Small Cap Value Report (Thu 18 June 2020) - DLAR, NRR, RNO, VLX

17th Jun '20 by Paul Scott

89 comments 9929 reads

Good morning, it's Paul here with Thursday's SCVR.

No preamble today, as I've run out of material.

In case you've not seen it, I added a section on Wincanton (LON:WIN) yesterday afternoon, to yesterday's report here.

Estimated timings - the main report has to be finished by 12:45, as the car needs to go back in for an MoT re-test. But I'm hoping to add a couple more sections later today. Today's report is now finished.

I'll start at 7am, and will start with the scheduled results from Newriver Reit (LON:NRR) (I'm long)

De La Rue (LON:DLAR)

A friend rang me yesterday afternoon, and ran through the bull case for DLAR. It sounds very good. Therefore, I think I've made a mistake by selling my 40k shares yesterday. Happily, it turns out that the open offer entitlement of 7 new shares for each 16 existing shares, was set at 8am yesterday. I sold after that time, therefore still have the entitlement. This means I'll be entitled to 17,500 new DLAR shares priced at 110p. The market price is currently 160p, therefore there's an instant profit of 50p * 17,500 = £8,750. Very nice indeed. I had intended opening a short on DLAR for 17,500 shares, to lock in the 50p profit (and then close it when the new shares come through), but my friend convinced me that would be another mistake. He's really very bullish on the potential for the company, with new contracts coming through now, and costs drastically reduced. He's normally very thorough with his research, and tends to make money overall from the market, so I've decided to take notice of his view, and stick with DLAR, with a view to buying more if it dips back down.

The problem I have, is that I look at so many companies here, that it's difficult to find the time/energy to really focus on the best ideas. Therefore I do tend to lean on my long-standing network of investor friends, and ask the shrewdest & sector-relevant people what they think of particular shares, as in this case. Over time, you gradually learn who usually gets things right more often than not, so they're the people to listen to.

Newriver Reit (LON:NRR)

Share price: 70.0p (down c.1% today, at…

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lpreidster

18th Jun '20

I agree - I think there will be a surge in sales over the next month or so, (with estate agents closed over the last 3 months and backlog of houses waiting to go on the market). This may feel like the sector is "back to normal" or even better, but with many payoffs and uncertainty ahead, I'm not sure many people will be moving homes in the next 12 months - unless the government applies discounts to stamp duty, (although reducing taxes might not be on their agenda right now.)

Lord Gnome

Paul. Many thanks for the excellent work on NRR today. I hold and have been buying more recently so your report made for encouraging reading. I saw their team at Mello in Derby a couple of years ago and I was impressed then. Things haven't gone their way, but the management is worth backing. I have every confidence that this will recover and once dividends resume, it will provide a very decent dividend at these distressed levels.

Silver Moon

I'm not sure as to who I should reply to here but you will do ,Gostevie. Scrip dividends, bouus shares, there must be difference between the. Today Vistry (LON:VTY) announced it would make a bonus share award in lieu of a dividend in August and I'm hoping this is not a dilution.

William

Housemartin2

Best Of The Best (LON:BOTB).From the current price, it would appear to my untutored eye that Mr Market either does not expect a sale to go through or that it would be at a significantly lower price than £20. Even at this distance would not a current price of £13 look skinny ?

In from £3.03 - and therefore generally excited !

wildshot

Silver Moon this will be a dilution for people like myself who held Galliford Try Holdings (LON:GFRD) which then sold the Linden Homes business to Bovis who became Vistry (LON:VTY). The dividend you refer to was promised to Bovis shareholders who held shares before the acquisition. So the pre-acquisition shareholders get more shares and people like myself who became VTY holders due to the acquisition don't qualify.

Tommy H

I played a blinder here, bought high and sold low on Card Factory (LON:CARD) so missed the recent bounce.

There are obvious attractions to the company, it was profitable though dropped last year up to Christmas which started the rout.

The one on our little high street always seems busy when I have been in, I love the 10 for £1 offers a great way to cover kids birthdays and just have a few random cards in the draw for emergencies. Staff friendly and seem to be happy that they make a profit as a shop,

My one complaint (having bought for income and sold due to no obvious future income) was the fact they could have still paid a good dividend back in the day (say ~5%) all be it slightly reduced and be continuing the expansion and reducing debt at the same time...who knows what the management bonus KPIs were based on, but obviously involved high gearing!

23jez

The benefits for companies and why they provide scrip dividend with or with out an option to take cash has benefits for share holders as well as for the company. Accepting shares instead of cash dividends I have found a great way to save particularly in an ISA, since they became available. The current tax situation is quite simple.

I have used the interactive investor platform since 2011. Any profit in my trading account less expenses and losses attracts either Income Tax or CGT. There is no tax liability on ISA profits (YET) but neither are there any Tax reliefs. (Unless I have missed something)

Andy Sav

Yes, I second the thanks

I've been averaging down on this over the last few months and at the current price I'm am finally near parity. It may not return to pre covid-19 levels, but I'm willing to hold for the future dividends

mammyoko

Don't think the market has ever really had a clue about how to value Best Of The Best (LON:BOTB) - hence the recent upwards lurch in price on low volume. Given the small free float the instis have not been playing here and only the house broker covers it. So price discovery seems mostly about PI supply and demand.

For once, I think holders are in a that fortunate position where there is limited two-way business - it feels like this will be all one way provided the company continues to deliver. If someone wants to buy it, good - provided it's at a good price. The only risk is that William and Rupert sell it too cheaply because what's the odd £10 million on the price when you're sitting on tens of millions already? But given that this is now a pure online play and that growth looks to be accelerating, the only reason I can see for them cashing in is that they don't feel that they are capable of taking the business forwards. I can't see why they would think that sitting on a yacht in Monaco would be preferable to taking their baby on the next stage of its journey, though. William is a self-confessed petrol-head so seems to be in the perfect job.

Given that these shares are very tightly held and that all the indications are that the business is poised to grow rapidly I can see no reason for anyone to sell. How many other companies with similar growth potential and financial strength are there out there at the moment?

davidhowman

The world is full of plonkers !

Effortless Cool

Ironic, coming from someone posting the same message twice.

Etonkush

hi Ben, what sort of figure could you think BOTB could command?

or even Betway, who already have a gateway to their online gambling & casino on the BOTB website

sorry, who is/ are PE?

slord54

19th Jun '20

Typically, and I believe in this case, a shortening of Private Equity.

john652

Excellent ping pong & information on Newriver Reit (LON:NRR). Its why the SCVR is so good, sometimes i do a lot of research but Paul is a machine and the output & comments generally excellent.

I hold Newriver Reit (LON:NRR) and generally do not double down but this time i will. The UK media & general feeling seems to be that the world has changed, but the world who are ahead of the UK on the C19 journey are showing it hasn't. People are still shopping, eating, drinking, and have not turned into reborn recluses, zoom or no zoom.

Entertainment exists as it does because thats what satisfies society, and has developed over 100s years, it will return to normal, (sorry highly likely too), so for me NNR is too cheap. We’ll see of course.

Prakash Kothari

I have just joined you and looking at the information on NNR and Volex, it is very good and I am impressed.

Momoko Miyamoto

20th Jun '20

Looked at the Newriver Reit (LON:NRR) presentation slides, the value of the property portfolio was written down from £1.29Bn in Mar19 to £1.2Bn Mar20 so likely does not reflect the full impact of covid-19. Current market cap implies c. £800M property portfolio valuation at par to NAV and halving of the valuation from Mar20 levels would wipe out all shareholder equity.

Small Cap Value Report (Thu 18 June 2020) - DLAR, NRR, RNO, VLX

De La Rue (LON:DLAR)

Newriver Reit (LON:NRR)

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Paul Scott

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