Small Cap Value Report (Tue 20 Oct 2020) - LUCE, DOTD, SOLI, TRT, CML

20th Oct '20 by Paul Scott

99 comments 12021 reads

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

This is today's agenda;

Luceco (LON:LUCE) - Q3 Trading update

Dotdigital (LON:DOTD) - Trading update

Solid State (LON:SOLI) - Trading update

Transense Technologies (LON:TRT) - Final results y/e 30 June 2020

Cml Microsystems (LON:CML) - Trading update

Timings - I've started late, but should be finished by 2pm. I'm tending to focus on just getting the reports done, rather than becoming embroiled replying to reader comments, so please don't be offended if I don't reply to anything addressed to me for the time being.
Update at 14:01 - today's report is now finished.

Luceco (LON:LUCE)

Share price: 244p (up 11% at 10:36)
No. shares: 160.8m
Market cap: £392.4m

Q3 Trading Update

Luceco plc ("the Group" or "Luceco"), the manufacturer and distributor of high quality and innovative wiring accessories, LED lighting and portable power products, is pleased to provide the following update on trading for the quarter ended 30 September 2020 ("Q3 2020").

I've written several times this year about Luceco, because it keeps putting out strong trading updates. Here are my notes from the recent interim results, which I've just re-read, to refresh my memory. Back then, on 8 Sept 2020, the company guided us towards 11p EPS for FY 12/2020, with further upside possible. At the time I concluded;

It sounds like the 2020 forecasts could be increased further - therefore I'd say the likelihood is that this share could have further upside potential. It's not expensive at the moment, given how impressive earnings growth has been. [SCVR 8 Sept 2020]

As expected, it's another increase in guidance for this year, by a surprisingly large amount;

Both Q3 2020 performance and current trading are ahead of previous expectations and as a result we increase our guidance for full year 2020 Adjusted Operating Profit from at least £23m to between £28m and £30m.

Why have they switched from guiding on EPS, to adj operating profit? I would have much preferred EPS guidance, as before. The trouble with operating profit, is that it's been mangled by IFRS 16, so is no longer a useful measure, as it omits part of the cost of rental properties (which is now further down the P&L, in finance…

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john652

20th Oct '20

Re Saga (LON:SAGA)

The have been falling like a stone since the right issue, I think the shares are now at 8p (dividing by 15 to get the pre consolidation price).

Anyone who followed Paul, or Paul, have you been buying/topping up, nothing much seems to have changed apart from more sellers.

Rusty2

Jack has done several articles on video gamers, here is one: https://www.stockopedia.com/content/finding-the-big-winners-in-uk-gaming-frontier-developments-and-codemasters-607353/

Most will now be too large for a small cap report.

I thought Paul had replied?

Yes here it is: "

Hi Carey,

Thanks for the pointer. I had a quick look at SFIX - lovely revenue growth, but it doesn't seem to make any profit. I do sometimes wonder if I'm wasting my time looking at UK small caps, when US growth stocks do so well.

Interesting company though, so thx for flagging it.

Best wishes, Paul."

Re hidden screens in new site - agree they are too hard to find, I just spent 10 minute looking and cant find half of them???

mojomogoz

Hi Carey...you could write up your knowledge and thoughts on the stock in a separate post...that would be interesting and may get general responses

Newer users can't switch to the old site, not sure when this started but it was some time ago so probably if you joined this year you can't go back to the old site. This means they can't see fantasy funds or the old charts.

GloucesterBob

Saga is one of my "punting" small allocation shares. After reading about the quick turn around tests, and I can see the retired taking it up, after all, what's another 2 weeks self isolation for them on return, I have bought another tranche.

Took my loss from 36% down to 18% down. With the Roger de Haan in for a lot more than me and a lot higher price and the above information, I see this moving from punting to a smart move purchase.

wallop

Thank you

ken mitchell

I didn’t know that. It means newer subscribers are missing out. Surely a new site should be an improvement on the old one and not the opposite?

I haven’t checked carefully buy maybe the figures in many of the other headings on that old site list are also out of date. If so, why?

It will be a real shame if Stockopedia stop allowing access to the old site. Based on my own experience with the new site there’s a case for writing off the money spent on the new site and further improving what once was their superb old site.

Whitbourne

Saga (LON:SAGA)

"Have you been buying/topping up, nothing much seems to have changed apart from more sellers?"

Yes, I bought for the first time last week, being persuaded by Paul's thesis that a vaccine and/or reliable testing will be available between now and next spring when the ships are booked to start operating again. As he said, you could wait until that news, but by then the share price may have doubled.

I know what you mean about "nothing much seems to have changed" but the daily fall in share price is itself a change - it changes the risk/reward. Like you, I watched the price go down day by day until the proposition became compelling, in my view. Then it went down some more! But that's fine, the underlying thesis is sound.

I would summarise the investment case as:

- a once-trusted brand that was tarnished by PE ownership but still commands residual loyalty, now with a new management team and Chairman

- brand new ships in storage with good earnings potential

- recapitalisation at higher share price than I can buy currently in the market

- an insurance division that can fund the losses of the travel arm while we wait

The last two items are key I think. That is the protection against a total loss. If it were not for those I would not have considered it.

I feel confident in these, on a one-year view. It's not a short-term trade (I am no good at those).

Saga (LON:SAGA) I must agree the risk reward does look a lot better & the kicker is the cruise ships & this is interesting, saying the Royal Caribbean are planning start 4th Dec, time will tell but Dec 4th isn't a long time away.

https://www.cruiseindustrynews...

Having scanned through the website, there seems quite of lot of activity where cruises are starting up. After all when the states that have accepted the virus has gone pandemic, and it cant be put back in the box, why stop someone travelling from one country to another where the rates of infection are very similar. Especially for cruises, ie if the port has an acceptable xxx per 100,000 cases or whatever, dock in the port, in not, move on.

At some point that type of joined up thinking will happen, maybe not led by UK, and certainly not Wales, but some rules will no doubt be agreed & synchronised and they will start sailing again. So Saga (LON:SAGA) looks a lot better at 130p

Chriskay

Don't want to boast, but as Sea Dream 1 was mentioned in the same post as Saga (LON:SAGA) I felt I should just mention that I have been on that ship twice on cricket cruises in the West Indies - those were the days - cricket on the beach with David Gower! However total capacity is only 112 guests and they were working on reduced capacity I think - certainly distanced on board. I do think a cruise ship could form an ideal bubble but it would be quite another challenge to do this on bigger ships of 1000+.where the risks of an outbreak on board would be much higher Also Seadream was going across the Atlantic only stopping in Madera. If it was offered I am sure the serial cruisers would jump at the chance but the responsibility on the cruise line would be enormous. Not impossible though as cruise ship companies are run by pretty creative people.

Thornabian

Team17 is the best. The games are best but the leverage of IP and building the same platforms of games allows them to churn out more than 7 games a year of high quality.

The Survivalists, Overcooked and the new Worms titles are doing well. Looks highly valued but it is still small given the market size and it is highly valued for good reason.

MiserableJacktPotato

I know at least one strong holder that bought more in the last 17 trading hours :)

They've also been using profits to pay for warehouse expansion,

Gromley

I too have some Saga (LON:SAGA) and I wrote my reasoning elsewhere.

I did ponder whether I was buying too soon, but was counting on the refinancing to put a floor under the price and perhaps even change the trend. Wrong!

Otherwise, the signal for my buy would have been a clear sign that the cruise business could restart. Mostly, I think that has drifted further into the uncertain future in the last couple of weeks.

Saga have got robust pent up demand for cruises when it can restart and one can infer that these customers are more inclined to take their own assessment of the risk.

Obviously cruise-ships have been something of a focus earlier during the crisis. But effectively they are hotels that happen to float and Saga's ships in theory should be easier to make Covid secure.

Whilst the "instant test before travel" might well represent progress; it seems to me that their biggest challenge will be to negotiate the right to disembark with all of their stopping points and to be able to give a degree of reassurance to their customers that those deals are robust.

Personally I will not be topping up here until and unless, the company feels confident enough to reveal their firm plans for restarting cruises (their latest public expectation I think was November - which I am confident will not happen).

There is a potentially good investment here, but why buy just yet?

Gromley

Saga cruises are scheduled to start in February with their first one the inaugural on their new ship Spirit of Adventure. They’ve only got the two new cruise ships. So other parts of the business like their travel and insurance businesses are equally important. That’s a big plus compared with sector giant Carnival. Their entire business is cruises....yet their share price is faring far better than Saga.

Phuntt

I’m actually 1 step further than this Gormley. Looked at this a couple of weeks ago when Paul reviewed. I think there is 2 steps before I buy - 1 evidence that cruises can restart and 2 evidence that older people are comfortable booking again. The second step is more important than the first for me and I’m positive I’m be giving up some return waiting for the answer but that gives me 2 things - surety and also momentum (positive price sentiment from the evidence we are discussing). I don’t need to be a hero here

Just to finish the night on a Boohoo (LON:BOO) post. CEO buys 300,000 after hours, and I see 3 other trades of 100K, 400K and 600K as well.

Suspect this one will be interesting first thing.

Sweet dreams

Totally agree Phuntt - we have though already been provided with some of the comfort that you (& I) wanted. I can't recall the exact numbers, but around 2/3 of cancelled cruises have been deferred rather than refunded - which I took to be pretty bullish wrt customer attitudes.

Cruise restart dates - thank you ken mitchell - now you remind me I had heard he revised February target date to restart. I would still say that feels quite speculative.

Small Cap Value Report (Tue 20 Oct 2020) - LUCE, DOTD, SOLI, TRT, CML

Luceco (LON:LUCE)

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Paul Scott

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