Small Cap Value Report (Thu 7 Jan 2021) - GRG, WAND, GHT, AUTO, MAB, JOUL, MPAC, JDG

7th Jan '21 by Paul Scott

131 comments 12993 reads

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

Timing - Today's report is now finished.

Agenda -

Firstly, here are some brief comments on a few company news items from yesterday.

Greggs (LON:GRG) - trading update

Wandisco (LON:WAND) - more jam tomorrow!

Gresham Technologies (LON:GHT) - 2020 trading update

Auto Trader (LON:AUTO) - trading update - possible read across for small cap car dealer shares?

Mitchells & Butlers (LON:MAB) - exploring a fundraising & trading update

Joules (LON:JOUL) (I hold) - Xmas trading update

Mpac (LON:MPAC) (I hold) - 2020 year end trading update

Judges Scientific (LON:JDG) - 2020 year end trading update

Greggs (LON:GRG)

1920p (up 8% yesterday) - mkt cap £1.95bn

Q4 Trading Update

This is an update for FY 12/2020.

Greggs is a leading UK food-on-the-go retailer, with more than 2,000 retail outlets throughout the country

FY 12/2020 revenues down 31% to £811m
Year-end net cash of £37m
£100m 3-year bank facility available, so liquidity sounds OK
Repaid Govt CCFF loan - reinforcing that liquidity is OK
Modest full year loss of £15m - not bad considering the covid/lockdown chaos in 2020
Successfully developed takeaway & delivery alternatives (5.5% of store sales)
New sites accessed by cars “performing particularly well”
Q4 shop LFL sales were down 19% - to be expected given changing restrictions, and reduced number of people in city/town centres
820 staff redundancies
Plan to open 100 new stores in 2021, net of closures
Diary date - preliminary results due on 16 March 2021

Outlook - not great -

Looking ahead, the significant uncertainty over the duration of social restrictions, along with the impact of higher unemployment levels, makes it difficult to predict performance.
However, we do not expect that profits will return to pre-COVID levels until 2022 at the earliest.

Valuation - these figures look a lot better than the consensus broker forecasts shown on the StockReport, which is good.

Greggs made c.100p EPS in 2019, by the sounds of it we’re looking at possibly getting back to that level in 2022, so 2 years’ time. The share price is 19.2 times that target. That doesn’t strike me as very good value - recovery looks fully priced-in, so why would I want to buy now?

It’s a terrific business,…

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Dojosan

7th Jan '21

Provided we dont have to muck around with tweaking of vaccines for mutations which will lead to big delays in the economy opening up.

timarr

I'm guessing you have to deposit an actual bitcoin (if there is such a thing) with paypal.

Hi Gromley

I'd guess not, although I haven't looked at it. I doubt most of the people using this can afford a Bitcoin, but fractionalising this allows for lots of people to buy beneficial ownership of a part of one.

You can't deposit a Bitcoin on Paypal, Bitcoins live on the Bitcoin blockchain which is a ledger recording "ownership" (I use the term loosely, Bitcoin is anonymous by design, but you possess the keys that unlock the Bitcoin you own - don't lose them). Basically Bitcoins don't leave the Bitcoin ecosystem.

Hypothesising, Paypal will purchase a Bitcoin and then record ownership of it on the Paypal ledger. Bob now decides he wants to buy a tenth of a Bitcoin, Paypal calculates the value of a tenth of a Bitcoin and Bob pays them that value (presumably plus a transaction fee). Nine of Bob's mates do the same same. The Paypal Bitcoin ledger now identifies Bob & co as being the beneficial owners of the real Bitcoin.

Now Bob & co have proxy ownership of a tenth of a Bitcoin each which (presumably) they can then sell back to Paypal at whatever the prevailing price is (plus a transaction fee). The actual Bitcoin doesn't move.

If I own a Bitcoin I can exchange it with other people - usually selling it to someone else for cash who wants it more than me, rather than exchanging it for goods - and that transaction takes place on the Bitcoin blockchain. The Bitcoin blockchain records the transaction and the proof of work mechanism that underpins the blockchain ensures I can't sell the same Bitcoin to two people at the same time (although you'd be foolish to give me any cash or goods until the transaction is committed to the ledger).

If I own a fractional Bitcoin via Paypal I can't exchange it with other people other than via Paypal as a Paypal transaction (yawn, transaction fee) but I can use it to buy goods from other people on Paypal who accept fractional Bitcoin. Nothing moves on the Bitcoin blockchain - the actual "owner" of the Bitcoin remains Paypal.

Some of the detail here may be wrong, I haven't looked at it, but splitting ownership of Bitcoins up in this way makes them eminently accessible for people who couldn't afford to buy a whole one but is probably part of the reason for the recent bounce in Bitcoin as it's now accessible to people who previously couldn't afford to play.

timarr

Phuntt

Yeah true lol - I wrote that too fast with three kids shouting at me about their dinner - doh

Gromley

Thanks timarr,

Accepting that neither us are that directly interested, your understanding is most probably better than mine.

So from what you say it does look,to me, like paypal have effectively become an (unregulated?) bitcoin exchange.

All too scary for me!

Beg to differ on that - Just bought Augean (LON:AUG) at 197 - not bad value I thought , £EQLS still bargain, Personal Group (LON:PGH) - is rock bottom , Saga (LON:SAGA) still bargain , Rbg Holdings (LON:RBGP) - rock bottom , £POLX - price fall

Tommy H

A late post for IGotPoesJacket

I sold Solid State (LON:SOLI) today, so missed the peak but banked the profits.

I also sold Dx (group) (LON:DX.) to on the same vain

So on my Patented "Buy High, Sell Low, Buy Back Even Higher" strategy both these are total failures as I made a profit!!! That is a Big Yay as they were both a successful part of the recovery strategy for this year.

My selling was driven buy having been there several times this year with companies such as Begbies Traynor (LON:BEG) Ig Group (LON:IGG) and Premier Foods (LON:PFD) seeing them reach a high, thinking that I should "run the winners" and then seeing them return from a high to a lower value than my original purchase, this time I just pressed the button.

So Solid State (LON:SOLI) and Dx (group) (LON:DX.) will probably do what Volex (LON:VLX) did and storm onwards and upwards from when I sold, but I can sleep at night and hopefully not get anchored should I need to buy back in again.

Though sometimes I wonder if my selling should be seen as a clear buy signal?

Tommy

New York has granted Paypal a "Bitlicense". I've no idea what the scope of that is but I think we can be pretty sure Paypal won't do anything that puts them in the crosshairs of regulators.

It isn't really a Bitcoin exchange as I understand it but that's splitting hairs - it allows the same sort of thing.

The best analogy I can think of was the attempt to create a unit trust that fractionalised Berkshire Hathaway shares. The trust (say) owned 1 Berkshire Share itself but fractionalised it into 1,000 units each. So I could then buy 1/1000 th of a Berkshire Share and could trade those as units. The price of the units would vary with the price of the real share but as a unit holder I wouldn't have any of the benefits of being an actual shareholder.

That analogy would be even better if the exchange that real Berkshire shares were traded on and the exchange that the units were traded on were completely different.

(Buffett stopped this by unitising his own shares to create 'B' shares).

Very happy with my Paypal holding but absolutely no interest in cryptocurrencies.

mojomogoz

What is the geopolitical position of bitcoin. People may think gold is a nonsense but the most powerful financial institutions in the world 'covet' it (ie Central Banks).

Bitcoin is a grand nonsense...that is not to say it wont be worth something or even more than now. But it purely a game of tag...

https://mojomogoz.medium.com/b...

MichaelFBS

I wish I could filter out all posts that contain the word “bitcoin”. :-)

davidjhill

nice article mojo

transport_tycoon

Facebook Marketplace is quite a threat to any other marketplace: it charges no fees unless you run an ad, gets incredible reach and has stronger trust between buyers and sellers than any other platform.

Paul Scott

Fantastic additional info on Joules (LON:JOUL) - many thanks Richard! :-)

MiserableJacktPotato

You don’t get broke selling at a profit :)

WarrantStar

This might come across as incredibly smug / arrogant / know it all. I hope not but I will post my view anyway. The antidote to trading out of boredom and impatience and the resulting losses is to develop a strategy and then a process, keep following it and improving it. I am fortunate enough to have the time to do this and I do understand that many do not have the time or motivation required.

Pro Bono

The simple difference between a company like Facebook and BTC is that Facebook performs a useful (for many, not me) function that people are willing to pay for, and it thereby generates an income for its owners.

All BTC does is consume energy at a phenomenal rate (now equivalent to the entire consumption of Denmark) to produce absolutely nothing of any value other than as an instrument for gambling and money-laundering.

2952melb

Iain1234 Auto trader £AUTO your comments regarding fees associated with selling cars are so small ,talk to any motor dealer and they will tell you Auto Traders fee's are far from small Trader's are always looking for a cheaper option ,yes Auto Trader are the biggest and probably the most widely used but in terms of return on costs they fall well short.

Antehelion

I would disagree that Facebook's value is 'just computer code'.

I would contend that Facebook's value is not anything to do with their code (from an ex-developer, their 'code' as you see as a customer/user might view it is mostly sucky and wouldn't hold any significant value for other companies):

Their database of personal details which they hold for 2.7 billion active users (Q2 2020), I think is more interesting - including messages, pictures and all sorts of datamining-friendly attributes such as political leanings, gullibility quotients etc - actionable information which does have a very material value, even if it is similarly intangible in a true digital sense.

Bitcoin is in my eyes is just a legalised ponzi scheme, allowing speculation to feed a frenzy - up/down/up/down/up [in the order of 0%-50%-10%-30%-15%-100% of today's price when viewed over the last 5 years].

mark1308

8th Jan '21

Or just take your money off the table and run the rest ?

Kaboom

Sdi (LON:SDI) (I hold) is operating in a similar sector and is about 30% of the market cap of Judges Scientific (LON:JDG), despite being on a strong run recently. Lots of room of acquisitions to make meaningful impact on their business yet. DYOR

Logical David

If you watch the Martin Lewis Money Show broadcasted on Thursday 7th January (yesterday) a lady asked Martin Lewis for his thoughts on BTC because she was thinking of buying some. In effect he told her that he is a MoneySavingExpert and he believed that BTC is a gamble.

I also view BTC as a ponzi scheme. Also, my understanding is that BTC is not regulated by the FCA, which means your money / first £85,000 of you money is not protected should your digit wallet get hacked and your BTCs are stolen or if the company which stores your BTCs in its digital vault gets hacked.

Small Cap Value Report (Thu 7 Jan 2021) - GRG, WAND, GHT, AUTO, MAB, JOUL, MPAC, JDG

Greggs (LON:GRG)

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Paul Scott

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