Small Cap Value Report (Thu 19 Jan 2023) - W7L, LIO, EXR, CURY, TIDE, STM, GFRD, TIFS, ACSO, IBST, GTLY, SMRT, BOO, JDG, FDEV, WAG, ZTF

19th Jan '23 by Paul Scott

49 comments 10146 reads

Good morning from Paul & Graham!

I'll leave it there for today, but plenty more items to cover, so I'll be looking at those in tomorrow's report.

CEO interview - recorded yesterday afternoon, I had a very interesting Q&A with Sam Bazini, CEO of Warpaint London (LON:W7L) - loads of interesting points, and I think he comes across really well, as a straightforward entrepreneur. After a good recent run, I think W7L shares look fairly priced around 175p, but the company seems to have good long-term expansion plans. Above all, I like owner-managed, entrepreneurial companies with sound finances, that pay divis, and have common sense business models. So W7L ticks a lot of my boxes as a long-term investment, hence why it's on my watchlist. As always, DYOR.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to review 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 are analysing the company fundamentals, not trying to predict market sentiment.

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 -

We'll put our one sentence summaries on this spreadsheet below (as we started yesterday), which makes it more efficient for Graham & I to update the article, and hopefully also gives you a very quick reference point for the overview -

I'm starting to flag, so don't think we'll get those done today, but if I get a surge of energy this evening, might do some ready for tomorrow again. Lots of interesting stuff to cover, not enough hours in the day!

Paul's Section:

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Lucky dip

19th Jan '23

The statement today explains all that.

Their bench mark has dropped 14%.
the loan is fixed at 2.9% until 2027.

Soled some assets in the summer and bought cheaper in this quarter.

Pays 8 p dividends this year.

Worth reading.

I plan to add more.

ACounsell

Not a small cap I know but trading update from Dunelm (LON:DNLM) was very positive this morning. Even said PBT would be above market expectations and yet share price down 5%+. It seems across a lot of the retail market above expectation is bad, in line is very bad and below expectations is catastrophic. Does the market really believe the that the market leaders in their respective niches Dunelm (LON:DNLM) andNext (LON:NXT) are going to have a truly disastrous year?

kuronagi

Paul

A couple of more points on Paypoint. As you have noted, the financial numbers look good (low PER, high ROE, high dividend yield etc, high Stockopedia quality ranking). As a retired investment analyst, I also look at the quality of institutional shareholders (excellent - check it out yourself). I also look at the background of the key managers (again excellent - in my view). But one of the interesting aspects of Paypoint is the accumulation of shares by Astericos - a Spanish group. I have dug around without getting much further. This is what I posted on ADVFN last August

I have held PAY since 2019 when I was buying at over 1000p. Purchases since then have bought my average price down. PAY is now the largest of my small cap holdings. I am intrigued that no mention (or almost no mention) is made of the increasing ownership of Astericos Patrimonial. The last RNS showed an increase from 22% to 23%. I have dug around a fair amount but the AP web-site does not shed much light. My assumption is that (like me), AP see a very much undervalued company which is off the radar of small investors (no bad thing).

bend1pa (comment above) talks about the share trades. If, as I suspect, AP are accumulating shares, their brokers will be using small trades.

Look at the other significant shareholders. Several big-hitters. Serious investors.

What are the chances of a bid of around 1000p?

Kuronagi/Sturmey

PS. That was last August. PAY is no longer the largest of my 13 small cap holdings (many held for several years). Largest is now BVXP. 2nd largest is NTQ (micro cap oil services company of which I own over 1%). Note also that Astericos own over 26% of PAY

The Boon Fund

Thanks for the mention, Michael C!

What are the rules around a takeover? If the Paypoint bid for Appreciate (LON:APP) is rejected in the GM tomorrow, can they immediately come back with a higher bid? Or is there a waiting period?

I was hoping Samson would have forced Paypoint to issue a new offer by now rather then let the vote go through. Because if it doesn't pass - then APP share price will drop, and Samson would be sitting on a big loss (until a higher offer is agreed).

Food for thought.

(I hold Appreciate in the Boon Fund)

Blimey, the benchmark has dropped -14%...!

Isn't that a steep drop over a quarter, for something like property? This is an area I don't know much about, but it sounds like flashing red alarms?

DarwenLad

Today’s £48m placing of shares in Ashstead Technology (AT.), the fast growing subsea technology group, deserves a mention. It is the third placing by its major shareholders since the company’s November 2021 IPO at 162p.

Each placing since the IPO has been done at progressively higher prices - July 2022 @£2.00, November 2022 @£2.60, and January 2023 @ £3.10. The latest placing is bigger than the previous two placings combined and has been done on a 5.8% discount – considerably tighter than previous placings.

The latest placing, just three days after an upbeat end-year trading statement covered by Paul, suggests that the company is building up a solid institutional following. I really hope that it does not mark “the end of the good news”, which can sometimes happen after the major shareholders, who brought a company to market, have taken the bulk of their profits and exited.

Camtab

I am not a fan of REITs at all. Yes I like the idea of diversifying property holdings, yes I like the idea you have to pay 90% of your profit as a dividend and yes I like the increased transparency and flexibility. But in the end they are a play on interest rates. We have had years of falling rates and property has done well now it is going the other way. Do they diversify, well at times yes, but at key times they are equities whenyou don't want them to be. So I have never bought one and it would have to be a significant discount to assets to make me. I would rather take the lower liquidity of a property fund and get the diversification.

Bouden54

The CBRE data flagged a steep fall In property valuations in Q4 so this shouldn't have come as a total surprise (although AEWU fell a bit more than I was expecting - not holding fortunately!)

ken mitchell

Camtab.

I disagree with you about Property Funds. I would never invest in one! If there are a lot of investors wanting to sell they can’t suddenly sell property to meet that sell demand so have to lock their investors in, and sometimes for many months too. They are inappropriate for Property imo.

Property Investment Trusts never lock in their investors. . Instead they go to huge discounts to NAV when the sector is out of favour and become bargain buys. Currently there are Commercial Property Trusts trading at nearly 50% discounts to NAV. E.g Tritax EuroBox (LON:EBOX) and £PSDL. I recently bought both of them. And Tritax EuroBox (LON:EBOX) also pays a 7% dividend. If these two were Property Funds, which always trade at NAV their share prices would be nearly double the current Phoenix Spree Deutschland (LON:PSDL) 242p and Tritax EuroBox (LON:EBOX) 65p prices.

I’ve held several Commercial Property Investment Trusts since they crashed in the 2020 covid crash. All of them pay big quarterly dividends and Ediston Property Investment (LON:EPIC) pay theirs monthly. And AEWU dividend at my buy price is 13%.

Dherb

I love these interviews Paul. I’m only at the start of my investing journey but find these and your reports so helpful.

BnB

£48m placing of shares in Ashtead Technology (AT.)

I pointed to this last night in yesterday's SCVR and interesting to see Simon Thomson doing the same today in the IC recommending investors exploit any weakness. The relatively small discount achieved for such a sizeable bookbuild points to high interest from institutions.

Paul Scott

Thanks Dherb! :-)

GloucesterBob

According to Sky News Seraphine (LON:BUMP) is being taken private by Mayfair Equity at 30p a share a stonking 206% rise on todays close, well done lucky holders, not me (as long as you are not long term)

Maternitywear chain Seraphine to be taken private at fraction of IPO price | Business News | Sky News

Roger Baron

There's a good reason why plenty of property funds have been closing down. https://www.ftadviser.com/inve...

planetx

Crikey that’s a bit of f luck I had a punt on these a few months ago at 10p then 9p, Cracked a bit and sold at 9p a few weeks but kept half .

Very nearly bough sone today .

That’s a super cheap deal really for Mayfair equity as this is s not too difficult turnaround .

Anyway it was always a punt.

Think Paul is holding too so we’ll done Paul he was reasonably vocal on this so that’s the Stockopedia subscription paid for .

BenHazz

Oh my word... I had a gamble on these at 7.9p just before Christmas. All thanks to Paul Scott, once he raised that the free float was only 700k of the at the time 5mil market cap, I thought it was worth a punt. Cheers Paul owe you a pint for that one!

iceman_pinto

Paul, thank you for the interviews. The interview with Sam Bazini was fantastic as I love the companies with founders having substantial holding. Last 5 mins just made me buy the stock :).

SGTA

Seraphine (LON:BUMP) looks like a big takeover is coming tomorrow at 30p vs current price of 9.8p

https://news.sky.com/story/mat...

Oh my word indeed. I had missed this news completely. Bought some in 2022 at 30p but having read Paul's comment took a punt and increased holding by 450% at 8.5p. Paul's owed lots of pints!

danjamesbaker

The main reason for the significant valuation change is the widening in the gilt curve, nothing to do with tenant quality or a change in mix. Certain areas like industrials were being priced all the way up to yields around 3% before the mini budget so naturally have had significant impacts.

There are still a lot of areas with significant value in my opinion - I hold Empiric Student Property (LON:ESP) , Ediston Property Investment (LON:EPIC) and Love Hemp (OFEX:LIFE)

Small Cap Value Report (Thu 19 Jan 2023) - W7L, LIO, EXR, CURY, TIDE, STM, GFRD, TIFS, ACSO, IBST, GTLY, SMRT, BOO, JDG, FDEV, WAG, ZTF

Agenda -

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Paul Scott

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