Small Cap Value Report (Tue 18 Oct 2022) - FCAP, RBG, 888, SOS, SED

18th Oct '22 by Paul Scott

52 comments 8522 reads

Good morning from Paul & Graham!

Audio interview - this latest one is me talking yesterday to the CEO of Sanderson Design (LON:SDG)

I think Lisa Montague's passion for the business comes across really well in this discussion. Obviously in current macro conditions, anything could happen, but the company did confirm full year market expectations recently. Organic expansion in America seems the main growth strategy, where SDG is only scratching the surface of a large market. Bulletproof balance sheet too. This is near the top of my personal watch list, to buy back in at some point. Lovely strong balance sheet too.

I'll type up a written summary & post it here later today, for those who don't have time to listen to the audio.

Agenda

Paul's Section:

finnCap (LON:FCAP) - confirms press (Sky again!) reports that it has received a takeover approach from rival broker Panmure Gordon. I give my thoughts on this below, and hope that Finncap remains independent, as it has been a good friend to the private investor community, providing us with research, and access to company management teams. Whereas Panmures, not so much - could try harder.

Revolution Bars (LON:RBG) - announces FY 6/2022 results (due out today) will be "slightly delayed" because management are busy working on an acquisition, which has triggered the "substantial transaction" AIM rule 12, so out of curiosity, I have a dig into the AIM rules. Results are confirmed to be "consistent with previous guidance", so I don't think there's anything to worry about here.

UPDATE: news coming through from Propel, the sector newsletter, that this is the acquisition target -

Revolution Bars Group set to acquire Peach Pub Company: Revolution Bars Group, which operates the Revolution and Revolución de Cuba brands, is set to acquire Peach Pubs, the 22-strong gastropub operator, in a deal valued at between £10m and £20m, Propel understands.

Sosandar (LON:SOS) - a solid H1 update, trading in line with expectations for the full year (which is a profit of £2.0m). Stunning organic growth. No sign of consumers retrenching for SOS. There's obviously risk from a possible downturn, but I explain why SOS's outsourced business model should protect it. Long term, I think this share could be heading a lot higher. Short term, it should be OK I think. A firm…

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TheFloatingInvestor

18th Oct '22

Never had a problem with AJ Bell...but guess that's Youinvest.

qimotte

Does this help?

https://www.trinitydelta.org/r...

Silver Moon

ii works for me.

Cuddlesticks

I agree with the positive comments around SRC management capability. For me the CEO Max comes across very well. I also think they have managed to successfully navigate energy cost challenges so far (concrete is very energy intensive) and don't seem to be suffering from a softening in demand.

That said there is quite a lot going on with the Group and I was disappointed only £19.3m operating cash flow was generated from a headline EBITDA of £47.6m. Very little was left after £15m of Capex. £18m of difference was due to seasonal working capital but I was disappointed a reconciliation of operating profit to operating cash flow was not provided (although I did request one from the IR team).

Needless to say I'll be hoping for some better news on the Group's cash flow at the trading update.

I almost added to Shanta Gold (LON:SHG) early this morning as I was aware it is going ex-dividend next Thursday but my wife had gone shopping taking her mobile phone leaving me unable to complete the bank's security check. C'est la vie, I will look at again next week when the price may have cooled. We hold Shanta Gold (LON:SHG) in our 4 accounts and they are all underwater of course.

Tommy H

IWeb for a simple service (owned by Halifax but lower fees than their own brand for exactly the same product that I can tell)

Funnymoney

The raise is a death spiral. £10m+ of shares could be issued at a discount to market price each year to pay interest and principle on the convertible. In other words, the state of the business may not be totally correlated with the outcome for the shares.

Graham Neary

Thanks for sharing your views on SED, qimotte. I can see myself turning outright bearish on this one in due course.... sounds a bit shaky alright. G

raggedtp

If you want service (but not advice), then Charles Stanley Telephone Execution Only. Possibly not the same as CS Direct. Having been a CS advised customer for years, who wound up deciding we didn't need advice any more, we are probably rare beasts with this, but it enables us to call real people, who know me as I am relatively active. They are an in-house dealing desk and admin service and can deal in a wide variety of stocks, work orders etc, but you can email anytime as, as I do from other countries. I'm not sure if there's a minimum amount for this, but message me somehow if you want a direct contact.

The raise is a potential issue. £10m+ of shares could be issued at a discount to market price each year to pay interest and principle on the convertible. In other words, the state of the business may not be totally correlated with the outcome for the shares. The next few years are not ideal for loss making blue sky companies.

Funderstruck

£SDG Thanks Paul for the detailed CEO interview with Lisa M; she clearly understands the business , finance & marketing. I was out a while ago but it is back on the watch list.

As others , i do appreciate your personal , polite & in depth manner in these interviews; which leads to a far better understanding of Company dierctors.

Camtab

Thankyou.

Paul Scott

Hi Andrew,

No, I've wound down my spread bet accounts, as it's just not suitable for this kind of market. Also, it stresses me out, having to constantly check the account, and deal with margin calls, etc. I need to live a quieter life, more in the slow lane in future, as I'm not getting any younger.

Regards, Paul.

Thanks Funderstruck!

My pet hate is interviewers who are always rushing, and interrupting. So in mine, I try to put the interviewee at ease, then let them talk on each point without interruption, and with no specific deadline (although 40 mins is usually enough!). I think it works quite well, and everyone I've interviewed so far seemed to enjoy it & got a lot of useful information across. Plus I think we pick up on what they're like as a person, and just the little asides can sometimes be quite revealing - e.g. Lisa Montague at Sanderson Design (LON:SDG) is clearly ambitious for the company, and a bit frustrated that the pandemic has slowed them down a bit. I've got a good feeling about her and the business, so think this could be a good long-term investment. I must buy some, when I have some spare cash.

Harry Hindsight

"A smarter person would have sold out at some point, but I’ve taken a deliberately “hands-off” approach to my portfolio, only selling shares out of necessity and doing my best to let all other positions run for as long as possible".

Not dumb but an investor as opposed to trader. Did that for THG (LON:THG) Boohoo (LON:BOO) Ferrexpo (LON:FXPO) Volex (LON:VLX) - oh well one day my prince will come.

Two strategies, but can do both - need some trading to get in some wins and keep the confidence (hope) going.

Tried spread betting - good god - how can things be so unpredictable - know Mr Market watches the RNS's and take out the shorts but not on the daily moving average supports. This has no pattern at all just a lottery.

The Bears are not hibernating yet methinks.

TamzinPiworld

Thanks Paul. Here's the Sosandar (LON:SOS) H1 23 trading update call from this morning, a great Q&A: video & podcast.

The Boon Fund

I am very pleasantly surprised by Sosandar (LON:SOS) update today. I was expecting a profit warning, given that they've been running "20% off everything" for many, many weeks now.

I used to be a holder and its still on my watchlist, will re-evaluate soon as on first glance the update sounds good.

Michael C

Lennart - you may not see this, it's late in the day so I may have to re-post tomorrow. I am with Hargreaves for my SIPP which is almost all cash at the moment - I know £HL is receiving much negative press and I am just wondering whether your motive for seeking ideas about alternative brokers is founded on fear of big problems to come or something else.

With huge macro headwinds for Clothing and Bars (see Barclaycard's Sep spending data, and their consumer survey) - you really need to be able to pick the winners, as majority will either struggle (mild profit warning) or do very badly (go to zero).

And it is not only Barclaycard data showing this, but also the retail standard GfK monthly data.

I use IG for one of my share dealing accounts, and found it decent. No advice at all, pretty no-frills interface. Live share data (at least for the UK) and possibly able to get DMA (free) and L2 (paid). Cheap execution fees. App works 100% without issues, but again is really no-frills.

They are also now big enough that I don't worry about them going under in an economic crisis and my funds and shares being frozen. (maybe famous last words!)

Small Cap Value Report (Tue 18 Oct 2022) - FCAP, RBG, 888, SOS, SED

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Paul Scott

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