Small Cap Value Report (Thu 3 June 2021) - FOXT, MBH, NRR

3rd Jun '21 by Paul Scott

44 comments 8591 reads

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

Apologies for the self-promotion, but here's my latest chat with Tamzin at PIWorld, which was great fun! I've asked that the next interview be me interviewing Tamzin, to mix things up a bit!

Timing - should be finished by about 1pm today.

Agenda - all written by Paul today, as it's quiet for news, and Jack has other stuff to do -

Foxtons (LON:FOXT) - trading update - ahead of 2019 & 2020, but doesn't tell us if ahead of expectations or not. Holding an online Capital Markets Day (CMD) today from 14:00-16:00, not clear if private investors can attend or not, I'm trying to find out. Overall I'm neutral, as it looks expensive on current broker forecasts (but maybe those will rise in future?)

Michelmersh Brick Holdings (LON:MBH) a positive trading update, but only in line. Is it limbering up to a forecast raise later this year, perhaps? This share looks quite good - decent quality scores, and seemingly positive market conditions in its sector - rising selling prices could trigger an operationally geared rise in profits?

Newriver Reit (LON:NRR) - a quick look at this interesting value retail property REIT. Resilient performance, but maybe fairly priced now, after doubling in the last 6 months?

Foxtons (LON:FOXT)

61p (pre market open) - mkt cap £199m

Trading Update (& Capital Markets Day)

Foxtons Group plc (LSE: FOXT), London's leading estate agency, will today hold a virtual Capital Markets Day for institutional investors and analysts.

This event is from 14:00 to 16:00 today. Why aren’t private investors also invited? These events should be open to all investors, not just institutions. We often ask better questions than the institutions, I’m told, by many companies that I do speak to.

Let’s hope Foxtons at least publishes the slide deck of the CMD on its investor relations website, or better still publishes a video of the CMD. Everyone should have access to the same information, anything less is unacceptable.

I’ve emailed investor relations to confirm if PIs can, or cannot attend the online CMD today, will report back here if I get any response.

UPDATE at 08:41 - I take it all back! Just had a reply from IR at Foxtons…

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Tortoise investor

3rd Jun '21

Feels like the turnaround at Braemar Shipping Services (LON:BMS) is starting to show results. Debt coming down, order book up, dividend resumed. Finncap note this morning puts them on 24.1p adjusted EPS for current financial year and 26.7p EPS for 2023. Share trades at c.250p this morning. This is a sector I don't know much about but I bought much lower when the value opportunity looked good. If you get time Paul I'd welcome your thoughts but totally understand if it's a sector you're not very familiar with either!

ForAFewDollarsMore

Hi Paul,

I have been a Stockopedia subscriber for a couple of months now and this is my first post. The various blog articles were not my main reason for subscribing at all but I have found them very useful.

In particular I am reading your report most days (too much for me sometimes when I'm at work!) and learning much. It was very interesting to see you on PI World which has reinforced my confidence in your research, it is always nice to put a face to a name.

Thank you for your continued efforts and now off to research RBG and SOS which caught my attention today!

welwichia

Hello - they showed up in my HL account yesterday I think. This is definitely within an ISA, so no restrictions that I am aware of there.

Trevor Sherling

Paul,

Very many thanks for your views and wisdom, always much appreciated.

garbetklb

I was quite interested in Cyanconnode Holdings (LON:CYAN) a few years ago - seem to recall that, in addition to Paul's comments, one thing that put me off was management remuneration. It may have changed, or my memory may be playing tricks.....

MichaelFBS

In case people are interested Lord Lee has a column published today in the FT;

https://www.ft.com/content/059...

He has had some excellent returns and invests in some great companies such as Treatt (LON:TET) which I think I need to get back into at some point.

Some of the comments are extraordinary (such as pass me the sick bucket) when you consider he is one of the most successful PI’s of our time.

rogerh

HI, I have them in my II ISA. The ones that came earlier as an in specie dividend from EKF won't be active for a while yet as they are subject to a lock-in.

mammyoko

eg INTU went bust - so did (different sector) ENTU actually. So if you spot companies called ANTU, ONTO, or UNTO, we should probably steer well clear!

Love it! Classic Paul comment and a major part of the reason we all come here.

Harry Hindsight

Braemar Shipping Services (LON:BMS) looks like the famous 'cup and handle', well at least cup and jaggy bit. Star Bulk Carriers in US was good but whole US exposure in the dumps at present. Don't know about V shaped recoveries more realignment to sensible values.

Silver Moon

I watched this PI World video, and thank you Paul for your input. A question I would have asked just to sum up, were I Tamzin would be to ask if the companies spoken about are on a crest that makes additional investment unworthy of the PI's interest. I feel that there are many up-and-coming prospects out there that a little bit of research could find.

Rusty2

My Trellus Health (LON:TRLS) are within an ISA, so Stockopedia is not correct. I have found it to be fairly unreliable for this info. but may depend which platform you are using.

Somero Enterprises Inc (LON:SOM) - the SP has 'levelled' out which means could be a long wait. Pun intended. Specialist subcontractors are expensive and not the type of thing used by housebuilders (I guess) so pumped on warehouse demand which need billiard table floors and quick build time. Expensive to get a good level floor which will last and not need downtime in remediation/repairs esp if using robots - so has a moat - maybe for the ISA/SIPP.

Materials costs are rising in the building industry, particularly insulation. Lots of roof tiles I think come from France for their unusual styles (so Housebuilders can make them look more unique/bespoke) but if supply constraints due to politics (or France being er France) gets in the way of supply/demand then maybe a fillip for our homegrown like Michelmersh Brick Holdings (LON:MBH) who produce more bespoke stuff. Need to study who else out there as most materials I think are EU based. Concrete mentioned somewhere - but this is surely Portland a part of the UK? Sigmaroc (LON:SRC) gets mentioned regularly so will have a look.

Mr Thompson likes Sigmaroc (LON:SRC) - wondered where I'd heard of it. 100p resistance methinks.

Boon

On Michelmersh Brick Holdings (LON:MBH) it is not just the direct impacts of inflation and rising input costs and shortage.

But also if construction as a whole starts to slow down due to the shortage of other parts. Presumably to build a building you need to have all the materials (bricks, cement, mortar, timber, copper pipes, etc) all ready and delivered. Otherwise it is inefficient to stop-start a project continuously?

Building works these days are done very much in the same Toyota "just in time" production, where supplies are timed to arrived as they need. If you mess up the delivery schedule, then works slow down.

If works slow down, then brick demand is lower given a certain time period. Of course, over time those delayed orders are fulfilled - don't think projects are being cancelled. But there's a risk of missing earnings for the upcoming half year, and full year, that will be deferred to future years.

davidjhill

hi Paul

Hope you're well and thanks for continued coverage as always.

Newriver Reit (LON:NRR) couple of things worth mentioning (I hold having bought around 65p).

1) The price falls that led to the NAV decline are mentioned in the outlook as having resumed growth since y/e, so whilst you might be correct that NAV could fall further that suggests to me it is actually going back up again or maybe flat.

2) Dividends are expected to rise to 9.8p this year and 12p year after. Thus doesn't look like a bad income share to me on 10-12% yield.

The uncertainty is the potential sale of the pub business Hawthorn. That will change the dynamics considerably. I'm still slightly bemused as to why they've changed tack on it having spent a lot of time telling investors how good a potential business it is.....hmm. I'd like more colour on that

cheers

David

KevinS1

Thanks BSV - very interesting and worth looking at further. I have juggled between the three of them in the past and could probably do with spending a few hours going over the numbers again.

Bouden54

I suspect they have to sell the pubs to get LTV down - currently around 50% which is too high. If they can sell the pubs at book value that will get LTV down to around 33%.

Interestingly around 20% of portfolio consists of assets earmarked for regeneration (eg converting to residential) and they think the alternative use value for these assets is around 50% higher than book value. If you add the regeneration assets to the pubs (25% of portfolio) and retail parks (16%), then around 60% of portfolio is in reasonably attractive assets. The question is how much of a discount do you apply to the c40% in traditional shopping centres?

Paul Scott

Well I research 500-600 companies on a daily basis, so by all means share your ideas here if you think there are better ones out there. I'd love to hear about them, if I've missed them.

You asked:

A question I would have asked just to sum up, were I Tamzin would be to ask if the companies spoken about are on a crest that makes additional investment unworthy of the PI's interest.

Fairly obviously, I wouldn't have mentioned any of the stocks if I thought that was the case!

Patrickmylnetrade

4th Jun '21

Thank you both. very valuable . Looking forward to the role reversal interview :p

Small Cap Value Report (Thu 3 June 2021) - FOXT, MBH, NRR

Foxtons (LON:FOXT)

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Paul Scott

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