Small Cap Value Report (Thurs 24 Feb 2022) - MACF, RCDO, INCH, VIC
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Good morning, it's Paul & Jack here with you for Thursday's SCVR.
There's a free Mello Investment Trusts and Funds event from 1pm today and Edmund Shing will be on the panel later - his contributions to the site are greatly appreciated, so I'll be tuning in to see what he has to say. Given all the developments, it could be a good opportunity to meet up and discuss with fellow investors. More detail in David's post. Here's the link to register.
Agenda -
Jack's section:
Macfarlane (LON:MACF) - I hold - strong growth ahead of market expectations, external pressures well-managed, and the valuation remains modest on an adjusted EPS basis. Macfarlane has grown profitably for a long time now, and the business is quite resilient. These good results will likely be lost amid the noise this morning, but all the more reason to put it on the watchlist in my opinion.
Ricardo (LON:RCDO) - looks potentially interesting, with a new CEO and a more sustainable strategy becoming clearer. There has not been a huge deal of equity dilution since the share price fall, so a successful turnaround could lead to good upside. A capital markets event is planned for the Spring, so that will be a good opportunity to get a better grasp of the group’s plans and prospects.
Inchcape (LON:INCH) - too large for the SCVR usually, but worth a look given the potential readacross for smaller peers given recent exceptional market conditions in the used car market.
Victorian Plumbing (LON:VIC) - looks like a mild profit warning, with higher costs leading to lower than expected margins. This is a recent IPO and has lost nearly 80% of its market cap in less than a year. Given that the past couple of years have been boosted by lockdowns, I’m unsure what the longer term growth prospects are like here so I don’t see the need to jump in.
Explanatory notes -
A quick reminder that we don’t recommend any stocks. We aim to review trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty. We are analysing the company fundamentals, not trying to predict market sentiment.
We stick to companies that have issued news on the day, with market caps up to about £700m. We avoid the smallest, and most speculative companies, and also avoid a few specialist sectors (e.g. natural resources, pharma/biotech).
A key assumption is that readers DYOR (do your own research), and make your own investment decisions. Reader comments are welcomed - please be civil, rational, and include the company name/ticker, otherwise people won't necessarily know what company you are referring to.
Macfarlane (LON:MACF)
Share price: 123.23p (-1.02%)
Shares in issue: 157,812,000
Market cap: £194.5m
(I hold)
Final results for the year to 31 December 2021
Highlights from continuing operations:
- Revenue +26% to £264.5m,
- Operating profit +47% to £20.1m,
- Profit before tax +50% to £18.7m,
- Including discontinued operations, diluted earnings per share is up 23.1% to 7.98p,
- Diluted earnings per share from continuing operations +40.4% to 8.62p,
- Net cash inflow of £23.8m (2020: £23.3m),
- Continued improvement in pension scheme, from deficit of £1.5m to a surplus of £8.3m,
- Full year dividend +25% to 3.2p.
These are good results regardless of how the shares fare today, so for those that are not running for the hills this morning, Macfarlane is one to watch on any fall in share price. Management strikes me as highly competent here, very experienced, and they’ve been managing external pressures (both Covid and post-Covid) well so far.
Packaging Distribution achieved strong growth in sales and an improvement in revenue (+19% to £239.5m) operating profit before amortisation (+19% to £2.6m) versus 2020. Gross margin has held up well despite input price pressures, holding steady at 32.4% (2020: 32.5%).
Business in Europe is growing:
During 2021 we made steady progress in extending our service into Europe to support a number of our pan-European customers. Through the Group's subsidiary company, based in the Netherlands, sales exited 2021 on an annual run-rate of c£5m with sales in 2021 of £2.3m (2020: £1.1m).
Macfarlane notes continued sales growth in the year thanks to the structural shift to e-commerce retail, a good performance in Medical, and a recovery in certain industrial sectors, and the GWP and Carters acquisitions. The strong profit performance is encouraging given well-flagged inflationary pressures on input costs and supply shortages of various materials.
Demand from the aerospace, high street retail and hospitality sectors has not yet recovered to pre-pandemic levels but, given how well the company is currently doing, I would actually view that as a positive, as existing demand will at some point be bolstered by recoveries here.
Our customers increasingly see the benefits of transacting with us online and this has resulted in a growth in activity through our website: shop.macfarlanepackaging.com and through our Simplicit-e electronic trading platform. In 2021, 44% of our customers managed their transactions with us online.
Manufacturing Operations delivered an ‘encouraging’ recovery versus 2020 in both sales and operating profit before amortisation. GWP is performing ahead of expectations. Year-on-year progress is distorted by the discontinued Labels business and GWP, but the net result is operating profit before amortisation of £3.7m compared to a small loss of £329k in the prior year.
Acquisitions - small, bolt on acquisitions are a core part of Macfarlane’s strategy. Again, management has proven over many years that they know their market and how to purchase sensibly. GWP and Carters Packaging were bought in February and March of 2021 and have performed well, according to the group.
The sale of its Labels business is complete, hence the continued and discontinued operations in today’s results. Labels generated a loss before tax of £0.9m after charging a goodwill impairment of £1m and costs of disposal of £0.3m.
This is probably a good move - if you look at Macfarlane’s progress over the past decade, it’s all about Packaging Distribution. Meanwhile, Manufacturing Operations complements that growth division and could grow itself (management presumably hopes so, having recently purchased GWP and added it to this division). Labels always seemed something of an outlier.
Outlook - 2022 will see ongoing inflationary pressure on input prices, continuing supply constraints on most raw materials and operating costs increasing due to staffing pressures.
However, despite these challenges, trading in the early months has been encouraging and the Board is confident that, given the effectiveness of our strategy, the resilience of our business model and the experience and commitment of our people, Macfarlane Group will continue to deliver further growth in 2022.
Balance sheet - there is a net debt position, c32.5m including leases, but the improving pension scheme is a big positive and the group is cash generative (with free cash flow well ahead of net profits).
Conclusion
I agree with Shore Capital that a 150p share price is warranted, although I still think that would be conservative and will personally be adding on any significant pullback. DYOR of course, that’s just my own position.
Macfarlane has proven itself as a resilient business, growing profitably over the longer term and handling Covid and resulting supply chain and input price pressures well. No risky change in strategy is required to continue to do so in future. Labels will bring in c£6.3m which can be redeployed into the remaining two divisions.
I think Macfarlane is well placed to grow, as it has done over the past few years, by growing organically and making small, high-quality acquisitions. Revenue growth resulting from structural drivers such as ecommerce should enable a degree of operational gearing, which has also been the case recently looking at the group’s operating margins.
Obviously there’s an elephant in the room today. Not the best time to herald positive results, but that could lead to an attractive entry point for anyone that has been considering this share.
Ricardo (LON:RCDO)
Share price: 434p (-2.91%)
Shares in issue: 62,218,280
Market cap: £270m
Interim results for the six months to 31 December 2021
Whenever I see a chart like this, the first thing I do is to check for signs of material equity dilution.
It’s not often talked about, but share price history is a flawed reflection of value as shares in issue are not represented. So buybacks and equity dilution can go unnoticed, and events such as steep share price drops can coincide with discounted equity placings, which make it virtually impossible to regain previous highs.
That’s not the case here though, with shares in issue from 2018 up from 54m to 62m, which is an increase but hardly disastrous.
Highlights:
- Order intake +16% to £210.6m, with accelerating environmental trends across all segments,
- Order book down slightly, from £318.2m to £315.5m,
- Revenue +13% to £185.5m,
- Underlying operating profit +42% to £10.5m,
- Underlying cash conversion of 162% and net debt down to £38.5m,
- Interim dividend of 2.91p.
Underlying operating profit margin is still quite low, although it’s up from 4.5% to 5.7%. Underlying basic earnings per share is up 56% to 10.6p. Statutory results are notably different to the underlying figures given.
Here’s the note connecting them:
In terms of segments, Energy and environment (EE) saw revenue grow from £26.6m to £30.9m, with underlying operating profit up from £3.8m to £4.3m. Rail revenue was down slightly from £38.5m to £37.4m although underlying operating profit improved from £3.5m to £3.8m.
Automotive & Industrial (A&I) revenue rose from £50.1m to £54.2m and operating loss reduced from -£3.4m to -£1.7m. Defense revenue increased from £13.9m to £21.5m and operating profit rose from £1.7m to £2.8m. Performance Products (PP) revenue grew from £35.6m to £41.5m, with operating profit steady at £3.9m.
There is seasonality here, with H2 typically stronger than H1.
There’s a capital markets event planned for late Spring, where the group will set out its plans for future growth.
£6.1m has been invested into research and development before government grant income of £1.2m. Development costs capitalised were £3.5m, the same as H1 last year, reflecting investments in software and technology.
Capital expenditure on property, plant and equipment was £2.6m (HY 2020/21: £2.2m), reflecting targeted investment in business operations such as a hydrogen and electrical test capability A&I EMEA.
Pension scheme - The fair value of the scheme's assets at the end of the period was £162.8m (FY 2020/21: £156.2m) and the pre-tax surplus increased to £9.6m from £6.8m at 30 June 2021. Ricardo paid £2.1m of cash contributions into the scheme during the period (HY 2020/21: £2.3m).
From November 2021, following completion of the 2020 triennial valuation negotiations with the scheme Trustees, the level of deficit funding contributions reduced from £4.6m per annum to £1.8m per annum through to November 2023.
That will be a useful cash boost for the company going forward.
Balance sheet - looks fine. £115.2m of goodwill and intangibles making up 29% of total assets, so NTAV of £69m. The current ratio is around 2x, with £56.8m of cash against £99.6m of current liabilities.
Outlook
Our strong order intake is particularly encouraging and is driven by increasing demand for services in respect of energy transition, climate change and decarbonisation. We have also seen strong cash generation in the first half that will create opportunity to invest in our key target segments to deliver sustainable growth.
The Group enters the second half of the year with a good level of orders and pipeline of opportunities and solid momentum in all segments. As we enter our seasonally stronger second half, whilst some economic uncertainty remains, we are cautiously optimistic to deliver on our full year expectations for revenue and underlying PBT. Following strong net debt improvement in the first half we would expect a further small improvement by year-end.
Conclusion
I can see how Ricardo’s ESG and sustainable energy expertise could see continued growth into the future. And, importantly, there has been no material permanent equity dilution over the past few years, so it is possible for the shares to rerate from here if the company does well.
I’m neutral for now, but it looks interesting. Debt has reduced over the past year or two and the StockRank has improved considerably. With a new CEO in charge, I’ll be watching out for that capital markets day as this looks like a solid turnaround prospect. The reduced pension contributions will be an additional boost.
It does seem like the strategy is becoming better articulated now, with a focus on existing strengths such as EE coupled with efficiency improvements. Sustained momentum should improve margins and cash generation, which can then be used to shore up the balance sheet.
Ricardo did once have double digit operating margins.
As the largest but lowest margin division, the recovery of A&I will be important to watch out for. It’s currently loss-making but profits are H2 weighted and the £76.7m of orders is encouraging. Moving on from Covid would clearly help.
There’s quite a lot going on here, across five different operating segments, so it will take some time to dig into, but enough to warrant further research at these levels in my opinion.
Inchcape (LON:INCH)
Share price: 768.5p (-7.63%)
Shares in issue: 381,662,261
Market cap: £2.93bn
Final results for the year to 31 December 2021
We’re venturing out of SCVR territory here, but Inchcape is a car retailer so it could have some useful readacross for smaller peers given the exceptional second hand car market conditions that have been boosting sector profitability recently.
Highlights:
- Group like-for-like revenue +21% to £7.6bn,
- Profit before tax more than doubled from £128m to £296m, thanks in part to high vehicle gross margins,
- Free cash flow of £289m, up from £177m,
- Net cash up from £266m to £379m following c£80m of share buybacks,
- Proposed final divided of 16.1p and new £100m buyback programme announced.
Outlook
The Group's strong performance in 2021 was supported by robust consumer demand and high vehicle gross margins (particularly in Retail), largely due to vehicle supply shortages. Looking ahead, our 2022 performance to date has seen a continuation of the trends experienced last year, although there is ongoing uncertainty relating to vehicle supply and the impact of the pandemic.
The group adapted operationally to Covid conditions and it’s good to see this therefore had less of an impact in FY21. Global supply-chain issues did have a more pronounced impact in H2, however.
Importantly though, the demand for vehicles and aftersales remained strong throughout the period, which created a supply-demand imbalance, and led to higher gross margins and profitability.
I won’t go into company-specific deal here, it’s more the industry outlook commentary I’m interested in. There’s not much of it in the statement, but the gist is that trends have so far continued into the new year.
This will normalise at some point, and it’s worth noting that Inchcape shares are down by more than the wider market today which suggests an element of ‘it’s better to journey than to arrive’ going on, but the dynamic remains in place for now.
Victorian Plumbing (LON:VIC)
Share price: 75.6p (-7.8%)
Shares in issue: 325,062,985
Market cap: £245.7m
Victorian Plumbing says it has ‘continued to trade in line’ with the dynamic set out in its full year results announced on 9 December 2021.
This is what the company said back then:
We experienced more subdued market conditions during the summer months following the easing of restrictions, before customer demand improved somewhat during September. Through the first two months of FY22, whilst consumers have continued to spend more on leisure and less on big ticket material homeware purchases, demand and revenue have been broadly the same as last year and 41% ahead of FY20.
The adaptability of our supply chain and investment in-stock inventory means we are currently operating from a position of strength relative to others. Given the popularity of our own brand offering, we are able to absorb most of the current supply chain pressures. However, as we look to balance revenue growth with profitability in the short-term, gross margins may move closer to those achieved in FY20.
Today the group updates the market
As we look to the second half of the financial year, we note that the comparative period performance for revenue eases and so we expect to return to having modest year-on-year growth through H2 2022. There are however ongoing inflationary cost pressures that we face. We are acutely aware that our customers are also managing inflationary pressures and will adopt a careful approach to price rises, which means we are choosing to temporarily absorb some additional costs. We therefore expect both gross profit margin and adjusted EBITDA margin to be slightly lower than previously anticipated.
I wouldn’t say that’s ‘in line’ with anything, seeing as it results in lower than expected margins.
Revenue for the four months ended 31 January 2022 was down 3% year-on-year, but up 38% on the same period two years ago, whilst marketing spend has now started to normalise. The group is confident of its ability to take market share in the long term.
Conclusion
This is an unfortunately timed IPO. The Value Rank is picking up though, now at 60.
It's an online bathroom retailer and the lack of trading data as a listed company makes Victorian Plumbing’s prospects hard to gauge. Online businesses across the board fared well over lockdown-impacted periods, so I’m unsure as to the longer term prospects here under more normal conditions.
Revenue growth has slowed year-on-year but is up 38% on a two-year view. So that’s a 17.5% annualised. But, given the IPO price of c330p less than a year ago based on what have transpired to be unsustainable growth rates, I think it’s fair to remain skeptical here. No wonder IPOs get a bad name. It’s really not in the UK market’s long term interests to have such a poor track record in this regard.
Meanwhile, costs are rising with limited ability to pass them on by the sounds of it. When consumer confidence takes a knock, I suspect people are more likely to skip Victorian’s bathroom products than everyday treats. If you look on the group’s website, there’s a 60% clearance sale on.
I haven’t read the admission document here, so I could be missing something and there’s always the chance this will end up being an excellent contrarian pick. The shares have lost nearly 80% of their value in less than a year, so there will be a floor somewhere. But this is not a forgiving market right now, and it’s up to the company to rebuild trust which has presumably been badly impacted.
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66 comments
I first became aware of Victorian Plumbing (LON:VIC) with the Paul Jourdan (Amati) interview on PIWorld who indeed observed that Victorian Plumbing (LON:VIC) had 'been through the hockey stick' of losses into profitability, which is far usual with IPO's.
They have 21% share compared to B&Q/Screwfix combined share of 20%.
The four largest players control 58% of the market leading to 42% of share to be taken from the smaller players.
One unknown is who will buy Homebase, which is currently up for sale, again.
Interview at 45:33 https://www.piworld.co.uk/educ...
Victorian Plumbing (LON:VIC) I've been taking a closer look here and think it could be interesting. They have a long term (I believe 20 year) growth record and are now established as the leading player in their space. However it's still quite a fragmented market so still lots of room to consolidate and grow further. After such a strong year, this year was always going to be tough to beat and perhaps easy to come to the conclusion that it's gone ex-growth - but I think the long term growth trend is still there as evidenced by the strong 2y figures. They've been unfortunate in also facing intense cost pressures (outside their control) and and their decision to partly pass these on will hit profits this year. But if they successfully take market share (and perhaps knock out some of the competition) I think they should be very well placed when things get back to normal.
Victorian Plumbing (LON:VIC) (I hold)
Thanks for the write-up Jack, and for your thoughts Bouden54.
I must admit to be sceptical of this company at first but on further research I am slowly warming to it. Accordingly I bought a starter position 2 weeks ago.
My rationale for buying:
See this link for keyword ranking analysis from SEMRush: https://bit.ly/3haPUKI
These won't repeat and I think they are masking how profitable the company can be.
I'm expecting marketing spend to stay constant at 25% of revenues, which I also don't think is unreasonable.
I have made increases for other OPEX too.
Modelling these numbers out gives me EBITDA in 2.5 years of c£45m.
If I'm being too optimistic somewhere then at the least I would hope EBITDA would be £30m.
The current EV is £211m.
Given the high organic search rankings (which are hard to achieve in such a competitive market) I personally apply a high multiple.
It just seems too cheap, though of course I remain wary that it might fall further this year.
---
Speaking to a knowledgeable friend this morning, I believe competition in an already fragmented market is about to get more intense as another big player prepares to enter.
This is a big risk and it if looks like the company's search rankings are in trouble then I might re-assess my position.
In the meantime I will keep an eye on it and hopefully look to top up once more numbers are published.
Cheers
A
Paul/Jack - can you explain in layman’s terms what the announcement from £STU actually means? They’ve appointed administrators but not in administration, involved in M&A and the shares are to cancelled from listing tomorrow? Thanks, it’s been a long day!
re Studio Retail (LON:STU) : If you re-read it carefully you will find that it is Studio Retail Group plc (the shares of which were the ones traded) that is in administration. One of its subsidiary companies - Studio Retail Ltd. is not. It is quite common for the parent company to be in admin, but not all the subsids. and equally for one or more subsid. to be in admin. but not the parent.
Studio Retail (LON:STU)
I see the announcement states that Studio Retail Group plc is in administration but for the avoidance of doubt, that its main operating company, Studio Retail Limited, is not.
It would be interesting to know with whom "The Administrators are currently in advanced discussions in relation to an accelerated M&A process" in respect of the business and assets and whether the parties concerned comprise the majority shareholders. Presumably administrators have no concerns over grounds for possible minority protection claims under Part 11 of the Companies Act 2006 / Foss v Harbottle. (Don't ask me, I just did a web search).
Can anyone suggest why Ig Group (LON:IGG) has had such poor momentum lately? I would have thought the recent market volatility would have been perfect for it. Thanks.
Hi Stocks
I think that this is being hit by a number of factors, partly it being seen as a "lockdown" benefiting stock, so massive boom in trading in Lockdown's 1 through 17. People expecting constant upgrades, increases and stocks always going up. When we look at the hit on Hargreaves Lansdown (LON:HL.) yesterday, Ig Group (LON:IGG) is holding up well.
I personally hold a level of growth with dividend for income.
Then there is the question of how the US acquisition is performing and being integrated, it is a big step, which with the US markets going into decline is there going to be a hit there?
So I expect a benefit to come from the ongoing volatility, but I question how many accounts have been blown in the last few weeks for those who are doing the CFD route, and how many people came in through lockdown have just moved on to something else instead. No such thing as free profit?
Tommy
I hold Ig Group (LON:IGG)
Ig Group (LON:IGG)
(1) I would guess the market has been somewhat skeptical about the sense of the Tasty acquisition and whether that will add to the business or whether the reduction in cash/extra shares will be recouped.
(2) If stocky is belied eps growth ye 31/5/2022 is showing 20% decline compared to 31/5/2021 - so perhaps the market is being unduly harsh now - or perhaps peeps who bought at previous higher levels didnt perhaps anticipate earnings would take a tumble.
(3) if times are tough for stocks and crypto is there the chance that peeps will not be using their services as much if they are losing money and throwing in the towel - or having less play money to play with if they are doing less well.
(4) Ig Group (LON:IGG) are mega cautious - perhaps at times their caution leads peeps to the wrong conclusion that future earnings will not be as good as they actually turn out to be. This can be a danger for companies that deliver very low baseline expectations at the year start and upgrade a very high % of the time. I previously sold out of IGG when they flaged up well in advance times would be tougher the following two years - for most companies thats an automatic red flag (look at loopup!) - it turned out that trading wasnt as bad as they feared - if i had known back then how cautious they are i probably would not have sold out.
(5) guessing they did well with covid tailwinds many such stocks seems to have been battered price wise.
Thanks Tommy and rmillarie for your insightful responses re Ig Group (LON:IGG) . It just looks too good on fundamentals and so I hold some. Also I don't think Hargreaves do cfd or spreadbets so their recent fall is not really comparable and if my experience of using these products is anything to go by, IG should be raking in ££ from inexperienced punters. Thanks
If you are profting directly, then yes; but that would mean, basically, selling guns 'n ammo to the participants. As we are talking about this on the forum of an equity platform, then my hunch is that you don't have a shed full of AK47's or missiles ready for shipping and that you are concerned about buying shares that are suddenly cheaper. Well you are profiting from lack of investor confidence. The main reason that confidence isn't there is because... markets are irrational and they are irrational because it's people we are dealing with; it's NEVER just about earnings multiples or any other numerical measure.
I was tempted to load up on Lloyds Banking (LON:LLOY) this morning, as they were already underpriced in my opinion and reasonably good results announced today haven't lifted the price, infact c/o Vlad they are down over 9%. But I didn't. I brought recently and because I have a relatively small stash of cash to invest, the broker fees and stamp duty have a disproportionate influence on how much "Value" I'll actually be left holding. The price needs to drop a bit further before it becomes a genuine bargain for me. My point, maybe it is best to think and act strictly in terms of figures.
Tremor International (LON:TRMR) - clearly investors don't believe the money is real or that the business is durable
Share price up 10% this morning while everything else down 5% suggests otherwise Tremor International (LON:TRMR)
Only 10%…nudge me when it’s 50% and then we can start parsing maybes and what could be. Price still says Tremor International (LON:TRMR) is mirage
I thought you were quite keen on Tremor International (LON:TRMR) medium term Mojo or have you changed your mind?
Suspect it would have been up a lot more had earlier events not played out as they had.
I'm keen on it. I had been selling at higher prices...but then I bought again when down at 500 area....I even bought a decent little slice extra yesterday near close as it took a trip down so it back to being a pretty fulsome position for me. TBH I'm surprised by the growth they've shown and which is more than I would have forecast. I tend to invest in things I think can see double over 2-3 year period (clearly I wont always get that right including time frame being longer etc!) and at 485p Tremor International (LON:TRMR) fitted that credulously IMO.
My prior comments above were a bit flippant. I see the difficulty people have for historic reasons with the share but the price relative to recent achievements is just a bit silly low. It implies its charlatan tech and biz relative to The Trade Desk, Pubmatic, etc...and clearly the price being low then leads to the anxiety that the market knows something etc
Dissonance makes the world go round!
lol - yes, I know what you mean!
thanks for your thoughts on it. Growth was a little ahead of my expectations and as you say, price comparatives to peers seem absurdly low given forecasts to grow at a similar clip. Q1 outlook appears to be +22% profits. Cash pile is now enormous too. Looking through analyst notes they expect net cash (absent of any major transactions) to be well over $500m within the next 18 months. Thats almost half the current value alone.
Shame they chose today to release results mind!!
Tremor International (LON:TRMR)
I think with prior history of similar companies in this sector and funny stuff with this specific company (??) - i can fully understand why the market would be skeptical that current level of profits will continue to exist and expand over the next 10 years - certainly a share to DYOR and not blame anyone else if you take a punt and you end up getting screwed over.
Who said FTSE 100 stocks were safer than our chosen AIM territory? Be grateful you are not in e.g. Evraz (LON:EVR) - £6 to £1.72 just since the start of this year! (Results due tomorrow). It will be a long while before anything tainted with Russian involvement is investable, at least for widows and orphans.
I would be grateful if I wasn’t in Evraz (LON:EVR) but unfortunately I am! I miscalculated the risks here, as I had expected Putin would be “content” with annexing the two Eastern provinces. I really should stop trying to second guess dictators!
Yep did the same with £POLY I would hate to sell at this stage but there is clearly a risk of them being delisted.
Polymetal International (LON:POLY) is looking a bit of a bargain at the moment - no sanctions imposed, no direct impact, gold price is sky high and rising, 40% off in the sales.
Polymetal International (LON:POLY) What about the development projects inside Russia?
Everything inside Russia is getting hit today.
Update at 2.35pm, I see it is now 547p and is suspended on my platform.
a clear and in my view encouraging RNS from Polymetal International (LON:POLY) earlier today.
they clearly are on top of things, and I think the SP drop is overdone given there is no expected impact as yet.
https://www.stockopedia.com/sh...
POLYMETAL REPORTS THAT ALL ITS OPERATIONS IN
RUSSIA
AND KAZAKHSTAN CONTINUE AS USUAL
* POLYMETAL - SANCTIONS ANNOUNCED TO DATE HAVE NOT AFFECTED
POLYMETAL.
* POLYMETAL - REITERATES ITS PRODUCTION AND COST GUIDANCE
FOR 2022
* POLYMETAL - CONTINGENCY PLANNING HAS BEEN INITIATED
PROACTIVELY
TO ENSURE BUSINESS CONTINUITY, INCLUDING SELECTION OF KEY
EQUIPMENT SUPPLIERS
* POLYMETAL - POLYMETAL BELIEVES THAT TARGETED SANCTIONS ON
COMPANY REMAIN UNLIKELY
Polymetal International (LON:POLY), I see the shares have gone from 505p to 714p, so a good one if you bought around low 500s. I'm not investing in that area at the moment and probably won't in the future either.
Yep - did the same with £JRS. Really thought Putin would only go for the eastern enclaves - "surely he can't be that stupid". My concern is that Xi takes this as an indicator of the West's metal and has a go for Taiwan. This would be much graver IMO. Thoughts with those directly affected.
YTD performances of UK Indicies suggests larger stocks have so far proved 'safer'.
Following the buffet mantra of buying when everyone is selling is today the day to start buying. I'm personally looking at putting some in today but I think it's far far too early to go all in.
Given the oversized "correction" in the AIM/Small caps are there any ETF's people can recommend in this space?
Surprised Bp (LON:BP.) is down so much considering Brent crude was $100 a barrel this morning.
they have a lot of Russian assets :o
I think BP owns a fair chunk of Rosneft shares, 20% from memory?
In a few weeks time those shares are likely to be worth 20% of Rosneft or £0 and so I can understand the uncertainty in the price. No idea which.
Not a small cap I know I’m surprised £BP. it is not down a lot more given its 20% shareholding in Rosneft, JVs with Rosneft & the not so small matter of oil supplied to BP by Rosneft. Unfortunately I expect the sanctions to be announced will hit these relationships very hard. However the fact that oil will go well above $100/bbl will have some offsetting impact and there may be some benefit from ramping up gas supply from Azerbaijan where Bp (LON:BP.) have strong links with the national energy company. This would perhaps offset the inevitable cutting off of Gazprom supply whether by Putin or due to Western sanctions.
Exxon, BP, Shell, Total, Chevron all have Russian investments. There will be a limit to the sanctions that can be applied.
Brookeda. As FXPO have said 'we are not really in a position to predict the outcome of Russia's intention's.' Currently Putin says his intention is not to occupy the country that he has just attacked, even though he does not recognise it, or had plans to invade it! Looks like the horse has bolted with gold and silver. Personally I'm more interested in topping up some of the stronger stocks I already have. Gl all
precious metal miners are just getting started imo
I closed all my positions Monday as all my stops were getting taken out, and with news of Russia's military drills not ending. FXPO tanked this morning. I'll be staying out of the markets until the war news subsides. While its still headline news, markets will continuing tanking. When I get back in, everything should be cheap as chips.
From John Authers a week or so ago
Maybe it is different this time. It is a concern that USA is energy independent so perhaps Bidet will continue to show no leadership/interest, and leave Europe to make the first response, but it is very exposed on gas supplies, and relatively weak militarily so what can Europe do. Which European leader will be strong enough to lead?
Fwiw, i agree.
indeed, Jpmorgan Russian Securities (LON:JRS) is looking good at approx 50% discount to NAV, and a hefty dividend in the future for those taking a punt now
I need to overcome my ethical constraint before investing.
Is it unethical to profit from this invasion situation? Thoughts? Serious question.
Is it unethical to profit from this invasion situation? Thoughts? Serious question.
Who says you are going to turn profit - things may get worse and prices may decline further. The reality is that for each buyer there is a seller and if you refuse to buy you are making it harder for that person to sell - practicably speaking your buy is doing them a favour being able to exit to willing buyer. I don't see any ethical considerations about buying if you think value is good.
As you say pimping up this disaster where ppl are dying as a great investment opportunity is not something i would want to be doing from a moral standpoint - but it wouldnt stop me saying that if there is value here and i had cash would i be buying as is normal , well yes. In summary my opinion is that you can still buy now based on value without being unethical.
I guess the question is, if people were invested in companies and the future earnings value, why would they dump their shares based on the moral principals of a dictator?
ultimately, as an investor I'm buying into companies that the market is discounting or asking a premium for based on future growth and earnings.
If the market is irrationally high or low, that is the time to sell or buy to facilitate better investments.
At the moment, people are reacting with fear, so it makes sense to be a very willing buyer... (just wish I had spare cash to add more)
"Is it unethical to profit from this invasion situation?"
I think it's ethical, but I can't tell you something that you have to decide for yourself. What I can tell you is that it is something you need to reconcile yourself to if you want to make money in stocks. Every great buying opportunity is a crisis for someone. Look at the great buying opportunities of the 21st century: 2003: Iraq war ... 2009: the GFC putting millions out of work and out of their homes ... 2020: covid-19 threatens millions with death. The same pattern is true of previous centuries. If you only want to buy when nothing is going wrong, then it would be almost impossible to find a time to buy, and if you did it would be the top of the market.
Nobody believed Putin would go the whole hog, but he did. Blindsided the markets and me with £FXPO. This can go anywhere but let's not put rose tinted glasses on. If a MIG or missile strays over into NATO territory then the 'jaw jaws' will have to stand up to their rhetoric.
Missile defence and cyber security are on my list and who gains from cutting off Russian oil/gas - grain I have no clue - fertilisers - food - maybe a separate discussion post.
As for investing when there is 'blood on the streets' - we pay tax so our betters can use it for the greater good.
Just when you thought taking a mask off in public was a thing.
Downing Strategic Micro-cap Investment Trust (LON:DSM) was tipped in another place.
If such things exist I wouldn't recommend any of them. A supposedly liquid vehicle investing in illiquid assets is just a bad idea. The illiquidity of small caps was discussed here a couple of days ago so I won't rehash that. As to the liquid/illiquid mismatch, the history of open ended property funds provides a good illustration of why this doesn't work.
To me, if you want a collective investment in AIM/small caps then it needs to be closed ended. This means it isn't forced to sell when panicked punters start offloading stocks. An interesting option in this space is River And Mercantile Uk Micro Cap Investment (LON:RMMC) which focuses on the really small fry. Unlike the majority of funds that focus on growing size and fees, this trust undertakes distributions of capital to shareholders so that it can stay small enough to manage the liquidity issues at that end of the market.
Brookeda’s question was about ETF’s, not open ended funds. Investment trusts are the better option.
I would not do open ended for the same reasons mentioned above. Thanks for the suggestions everyone
Then why ask for recommendations on ETFs? ETFs are open ended.
ETFs are open ended funds and of the open ended structures they are the ones that have to provide the most liquidity. They have to be open intra-day - they must buy and sell underlying investments immediately to reflect the buying and selling of punters in the fund. A traditional open ended mutual fund has a slight advantage in not needing to trade intra-day, but in reality no open ended fund is appropriate for illiquid assets.
Small caps are about active management. ETFs are trackers and best for large caps. Plenty of good small cap funds-BlackRock ,Cavendish, Liontrust.
Nice update from Riverstone Energy, share price is £5.58, while the NAV is £9.19 - big discount there.
Re Riverstone Energy (LON:RSE) , the NAV discount has persistently struggled to get above a discount of -20% - any ideas why this is ?
One reason is that historically the manager plays heads I win tails you lose. This is from this mornings annual results:
“a vote to wind-up, if passed, would trigger an exit fee equal to twenty times the most recent quarterly Management Fee (see Note 9 for further details). At year end, such amount payable to the Investment Manager would have been approximately $49 million.”
I believe this is actually somewhat of an improvement over how things were previously believe it or not. (I hold while they leap aboard the decarbonisation band wagon.)
Bit big for here but Tremor International (LON:TRMR) released excellent results this morning.
Not a good day to expect any share prices to go up though :-(. I expect a sea of red in my portfolio today but first thoughts go to those affected by current events.
Agreed - it seems these terrific results from £TRMR will be lost in the very sad news of the day. I have held these from their previous highs of over 800p, and wondered if I was mad, especially given the propensity for management to spook the market with massive stock selling. Record results, a stack of cash for M&A, and a fairly big buy-back. They could also be a target. Holding for now.
Damn you Putin!
Plenty of buying opportunities this morning. I will be Putin in some of my cash into the market. (He is a very bad man though).
Yes but the stock based compensation payments at the moment are insane. If I'm reading it right $19m this quarter (net income $24m). $40m for the year (net income $73m)
Tremor International (LON:TRMR)
Welcome to the world of us listed/facing companies
The finncap note says to expect $50m of share based compensation payments for fy22 and $23m for fy23. There appears to be little upside for investors until fy23 and beyond and in a fast changing market where will tremor be then.
Tremor International (LON:TRMR) I hold.
I have only got partially through the accounts but both items are the adding back of options to come to adjusted EBITDA and the egregious size of the option grant. See image attached.
The cost of options is a bit too complex for me and I am not sure how they cost should be shown in accounts. If a director is granted a 1,000 shares at a strike price of £1 and he is able to excise them three years later at £3 he does. What is the cost? I can see eps has been diluted because the shares in issue has gone up by 1,000.
Anyway Tremor continues to be an uncomfortable holding for me but the do seem to be a genuine cash machine. Even if you strip out the money raised in the NASDAQ offering the cash has still increased by a prodigious amount.
Regards
Michael
Liked Tremor International (LON:TRMR) for a long time. They have £275m in net cash and growing. EBITDA is above my expectations at £120m (I had pencilled in £100-110m earlier in the year). So on a cash adjusted basis trade on sub 4* which looks absurd. Compare that to other Adtech and they are miles off relative valuations.
There is a lot of historic acquisition depreciation to unwind which does mask the growth of the business as it comes through in the EPS and PE so better to view on the cash it generates.
Will spend $75m on a share buy back so hopefully that will chase away any loose shareholders and will be significantly earnings accretive.
Outlook for Q1 looks fine to me at min of $33m ebitda (Q1 last year was around $27m) so looking at a YoY uplift of 22% (remember Q1 is also quietest quarter). I like the fact that europe and RoW sales are now also growing quite significantly.
Good morning gents, very good looking results from MACF after a quick review, but I would appreciate your views...Many thanks DH2