Small Cap Value Report (Thu 27 May 2021) - AUG, BLV, FIF, XLM, CAY

27th May '21 by Paul Scott

69 comments 10392 reads

Good morning, it's Paul & Roland here, with the SCVR for Thursday.

In case you missed it, I added new sections on Gym (LON:GYM) and De La Rue (LON:DLAR) yesterday afternoon, so here's the link to yesterday's completed report.

Timing - today's report is now finished.
I've got some spare time, so am going to write up my top 10 personal portfolio holdings, and the rationale behind each one. You'll be familiar with all the names, as I gush about them here! I'll post a link here to my top 10 holdings report once it's done later today. OK, here it is!
Link to my top 10 holdings as of today.

Agenda -

Paul's Section:

Augean (LON:AUG) (I hold) - Morgan Stanley says it is considering a possible offer for this recycling company.

Belvoir (LON:BLV) (I hold) - another strong trading update from this estate agents franchise business. Broker forecast increased considerably. Still looks good value, even after doubling n price in the last year. How much of the trading out-performance is temporary though, due to stimulus from Stamp Duty holiday?

Finsbury Food (LON:FIF) (I hold) - positive trading update yesterday, but lack of broker research hampers me from digging any deeper. Looks good value still.

Roland's Section:

Xlmedia (LON:XLM) - a disappointing trading update from this online publisher, warning of a continued decline in the Casino business. Revenue guidance has been reinstated, but the market doesn’t seem impressed.

Charles Stanley (LON:CAY) - this venerable wealth management firm has a bulletproof balance sheet. Today’s results look reassuring to me, although the company’s exposure to interest rates means profits suffered last year.

Paul’s section

Augean (LON:AUG)

(I hold)

248p - mkt cap £248p

Statement re Possible Offer

This statement has been issued by Morgan Stanley Infrastructure Inc. -

Response to press speculation regarding Augean plc ("Augean")

Morgan Stanley Infrastructure Inc. ("MSI") notes the recent press speculation regarding a possible transaction involving Augean and confirms that it is in the preliminary stages of considering making an approach to Augean regarding a possible offer for the entire issued and to be issued share capital of Augean.

There can be no certainty that an…

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timarr

27th May '21

I hope Aviva don't do a bloody Tesco (LON:TSCO) when they dish out this cash!

Indeed.

Very off topic for the SCVR but Aviva (LON:AV.) have raised over £8.5 billion through disposals since the new CEO took over last summer, when the market cap was £11 billion. The market cap now is nearly £16 billion and the company has paid out £1 billion in dividends in the intervening period.

Historically it's been a rubbish company but value still outs, if the catalyst is right.

gus 1065

Hi Ken.

Good idea about setting up a separate thread for Investment Trusts. Have done so just now .....

Gus.

rmillaree

Aviva (LON:AV.)
I am certainly sitting patiently in the forlone hope that there is some decent soon to be unlocked super value here that will manifest itself in the next 6 moths. The share price does not seem to want to move above the £4 level. I would say this is a low conviction holdimng of mine bought when shareprice was closer to 300p than the 400p it resides at now so the retun has been acceptable here even if below the general market returns.

Ref not doing what tesco did i am not sure what tesco did - their fresh and easy venture and dishonest reporting has left a bad taste in my mouth and i have noew fully ditched them.

Based on what i have seen from Aviva the last 6 months i think its reasonably certain that there will not be any huge vanity projects here that will consume the cash - unless they are directly related to main core business and have compelling value charaterstics - however i am wrong often enough to know taht my near certain is not soemthing that should be relied upon.

One thing i noticed with most recent update was that there didnt seem any massive chage ref solvency ratios etc - perhaps its way to soon with sales not completeing but i am not entirely comvinced all the proceeds will flow through as free excess cash as we would like or hope. I suspect if the "being done deals" were that good for shareholders the price would have uplifted - i am kinda hoping its just the natural "market hates uncretainty" that is te issue here and when the cash is all in the bank the following update will be the bingo moment - clickety duck and all that.

This comment has been moderated

mevans6890

Wow even a full time investor would struggle to properly monitor 135 positions. I have 22 and keeping an eye on sp, dividend payments news flow, reading annual reports, thinking about changes to pf etc is just about manageable.

LeopoldAlcocks

Thank you for the response Paul.

It's reassuring to know I'm not the only one with lots of very small positions from the last year!

Opportunities were everywhere, but so were the risks

With the turbulence of last year it has proven to be a wise decision

Thanks, Charlie

Kevin Holloway

I've trimmed my pf down to 40 stocks in my SIPP and 7 in my ISA (5 overlaps I think) but gradually trimming this down...

grb

Hi Donald

In terms of Anglo Asian Mining (LON:AAZ), the 49/51 sharing of profit doesn't come into effect until sunk costs have been fully recovered (and it's segregated by contract area). For their current main operation at Gedabek, according to the latest results there was still $36.9m in unrecovered costs at the end of last year - the threshold is due to be crossed in 2023. Hopefully by then some of the newer contract areas will have picked up. They're currently paying 12.75% royalty.

Leebod

Well as it happens I don't 'work' so I guess it is my full time job - albeit unpaid (at least for another couple of years anyway!). Either way 135 is still miles too many - actually if I take out the funds then its probably 100 - keeps me busy I suppose but definitely a problem caused by frantic pandemic trading.

Yeah sorry I didn't explain - when Tesco sold off Asia last year it equated to about 25% of the business of which I think 20% was returned to shareholders (maybe it was the full 25% I can't remember). Rather than giving a series of special dividends they instead paid the money in one go (thereby tax issues for those not covered by SIPP/ISA) and rebased the shares to account for what would have been the 20% drop so you ended up with less shares as the business was 20% smaller and in theory a share price that was unchanged but actually then carried on dropping anyway.

on_27

Hi Paul, which broker do you use out of interest? Any recommendations would be greatly appreciated. Thanks

Lion Tamer

Re: quoted price change on Revolution Bars (LON:RBG)

Yes I've previously noticed this sort of issue on the site, but it seems it is a symptom of the quoted prices being based on the last traded price (I think the last price I noticed for RBG yesterday, near the end of the day of the placing results, was about 23p but with a big spread it'd only take one opposite trade a bit later to change the closing price). Using last traded price impacts the change in quoted prices and other data on the site such as some folio data, options for alerts etc, especially when the spreads are wide. I raised it via the green contact button with a request for options to quote on bid pricing (although others will prefer mid or offer) and got this reply:

"The last trade price is the stock was last traded on - not one of bid or ask only. But I will add your suggestion in to allow alerts and changes to support last bid/ask, instead of just the last traded price.

Hopefully we will be able to support this in the future."

Laughton

"actually if I take out the funds then its probably 100"

Or you could say, those 35 funds mean you're holding many hundreds of stocks.

RE: Aviva (LON:AV.)

I would say this is a low conviction holdimng of mine bought when shareprice was closer to 300p than the 400p it resides at now so the return has been acceptable here even if below the general market returns.

As we're past the witching hour ...

I tend to baseline from the crash in March last year and it's doubled if you include dividends from that point. That's a pretty decent return for a large cap, low risk holding and has outperformed all the UK indexes.

Most of the sale proceeds are yet to arrive so solvency ratios will be more or less unchanged as yet. The disposals have been at higher levels than Aviva (LON:AV.) is trading at, too. The Polish sale, for instance, was at a 130% premium to Solvency II funds.

With solvency no longer an issue I expect Amanda Blanc to focus on costs and customer service. The capital returns as mentioned today will be "substantial", although I anticipate a buyback rather than a dividend as long as the price stays low.

In her own words:

“From this moment on, we must deliver. Nothing else will do. My focus is making sure it happens and at pace."

And, of course, she backed her own words with £1 million in stock at about £3 a share. So you're in good company.

timarr

Momoko Miyamoto

Isn't taking on too many positions a symptom of FOMO? Surely it's better to focus on fewer thoroughly researched high conviction bets and monitor them carefully.

Tortoise investor

Belvoir (LON:BLV) has been a fantastic long-term earner for me. It'll probably do more acquisitions this year too so I reckon the Finncap broker estimate will get beaten (the previous estimate made no sense anyway as seemed to imply falling revenue in FY21 which seemed unlikely to me, once you factored into calculations the recent acquisition). It's a classic 'value' share - lowish price/earnings ratio and nice dividend.

ridavies

28th May '21

Hi John Doe. Presumably you are talking about Belvoir (LON:BLV) and the market response. I have watched / listened to their presentation at Mello recently, and I have listened / watched Property Franchise (LON:TPFG) management on 2 or 3 separate occasions recently.

I found the latter a bit more sexy if that's an appropriate word. The latter team seem to be more active, more dynamic - a recent acquisition Hunters where the management clearly want to join the party (40% in shares at their request); a very recent deal with another company providing financial services; a senior named (by the CEO) senior management team with strong individuals not only managing their own patch but also bringing specific skills to the support the CEO at the centre - financial services, training, marketing; a fast growing element which they describe as out-disrupting the disrupters in terms of performance and profitability; and they also attracted the former MD Belvoir (LON:BLV) (I dont know the background to that of course).

I bought them both at the same time and Property Franchise (LON:TPFG) are ahead at the moment for me.

As far as market response is concerned, clearly they expect 2021 to be a very good year but after that........well Belvoir (LON:BLV) management put it out there.....they aren't sure for how long and how far the market growth will go, when certain government schemes stop. In the case of Property Franchise (LON:TPFG) no mention of it at all although it will be the same across the market. So perhaps that influenced the relatively muted market response.

UK_Investor_8888

"But its basic deal is that it splits its production 51/49 with the Azerbaijan stat"

If you are in business with a partner and you have a 50:50 (or near) split, they are as incentivised as you to make a business work.

They are getting the maximum return with your input.

When your partners only have minority interests in your success, that's where enthusiasm and self interest wanes. Give more to get more!

Boon

That's only if the partner is driven by economic interest...

When it comes to a state government, politics comes into play... and economically irrational behaviour can happen.

Funderstruck

31st May '21

£AUG Another victim, Paul, of a possible takeover having sold on 25th. thankfully only up + 20%. As you have written previously there may well be a lot more of these whilst prices are still reasonable, so caution called for when selling.

Small Cap Value Report (Thu 27 May 2021) - AUG, BLV, FIF, XLM, CAY

Paul’s section

Augean (LON:AUG)

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Paul Scott

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