Small Cap Value Report (Thurs 30 Sept 2021) - NUM, HSS, NWF, MEAL

30th Sep '21 by Jack Brumby

74 comments 11332 reads

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

Agenda -

Numis (LON:NUM) - H2 revenue up year-on-year (beating exceptional Covid comparative) but down slightly on the first half after a summer pause in corporate activity. Full year revenue of c£215m is expected to lead to 'significantly higher' profits this year, but are we approaching peak earnings?

Hss Hire (LON:HSS) - good trading results for this tools and equipment hire company, but, while the finances have improved, this has come at the cost of heavy shareholder dilution. The fact that it could have floated in such a condition makes me wary, but it is possible that improving market conditions will help fuel the ongoing turnaround.

Nwf (LON:NWF) - a quick AGM statement from a very steady and sensible dividend-payer. It's not the highest growth option out there, but it could play a useful role for investors more concerned about long term income. The valuation is undemanding.

Parsley Box (LON:MEAL) - c30% fall in share price today with FY21 revenue and profit forecasts reduced due to supply chain issues. Marketing spend is getting slashed, which will weigh on revenue growth in the short term.

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 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 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.

Numis (LON:NUM)

Share price: 366p (pre-open)

Shares in issue: 114,367,448

Market cap: £418.6m

It’s been a busy period for investment banks and corporate brokers. First we had the emergency placings driven by lockdowns, and then there has been the…

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gus 1065

30th Sep '21

Curiosity piqued on the Schroder Uk Public Private Trust (LON:SUPP) valuation - apologies to those with no interest. Different fag packet.

NAV as of June 30th was 40.65p per share (NAV £369.4m/908m shares). Of this, ONT was then valued at £90.7m. On today’s IPO numbers, SUPP ‘s position in ONT is worth (10% of 3.7% of £3.4bn @425p) plus (90% of 3.7% at £4.8bn @600p), or £174.4m. This is an uplift of £(174.4 - 90.7)m or £81.7m on previous SUPP NAV. So post IPO, the revised NAV would be £(369.4 + 81.7)m or £451.1m. Per share this equates to about 49.7p per share, about a 9p per share increase. Various assumptions here - not least that the rest of the moving parts in the Schroder Uk Public Private Trust (LON:SUPP) portfolio haven’t changed.

On today’s Schroder Uk Public Private Trust (LON:SUPP) share price of 35p, the discount to implicit NAV is about 42%.

Gus.

timarr

Ah, you want it both ways, you want to imply that post Brexit the UK is an international basket case like Zimbabwe but when called out on it, state "obviously" you're not comparing the UK Zimbabwe , so why even mention it?

In the context of Authers' article suggesting sterling was behaving more like an emerging market currency than an developed nation currency I thought it was a rather clever use of reductio ad absurdum, since surely no one could take a comparison between the UK and the basket case that is Zimbabwe (inflation rate still nearly 100%) seriously.

Which just goes to show you should never mark your own homework :-)

No further comment from me on this thread.

Silver Moon

Growing Directors remunerations only IMHO, it's just laid there, not earning its keep in my kennel along with Nahl (LON:NAH) which turned out be an even bigger breed. I know, I know, you'll say why don't I buy just the dips.

Silver

davidjhill

yep - as will many I suspect.

The revenues attributable to the company are all fully independent btw - they have 16 customers to date. The forward bookings include the exclusive re-seller agreement amounts with Verisilicon but they are not revenues yet, so there is no cross-contamination on the revenue front. That was thrown in as subterfuge.

The problem is that because some of the agreements are complicated it creates an opaqueness that someone wishing to go short can manipulate. As you say that cloudiness creates uncertainty and uncertainty creates downward pressure. Isn't going to change any time soon - only by revenues and customers outside of the Verisilcon and CPP channels.

Albertos

That's quite a surprise - I thought £SUPP held a bigger stake rather than a considerably smaller one compared to £IPO .

RNS 16/9/21

"IP Group, which was a founding shareholder in Oxford Nanopore in 2005, has a 14.4% undiluted beneficial stake in the Company, which was valued at £359 million as at 30 June 2021."

RNS 30/9/21

"IP Group announces that it has realised approximately £84m of proceeds* through the partial sale of its holding in Oxford Nanopore."

"Following the sale, IP Group holds 82,062,144 shares (or 10.3% of Oxford Nanopore) which is valued at £348.8 million based on the £4.25 Offer Price of Oxford Nanopore."

Given the current conditional trading price the value of £IPO retained stake is now (348.8 * 600/425) £492m - if my maths is correct.

So an overall uplift of (84 + 492 - 359) £217m from the 30/6/21 valuation - if my logic is correct.

Let's see how this pans out.

Phil

That's quite a surprise - I thought Schroder Uk Public Private Trust (LON:SUPP) held a bigger stake rather than a considerably smaller one compared to Ip (LON:IPO)

They got diluted along the way, as they didn't have the funds post Woodford to maintain their investment. Still, they've done a decent job maintaining any kind of stake given what a mess they inherited. The open ended Woodford fund holders weren't so lucky ...

Sorry - didn't realise there was a separate thread,

simoan

Hi Jack - really appreciate your reply. I agree the word biased is inappropriate and that you do point out many positives - but the overall flavour left in the mouth is negative. I look at the list of positives (fundamental growth over many years through thick and thin) and see a re-rating upwards to a higher PE on higher earnings as likely - but your view appears very much more muted. Anyhow, it's only a small thing in the grand scheme of things and I very much like your analysis - usually ; )

I have always felt that when you feel someone is being biased in their comments you should first look at yourself because the bias is nearly always much closer to home, especially where someone is commenting from a neutral position on something in which you have a vested interest. I have just re-read Jack's piece and feel it is completely balanced, but then I'm a neutral too :)

All the best, Si

MiserableJacktPotato

Ah, so rather than engage the point that Germany's relatively weak currency is crippling the economies with relatively strong currency such as Spain and Italy, three countries much more relevant to the situation the UK finds itself in, you thought you'd make a nonsensical comparison that you now openly say is irrelevant in the context of the discussion on the relative merits of a stronger or weaker currency. Plus it's worth noting that I never stated a weakening currency is good for competitiveness, I did state a stronger one is worse which is not the same thing.

So this whole thread has been a pointless exercise based you trying to show how "clever" you are and whilst I take much of the blame for that, with your previous history of running down Brexit it's hard to tell when you are being serious. I guess you've proved Poe's law (ironic given my screen name here) so that's an achievement of sorts.

dfs12

Like the turn it on yourself idea. Sounds like something I'd say to the kids!

GTrader

Anticipating of news regarding supply chain delays as per many other cos reliant on eastern imports. Would expect a spat of updates over the next few months. There is only so much pre stocking these cos can do.

KTF67

H2 guidance discussed margin pressure. Oddly shares that day weren’t down much so I sold, bought back this week given the decent derating. Could see more estimate reductions for this year but as price increases kick in late 21 / early 22 we should see a share price upside again.

ctoman

re Luceco (LON:LUCE) - I've read that its to do with supply chain worries - I think £UPGS tarred with the same brush

GN100

Kieranj077,

We all have different opinions but I find the Boohoo (LON:BOO) comments better on a separate page (I hold). If you look at that page today people are able to go into a lot of detail and this just tends to irritate the non-holders if posted here. I'm happy with it where it is - although I didn't push for the initial mopve.

Rusty2

Yes but the others such as Up Global Sourcing Holdings (LON:UPGS) and Volex (LON:VLX) have not fallen back so much, maybe their time will come? I sold out of Up Global Sourcing Holdings (LON:UPGS) a few weeks ago and top sliced Volex (LON:VLX) .

The fall could be overdone, depends how long these issues go on for.

James Kerr1

Re Luceco (LON:LUCE) (I hold) they do seemed to have been tarred with the same brush regarding supply chain problems. There are issues - but they are in a better placed than most to ride them out. They own their own factory in China, they feel that they can pass on inflationary costs (over time) specifically relating to raw materials and shipping, and they have increased inventory - something they pointed out in terms of increased working capital when they made their most recent presentation. I bought a few more lately and might buy again once the price settles - I think as a long term holding this has merit at current prices.

Wimbledonsprinter

Gus Curiosity also piqued on our differences in valuation of Schroder Uk Public Private Trust (LON:SUPP) (more apologies for those not interested).

In your calculation, you assume SUPP owns 3.7% of Nanopore - but this was their holding pre the IPO, in which another 123 new shares were issued - diluting SUPP to c3.15%, I believe. If you use 3.15% instead of 3.7%, your and my fag packets (or at least their back sides) will probably look very similar.

[In the IPO, SUPP has also sold shares, so their stake will now be below 3% and so any changes from here on, will not be disclosable.]

Hi Wimbledonsprinter.

Re. Schroder Uk Public Private Trust (LON:SUPP), I had indeed missed that the IPO is raising new equity thereby diluting SUPP’s holding from 3.7% to a lower figure. Thanks for pointing this out. At risk of trying to count angels on pinheads, presumably this will raise cash for ONT/put a higher number of shares in circulation - do you have a sense as to whether this is being factored in to the various numbers being discussed as to the ONT market cap at IPO? Either way, big picture seems to be that at the grey market IPO levels being discussed Schroder Uk Public Private Trust (LON:SUPP) appears to be trading at a healthy discount to its revised NAV.

Gus

I believe this is factored in. 82 million new shares were issued (not 123m as I stated earlier) plus 41 million secondary shares. The post IPO share count for Nanopore is 794,668,860 shares. The 82m new shares raised £350m cash (pre-fees) for Nanopore.

Details are here:

Investegate |Oxford Nanopore Tech Announcements | Oxford Nanopore Tech: Announcement of Offer Price

Phil O.

1st Oct '21

thanks David - yes I agree encouraging news on Sosandar (LON:SOS) (I hold)...and they've reached a 60,000 subscriber/member base which Julie (Dir) says is very encouraging (they argue they are not fast fashion so this is a stronger loyal base they are building)...

Small Cap Value Report (Thurs 30 Sept 2021) - NUM, HSS, NWF, MEAL

Numis (LON:NUM)

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Jack Brumby

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