Small Cap Value Report (Thu 21 Jan 2021) - CRW, GETB, SCE, IDP, AIR, SOM, SDG, HEAD, BEG, ZTF

21st Jan '21 by Paul Scott

106 comments 14453 reads

Good morning, it’s Paul and Jack here with the SCVR for Thursday.

Timing - update at 13:15 - mostly done for today. The sun has just tentatively appeared, so I'm downing tools now to stretch my legs, as lockdown in foul weather is sending me stir-crazy! Let's say all done for today, but I might cover a few more things this evening, for tomorrow's report.

Paul's Section:

Agenda - I prepared some sections last night:

Craneware (LON:CRW) - trading update FY 12/2020

Getbusy (LON:GETB) - trading update FY 12/2020

Air Partner (LON:AIR) (I hold) - trading update FY 12/2020

On to today's trading updates/results:

Somero Enterprises Inc (LON:SOM) - a sparkling end to FY 2020

Sanderson Design (LON:SDG) (I hold) - Trading update for FY 01/2021 - ahead of expectations

Headlam (LON:HEAD) (I hold) - Strong H2 recovery & resumption of divis

Jack:

Begbies Traynor (LON:BEG) - red flag report

Zotefoams (LON:ZTF) - Operational & trading update

Craneware (LON:CRW)

2240p (up 2.3% yesterday) - mkt cap £601m

Trading Update

20 January 2021 - Craneware (AIM: CRW.L), the market leader in Value Cycle solutions for the US healthcare market, is pleased to provide an update on trading for the six months ended 31 December 2020 (H1 FY21).

“Strong performance”

H1 revenue & adj EBITDA up >5% on LY H1

Customer retention rate above 90%

… building the foundation for a return to double-digit growth in the future.

Long-term visibility of contract revenues

Capitalising R&D at similar levels to prior periods

Cash reserves “healthy”

Good cash conversion

Confident of meeting market expectations for FY 06/2021, with a useful footnote -

1 Company compiled, publicly available market expectations comprises the published estimates of 5 analysts from Peel Hunt, Investec, Berenberg, Panmure Gordon and N+1 Singers. For FY21: Revenue of $74m (range $71.5m to $76m) and Adjusted EBITDA of $25.3m (range $23.7m to $27m)

My opinion - it’s a good quality business, but growth seems a bit pedestrian. Forward PER of 45 suggests investors must see upside against existing forecasts. The share price has done well recently, it looks very expensive now. I’d want much faster growth to justify paying such a high multiple.

Getbusy

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simoan

21st Jan '21

It does. But while I quite understand the caution, and the fact that study over a decent period of time (months probably) is going to be needed to confirm the impact on infectivity of the vaccinated, I find it very hard to believe that it is not going to prove to be the case that there is a major impact on transmission.

Just to quickly follow this up as it may be of interest to some. I listened to this weeks excellent "More or Less" program or R4 this PM on BBC Sounds. The Pfizer Phase three trial did not test for the level of protection from getting the virus of those that had received the vaccine, but the Oxford/AZN phase three trial did. The latter showed that 100 vaccinated people still tested positive with a PCR test without any signs of illness (i.e. asymptomatic) and overall the vaccine was only 46% effective at protecting against getting the virus. This means more than half of those who receive the Oxford vaccine can still carry and pass on the virus. Please don't go and hug your old folks even when they've had both doses!!

All the best, Si

Laughton

"The latter showed that 100 vaccinated people still tested positive with a PCR test without any signs of illness (i.e. asymptomatic) and overall the vaccine was only 46% effective at protecting against getting the virus."

I don't understand Simoan, the first bit says, to me, that all 100 still got the virus but the second part says 54% of those vaccinated still got the virus.

Which is correct - or is it that everyone still gets the virus but 54% of them suffer symptoms?

timarr

Which is correct - or is it that everyone still gets the virus but 54% of them suffer symptoms?

Neither. In the vaccinated group about 100 people tested positive, compared to 190 people in the control group. None of those positive testing people in the vaccinated group became ill - but they were still able to transmit the disease.

You'd therefore assume that 90 people in the vaccinated group also caught the disease but didn't test positive, resulting in a 46% reduction in the group capable of transmitting the disease.

Basically - the Oxford data says that the vaccine stops people becoming ill but is less effective at stopping them catching the disease and spreading it.

You can give CV-19 to your vaccinated granny and she probably won't get ill - but she could infect someone else.

Albertos

IG Group (LON:IGG)

Graham Neary always liked IG Group (LON:IGG) this was his take on today.

https://cube.investments/cube-uk-report-21-jan-2021-tasty-acquisition-at-ig/

Probably best summarised as loved the results but horrified by the acquisition.

Phil

Boon

Any updates for Paypoint (LON:PAY) on the Ofgem competition probe? That's the unknown risk.

Spl183

Hey Guys,

A random one, but has anyone else noticed a really worrying trend coming from the US these past few days, whereby folks' on CNBC/ DC politicians have elected to use the term "normalcy" instead of normality ?!

Let's all pray to god that it doesn't catch on over here !

Spl183

Westway001

it’s not a new trend, normalcy has long been American for normality.

laurie

Greetings, sharw,

That still raises the question as to where the forecast of £7.3m on Stocko came from.

I don’t know where the estimate comes from, but when it came was December 2019. After this point forward guidance was suspended. Stockopedia merely states the last recorded profit estimate.

Air Partner (LON:AIR) reported earnings regularly during the spring and stated that profit for the second half would be modest. I assumed from the wording of updates that this meant the second half would be marginally above breakeven, which corresponds to the broker’s estimate of 10.5mil. AIR is made up of many businesses, some of which will have had little work due to travel restrictions; I assumed that the businesses benefiting from the current situation would be supporting those that had no work, and the result would be 0-.5mil pretax. Today’s update says that the result is a bit better, which I am pleased about. I had hoped that there would be a greater profit, but the company had been clear. AIR still trades below historic averages despite having had an exceptionally financially successful year.

I hold.

RebelChatRoom

yes, 'envision' rather than 'envisage' too - it's gotten to be a terrible version of English

22nd Jan '21

Yes ! I even raised the normalcy reference on a US chat group I'm a member of and it seemed only those situated near the DC area were familiar with the term.
Apparently "normalcy" was never a word until the 1920 Presidential Election where Harding first used the phrase "Return to normalcy". After that, it seems to avoid embarrassing the president for making up a word, it became acceptable to use. So, it appears a politician made up that word. Been a regular watcher of CNBC for approx 6 months, and it's only been said over the past few days. Then former president Clinton goes and says it at the inauguration !!

Or 1857, according to Wikipedia

https://en.m.wikipedia.org/wik...

Caper4

100% agree with this opinion. I know many friends who are desperate to go on a cruise as soon as possible. I have a fairly large position in Saga but also Carnival as the latter has a strong enough balance sheet to survive even if cruises cannot start until 2022. And no doubt some competitors will fall by the wayside .

Ahh, yes of course, the credible source that is Wiki (!)

But, thank you as the link led me to learn about terms; "malaproprism" and "neologism" !

Have a good day @Westway001

peterg

Without wishing to extend the virus/immunity discussion too far (though it is certainly relevant to investment strategy), I'd take a bit of issue with this:

We don't know they could still transmit the disease, or if so how well. We know they had antibodies, so tested positive. If they were asymptomatic then the viral load was probably low, and so they would be likely to be (a lot?) less infectious.

However, clearly, at this time we don't know the full picture, and I'd agree with simoan - be careful hugging vaccinated grannies!

Well, we're off the main thread, so I don't think it matters much.

If they were asymptomatic then the viral load was probably low, and so they would be likely to be (a lot?) less infectious.

It's unclear how viral load connects to infectiousness but the general point is correct - that asymptomatic people are probably less infectious: https://www.bmj.com/content/37...

"While viral load seems to be similar in people with and without symptoms, the presence of RNA does not necessarily represent transmissible live virus. The duration of viral RNA shedding (interval between first and last positive PCR result for any sample) is shorter in people who remain asymptomatic, so they are probably less infectious than people who develop symptoms".

So I'd agree with your statement but I don't think, in practical terms, it makes any difference. We have to assume people who are asymptomatic, whether vaccinated or not, are infectious and wait for the research to tell us exactly how infectious they are.

Samsgrandad

Surface Transforms (LON:SCE)

Hi Paul, You asked.

How to value it though? Very tricky.

My answer would be "move along, nothing to see here". 2 million in sales after 20 yrs for a company valued around £100M. I remember them from OFEX 20 years ago and they still are driving with the brakes on and passing around the collection plate regularly.

24th Jan '21

Many of the objections so far to the acquisition by Ig Group (LON:IGG) is the multiple paid for the earnings.

However, there are two hidden value here:

Rev per active account at tastytrade is below IG's own and also industry players. So there's scope to increase, using IG's know-how
Tastytrade isn't just a platform to trade. They have a huge learning/education arm. Currently they're not charging for it. Right now it is only funnelling free qualified leads to tastytrade platforms. But globally, it could be used as a marketing vehicle to funnel free qualified leads to IG's platform. CAC of new customers is probably the highest Opex cost I imagine for IG, so tastytrade education side could be the hidden value here, contributing to lower marketing costs for IG overall instead of top-line revenue growth.

Rusty2

I have not looked at Tastytrade’s platform. As a new user of IGs platform I’m disappointed at how basic it is. I have been looking at Robinhoods platform which is one of the free us ones and I must say I’m very impressed with the ease, speed and information, this is what I expected from IG and other U.K. platforms. It can’t be that difficult can it.

I will have look at Tastytrades. Maybe IG can learn something to improve their own platforms.

Andy Sav

Hi Samsgrandad,

I recently saw their presentation at a Mello Monday event (and found a similar one here). Basically, the disk brake product has been in development for 10 years! This development time is the barrier to entry in to their market. It probably explains why there is only Brembo in the market today (yes, one competitor!). Surface Transforms (LON:SCE) have about4 - 6 car models signed up to use their line of disks, with another couple. Surface Transforms (LON:SCE) refer to these as OEM lines.

Surface Transforms (LON:SCE) have a modular approach to their factory and the latest fundraising was to double the manufacturing capacity (by building cell 2), so they can handle the demand they have signed up to deliver for the OEM contracts.

I agree its very hard to value and they do look expensive on a PER of appx 40. You can see this as a jam tomorrow type of share, however, it does look on the bring of a turn around.

Given electric cars are heavy and need more efficient disks, I think there is opportunity here , fingers crossed (I'm a new holder).

All the best, Andy

25th Jan '21

Hi Andy, maybe you should check the stock report again. The price to SALES is 40 ish. Their forward per is nearly 500 but it's your money you're giving away. And its 20 years since they floated on OFEX and 2 years later on AIM with their carbon-ceramic disk , not 10. See "about us" on their web site.

Good luck, but you'll find much better opportunities on Stocko.

Small Cap Value Report (Thu 21 Jan 2021) - CRW, GETB, SCE, IDP, AIR, SOM, SDG, HEAD, BEG, ZTF

Craneware (LON:CRW)

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Paul Scott

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Small Cap Value Report (Thu 21 Jan 2021) - CRW, GETB, SCE, IDP, AIR, SOM, SDG, HEAD, BEG, ZTF

Craneware (LON:CRW)

Getbusy Unlock the rest of this article with a 14 day trial Unlock with Email Unlock with Google Already have an account?Login here

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Paul Scott

106 comments

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Getbusy

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