Small Cap Value Report (Tue 20 April 2021) - CTG, BRCK, W7L, RBGP, PRV

20th Apr '21 by Paul Scott

41 comments 8746 reads

Good morning, it's Paul & Jack here with the SCVR for Tuesday.

Timing - I think we'll leave it there for today, 5 companies is enough for one day! Today's report is now finished.

Agenda -

Paul:

Christie (LON:CTG) - a quick review of its FY 12/2020 results, issued yesterday. Recovery looks already priced-in, especially when you take into account the increased pension deficit.

Brickability (LON:BRCK) - a positive update, ahead of expectations, but they fail to mention profits are down on last year. This share has more than doubled in the last 6 months - that looks justified, but where's any additional upside going to come from? Probably priced about right.

Porvair (LON:PRV) - positive-ish trading update. Signs of recovery starting, so more optimistic for H2. As always, I struggle with the high valuation of this share, given its lacklustre growth, and sideways share price, in the last 3-4 years. Just feels like the growth story has gone a bit off the boil.

Jack:

Warpaint London (LON:W7L) - this supplier of cosmetics has had a couple of false starts since listing in 2016 but trading momentum is improving. Returns on capital have been poor but the founders continue to run the business and remain its largest shareholders. Have lessons been learned?

Rbg Holdings (LON:RBGP) - acquisitive professional services group adds another business to the fold and sees further consolidation opportunities in its sector.

Paul's Section

Christie (LON:CTG)

105.5p (down 5% yesterday) - mkt cap £29m

Preliminary Results

Christie Group plc ('Christie Group' or the 'Group'), the leading provider of Professional & Financial Services (PFS) and Stock & Inventory Systems & Services (SISS) to the hospitality, leisure, healthcare, medical, childcare & education and retail sectors, is pleased to announce its audited preliminary results for the 12 months ended 31 December 2020.

Reading through the commentary, it immediately struck me what a sprawling group of different businesses this is, considering the market cap is only £29m.

Christie Group operates in two complementary business divisions: Professional & Financial Services (PFS) and Stock & Inventory Systems & Services (SISS). These divisions trade under the brand names: PFS - Christie & Co, Pinders, Christie Finance and Christie Insurance: SISS - Orridge, Venners and Vennersys.

Tracing its origins…

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pj8

20th Apr '21

Not if they're in ISAs. And where shares are held on platforms, they appear on companies' share registers in (and as) the platform's undesignated nominee account

thirty fifty twenty

Rbg Holdings (LON:RBGP) excellent results. i believe that this is the first RNS that refers to the 'big cases'. these could bring in 130m (per last presentation), that's 150p a share in 2022. RBGP has an 85% success rate in such cases over a 15 years period - obvs no guarantee to future success.

this is the first RNS that they highlight the cases and the fact that a potential 150p s NOT mentioned o included in broker forecasts.

disc i hold

slopsjon

Primark shopper numbers 'back to pre-Covid levels'

Camtab

Watchdog look a bit closer. The LFT is a leader at this point. Only 1 negative misread out of 122 and specificity of 98%. Really very good. But that is not the story here, Avacta's business is Affimers be it diagnostics or therapeutics they have a role to play. The current sp probably is fair for the LFT but the real promise is in the Stage 3 tests they are currently running on a Chemotherapy drup called Doxyrubicin which is a well known and used but very toxic chemo drug. Anyway if you have any real interest there is enough there to get you going. You can decide if you think it is interesting or not.....

Hargreaves Services (LON:HSP) - materially better from its German JV.

its owns just over 50% of this JV but is entitled to 86% of the economic benefit. it was 12 months ago that Hargreaves Services (LON:HSP) said profits from the JV would enable an 'extra' 12p per annum divi to be paid.

HSP other businesses continue to perform well.

so it looks like a very secure 20p divi for this year, and 22p next year per broker fcts.

thats a 7% yield, with net CASH and undeveloped property assets of c. 120p a share.

also, the chart looks to me to have a very solid bottom formed.

disc i hold.

Paul Scott

Very kind, thank you! :-)

Berksbee

Frankly I am a tad jealous of people who can write so quickly and lucidly! But it is much appreciated.

shanklin100

A 1% false positive on LF testing makes them unusable for mass events in my opinion. Turning 500 people away in a football crowd of 50k, for absolutely no good reason, is IMHO completely unacceptable. This is especially so if the infection rate in the population is say 1 in 10,000 so typically 5 people out of the 50k would actually have Covid.

peterg

Well, a 1% false positive rate isn't ideal, but if the choice is turning away 1% of people who are not infected in order to keep those who are infected out and to keep the infection rate down - which may lead to needing to stop all 50k from attending, then it may not be a bad trade off.

proffittpar

Hargreaves Services (LON:HSP)

Hi Paul,

Would it be possible for you to provide your comments/insights following the trading update from Hargreaves. I don't think it has been reviewed/commented on for sometime and your overview/analysis would be most appreciated.

tindrum

Joules (LON:JOUL) have announced a secondary placing of around 5.25M shares. The founder (Tom Joule) is selling approximately a fifth of his holding to diversify his portfolio. This placing will leave him with around a fifth of the shares. Shares are down ~5%.

Silver Moon

2021 has seen a continuing improvement in £Joules fortunes I must say, so now is as good a time as any other to top-slice and diversify, wish I could too only I'm 33% underwater thanks to my ideas on diversifying. I look forward to the trend carrying on.

whatmore1951

Ah EBITDA. What we used to call gross profit in the olden days.

Looks like the sale went through at 232p and the shares are now slightly up on the day.

FuzzyHaha

£CTG Paul, you referred to increased activity post-COVID. After the last recession a lot of pubs / hotels closed. Although they're being marketted, Christie would only be paid upon completion of the transaction, so I can see a lot of revenue being deferred rather than quick turn around sales / re-lettings.

Boon

If only someone invented a Quality rating for brokers, similar to the Quality rating on Stockopedia!

That's a new ESG slant...! HS2 in the no-invest bucket.

Can't really trust first few days or first week numbers. Might just be short-lived pent-up demand and those Instagrammers looking to jump on a trending sexy headline, that vanishes within the week.

Just like all the airlines and package providers saying surge in travel interest and bookings the day after Boris announced roadmap. But here we are, two months on, and none of the travel providers have come out with "expect to exceed market expectations" statements yet.

Gromley

Wow, I'm delighted to learn that I'm not as old as I thought as those "olden days" must definitely pre-date me.

I've always had 'Gross Profit' down as the revenue you get from selling your widgets less what it cost you to make them.

EBITDA then effectively also takes account of your cash costs of running the business, paying your staff, paying the rent (no lets not mention IFRS16!) , etc.

EBIT, further takes account of depreciating the assets you use to make this profit. (Important because if your Depreciation & Amortisation policies make sense, then you need to be saving cash to ultimately replace those productive assets.)

PBT (why not EBT?) then also accounts for paying interest on the debts you have.

Finally you get to PAT (why not EAE? - "Earnings After Everything"?) Which tax account of corporation tax.

EBITDA I think really became the norm during the dot-bomb. Mostly I think because this made "earnings" seem more impressive but second because of an implicit assumption that the assets (Tangible & Intangible) were actually evergreen and would not actually need replenishing and also the assumption that as revenues and 'earnings' scaled up the initial debt would become insignificant.

Personally I think that all of these metrics can be useful, but I would agree that EBTIDA should not in most cases be the most important metric on which to value a company.

stevenhume

28th May '21

Agree - a lot of people are overlooking these cases which do not show in the accounts (other than time/money expended) and are potentially massive when compared to their 'normal' profits.

Small Cap Value Report (Tue 20 April 2021) - CTG, BRCK, W7L, RBGP, PRV

Paul's Section

Christie (LON:CTG)

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Paul Scott

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