Small Cap Value Report (Thu 19 Aug 2021) - CLX, RBN, MCB, CGS

19th Aug '21 by Paul Scott

42 comments 9071 reads

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

Explanatory notes -

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), and make your own investment decisions. Reader comments are welcomed - please be civil, rational, and include the company name/ticker, otherwise people won't necessarily know what company you are referring to.

Agenda -

Paul's Section:

To follow

Jack's Section:

Calnex Solutions (LON:CLX) - another 'in line' update from one of 2020's more intriguing IPOs. The shares trade on a premium valuation, but this is a well-managed, growing company with a strong market position and positive longer term prospects.

Robinson (LON:RBN) - tricky conditions here, with cost inflation and variable customer demand. It's capex heavy as well, and I wonder if payments to shareholders might be better to reduce operational costs and pay down debt post-acquisition. There are signs of value as well, and the company has been running for a long time, so it should have the nous to navigate tougher markets. Illiquid shares though - that will rule it out for a lot of investors.

Mcbride (LON:MCB) - more warnings on cost inflation, this time including a shortage of heavy goods vehicles. McBride has a fair amount of debt and has a lot going on with its Compass strategy. It's a fairly capital intensive business at the best of times, so if profits fall and the low margins take a hit things can get risky here.

Castings (LON:CGS) - a good, safe company with an excellent dividend track record that has been operating steadily for a long time although profit has been on a declining trend for years now. Conditions are tough, due to…

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AnonymousUser894098

19th Aug '21

Shorting Tesla has proven the downfall of many a hedge fund.... word of caution on that one.

TamzinPiworld

Here's the PIWORLD interview with Stockopedia's Keelan Cooper, who discusses the background and findings of The Stockopedia IPO Survival Guide. You've probablly already read the report, if not find it here. Fascinating evidence that small and micro cap IPOs bought on the first day of trading and sold around the sixth month after the IPO will give a better performance. Video & podcast.

Separately, following the Calnex Solutions (LON:CLX) trading update today, here's the last FY21 & H1 21 results presentations.

BnB

Terrific performance of late but forward revenue and earnings estimates are still moderate relative to, say, Acuity Ads, a Canadian DSP chasing similar customers (as far as I can tell), which is growing a third faster and yet is valued 10% lower on EV/revenue - perhaps explained by the fact that margin acceleration is a couple of years behind. I think it's the discount for scale when you consider the DSP elephant in the room (TTD) is on 31x EV/revenue.

CliffW

Agreed Daniel.

It's not for everyone and stakes should be kept small with a stop put in place. My feeling though is that it has 8 bagged over the last 15 months or so and is now valued at approx $500 billion. Toyota reported today on semi conductor and supply chain issues which Tesla will not be immune to. When the US downturn eventually takes place (whenever that may be) i feel Tesla will be one of the heaviest fallers. Must admit though i have shorted it several times before though and each time been stopped out!

Berksbee

One of my conviction holdings - which I've topped up today. Not entirely sure why the recent price drop is justified - it looks a little to me like there are some "sell everything" instructions out there which have hit the whole market.

Time will tell but as you and Ant say - IP and a possible takeover give a tasty upside to a solid story IMO.

Snowbum

Anyone interested in the type of business that Robinson (LON:RBN) is involved in should consider taking a look at Coral Products (LON:CRU) as an alternative. Debt free and cashed up.

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

davidjhill

I don't think so. Go and look at the analysts note on Research Tree. Tremor International (LON:TRMR) is way outpacing its peers on growth.

also trading on an EV to EBITDA of 8 !

MichaelFBS

Hi Zipmanpeter

Was typing on my mobile so would like to think it was a typo but knowing my spelling…..

Are you a bear on the stock?

Regards

Michael

mojomogoz

Tremor International (LON:TRMR) - very rarely does the combination of price/value and results/growth evidence support such a high probability of significant upside skew to price.

Lots of scepticism and misunderstanding still in the price for Tremor despite how far the price has come up in last 15 mths

Hi Brookeda

My most recent (28/3/2021) musings on Tremor International (LON:TRMR) are at:

https://investing4value.wordpr...

I think that the reason that Tremor is undervalued is many fold and in no particular order:

Too good to be true
History (convicted ex CEO)
Israeli based, trading on AIM, mainly US sales,
Some of the accounting seems a bit opaque, but that could just be me as I am in no way an forensic accountant
Change of auditor
Continuous fairly significant sales by Druker & Carmi (for example Carmi sold 312,718 shares last April at £1.20. That has cost £2 million. I would have thought he would have been buying at £1.20 but maybe like me at the time he thought the world was going to sh!t. I like “my” management to hold stock, through thick and thin, and even accumulate, not sell down at every opportunity. Buffett hasn’t sold a share 50+ years of BRK.A. So yes this still makes me uncomfortable.

On the plus side:

The cash appears to be real
The acquisition from News International did take place
NI holds 6% but they made a small sale on 18th June
A bid for the company is entirely possible at some point
The “IPO” on the NASDAQ will have required some scrutiny I believe so again gives comfort.
I have gone through the accounts as well as I can and part from a couple of things outlined at the link above, I can really see nothing wrong with them.

The risk reward seems good to me here, and so I continue to hold for the time being but another £ on the price from here would see me top slice a bit.

rkells

Robinson ( LDN: RBN) I hold. The one positive from the half year report is that two plots of industrial land are contracted for completion before year end for £3.4M and that further sales should take place 2021/2. The company currently has 32 acres of industrial land on 3 sites. One of the sites has existing buildings yielding a rent of £400k pa. If wisely used the proceeds of property sales should help to build a more resilient business.

That's the rear view mirror and which clearly highlights how cyclical their business has been. I'm seeing consensus on Refinitiv of only 12.6% growth in FY22 and 14% in FY23, with eps gaining similarly overall. That's not to sniff at but it suggests a FY23 p/e of 21x is about right for a still cyclical business. I think the big gains have been made but I'm happy to be wrong as I hold two of Tremor's competitors.

mark1308

Michael - fully agree with you

Yes letap73 agree with you on Mcbride (LON:MCB) and if anyone invests on Stocko StockRank criteria what a shock they would get as its a so called super stock on 95. How mad that seems ! DYOR has never seemed so important !!!!

completely agree Mojo. I keep scratching my head looking for the bit I'm missing and I just don't see it, but then I don't see why we should find it blindingly obvious whereas mr market is oblivious either!!

if you are valuing this on a P/E compared to competitors then your metrics are misplaced. This is effectively on 8* free cashflow. All of the competitors you mention are considerably more richly valued.

Then we get onto rear view mirror....... the growth of the last 6 months is way outpacing similar businesses. I think you'll find the forecasts are also too conservative and plainly wrong. However, that's less the case for the competitors.

A more misunderstood stock Tremor International (LON:TRMR) is hard to find.

Thanks for your observations. I perhaps need to dig deeper.

Rusty2

20th Aug '21

McBride (LON:MCB) is now only 89 and is a Style Neutral, so Stockopedia agrees with you.

WDWombat

If you read previous management comments this was expected and should prove only a very temporary apparent 'blip'. I am a fan and a knowingly patuient one.

kjmanni

1st Oct '21

Yin in my niiijiiinip I iiiijiI’miii

Small Cap Value Report (Thu 19 Aug 2021) - CLX, RBN, MCB, CGS

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Paul Scott

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