Small Cap Value Report (Thu 9 Sep 2021) - PEB, G4M, STVG, CNKS, LOOK, NWOR

8th Sep '21 by Paul Scott

68 comments 9377 reads

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

Today's report is now finished.

Agenda -

Paul's Section:

Pebble Beach Systems (LON:PEB) - a quick review of interim results from this micro cap. Performance & outlook look quite good, although dilution risk remains, due to excessive debt. It's making progress though, so could be worth a closer look possibly?

Gear4music Holdings (LON:G4M) (I hold) - an in line with expectations trading update for the AGM. Some supply difficulties re Brexit, but being resolved with new European warehouses opening shortly. Acquisition also announced, which looks a good fit, and reasonably priced. All looks good to me.

Cenkos Securities (LON:CNKS) - a very quick look at its interim results. Profitable, cash rich, paying divis, and a modest market cap. Looks quite interesting.

National World (LON:NWOR) - a reader request (after my interest was engaged with some details provided in the comments section). This is the new holding company for the collapsed Johnston Press newspaper businesses. Still profitable, although print obviously in decline. If they can talk up the digital advertising growth like Reach (LON:RCH) has done, then I see a potentially lucrative, speculative trade here! Not particularly high risk, as the balance sheet has been sorted out, with JPR's crippling debts gone.

Jack's Section:

Stv (LON:STVG) - Scotland's most watched TV channel with growing digital services and increasing content production. It looks like the right strategy in a rapidly evolving world of content delivery, and trading looks good, but there is a huge pension fund here and so there is a good degree of financial risk. The latest triennial valuation is ongoing.

Lookers (LON:LOOK) - It's a great time to be a car dealer. Lookers has had accounting issues in the past but favourable conditions have transformed the balance sheet. There could be further to run in the share price if it closes the gap to peers and the sector strength continues. But is this the company investors will opt for given the alternatives? Trust takes time to rebuild.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to cover trading updates & results of the day and offer our opinions on them as possible candidates for…

Unlock with Email

Unlock with Google

Already have an account?
Login here

1James1n1

9th Sep '21

Could it be argued that Pebble Beach Systems (LON:PEB) sits in a niche within the industry due to its investment in R&D and therefore technological capabilities which customers are willing to pay for, as evidenced by GM's of 79% and 20% profit margins?

TamzinPiworld

Stockopedia/PIWORLD StockSlam last night was a lot of fun, with all of the following 'slammed': Robert Walters (LON:RWA) Argentex (LON:AGFX) Capita (LON:CPI) Belvoir (LON:BLV) Ab Dynamics (LON:ABDP) Base Resources (LON:BSE) Totally (LON:TLY) Watches Of Switzerland (LON:WOSG) Geiger Counter (LON:GCL) Quiz (LON:QUIZ) the video/podcast will be published tomorrow.

In the meantime, if you're interested in opportunities in the renewable space Invinity Energy Systems (LON:IES) manufacture Vanadium Flow Batteries for energy storage. Albeit, it's loss making and probably will be for the next few years. Schroders has a large holding. Here's an interview we did earlier this week video & podcast. They have ambitions to take 10% market share in 10 years' time!

Emis (LON:EMIS) analyst presentation this morning was impressive. We should have the recording tomorrow.

Blackfinch Renewable European Income Trust #BRET is a new Investment Trust IPO (subscribe by 30.9.21). Listing on the main market. They intend to invest in renewable energy infrastructure to generate income for shareholders. Quite ambitious targets over time. Here's a short introduction by the Fund Managers and Chairman. Video.

You may already have seen the Headlam (LON:HEAD) H1 results presentation from last week. Video & podcast.

Pebble (LON:PEBB) H1 results were released on Tuesday. We have a management presentation today 9.9.21, 1pm. Register here. H1 results showed a strong recovery with revenue +39%, with an adjusted EBITDA margin of 54.6%. They expect FY21 to be at least in line with expectations. Today, Chris Lee, CEO & Claire Thomson, CFO will present followed by Q&A.

Somero Enterprises Inc (LON:SOM) amazing H1 results yesterday. We have a results webinar with management on Monday 13th September at 1pm. Register here.

Property Franchise (LON:TPFG) H1 results webinar Wednesday 15th September, 12.30pm. Register here.

Litigation Capital Management (LON:LIT) FY21 results webinar Wednesday 22nd September, 9am. Register here.

Rusty2

Reach (LON:RCH) etc. I would like to point out that with digital you have a far greater reach than with printed media, take local news, who would read local UK news around the world, if it was just in a local newspaper. Now if you search online for information on a place, you will usually see lots of local news articles, many are owned by £RCH.

£FTRE has done a similar thing with magazines.

I used to hold Reach (LON:RCH) shares but have sold out recently, taken a small opening position in National World (LON:NWOR)

Paul Scott

Gosh you've been busy Tamzin! Thanks for creating so much excellent content, I find it immensely useful & interesting.

Best wishes, Paul.

rmillaree

Dicktrade

I am in awe of your work ethic.

I hope , as i am sure most do, that other Stockopedia subscribers concur.

Yes - i 100% agree - being honest the ramp up in volume of stuff being covered in the last 18 months (by Paul.Roland,Jack and Graham and Ed and Co) has been exceptional - i was kinda presuming it was covid tailwinds related and would reverse back out naturally - being honest i am more than happy with 50% of the level of what we get at present - not that i am complaining. Please don't try and do too much so that you end up being burnt out Paul for our sakes :)

davidjhill

echo that Paul.

Tamzin - Find your content invaluable and extremely well structured. Brilliant job, so thank you.

drvodkaquickstep

I don't know the industry very well but as 1James1n1 has mentioned Pebble Beach Systems (LON:PEB) is a business that generates GM's akin to the likes of Games Workshop so they are clearing doing something right.

Other quality metrics include ROCE >30% and ROA >10% demonstrating high quality earnings and it's evident from the amount of repeat business they generate that their clients like their offering and now that they are pulling nicely away from the Vislink legacy that has held them back over recent years, they are able to start making inroads into new geographies such as Asia where their current market share is very small compared to say Europe.

So we have an underlying high quality business now on a growth trajectory with top line sales growth expectations of 15% with chunky margins yet it's on a forward PE of around 8.

Its worth investors considering the Plc costs in the valuation too, especially if PEB were to be acquired.

Without the debt Pebble Beach Systems (LON:PEB) would be on a much higher rating in my view and I can understand some investors concerns re: the balance sheet , however, mgt are very comfortable with it and are just getting on with paying it down, the banks are very supportive and its hard to see any reason for this to change, particularly as its an improving situation and outlook.

I also own the stock.

sharw

Yes, finnCap forecasts Dec. 2022 net debt at Pebble Beach Systems (LON:PEB) to be £5.2m giving net debt/EBITDA
FY21E: 2.4; FY22E: 1.6

I don't think debt is the problem it was at the time that Executive Chair Hawkins left.

Comments on Gear4music Holdings (LON:G4M) this morning remind me that it usually has an off-putting but fictitious spread. Today is no exception - officially 952p - 1000p. I have just got quotes for 1,000 shares where the actual spread is 960.551 - 975

simoan

It's a software company. If it didn't make high Gross Margins there'd be something very badly wrong. High margins is the very least you'd expect for any company licensing software on a B2B basis.

When I worked I often came into contact with companies in the Broadcast Audio & Video sector, including Vislink. It's a feast and famine sector and I avoid any companies that supply into it.

All the best, Si

Stonethecrows

I owned some National World (LON:NWOR) a short while back. They were quite volatile so I sold for a small profit. My main reason for selling was the company website for investors and the the national world news site itself. For a media company, I found it very drab and plain. Not very encouraging. I certainly would not go there for news as it’s craply laid out. Also there was very little detail of the publications it dealt with. Lots of talk about goals and objectives but no real info I compared with £Reach and found reach much more zippy and interactive generally. Conclusion : if you can’t get your product looking good and give detailed info to shreholders, and make me want to visit, I’m out!

Bango (LON:BGO)

Apologies everyone for going Bongo for Bango the last couple of days - skip onto next one if you have no interest in Bango.

Most excellent (IMHO) write up available here from random person who says they have spoken to management since latest update. The comments seem very promising in that although there is no upgrade to expectations that i can see after most recent update it does seem that the company may have a bit in reserve ref sales this year with Liberium expecting 52% of revenues to be H2 weighted when traditionally its been 60% - and the vibes seem almost uber confident (ohh ohhh don't forget management do talk up their own book rmilarree). Personally i am happy with pencilled in growth for this year and next without upgrades. Lets hope i havent fallen for the classic "management spin" with this company - at least they have some decent targets that need hitting - so no hiding place for them now if they dont deliver £18.5 revenue mill next year :).

https://martinflitton1.wixsite...

James Kerr1

These are very fair points re National World £NWOR. The online presence is very basic. I'm hoping that it will improve in time - it would need to. Maybe Montgomery is too tied to the old world to really understand driving an online media business. That said, the old world titles include some very well established names, and it would be wrong to write off physical papers just yet.

I bought a very small position a couple of months ago, and added slightly today. A 'keep me watching' stake which with either be built upon or sold depending on how thing look over the next 18 months. They could remain quite volatile so there might also be money to be made trading them.

Emis (LON:EMIS) analyst presentation from earlier today. CEO, Andy Thornburn and CFO, Peter Southby present interim results for the six months ended 30 June 2021. Revenue and adjusted operating profit were ahead of both H1 20 and 19. Recurring revenue represents 79%. The dividend has grown to 10%. EMIS Enterprise was boosted by the use of the Outcomes4Health solution to support the CV19 roll-out in England. EMIS-X development continues and is building strong foundations for future growth (this is the exciting bit!). The outlook is in line with expectations for the full year. Video & podcast.

Good point Simoan - Pebble Beach Systems (LON:PEB) is a software/ IT company essentially, but is valued on a forward P/E of less than 10 - potentially significantly less if you take the view (as I do) that broker forecasts are highly conservative, which means as the value becomes clearer to the market, the company demonstrates further growth and debt recedes further, this could offer a very decent re-rating opportunity imo.

I should mention, I hold.

I wish you all the best with it. I would suggest the low P/E is because of the terrible balance sheet and the above average chance of dilution. On that basis it maybe deserves to be on a discounted P/E rating to the software sector.

If I were you I'd read some Broadcast industry specific journals, blogs etc. to get a feel for the outlook for the industry. I am not familiar with the end user base for Pebble Beach Systems (LON:PEB) products but more generally the end customers for a lot of broadcast equipment tend to be national broadcasters, many living off government money.

Thanks Simoan, as a holder of Pebble Beach Systems (LON:PEB), I have certainly already taken steps to understand its tech and the fit as well as opportunity in the sector.

I think you miss my point on the forward P/E rating. It was to acknowledge that the low P/E is potentially due to a mix of historic factors, but as the the company pare away at the debt and the Balance Sheet increasingly strengthens, growth is demonstrated and value becomes clearer, there is a re-rating potential to more common tech type valuations. This may well provide very decent upside and I see this tipping point being very near-term if the company continue to execute well.

Deegee Eff

Facebook needs content, it has very successfully undercut the providers of content and then pretends to be horrified by "fake news". The reason there is "fake news" is because there is no revenue for providers of news... presumably funding a few local journalists is there way of giving a little back of what they have taken, they do it for Reach as well.

thirty fifty twenty

i agree with your points raised 1james.

the banks have been supportive when it would have been easier to force some funding.

additionally Kestrel have built up their stake at increasing prices, i'd have thought when they had 20% they would have found it much easier to persuade the company to have a cheap equity raise but instead they continued buying shares up to 29.9%.

further, the appointment of David Dewhurst (c.10+ successful years at the start of NFC), gives a lot of credibility to their intentions to build a more substantial group. He has said that he wants to see the share price much higher before using equity for acquisitions. thus i think fter these results the company will be keen to tell its story and get the share price up.

i think it is a potential classic Simon Thompson tip in the investors chronicle. time will tell!!

disc i hold too

Harry Hindsight

Ever tried doing a 'stockslam' to your younger heirs - usually go back to the screen with the tail between the legs - except for us 'know betters' of course.

Small Cap Value Report (Thu 9 Sep 2021) - PEB, G4M, STVG, CNKS, LOOK, NWOR

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

68 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...