Small Cap Value Report (Thu 19 May 2022) - HEAD, TYMN, BEG, PMP, KGH, SHOE

19th May '22 by Paul Scott

62 comments 9462 reads

Good morning, we have Paul & Jack here today.

More problems across the pond yesterday, with the recent bounce in US markets unravelling in one day. The trigger seems to have been disappointing results from big retailers Walmart and Target, both down sharply. Plus disappointment from Cisco. It's becoming increasingly clear by the day that the short term economic outlook is deteriorating. UK small caps have reflected that for a while, with prices really bombed out. I've got lots of thoughts gestating on the macro picture, so will try to type that up when time permits.

On to today's company news.

Agenda -

Paul's Section:

Headlam (LON:HEAD) - a very encouraging trading update. Slight softening of demand in April, but self-help measures mean this carpet distributor remains comfortable with full year expectations. It looks terrific value to me, although obviously macro uncertainties are not helping investor sentiment. Looks a really strong long-term investment to me, with a 6.5% divi yield to keep you happy in the meantime, arguably much better than losing 9% p.a. to inflation by holding cash, for long-term holders prepared to look through short-term market volatility.

Begbies Traynor (LON:BEG) - an encouraging year-end trading update for FY 4/2022. Profits 3.5% ahead of expectations. Everything seems to be going well, and remember this is before the avalanche of insolvencies that seem likely now Govt covid support measures have been phased out. I remain of the view that this share is cheap, and has excellent prospects. Good if you want some counter-cyclical exposure. Also it's now a proven acquisition vehicle, which is in for free.

Portmeirion (LON:PMP) - a trading update which I find quite reassuring. Cost increases are being passed on, and sales are up 2% in the first 4 months. However, PMP makes its profits in H2, which is obviously looking shaky on a macro level, although order books (including for key Xmas trading) "remain healthy". I reckon long-term holders should be fine, but there could be bumps in the road due to macro factors. Key point - energy costs are fixed until Mar 2024.

Shoe Zone (LON:SHOE) - yes, I finally got round to looking at this! It looks excellent, and I can see why readers like it.

Jack's section:

Tyman (LON:TYMN) - the group is trading well in a difficult environment, with supply…

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Paul Scott

19th May '22

Hi Breakout Trader,

Well done, I can't argue with that! :-)

Best wishes, Paul.

Hi Aston Girl,

Great, see you next week!

I also spotted the big H2 seasonality with SHOE as I was writing up my piece on it, and it changes everything IMO - the investment case looks great, if they can get anywhere near the old level of seasonality.

Looks good to me!

Regards, Paul.

Bouden54

Well I would expect them to pass on at least some of the higher costs to protect margins, and you also need to factor in bigger, more profitable stores and lower rents which they've been able to negotiate. As long as there isn't a major economic meltdown I would expect them to get back towards 20p next year.

JCPr

I usually find breakouts easier to spot after the share price has gone up 20%.

Revs8

Hi gmtrader

Thanks for highlighting £IOMG (I now hold) There is a lot to like about this chart set up. The 50/200 also look set to cross shortly.

Long term falling channel and bottom of gap down at around 190p are negative but also provide the possibility of a breakout.

Hi all,

Does anyone see any read across from Shoe Zone (LON:SHOE) to Unbound (LON:UBG) ? Both are very bullish about the future. Big difference in their route to market.

Silver Moon

I've added to Shoe Zone (LON:SHOE) late this afternoon because I'm underwater, if I wasn't I would probably have used my Aviva (LON:AV.) cash-back on one of those companies that are heavily into buying back their own shares at the moment. I notice they seem do this when they have plenty of cash coming in whether the SP is on the crest of a wave or at the bottom of the trough.

jimrog64

Paul, thanks for the Shoe Zone (LON:SHOE) review. Much appreciated, particularly the point about H1 v H2

Boon

Interesting that one of the siblings in the Boohoo (LON:BOO) founding Kamani clan sold down today at the current share price, and the other siblings didn't step in to buy the stake to preserve the family holding.

Maybe shows that the founders don't think the current SP is a bargain?

Breakout Trader

yes, agreed. Normally you definitely want to be buying an uptrend - My usual scan focuses on stocks trending above key moving averages and within 10% of the 52w high.

However, begbies is theoretically counter-cyclical and should do better when companies are struggling and markets are down.

I’ve been watching it for a while as one of very few potential longs in the current environment.

Db47

it's weird the RNS says he sold 100,000 shares - but still owns 50,709,141 shares, yet his holding dropped from 4.98% to 3.99% - a 1% drop - I'm no mathematician but selling 100,000 shares out of over 50m doesn't represent 1% does it ?!?

Mark B

20th May '22

One of the other siblings could have stepped in, but as they're below the threshold of reporting - we don't get to see the transactions. Only two Kumani's are above the threshold to report.

simoan

Nothing strange about this at all. You need to understand how holding RNSes work. They only notify when a whole percentage threshold (in this case 4%) is crossed . This means previous sales from the last reported 4.98% holding do not need to be reported until this sale which crossed the 4% threshold,

All the best, Si

KevinS1

Hi BT - any decent advice on where to develop these types of skills about understanding breakouts and other trading strategies?

marcusb

Thanks for this Breakout Trader. It would be great to have a separate post where we can all add potential breakout setup ideas. What do you think?
I have been waiting patiently for CMC Markets (LON:CMCX) (i hold) to breakout above 292. It is range-bound at the moment. But the price should move fast upward when it get to around 310 due to the big gap down on 2nd Sept.
The price is holding well in this market as there is a large share buyback happening at the moment.
Just waiting for a catalyst for this to jump up. Which should come on the earnings report on 9th June. CMC Markets (LON:CMCX) earnings usually do well in a volatile market.
It is also worth mentioning that the owners hold a large percentage of the shares.

Zipmanpeter

It's a fascinating comparison - both are shoe focused but very different: one mostly serves lower income customers through stores whilst the other serves, mostly online, affluent older customers. Both have a clear strategy that could success so actually both could win or both fail! I therefore think there is surprisingly little read across - the commonality of consumer product shoes is outweighed by the divergence in strategy in final consumer and route to them.

Personally, FWIW, I'm betting on Unbound (LON:UBG) (I hold) because although riskier, I feel they have the chance of a bigger upside, esp if they can become a platform for other brands targetting the elderly who always have money. But Shoe Zone (LON:SHOE) look well placed for the times and to ride the collapse in shop rents.

As ever, the ones to really fear for are those without a distinctive strategy/offer - both independents and chains....and as these suffer, those with better offers can thrive. What is ever sharper these days, is that the bland suffer.

gmtrader

Your welcome. Some times you just need a little luck and buy that day before it goes up. What’s your target, 210?

Rambo

Many thanks for linking this - very enjoyable watch and finished off my trading week on a happy note even though my portfolio has gone down the plug hole. !!

Aagh ok thanks Si - interesting info !!

27th May '22

True, that is a good point I have not considered.
But if that had happened, the company / siblings could have proactively disclosed that (even though they didn't have to), and reassure the market?

Small Cap Value Report (Thu 19 May 2022) - HEAD, TYMN, BEG, PMP, KGH, SHOE

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Paul Scott

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