Small Cap Value Report (Thur 23 May 2019) - Market overview, BOWL, GTLY, TUNG, SOG, HSS, PAM

Thursday, May 23 2019 by
72

Good morning! 

Some companies with updates today:

Cheers,

Graham




Market overview

A quick word on where we are in big-picture terms.

The FTSE is bang in the middle of its range over the past two years. We can all see in hindsight that December 2018 was a super buying opportunity, and I'd wish I'd been more aggressive at the time:

5ce65cb3ad1d0FTSE_20190523.PNG


(Stockopedia chart.)

Looking back on my trade history during that month, I did the right thing by partially switching out of fixed income and into shares, but I didn't fully capitalise on the opportunity.

As far as the current situation is concerned, I am amazed by the complacency in markets at the moment, at least as it is expressed by the VIX and VFTSE indexes.

The last six months have seen "fear" declining in VFTSE, the FTSE's volatility index, the trend only reversing a little in recent weeks:

5ce65e5e8447bVFTSE_20190523.PNG

This is relevant for IG Group (LON:IGG) (in which I have a long position). The spread betting companies have all blamed low volatility for poor trading in recent months.  But IG said yesterday:

"In the first three weeks of May market conditions have been more favourable and the Group's high quality and loyal client base have identified and taken opportunities to trade."

For what it's worth, I was encouraged by the IG update - while I'm not expecting a big financial improvement in the current financial year, I'm excited by what could be achieved over a 2-3 year timeframe.

In the UK, with elections in which a new political party is likely to win, the expected departure of the current Prime Minister, etc., I'd have guessed there would be a little bit more "fear" (expected volatility) to be written into UK markets.

But it seems that most market participants expect that little of any real substance is going to change on the political front for the…

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Disclaimer:  

All my own views. I am not regulated by the FSA. No advice.

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Hollywood Bowl Group plc is a bowling entertainment operator in the United Kingdom. The Company is engaged in the operation of ten-pin bowling centers, as well as the development of new centers and other associated activities. It has a portfolio of approximately 50 centers operating across the United Kingdom. The Company's centers are located in multi-use leisure parks, and each center offers approximately 20 bowling lanes, on-site dining, licensed bars and family games arcades. Its brands include Hollywood Bowl, Bowlplex and AMF Bowling. Its Hollywood Bowl brand has over 30 centers situated in prime locations at leisure parks. Its Bowlplex brand has approximately 10 centers in prime locations at leisure parks. Its AMF Bowling has over 10 centers in non-prime locations. The Company's family-focused arcades offer games, such as air hockey and basketball hoops, games with prizes and video games. The Company's licensed bars offer a range of soft and alcoholic drinks. more »

LSE Price
226p
Change
0.4%
Mkt Cap (£m)
339
P/E (fwd)
15.5
Yield (fwd)
3.6

Gateley (Holdings) Plc provides commercial legal services together with complementary non-legal services, including acting as independent trustees to pension schemes and also provides specialist tax incentive advice. Its segments are Banking and Financial Services, which is engaged in the provision of legal advice in respect of asset finance, banking and corporate recovery services; Corporate, which is engaged in the provision of legal advice in respect of corporate, family, private client and taxation services; Business Services, which is engaged in the provision of legal advice in respect of commercial, commercial dispute resolution, litigation, regulatory, shipping, transport and insurance services; Employees, Pensions and Benefits, which is engaged in the provision of legal advice in respect of employment and pension services, and Property, which is engaged in the provision of legal advice in respect of construction, planning, real estate and residential development services. more »

LSE Price
158p
Change
0.3%
Mkt Cap (£m)
175.3
P/E (fwd)
10.9
Yield (fwd)
5.6

Tungsten Corporation plc is engaged in e-invoicing, purchase order services, analytics and financing business. The Company's segments include Tungsten Network, Tungsten Network Finance, Tungsten Bank and Corporate. Its Tungsten Network segment includes e-invoicing and spend analytics business of Tungsten Network. The Company's Tungsten Network Finance segment includes the supply chain finance business. Tungsten Network connects buyers to their suppliers, enabling tax-compliant electronic invoicing. Its software translates and validates each supplier invoice, and allows suppliers to check invoice status online. All the users ' invoices are digitally signed, encrypted and stored within the Tungsten Network image archive, where the user can access them anytime. Tungsten Bank provides specialist banking products and services. It focuses on providing invoice financing solutions to small and medium enterprises (SMEs) in the United Kingdom, the United States and Europe. more »

LSE Price
47.6p
Change
0.2%
Mkt Cap (£m)
60.0
P/E (fwd)
834.1
Yield (fwd)
n/a



  Is LON:BOWL fundamentally strong or weak? Find out More »


29 Comments on this Article show/hide all

rmillaree 23rd May 10 of 29
4

In reply to post #478046

Hollywood Bowl (LON:BOWL)
Only concern is that number of games is flat which would seem to be an important metric.

I guess the main thing is that spend per game was up 6.4% so overall that seems pretty decent - i am guessing its the exact opposite of the old days  when it was unlimited bowling and 1.50 per pint so the fast past of the game only slowed near the end with the increasing amount of toilet trips - soreness in ones shoulders and drunken stupidity. I am guessing nowadays it takes a group like forever just to play one game.   Mhhhh makes me want to set up a bowling drinking session immediately - its just a  shame the old place that did unlimited bowling and burger deal (Wimpey burgers to!!!!) and cheap beers close a few few years back - sigh.


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jesseowens 23rd May 11 of 29
3

In reply to post #478071

The over capacity in the casual dining sector doesn’t seem to be resolving itself . It doesn’t seem to matter how many restaurants go out of business , there is always a willing supply of fresh victims happy to open in their place . The structural change in the quality of home food delivery means we simply need less restaurants in the UK. Until we actually see restaurant space being repurposed for other uses the whole causal dining sector will be in trouble

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Trident 23rd May 12 of 29
5

I see TW on Shareprophets celebrates the Jamies demise. Seems a very low position to take when people have lost their jobs etc.

I think the rise in Business rates, minimum wage, employers NI, and other obligations such as auto-enrol pensions etc, apprentice levies, have put enormous pressure on retailers, who may have taken out upward only rent increase leases in the main parts of UK towns. So its no wonder many are going through formal restructuring to reduce their rents, otherwise there is very little escape from the economic stress of the current environment. I am surprised more aren't folding in an industry that is notorious for retail dreams being dashed by harsh realities.

That's not to say that a badly run business doesn't bring its own dangers, and Jamies may or may not fall into that camp.

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LeoInvestorUK 23rd May 13 of 29
36

In reply to post #478111

Re: Shareprophets and Jamie Oliver.

I can hear my younger self rebelling at this statement, but Tom Winnifrith is living proof of how it is possible to be 100%[1] right but communicate / conduct yourself in such a way that the world would be a much better place if you had never spoken. I unsubscribed a while ago in disgust at some conduct or another of his and now whenever I see the initials TW I can't help but autocomplete and ponder how ladies' bits ever got such a bad name.

[1] As I won't read the article I must reluctantly give him the benefit of the doubt.

Blog: LeoInvestorUK
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WDWombat 23rd May 14 of 29

I notice Graham hasn't mentioned Tesla. I know this is a UK small cap forum but his views here have been publicly aired - I am afraid I gave up on the presentation a month or so back when the sound system failed but I was anyway only planning to play devils's advocate. Where will the champagne corks be popping?

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V4Value 23rd May 15 of 29
2

Hi Graham, 

Hope Mello went well...I’ve just finished reading Howard Marks’ The Most Important Thing and he writes about the baseball pitch  analogy. It is a brilliant book actually and he is very humble and defensive with his investing. I’m sure you’ve read it but I would recommend it to all the readers here as Oaktree have a strong value focus and will not invest unless they pay less than intrinsic value. Psychology and risk are major themes of the book and I’ve learnt a lot from reading it. Now I just have to sit tight and wait for the opportunities to come along, something which I find very hard to do. 


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Graham Neary 23rd May 16 of 29
3

In reply to post #478131

Hey V4V, yes that's a great book although I've never read it in one go. I usually just open it on a random page and read the memo! I'm familiar with Oaktree.

Mello went very well, yes. Although it has taken me until today to recover properly!

Yep - sitting tight and not doing anything from time to time is one of the more difficult parts of investing.

Cheers,

G

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simoan 23rd May 17 of 29
2

In reply to post #478131

I’ve just finished reading Howard Marks’ The Most Important Thing and he writes about the baseball pitch  analogy. It is a brilliant book actually and he is very humble and defensive with his investing. I’m sure you’ve read it but I would recommend it to all the readers here as Oaktree have a strong value focus and will not invest unless they pay less than intrinsic value. Psychology and risk are major themes of the book and I’ve learnt a lot from reading it. Now I just have to sit tight and wait for the opportunities to come along, something which I find very hard to do. 

I agree, it's in my top 3 investment books. It's hard to sit on cash and do nothing but sometimes it's the best position to take. I don't know about anyone else but I've not been swinging very much YTD and I ain't struck out yet...

Nice results from Hollywood Bowl (LON:BOWL) today. Perhaps we should come up with a bowling ball analogy :-)  

All the best, Si


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martinthebrave 23rd May 18 of 29
1

Any views on #NSH Graham? A late AGM statement covers the first 4 months of the current fiscal & seems to be well ahead of consensus. Cold Storage benefiting from Brexit stock piling & the Dairy side also out performing. I have bought more.

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Gostevie 23rd May 19 of 29
3

Ah, Tungsten (LON:TUNG). The mention of it still makes me shiver...

https://gostevieblog.weebly.co...

Gostevie

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Graham Neary 23rd May 20 of 29

In reply to post #478126

WDW - it was so annoying when the speakers gave up! I don't blame you for wandering off.

re: $TSLA, I'm not planning to make any additional comment in the short-term. I've been keeping a very close eye on the story of course.

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john652 23rd May 21 of 29
1

Tungsten (LON:TUNG) results look good at first read, executing on turnaround strategy seems to be working, directors buying shares in feb, maybe finally shaking off the Eddie Truell disaster, however....the ceo resigned last year with immediate effect, no explanation what so ever, and they are still looking for a CEO, hmm??

I still hold this worst performing share as a reminder to avoid story stocks, always, and avoid loss making companies, always, and try and stick to a mental stop, first two a lot easier!

As Graham says, If this makes a real true profit & real cash then it might become quite interesting as they do have solid IP and very imbedded technology with many ftse/s&p giants. If they can leverage this properly, as per their story/strategy it could pay off. Does any one have any insite to accounts payable/supplier payments/experience of the tungsten system?

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Graham Neary 23rd May 22 of 29
2

In reply to post #478061

IGPJ --- thank you, yes I can't complain about the TSLA short. Unrealised gains are already sufficient to cover plenty of this year's expenses (mostly because they are tax free). G

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Nick Ray 23rd May 23 of 29
4
The FTSE is bang in the middle of its range over the past two years. We can all see in hindsight that December 2018 was a super buying opportunity, and I'd wish I'd been more aggressive at the time.


A little "trick" if you are using screens to generate ideas is to use the "rank in market" (or "rank in sector") option for the rules rather than putting in an explicit value. This tends to work well when things are depressed (as in Dec-2018) but you want to find some good leads for the future. If you use explicit values the list of potential stocks dries up just when it should be giving you good possibilities.

I did wonder whether the stocks suggested might not be as good as during the good times but from a quick back test using my own data that does not appear to be the case.


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JonBirdy 23rd May 24 of 29
13

Hi Graham, I always find your market overview intros very useful so thanks for putting them in occasionally. I enjoy the SCVR too ;)

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Graham Neary 23rd May 25 of 29

In reply to post #478086

Hi jonno, sorry I didn't feel there was much for me to talk about on those companies today. I can see they have attractions, though. Thanks! G

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peterg 23rd May 26 of 29
5

Late news from Volvere (LON:VLE). They've just increased their cash pile further, by about £2.55m by selling Sira - generally seen as having little or no value, so a good sale.


https://www.investegate.co.uk/volvere-plc--vle-/rns/disposal-of-sira-defence-and-security-limited/201905231637410476A/

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lemonjar 23rd May 27 of 29

Yeah +1 from me on including market sentiments when you do Graham, I find them really useful!

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ValueWise 23rd May 28 of 29

NewRiver REIT results were published today. Any thoughts on this one Graham?

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Sireed 28th May 29 of 29

In reply to post #478151

Thank you V4V.. I have been looking for recommendations for good investement books... particularly about assessing accounts and making an investment case (or not) for a company. Howard Marks' book looks excellent.

I would be fascinated to hear what everyone's favourite investment books are?
Many thanks, Sarah

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 Are LON:BOWL's fundamentals sound as an investment? Find out More »



About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »

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