Small Cap Value Report (Thu 4 Feb 2021) - IDP, EVE, IGP, VLG, VTU

4th Feb '21 by Paul Scott

111 comments 13884 reads

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

Timing - today's report is now finished.

Agenda -

Innovaderma (LON:IDP) - bid approach by Creightons (LON:CRL)

Eve Sleep (LON:EVE) - trading update - still has plenty of cash, and losses reduced.

Intercede (LON:IGP) (I hold) - convertible loan notes dealt with - mostly converting into new equity.

Venture Life (LON:VLG) - Trading Update (from Monday this week)

Holiday bookings

I’m definitely getting old, because each passing week seems to fly by in a blur. Maybe it’s because every day is virtually identical at the moment? Get up, analyse shares, have a nap after lunch. Get up again, watch TV, listen to audiobooks/podcasts, go for a walk if it’s not tipping it down, analyse some more shares, go to bed. That’s it at the moment. At least I’m not having to home-school unruly/bored children, whilst trying to work from home, so I count my blessings in that way.

Something had to give, so I booked myself flights to spend 5 weeks in Malta in Sept/Oct, The cost was below £200, and it gives me something to look forward to. I’ll take the laptop and carry on writing the SCVRs here as before.

I wonder if other people are having similar thoughts? If any of you spot forward bookings information from travel companies, do post a comment here, as I’d be interested to find out if other people are booking up overseas trips like me, or are reluctant to do so due to the uncertainty, like some of my family for example. Opinions seem to be mixed.

Covid comments

Most people respect this, but please could those who don’t, take on board this gentle reminder - we’re discussing investment/markets/economics here. We’re not interested in anyone’s views on the pandemic more generally, or which politicians have been clever or stupid, etc. We need to keep focused on how covid is likely to affect the markets. Not the wider issue. Let’s try to keep the focus. There are plenty of other places on the ‘net for a wider discussion/rant.

I’m exercising restraint myself - there are plenty of things I’d like to say about the EU right now, but am keeping my personal opinions to myself, because…

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Paul Scott

4th Feb '21

You don't have to disclose your personal addresses on Companies House forms. If you put down a business address instead, nothing happens. Nobody checks.

Gostevie

Hi Paul,

That is a great list of proposals for Lord Hill's review. My top two priorities from your list would be:

The ridiculous nominee system which disenfranchises smaller shareholders, removing proper shareholder oversight
Dis-application of pre-emption rights becoming routine when it should be an exception

Thank you as always for the excellent SCVRs.

Steve

I agree Michael. It's a bit easier for me, because writing the SCVRs means that companies & their advisers are often quite keen to speak to me, create a positive impression, and answer any queries I have.

Whenever I speak to companies, I urge them all to engage with InvestorMeetCompany or PIWorld, to do results webinars for private investors, as part of their results roadshow. Quite a few have followed up on that, and been happy with it. Companies that have done so, tell me that they found it useful, and enjoyable to engage with private investors. The questions submitted are always really impressive too, just as smart as the questions from institutions!

I think places like advfn's bulletin boards do immense harm. Company Directors read them, and get the impression that private shareholders are deranged muppets! Hence sometimes they are not keen to engage, having read the often malicious claptrap posted on those bulletin boards.

IMC and PIWorld (and others) give a much better impression, and once companies are engaged with their PIs, they seem to want to develop that communications route. Hence when any of you talk to company Directors, then I urge you to encourage them to engage with us more & tell them how useful it is.

There's no reason why PIs couldn't join in analyst calls, maybe in listen-only mode if they want to prioritise questions from research analysts who want numbers to plug into their forecasting spreadsheets.

Or hold a separate investor event. Plenty of companies are now holding results calls which anyone can dial into, which is best practice I think. Advisers who stand in the way of this process are not helping anyone, and should be ditched in favour of advisers who get the company out there in front of as many investors as possible! The message is slowly spreading I think, so things are moving in the right direction.

Best wishes, Paul.

Hi FREng,

I seem to remember that Paul said he would be unbearable when his position on French Connection (LON:FCCN) was proved right!

I'm not saying anything, as I don't want to jinx things! But, yes I will be! ;-)

Harry Hindsight

Venture Life (LON:VLG) : announce a miracle covid killing mouthwash one day and the next dilute shareholders - burn't and wary. Good toothpaste though.

Big Dog

J Sainsbury (LON:SBRY) : remember they have Argos and a bank. Also feel happier in their larger less crowded stores - a dichotomy there.

Phuntt

I agree Paul - sorry for that. I would say you pointed me towards looking at it seriously and gave me confidence I wasn’t crazy when I liked it.

Funny enough, you prompted me to have a look back through your comments on French Connection (LON:FCCN) in the SCVR. They were actually much less positive than I had remembered which was interesting. Can’t quite remember now why I chose to add again in September other than it was cheap....

davidjhill

Thanks Paul - I am indeed honoured :)

Boon

Don't forget to check r/wallstreetbets on Reddit if you're looking for causes of mysterious share price jumps! :)

Hi David,

I was pondering the same issue re Intercede (LON:IGP) (I hold) new shares - i.e. whether holders who convert their loans would be tempted to flip the new shares for an instant profit.

I've made some enquiries, and whilst nobody can know for sure, it isn't expected to be a problem. Some of the loan note holders are existing long-term shareholders (e.g. the NED who has converted his, and now holds a whisker under the 30% maximum). So they're expected to remain long-term committed holders.

Apparently there's growing institutional interest in Intercede (LON:IGP) because it's moved into profit, the balance sheet is sorted out, and the prospects look good. Therefore if anyone did want to sell a block of shares, it would probably get snapped up by an institution, rather than being dribbled out piecemeal into the market.

Put that all together, and I think there's probably not a problem with any overhang of shares.

If you do want to sell a big block of shares in something illiquid, you don't hit the market bid, you just ring up the house broker and get them to find a buyer. That way the block changes hands, without affecting the market share price at all. They often have a list of potential buyers who want shares, but are not interested in buying piecemeal in the market.

Overall, I think the share price of IGP is currently about right. The company needs to demonstrate accelerated top line growth to power it higher. I've held since 2018, and am happy with progress so far, so intend holding for the foreseeable future.

Regards, Paul.

If Frasers / Mike Ashley were going to make a takeover bid, the smarter thing to do is hoover up shares at the 10p price until they get to 29.9%, and then make a bid. That way, only paying a premium on as few shares as possible.

Could be just retail investors all jumping in when they saw 10%, 15%, and additional volume. If you look at a swath of small cap shares at the moment, 5% to 10% share price movements seem to be the norm over the last few days. Just too much bored money in shares that don't have deep liquidity.

Agree, dahoko. The share sale only registered with me because it was so random. Why would Frasers want to sell 1%/ £100k of shares in a company that they own a blocking share of? The money isn’t material and if the objective is to start divesting surely they would have sold a larger amount before having to report to the market.
I know the bid limit is 30% so it made me wonder if there was another relevance to being below 25% I wasn’t aware of? Then I thought maybe someone else was being enticed to bid. Then I wasted half an hour looking at company takeover law. Then I got back to work in my day job. Then I dismissed the whole thing because I was just randomly speculating at this point.
Then the shares went a little bananas this week with no credible reason (even a rumor) I can see. My guess is that someone (not Frasers) is accumulating a stake for a bid. But expect to find out more tomorrow/ next week from either company RNS/ rumour mill/ declaration of sizeable stake.

Clissoldkid

This has been a small holding for me since Paul recommended last year but I’ve added to it on dips etc. and lovely to see a +106% beside it right now.

It should perhaps be remembered amongst all this euphoria that the shares were trading at around 60p just a couple of years ago, so for longer term holders they have been a disaster.

portugull

5th Feb '21

Apologies maxistaxis I was replying to the post by Simon7061 which he posted at 2.27pm re Hummingbird Resources.

Roger Baron

Intrigued to know why my question got thumbs down? Eco Animal Health (LON:EAH) released final results and half year and has jumped up 40%. Would have thought that was worth a comment seeing he discussed it here last June.

UK_Investor_8888

"You don't have to disclose your personal addresses on Companies House forms. If you put down a business address instead, nothing happens. Nobody checks."

For investing, Limited companies, and I think that includes investment clubs, have to use this bullshit "Legal Identifier" LEI code.

When they first came out with this, we had to pay about £100 in fees to get this number.

Mercifully, they have not expired the number, so so far it has been a one off tax and inconvenience.

Caper4

Perhaps the way you worded your question? Always good to put a please or I would appreciate?

simoan

post deleted

Gromley

More likely (than Caper's answer) I suspect is that you did not offer a personal interpretation or insight into why ECO Animal Health (LON:EAH) might be worth looking at.

It's a subject that I don't want to poke to much for fear of disturbing wasps, but :

Your post could be read as "As I paid for this service, I would like to ask if this view could be provided".
Whereas I suspect the downvotes came from those that believe that "this is a community - you only get to take out if you also put in"

To be honest I no longer know where I even stand on this 'issue', except that I don't think I care and just accept that some people are going to find upset for the sake of it and my sanity is probably enhanced by avoiding such people and environments.

Small Cap Value Report (Thu 4 Feb 2021) - IDP, EVE, IGP, VLG, VTU

Holiday bookings

Covid comments

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Paul Scott

111 comments

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