Small Cap Value Report (Thurs 27 April 2023) - SDG, TW., CREO, IPF, 4GBL, PPHE, HOTC, RWS, WINE, IBST

27th Apr '23 by Paul Scott

39 comments 8958 reads

Good morning from Paul & Graham!

Today's report is now finished at 12:56.

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.

I'm happy with that, we covered lots today - with plenty left over for me to scrutinise tomorrow too.

Summaries

(more detail below, in main sections)

Sanderson Design (LON:SDG) - down 8% y’day to 134.5p - Paul - GREEN

FY 1/2023 results in line with expectations. FY 1/2024 outlook also in line. I review the numbers in detail below. SDG remains one of my favourite value/GARP shares.

International Personal Finance (LON:IPF) - up 3% to 98.9p (£221m) - Graham - GREEN

Q1 update is ahead as all divisions are performing at this international lender. Impairments ticking up but still below their pre-Covid levels. Good growth in lending and receivables and the company is ready for new Poland regs. A risky share but the value keeps me interested.

£PPHE - down 2% to 1120p (£474m) - Graham - AMBER

Solid trading in Q1 from this hotel group with summer bookings giving it confidence for the full-year revenue outlook. Occupancy is still lagging and needs to improve to pre-Covid levels before I can have any faith in the written-up valuation of its balance sheet.

Quick comments

Taylor Wimpey (LON:TW.) - 125.6p (pre-market)…

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Roger Baron

27th Apr '23

I'm confused. Above says Paul has done Naked Wines (LON:WINE) but it doesn't seem to be there - or at least I can't see it.

RJS89

it's there!

it's between RWS Holdings (LON:RWS) & Ibstock (LON:IBST)

Snazzytime

hi shipoffrogs

Driver (LON:DRV)

The post is poorly worded. They are talking about two different things.

1. ED note the level of NAV at £16.4m (which is actually in excess of the this morning's M/Cap of £14m hence shares are trading at a discount). M/Cap is now £15.7m following today's 3p SP rise to 30p.

and they separately note

2. The level of net cash at £4.9m represents 35% of this morning's M/Cap of £14m

Hope that helps.

Snazzy

Silver Moon

Missed the presentation, the notice given being too short (received at 7.18 am today), but will find the recording on Investor Meet Company when it's available as I do hold.

ezlifeme

Paul & Naked wines - It's in the quick comments section

rmillaree

Isn't adding net cash to NAV double counting?

I suspect they arent "strrictly speaking" double counting - ie there are two different statements one being nav is great and the other being net cash is great. It could be possible to have great nav without any cash - so i guess they are kinda saying the net cash is tyhe cherry on top. Or perhaps its their best atemptn at positive spin with the cards they have.

eParo

Staffline (LON:STAF)

Staffline (AIM: STAF), the recruitment and training group, has been notified that on 26 April 2023, Henry Spain Investment Services Limited, a person closely associated ("PCA") with Thomas Spain, Non-Executive Director and Interim Chairman of the Company, purchased 152,517 shares of 10p each in the Company ("Ordinary Shares") at aprice of £0.3802 per Ordinary Share and purchased 42,762 Ordinary Shares at aprice of £0.386 per Ordinary Share.

Following the above transactions, Henry Spain Investment Services Limited has a resulting notifiable interest in 32,342,585 Ordinary Shares.

T. M. Spain has bought 3,071,168 since start of this year. Is he lining up a buyout? HR Net are a big shareholder here.

Stocko rank has increased by 25% over the last 30 days. I've followed the money here.

Equity Development

Mattioli Woods (LON:MTW) - new acquisition, new note - Mattioli Woods (MW) has acquired 50.1% of White Mortgages Limited (White) with an option to purchase the remaining 49.9% within 24 months. White is based in Lincoln and specialises in providing independent mortgage advice as well as protection insurance advice. In the year to 31 Mar 23 it generated revenues of £0.68m and PBT of £0.35m. White looks like a good fit: MW’s existing advice proposition is extended by adding a new in-house mortgages capability, and the White business is well-positioned to benefit from being fed more business from MW’s large adviser-base.

It looks like a low-risk deal for MW which has paid £0.425m on a cash-free debt-free basis for its first-tranche 50.1% stake of White (a pre-tax PER of just 2.4X). The second tranche of the deal for the remaining 49.9%, if exercised, will be for a consideration of up to £2.625m, dependent on the attainment of specified targets being met. We would expect the deal to be earnings enhancing and therefore, if the second tranche is exercised with a performance-linked payment in place, we would foresee the full deal PER as being less than 8.7x, an attractive proposition for MW shareholders.

We remind readers that acquisitive growth is a core part of MW’s strategy. It has a long track record of success with 34 acquisitions (excluding White) since its admission to AIM in 2005.

Link here: https://www.equitydevelopment....

CHRI55

Likewise, big money getting spent here, the reason will be known soon I'm sure...

Thanks. Found it!

mikebianchi

Sanderson Design (LON:SDG) Let us not forget although it did not get a mention in the RNS, the electricity and heating costs for the factory should tumble providing they have not bought ahead too far, if they can hold pricing margin gains should be very helpful.

The Ox 2906

Paul & Naked Wines I thought it was a postcard from Gozo!

The Boon Fund

Interesting on the cautious outlook for Brave Bison (LON:BBSN)

As the outlooks this week from the BIG players (Amazon, Google) have been decent.

However, Brave Bison operates at the somewhat discretionary end of marketing unlike Amazon and Google that are more performance driven marketing.

30% drop in Heiq (LON:HEIQ) today seems overdone? Just a few weeks delay in getting results published?

Albeit the announcement had red flags all over. Process chaos, new systems chaos. Maybe reflective of a terrible management? But the shares look really cheap now.....

28th Apr '23

Cheers Ox 2906 - Classic comedy duo script, the straight guys lines just set up an easy laugh for the funny guy

Zipmanpeter

Re Ibstock (LON:IBST) - the balance on the demand side is covered in Paul's commentary but the big brick makers, led by market leader Ibstock, have also been investing big in CAPEX and R&D in recent to reduce the energy component of brick production on the supply side.

Ibstock have a major new factory equivalent to 5% of national demand is opening in the next year or so, FORT a year or so later. Together with expected falling energy input prices next year, this will generate improved margins. As the market is dominated by a triopoly, this should give a good tailwind. I hold some already but am considering buying more as there is also a decent dividend whilst we wait.

abtan

Heiq (LON:HEIQ)

Hi Boon

I couldn't agree with you more and must admit that I've very tempted to take a very very small position here.

It's worth noting as well that HEIQ own most of a subsidiary that was only last year valued at $200m when Hugo Boss bought a 5% share in Feb 2022.

Even if this subsidiary was now worth 75% less (i.e. $50m), there's surely still a deep value play, especially given the net cash positive position (excluding leases), low cash burn and current market cap of only £25m.

Hi Zipmanpeter

Ibstock (LON:IBST) capex spend this year is material, wiping out most of the cash generation as far as I can work out.

It's one of the reasons why I probably wouldn't buy today (just in case something does go wrong), but if all goes well it certainly looks like an excellent company for the long term.

Below is an extract from the Michelmersh Brick Holdings (LON:MBH) FY presentation, which might be of interest to you and other brick lovers.

I hold Michelmersh Brick Holdings (LON:MBH) and have my eye on Wienerberger AG (WBAG:WIE) .

Presentation Link:
https://www.mbhplc.co.uk/wp-co...

Mulberry

14th Jun '23

Hotel Chocolat (LON:HOTC) s an ugly share for all the reasons you've listed before. I wrote about this here a couple of years ago when the shares were 350-400p and tried to short them at IG Index but couldn't! I know the chocolate industry and HOTC is smoke and mirrors when it comes to production. Great brand..poor product if you know chocolate. Sales, but almost impossible to make a margin on which is odd as their price point is mid+ and they apparently have a huge mailing list, but something is going on with costs or with ARPC. This share starts to become value at 75p. No chocolate company makes money unless it's has growing volumes in the US, and China. You cannot make big money from mid market chocolate in the UK.

22nd Jun '23

Hotel Chocolat (LON:HOTC) I'm going to add another comment now that I've been through their March 2023 report. The takehome is that it should be trading at less than 1/2 its current price of 140p because (i) its has no real strategy for its chocolate! (ii) it cannot drive revenue and margin growth from its digital marketing base without constant innovation, but this costs money every time, so as a single-branded company, it's stuck (iii) it's focusing on Japan, instead of the USA and China. HOTC's overriding strategic moves are WRONG. Shame, as with the right ideas, it could make a lot more money but at this price and with this shareholding structure, it's a dog.

Small Cap Value Report (Thurs 27 April 2023) - SDG, TW., CREO, IPF, 4GBL, PPHE, HOTC, RWS, WINE, IBST

Summaries

Quick comments

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Paul Scott

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