WINK, CAY, SIS, RNO, BOO, BOTB, G4M, PMP

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Paul Scott

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