Small Cap Value Report (Thu 24 June 2021) - TND, LTHM, IBPO, VTC

24th Jun '21 by Paul Scott

40 comments 9552 reads

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

We had another StockSlam last night, they continue to be great fun so well done to all the Slammers, Tamzin and the team at PIWorld, Damian for hosting, and Sam & Lawrence for helping out with the promotion.

If you haven’t gone to one yet make sure to sign up for the next slam when it comes round in September. It’s a short format (around ten different stock ideas presented in an hour) so it’s a handy way to brush up on a range of investment ideas that you might not otherwise encounter. There should be a video out on Youtube by Friday, I believe.

Quick note - a friendly reminder that we don’t recommend any stocks. We aim to cover notable trading updates & results of the day and offer our opinions on them as possible candidates for further research if they pique your interest. We tend to stick to companies that have news out on the day, and market caps up to about £700m. We avoid the smallest, blue sky type companies, and a few specialist sectors (e.g. resources, pharma/biotech).

A central assumption is that readers then DYOR (do your own research) and discuss in the comments below. The comments, incidentally, sometimes add just as much value as the articles. We welcome all rational views, whether bull or bear!

Timing - today's report is now finished.

Agenda -

Jack's section

Tandem (LON:TND) - slower revenue growth and possible margin impact from well-flagged supply chain and input cost issues, but demand and order book at record levels; investment in longer term growth continues.

James Latham (LON:LTHM) - family-owned timber distributor reports FY earnings growth and encouraging outlook, but also flags supply chain congestion. Prudent balance sheet and long track record of trading. All in all, looks good.

Ienergizer (LON:IBPO) - resilient performance over Covid from this business process outsourcer. It has grown strongly in the past and could do so again in future, but the shares are tightly held and liquidity is an issue.

Vitec (LON:VTC) - unscheduled update to communicate better-than-expected trading and record order book. Shares up by than 10%, having already doubled from lows recently.

Jack’s section

Tandem (LON:TND)

Share price: 565p (-6.61%)

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Roger Baron

24th Jun '21

Well presumably Morgan Stanley are still interested in making an offer in Augean (LON:AUG) Frontrunner - and the news about HMRC won't have done any harm. Surprised the price hasn't risen more. (I hold - 39.6p)

"Augean plc, one of the UK's leading specialist waste management businesses, last year contested a preliminary issue with HMRC at the First Tier Tax Tribunal (the "Tribunal") as to whether Augean (North and South) had appropriately interpreted certain elements of landfill tax law as described in guidance note LFT1 (published by HMRC). The decision of the Tribunal has now been released, which has found in our favour. HMRC can appeal this decision within 56 days. We are pleased with the outcome of the Tribunal and believe the decision is vindication of our view that we have correctly applied landfill tax law and paid the landfill tax correctly."

Sharewallah

Augean (LON:AUG) I am a little baffled by the announcement just made by Augean to the effect that the tax tribunal has decided in their favour and yet the decision appears to have no financial effect. Clear as mud.

Berksbee

Agree - in my limited understanding, this should be a major boost to the finances! What price a moral victory?

Maybe its the appeal bit.

Chasbas

USA is the dominant territory contributing 80% of revenue with India in second place with only 13% of total. However, revenue from India fell by 18%. UK is third contributing only 4% and also fell by 12%. If India bounces back strongly this year and next maybe revenue could grow very strongly? I assume that USA may also exceed growth expectations. Perhaps this revenue outlook is behind the company's strong revenue guidance post COVID?

ThumbsUp

On Ienergizer (LON:IBPO) it’s worth knowing that Aggarwal doesn’t exercise his voting rights and will continue not to as long as his holding exceeds 30%.

WarrantStar

Hi Jack. It appears that you have confused Vitec Software with Vitec Group. I can't criticize you for for that because I made the same mistake this morning! But I thought that I should bring it to your attention. The company which released a trading update today is Vitec Group.

Jim Wall

Vitec (LON:VTC) is a Richmond-headquartered business that supplies products and solutions to the TV/Photography and content creation industries and traces its roots to the earlier 20th century (William Vinten)

gtrdave

Hi Tamzin,
Am I right in thinking that you've removed the podcast page from the website ? If so, I'll be very disappointed as I liked downloading the MP3 versions to listen to when I'm on the go, and downloading a selection of recent presentations in mp3 format from podbean is a more laborious process.

Silver Moon

Jack, I take my hat off to you for your response to the popular request on £IBPO today, I see it as a close parallel to Ra International (LON:RAI) which I do hold and given the toss-up would still prefer Ra International (LON:RAI) even though its dividends are smaller.

Silver

gus 1065

Re. Vitec (LON:VTC) and Vitec Software AB …….

Gus.

Jack Brumby

Many thanks WarrantStar, of course there are two Vitecs... I've edited the text & company description to hopefully avoid any further confusion

shamusj

It’s worth seeing Jack’s excellent analysis on Ienergizer (LON:IBPO) in the context of the total addressable market size:

Business Outsourcing US Market size

I see plenty of room to grow and to gain market share from Infosys.

abtan

Augean (LON:AUG) (I hold)

In response to multiple comments below:

I too am surprised by the muted share price movement today after the favourable ruling came out.
I imagine that as:
1. it's the first stage of litigation,
2. HMRC still have 56 days to appeal (so the result actually came out 4 days ago?) , and
3. there's zero change in whether the company will receive back the c.£40m "overpaid" tax,

then I'm not surprised that no forecasts have been changed or adjustments made to the accounts.

At least we have a new 56-day deadline now before we know more.

I think the company last said they expected today's decision before the end of 2020, and it's clearly not 2020 any more.

After hours £32m acquisition of Salter Brands (best known for kitchen and bathroom scales) announced by Up Global Sourcing Holdings (LON:UPGS) together with a £15m fundraising at c.2% discount including a PrimaryBid offer to retail.

https://www.investegate.co.uk/...

Looks a good fit into UPGS stable and they don’t usually overpay although I’ve not looked through the numbers in detail yet. Looks like they’re paying about 7x forecast Salter 2022 EBITDA whereas Up Global Sourcing Holdings (LON:UPGS) is on a PE of 20 so should be comfortably earnings enhancing.

There’s also an “in line with expectations” trading update buried lower down in the announcement.

shanklin100

Has to be said it’s a more than 10% discount to the Up Global Sourcing Holdings (LON:UPGS) share price of a couple of weeks ago, presumably the SP has fallen as details of the forthcoming acquisition/placing leaked out. Still looks a cracking deal.

FuzzyHaha

25th Jun '21

They're available on Spotify as a channel.

wildshot

Out of interest I don't use Podbean but I subscribe via Google podcasts to PI World and can either stream or download them to my phone to listen later. Very helpful since I have less time than before to watch the videos.

Gobbagvooar

26th Jun '21

You can easily download mp3 using the link for the relevant episode in the podbean/Piworld RSS feed, open in a browser RSS add-on or use e.g. QuiteRSS

https://feed.podbean.com/piworld/feed.xml

Oops - wrong thread!

Small Cap Value Report (Thu 24 June 2021) - TND, LTHM, IBPO, VTC

Jack’s section

Tandem (LON:TND)

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Paul Scott

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