Small Cap Value Report (Thu 28 Jan 2021) - PCIP, JOUL

28th Jan '21 by Paul Scott

104 comments 11337 reads

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

Timing - I have to finish by about 2pm today. Update at 13:33 - sorry I'm completely bogged down in JOUL (I hold) results, so that (big!) section should be up by 2pm. Please bear with me.
Update at 14:35 - I spent absolutely ages on JOUL, so haven't got round to the other stuff, and have to go out now for an appointment. I'll catch up this evening, to go into tomorrow's report first thing. Apologies for any inconvenience. Hence, today's report is now finished.

Agenda - The first 3 companies I'll be looking at are all things that I either hold, or am considering buying, namely -

Pci- Pal (LON:PCIP) (I hold) - Trading update for 6m to 31 Dec 2020 - (done)

Joules (LON:JOUL) (I hold) - CFO leaving, and interim results 26 wks to 29 Nov 2020 - "Accelerating digital sales support delivery of profits ahead of expectations for the Period". At first glance this looks good. The key point is that Joules is more than recouping lost physical sales with online growth. That's very important, and not something I've seen with other similar companies. It mentions higher costs of export to the EU, something we've recently been discussing here. - (done)

De La Rue (LON:DLAR) - Trading Update - FY 03/2021 to date - guides ahead of expectations £36-37m adj op pr, vs £34m mkt exps) (to do)

Other things on my to do list, which I may or may not get round to covering, dependent on time, are these: BLV, ACSO, TRB, MMTO, Fonix, EMR - so please don't request them, as I'm already aware. Update - sorry these are going to have to wait until tomorrow.

As usual, I welcome readers giving your own opinions on companies reporting, in the comments, if backed up by facts & figures. Some of you know your companies inside-out, if so, do contribute your views here, it's a team sport after all.

Pci- Pal (LON:PCIP)

(I hold)

61p (up 4% at 09:05) - mkt cap £36m

Trading Update

PCI-PAL PLC (AIM: PCIP), the global cloud provider of secure payment solutions for business communications, announces a trading update for the six months to 31 December 2020.

This is niche software, which integrates into…

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OsullivanB

28th Jan '21

Thank you, Phillip.

Thank you, Gromley.

Lloyd Garvey

Just an observation on £JOUL (Joules) . I live on the West Coast of Wales. We have mostly independent shops here (shock horror) that cater for tourists during the summer. Up till a couple of years ago the go to clothes brands they stocked were SuperDry and Ted Baker. This changed in 2019 (so before the pandemic) when these seemed to go an Joules appeared.

judywil

Shame I couldn't give this one hundred upvotes!

I find it very amusing how little people understand why Tesla is so highly valued. Lots of people did this with Amazon too, when they didn't understand what Jeff Bezos was doing and were all 'well anyone can set up a website and run a shop can't they?' My day job is technology investment and it's really, really complicated. Even people who know technology and are experts in a field often struggle to say whether something is groundbreaking or not. But if you listen carefully you might understand why. Someone on this thread once said something about 'anyone can build an electric battery for a car' and it really made me laugh. No, they can't. They might be able to copy Tesla in time, MAYBE. The thing about Tesla is it's energy management system that manages the battery and that's software and probably a lot of other things that I don't understand and others don't too. It's going to take a long time for other companies to get even remotely close...and god knows where Tesla will be by then.

gtrdave

Cash shell Ridgecrest (LON:RDGC) (formerly Nakama Group) has been suspended today "as a result of the deterioration in settlement performance". As Ridgecrest recently announced a placing of new shares due to be issued at 0.6p, and the SP has risen to many times that in recent trading, I expect that a Market Maker, or one of the instis earmarked to receive the new stock, has been selling the stock short, either hoping they can settle when the new stock is issued, or that the stock would quickly fall back to nearer the forthcoming placing price.

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

This could end up being another Room Service fiasco, which some of you may remember involved Evolution Group selling short more than twice the entire issued share capital of the company, in anticipation of making a killing when heavily discounted new stock was due to be issued after a shareholder vote. Unfortunately for Evolution, shareholders voted against the new stock issue, leaving them with a rather large problem.

https://www.fca.org.uk/publica...

MiserableJacktPotato

Tesla don’t make the battery. They buy them. They buy the same batteries as everyone else. See the recent news reports of Germans being extremely unhappy with the range of their Made In China Model 3s.

VW are already eating Tesla’s lunch, any market where the Model 3 and ID.3 go head to head the ID.3 is winning, as Deiss mocked Musk for in a tweet recently.

Real world tests by independents have stated the Mach-E goes further than the equivalent Model Y.

Ditto the Taycan versus the Model S. Porsche have just announced a “cheap” Taycan to directly compete with the Model S.

Tesla’s results last night were shambolic. Missed earnings, stretched creditors, huge accounts receivable, a load of costs stuffed in “other”.

Yeah, years ahead.

Mark B

Hell yes, that would time to pick up a bargain!

Yes, it won’t give me a margin for Tesla.

Even FTSE 100 spreads are sporadic, occasionally it will work, often it won’t.

Kouremenous

Hi,

TV is just one application, their mobile carrier billing system can used for multiple mediums - web, tv, gaming..

GrahamF

Chris

A bit harsh.

From what I’m reading in the RNS from IQ-AI (LON:IQAI) they think they’ve achieved a breakthrough in producing brain scan images without using contrast agent.

Graham

danjamesbaker

Sky News have just said that Boohoo (LON:BOO) is in advanced talks to buy the Dorothy Perkins, Burton and Wallis brands for £25m and won’t retain any stores.

Sounds like a good bolt on brand for relatively cheap, especially a further push into men’s fashion with Burton.

Cisk

History is littered with first movers who no longer exist - I just apply logic: 1) Tesla was 1st to mkt with electric offerings that sold in any scale, 2) Demand and regulations dictate that electric car sales will increase, 3) The competition will catch up - because they know how to build cars - i.e. produce a vehicle in volume, reliably and turn a profit. Tesla does not know how to do this.

So I do not believe that Tesla will continue to dominate the sector - and if software or their charging network is their USP - both can be replicated.

So where will Tesla be? No-one knows but one guarantee is that they won’t have the market to themselves, and competitors will become faster & cheaper. Throw in the erratic behavior of the CEO and avoidance of jail time - yes people have gone to prison for far less - you have an interesting situation, one I’m just happy to watch from the sidelines.

timarr

History is littered with first movers who no longer exist

RE: $TSLA

Maybe so. But the first time judywil posted that she owned Tesla was December 25th (yes, really) 2019. Tesla's share price then was $63.95. It's now $845.71.

Where's fair value for Tesla now? No idea, but I wish I was so wrong.

It's important to remember that the competition has serious legacy drags on their business. The cost of winding down existing production - particularly diesel for the German car manufacturers - is a serious inhibitor of future growth.

Don't misunderstand me, I think Tesla's current share price is insane. But I thought that on December 25th 2019, in between basting the turkey.

turbo

Thanks to greyster and Kouremenous for bringing Fonix Mobile (Fonix Mobile (LON:FNX)) to readers attention. Having never heard of this company, I have been doing some reading up and have come round to the view that Fonix Mobile (LON:FNX) is a decent and uncomplicated proposition which offers good value and potential for the investor. So I have taken a position for the medium to longer term in a bid to diversify my portfolio. Looking at the Fonix team, I was particularly struck how young they are, the client services manager must be about 15 years old!

Tortoise investor

For £BLV Finncap upgraded broker expectations for FY20 that's now closed to 16.2p (was 15.2p). So this share is trading 11x p/e despite seeing off a pandemic and the lettings fees ban and yielding 4.3%. The share price looks a bit mean and didn't go anywhere on a day the markets went down. A p/e of 13-14x feels fairer value to me. Financial services are providing some additional growth and Belvoir (LON:BLV) has tended to make some decent acquisitions. It's also a company that's had 24 years uninterrupted profit growth.

It won't multi-bag but this has been one of my best little steady 20%+ a year earners in my portfolio for a number of years now.

Dojosan

Iq-ai (LON:IQAI) is one of those stocks that traders and rampers have jumped onto it seems. I am late to it and just bought a small position given that the price appears to be somewhat of a support level price .

I was put off with the company when it made a huge jump on Nov 3rd - when a "licensed" product which they have rights to sell obtained FDA clearance and the BB's were going ape stating "wow ...ooo THEIR product has FDA clearance etc". I was left extremely perplexed - the IP does not belong to them. Seems the rampers have left this stock now

Anyways - two key factors that make them legit (decided to jump in after some initial research and will do in-depth later:

- They have spent circa $20mn in the P and L - so likely on R and D,

- they have partnerships with some big US hospitals who are trialling out their products.

- Prima facie - their products appear to be legit and state of the art.

- A small shareholding by the Mayo Clinic Endowment Fund - surely some DD was done by the former -

AI in biotech is a hot theme e.g. Renalytix Ai (LON:RENX) (I hold) , don't like their cash position and Covid is impacting on them. Overall, let's see how this pans out.

And got to hand it to the CEO for his Wow comments - yay!

I don’t understand the point about costs of winding down production. Cars / engines manufacturing plants get repurposed every few years. It’s nothing new for companies that have actual product development lifecycles, rather than ones who put a square steering wheel in car (Austin Allegro anyone?) and make out it’s something amazing.

29th Jan '21

I don’t understand the point about costs of winding down production

Well, there's plenty of research out there about the challenges facing car makers of winding down production of ICEs while also ramping up those of EVs, if you're interested. They can't just switch because the former are far more profitable and they need the cashflow to fund development of the latter.

The economics of ICEs v EVs is fascinating too, The main cost in the latter is the battery, which existing car makers don't control while EV manufacturing is a significantly different process, with far less parts to make, or things to break. That feeds into the post production process, potentially impacting the franchise model and the concept of after sales - which is more like a software update than a traditional service. Add in a lot of unneeded workers, their redundancy costs and pension liabilities and it's a real challenge to manage the transition.

Under the bonnet this leads to the question as to what extent ICEs and EVs are really the same type of thing. And from that you have to ask to what extent ICE manufacturing and EV manufacturing are the same sort of process. And, hence, to what extent legacy car makers have any kind of competitive advantage over the upstart EV makers.

It's all very interesting, if you like that sort of thing,

hayashi22

That rather reminded me of the period when the Labour government led by G. Brown was promoting diesel cars and everyone was buying them. The argument was that they had a better environmental footprint. Oh dear. What a clown he was.

Small Cap Value Report (Thu 28 Jan 2021) - PCIP, JOUL

Pci- Pal (LON:PCIP)

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Paul Scott

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