Small Cap Value Report (Thu 25 Nov 2021) - ALT, IQE, MUL, CBOX, LTHM, MACF, AOM

25th Nov '21 by Paul Scott

52 comments 10669 reads

Good morning! It's Paul & Jack here with the SCVR for Thursday.

Agenda -

Paul's Section (I've gone a bit nocturnal, so apologies for the erratic timings, this was mainly prepared overnight) -

Altitude (LON:ALT) - in line update. Altitude has over-promised and under-delivered in the past. £20m market cap could be a speculative idea?

Iqe (LON:IQE) - profit warning - shares down 24%. It sounds tech impressive, but doesn't make any cashflow. Not for me.

Mulberry (LON:MUL) - interims looks good, but more than half profit came from a Paris lease disposal. Weird ownership - 95% owned by 2 shareholders. But if this brand takes off again, could be a multibagger. Worth a look, for fashionistas, not bean counters who mistakenly think they know about fashion! like me! :-)

Cake Box Holdings (LON:CBOX) - when is it right for founders to sell? We love CBOX here at the SCVR - exactly the type of hard-working founder entrepreneurs, with big shareholdings. But they're selling a quarter. How do we feel about that?

Jack's section:

James Latham (LON:LTHM) (I hold) - strong H1 results, as previously flagged. The group faces a number of cost pressures now, while volumes and margins are normalising. The current period has benefitted from stock bought at historically normal prices and then sold at a mark up amid unprecedented demand conditions. Receivables have increased and customers are 'a bit quieter' as they hold off in order to source parts. It's a good company but I wouldn't be surprised to see the share price ease back over the next year or so, depending on how the wider market plays out.

Macfarlane (LON:MACF) - a short update confirming that the group now expects to exceed full year expectations. There's a good track record of long term revenue growth and operating margin expansion here that warrants further investigation.

Activeops (LON:AOM) - relatively new software float with recurring revenue, although it remains loss-making. The company has cash to invest and I'm interested to see how it might grow in time but, for now, the valuation looks quite full.

Paul’s Section:

Altitude (LON:ALT)

28.5p (up 6% yesterday) - mkt cap £20m

Trading Update

There’s a change of Chairman too, which doesn’t really matter in…

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Effortless Cool

25th Nov '21

Thanks for the review of Macfarlane (LON:MACF) , Jack. I am a long-term holder of these and have added a little more detail below, based on my own analysis.

Headline revenue growth is quite heavily impacted by the two sizeable acquisitions made this year, one in March and one in April.

Doing some rough calculations, I reckon that LFL growth over the year has progressed as follows:

Jan-Mar - 13.8%
Apr-Jun - 24.3%
Jul-Oct - 9.1%

Extending the analysis to the full year, I reckon that my current revenue forecast of £279.6m implies a meagre 0.2% LFL growth in Nov-Dec. I'm comfortable with that, given the current impact of supply chain challenges and the tough comparatives.

The end-October net debt position of £2.8m is a lot better than my year-end forecast of £5.7m. Last year, net debt improved by £0.3m from October to December so, assuming this year is similar, it looks like my current forecast is too pessimistic. However, the variance of £2.9m is small compared against current assets/liabilities that will be around the £90m mark at year-end, and could easily just reflect "noise" in working capital movements.

Overall, I'm comfortable that my current forecast is broadly consistent with this update, albeit with a slightly prudent bias. Hence, I am not updating my model. Due to an increase in the market median forecast PE ratio since August, however, my valuation of Macfarlane (LON:MACF) has improved to 231.5p.

Thus, Stockopedia's "neglected firms screen" appears to be working well. I would endorse your suggestion that it may not be too late to get in here; I'm certainly anticipating further excellent returns.

More information here, for those that are interested.

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

FREng

Does the profit warning from Studio Retail (LON:STU) suggest trouble ahead for N Brown (LON:BWNG)?

pinstripe

Agree, this is a huge sale Cake Box Holdings (LON:CBOX) - no interest from me now - the shares won't go higher unless there is another significant catalyst

Snazzytime

re Cake Box Holdings (LON:CBOX)

My view - that sounds fine. The explanation given sounds reasonable - founders want to partially sell, to diversify so that all their eggs are not in one basket.

They don't have any eggs to put in their basket - it's an Eggfree Cake Box :)

Snazzy

nathantrader

£DX were on my research list, thankfully I did no purchase any, about the only thing I got right i the last few months.

sharw

It was, in fact, none other than Stephen English who chose Dx (group) (LON:DX.) as his share for 2021 (but note the prediction of embarrassment!) :

laurie

Dx (group) (LON:DX.) RNS 15.51

Director Share Purchases

On 25 November 2021 Lloyd Dunn, Chief Executive Officer, purchased a total of 529,801 ordinary shares of 1 penny each ("Ordinary Shares") at an average price of 18.18 p

Paul Ibbetson, Managing Director DX Freight, purchased a total of 109,970 Ordinary Shares at an average price of 18.18 p

disclosure: no position

willhampson

I just don't understand how they were allowed to purchase stock where they have information that they haven't disclosed to the market (i.e. they know what the issue under investigation is - and its severity - and we shareholders do not). Of course, I'm sure the NOMAD cleared it before the purchase, but this seems crazy to me. Confused holder. £DX.

MrContrarian

It's not right that Dx (group) (LON:DX.) directors can trade when they almost certainly have more insight into the accounts problem than we do.

davidjhill

Dx (group) (LON:DX.) yeah - not sure how I feel about that !! On the one hand great that they are trying to back up their confidence in current trading with share purchases so as to assuage investors it's not going to zero............ BUT..............

the issued statement this morning didn't clarify anything for shareholders around the issue hence the big reaction. If management have more information on the issue than investors and it proves to be innocuous (I have no idea either way) and the share price recovers quickly, they gain a lot whereas shareholders selling on uncertainty have lost out.........hmmmmm.

colin1862

Paul, when you are on % shareholding Stocko page left click and drag to right and % holding appears on right

Outrageous for DX directors to trash the price with such a vague RNS and then buy in the resultant market, when they know the detail of the issue behind the RNS.

A good clue that things are overdone, however - I picked up 300k just before the close!

gus 1065

Today’s Dx (group) (LON:DX.) Director purchases remind me of student ruse at Uni. Walk into the college bar and shout that there’s a fight going on outside. Wait till everyone rushes outside to watch and then calmly minesweep all of the unfinished drinks on the tables. That wasn’t especially good “corporate governance” either but it worked a treat (apparently - not one I tried, honest).

These director purchases show an appalling lack of judgement on their part, even if it wasn’t insider dealing/illegal. Not hard to see why the Independent Directors on the Audit & Risk Committee might be having a few issues with the Executive Management if this is typical of their behaviour.

Gus.

Tuffty

I contacted the Company Secretary and they confirmed to me that the directors purchasing the stock know no more than the information released to the market this morning.

Wilbraham

''Unfortunately, the explanatory note on this Stockopedia page takes up so much width, that it compresses the columns to the left so that I cannot see the most important one! (% shareholdings). Hopefully the IT team can do a quick fix on this simple problem, by making the columns wider, or just getting rid of the explanatory note which obliterates the actual data? I’ve been moaning about this for a long time, so it would be good to get it fixed.''

I so agree! The RH column seems such a pointless waste of space. Eg in a typical SCVR daily report all it has is a mugshot, summary detail on just one of perhaps 5+ stocks being discussed and links to the other 4 or 5 stocks. This really adds nothing of value but means the meat of the report is on my good quality Huawei laptop compressed into just 7'' width. Not too painful on typical SCVR but really annoying on some other threads where people post intricate charts/tables that I often have to open in a separate tab to read the detail of the axes, labels etc (OK I know I can easily magnify with a touchscreen, but not everyone enjoys this facility).

BClegg

I agree with you. To me it makes no sense to display two panes side by side when the main pane is many pges long, and the other one very short. You soon scroll past the end of the text in the RHS pane and then have to put up with reading the main article restricted in width while the RHS pane - now just grey, occupies the rest of the available screen width. It would be fine if the smaller pane were put above the main article so you could quickly scroll past it and then be able to read both at full screen width. I raised a green blob about this a few weeks ago and was told it would be passed to the technical team.

Albertos

If you believe that you'll believe anything - at the very least they'll know what its about - which no one else does!

Rusty2

I agree it takes up too much width. Maybe there should be an option to turn off this feature?

Also it does not always have the correct stock, as the Boohoo (LON:BOO) general discussion post has Anglo Asian Mining (LON:AAZ) as the default stock.

mojomogoz

26th Nov '21

Yeah. Company speaking bs here. Plus you don’t just buy on a 40% down day as CEO without having an eye on what’s happened. I think we find out how much AIM is regulated for investors here…

Small Cap Value Report (Thu 25 Nov 2021) - ALT, IQE, MUL, CBOX, LTHM, MACF, AOM

Paul’s Section:

Altitude (LON:ALT)

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Paul Scott

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