Small Cap Value Report (Thu 15 July 2021) - ALU, GFRD, JIM

15th Jul '21 by Paul Scott

56 comments 9779 reads

Good morning, it's Paul here today with the SCVR for Thursday. Jack's busy with other things today, so you'll have to put up with just me.

Disclaimer -

A quick reminder that we don’t recommend any stocks. We aim to cover trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty. We stick to companies that have issued news on the day, with market caps up to about £700m. We avoid the smallest, and most speculative companies, and also avoid a few specialist sectors (e.g. natural resources, pharma/biotech).

A key assumption is that readers DYOR (do your own research) - don't blame us if you buy something that doesn't work out. Reader comments are welcomed - please be civil, rational, and include the company name/ticker. If you're angry about anything, don't leave a comment here, nobody is interested, put it on Twitter instead if that makes you feel better.

Timing - TBC

Agenda - everything by Paul today

Alumasc (LON:ALU) (I hold) - another strong trading update for FY 06/2021. Outlook comments mention possible supply chain problems, as many companies are reporting at the moment. Note there's a pension deficit here which sucks out a fair bit of cashflow each year.

Galliford Try Holdings (LON:GFRD) - a mildly positive trading update (towards upper end of analysts forecasts, with a footnote provided!). Cash is above market cap (although outweighed by creditors). Order book strong. Tiny profit margins though, on large complex projects.

Jarvis Securities (LON:JIM) Interim results - readers asked me to look at this, and I love it! Strong results, broker forecast goes up 15% today, divi yield over 5%, and on a PER of only 16.6, which seems good value for such a high quality, growth company. A big thumbs up from me.

Alumasc (LON:ALU)

(I hold)

274p (last night’s close) - mkt cap £99m

Trading Update

Alumasc, the premium building products, systems and solutions group, provides a trading update for the year ended 30 June 2021, ahead of publishing FY 2021 results on 7 September 2021.

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SundayTrader

15th Jul '21

Strictly speaking, Capital (LON:CAPD) is not a miner, though arguably its fortunes are so tied to the gold price it might as well be. Just guessing myself, but in the nature of the business they may be reluctant to issue a figure for eps at the interim stage, because there may be decisions to be taken on the value of old equipment which they would prefer to take at the year end. I thought the operational update they give was more informative than the "adjusted ebitda" figure which you see so often. I hold, and like you I like the numbers.

davidjhill

In my view

(1), (2) & (3) Boohoo (LON:BOO) operates a local business model and therefore should suffer much less

on (4), (5), (6) nothing new : all well flagged : really what £ASOS said about revenues is don't expect 60% p/a type growth - things are normalising. Tell us something we don't know!!

In Boohoo (LON:BOO) case they have steered us to a much more reasonable 20-25% p/a base case. So the actual read across should be that Boohoo (LON:BOO) should be well outperforming over the course of the last 4 months, which gives them plenty of headroom for the rest of the year to meet/exceed expectations.

My point being that if the first set applied to Boohoo (LON:BOO) in any great sense I'd be concerned but the business model differs so much there isn't a big read across.

The rest I'm actually encouraged by. It tells me that Boohoo (LON:BOO) guidance looks pretty robust.

re £ASOS, Boohoo (LON:BOO), etc, my own view is that the online retailers got a one-off boost from Covid which must now unwind - so with unchanged underlying growth trends the numbers over the next year will not be as good as you might have expected if you simply extrapolated last year's growth. A bit of retrenchment across the board doesn't seem unreasonable.

Rusty2

There are several issues which effect ASOS (LON:ASC) and will also effect Boohoo (LON:BOO).

"British online fashion retailer
ASOS ASOS.L reported a 21% rise in sales in the four months to
June 30 but said trading in the latter three weeks was more
muted as uncertainty over COVID-19 and inclement weather
impacted market demand.
ASOS, which sells fashion aimed at 20-somethings, said it
anticipated trading volatility to continue in the near term,
given the rapidly evolving COVID situation worldwide.
As a result, it expected its underlying growth rate for the
balance of its 2020-21 year to be broadly in line with the prior
year period."

So there is no growth at the moment it is same as last year and forecast to continue plus there are higher costs. Boohoo (LON:BOO) also imports many clothes and I believe this proportion has grown thanks to the media coverage in the UK. ASOS (LON:ASC) are not talking about 60% growth, it was around 20% and now 0%.

"UK retail sales 526.4m 329.2m 60%"

ASOS (LON:ASC) that is just for the UK. The adjusted underlying figure for the UK is 36%.

alison ruggles

I have held some JIM for the past 14 months showing a profit of 88.9% to date, so very happy with it

wildshot

Hi Diversification 99,

Whilst I may not qualify as a great investor I may well fit your narrative of "experienced investor" since I've been investing since the late 90s.

Your assertion of a "summer lull" may well be correct. During the summer months, particularly July and August trading tends to be on thinner volumes and markets can drift a bit. This can at least partly be explained by a lot of staff at investment houses being more focused on annual leave with school holidays and such like.

So to your comment "Is the advice just to stay put and wait it out?" that is generally the approach I take. I will try and monitor my holdings and like any other time of year consider if the investment case has changed on a holding which could lead me to consider selling or topping up. Otherwise, if nothing significantly has changed just relax over the summer months since the market always tends to recover (eventually), although some specific stocks may not!

There are currently macro noises about inflation fears going on. However at any one point in time the market headlines are worried about something whether it be inflation, interest rates, exchange rates, legal rulings, war, foreign policy,...... There is always something to worry about if you go looking for it. However the more I read about successful investors the more they ignore the macro noises and succeed throughout because they have good stocks.

I don't know your investment style so can't say what is best for you. For me at least I'm an investor rather than a trader and over the long term see triple digit % gains in most of my holdings, but then again I tend to hold for years, not months.

sady

I think this is one of the best websites.The information published is sooo informative that you can only learn but you have to look at the global picture.The companies are part of the economy where Pandemic, interest rate ,the direction of the flow of money i.e Dollar /Pound and govt policy all play a very important part in fluctuating the stock prices of individual companies.Please don't get angry as this is a very good platform.Congratulations to all the writers on Stockopedia, keep up the good work.Well done for all the hard work.

ken mitchell

davidjhill

I hope you’re right!

Until the ASOS update I also thought that BOO “should be well outperforming over the last 4 months,” helped by their bargain buy UK acquisitions. That could well be the case, but though hoping I’m wrong I can’t see how BOO cannot have been affected, even if to a lesser extent, to the short term problems covered in the ASOS update today.

If my posts gave the impression I’m negative on BOO, that’s not the case! Influenced by Paul’s comments and analysis I see the current weakness as a great long term buy opportunity and a chance to add, except that it’s possible the share and the sector could get weaker still short term.

rmillaree

Boohoo (LON:BOO) and ASOS (LON:ASC)
I have always though that ASOS are a much more flakey outfit than boohoo - they seem to continually run into bad patches - if we go back to 2016 ASOS sales were 5 * what boohoo managed and if we look at 2022 forecasts it looks like boo will make significantly more profit than asos depsite having their year end 6 months earlier.
I think 2019 was an example year where they performed poorly.

This gives me some hope that what is terrible for ASOS may simply be a minor inconvenience for Boohoo - i guess we wont have that long to wait for an update of some sorts. Must admit i have stupidly caught this falling knife at 290p despite seing domeone posting that there was no support till the 270p. When will i ever learn that patience is generally rewardeed when the trend is downwards - sigh.

gus 1065

Big after hours acquisition/ reverse takeover with accompanying debt and equity finance package announced by Sigmaroc (LON:SRC) . Buying Nordkalk Oy AB for €470m.

https://www.stockopedia.com/sh...

Includes a retail offer via PrimaryBid at 85p (about a 5% discount to this evening’s close). For once „game changing“ seems an appropriate adjective given the relative scale of the target. Also, unusually, seems the news didn’t leak into the markets as the share price has barely moved in last few days. Good article by Jack Brumby last year looking at the company‘s approach.

https://www.stockopedia.com/co...

Gus.

JollyBiologist

gosh, thanks for this - I'd missed it! As you say, that sounds pretty transformational.

Diversification 99

Thanks for the advice wildshot

That helps a lot. I'm also an investor and look at fundamentals and long term prospects and nothing really has changed with the prospects or story for each of my stocks. As you say there is always something to worry about and Peter Lynch mentioned this also in one of his talks.

I have been in and out of the markets but don't think I have stayed longer than a year in the past, lol, until now my second year. So this pullback in a lot of small stocks in different sectors as well was worrying. So it's good to get your perspective based on your many years of investing. Thanks again.

Richard Goodwin

£capd do own stakes on various goldminers though. They were written up in the last full year results

mark1308

16th Jul '21

I have been investing since the 70's but i could not have put this better - well done wildshot !

hi Ken

I have a smallish position in Boohoo (LON:BOO) for me so I'm not a diehard fan of the stock by any means but I do see the long term potential in it. At a macro level if they continue to innovate and execute well then I see them performing strongly over the next 5-10 years. However, you are right to constantly test your assumptions as to the investment case around any stock, and in particular any potential negatives.

I just think that Boohoo (LON:BOO) business model relies much less on cheap overseas manufacture and therefore freight costs shouldn't hurt margins in the same way so we shouldn't try to read that across as it's an apples to oranges comparison. Where we can read across is on UK sales in particular I think. £ASOS were up 60% on an absolute basis and 36% on an adjusted basis. Both of these numbers exceed Boohoo (LON:BOO) target growth rates so my expectations of 20%+ haven't changed. On that basis I'm happy the investment case remains intact for now, though of course that doesn't mean I will be right! And of course as you say, investors are fickle so the sector could continue to get weaker and that will drag the share price down.

I'm a bit apprehensive about this US action. $100m is neither here nor there really from a valuation perspective but it isn't helpful, particularly if management have to spend lots of time on the matter.

ASOS (LON:ASC) those figures you quote are just for the UK part which is only 41% of revenue, overall the adjusted figure is 21% for the last 4 months and forecast to be 0% for the rest of the year. Why are posters just quoting the UK figures?

Boohoo (LON:BOO) seems to have a lot more issues to deal with, suppliers and the USA.

Brilliant Leader

Anyone following the Jarvis Securities (LON:JIM) discussion here yesterday might be interested to know they have today declared a special interim dividend of 8.5p. I’m a happy holder as I’m sure are others.

18th Jul '21

For the very simple reason that the UK part of the business for Boohoo (LON:BOO) and £ASOS is reasonably comparative and in Boohoo (LON:BOO) case 50% of their business. Rest of World is much less comparative - different geographic splits, warehousing models, sourcing models etc.

So I focus on what I can compare as opposed to trying to read tea leaves across the stuff I can't, where I'm likely to be comparing an apple with an orange, or worse...a banana!

That doesn't mean that Boohoo (LON:BOO) don't have a set of specific problems elsewhere that £ASOS don't have, or vice versa, but at least it gives you better indicators over a good chunk of the business and some room for error.

Small Cap Value Report (Thu 15 July 2021) - ALU, GFRD, JIM

Alumasc (LON:ALU)

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Paul Scott

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