Small Cap Value Report (Tue 21 July 2020) - JDG, TED, SDI, BIDS, AO., BMY, CTO

21st Jul '20 by Paul Scott

107 comments 11142 reads

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

The news coming out of Oxford University sounds very encouraging, with talk of a possible covid vaccine by the end of this year, if further trials are successful. Wouldn't it be wonderful if a vaccine is successful, and is given to the world by British scientists? Let's keep everything crossed to hope it works. I suppose we mustn't jump the gun, but this surely increases the probability that we should be thinking in terms of a bullish outlook for sectors that have been smashed up so badly, such as hospitality, travel, etc.. Providing companies have the balance sheet strength to survive into 2021, then some of these shares could be very lucrative from this point onwards. Hence I've closed my shorts, and am now thinking in terms of economic recovery, and maybe things even returning to normal next year? If a viable vaccine is imminent, then investors are likely to look through poor 2020 results. This is a big opportunity I think, to snap up some bargains.

Please see the header for the company announcements I'll be looking at today.

Estimated timings - we'll see how I get on.

Optibiotix Health (LON:OPTI)

The CEO reached out to me, with a slightly ill-tempered reply to my negative article about his company yesterday. Bizarrely, he accused me of lying, and having an agenda against Tom Winnifrith! (who I've had no contact with for several years). Complete nonsense of course, but there we go. Whereas if he were a regular reader here, he'd know that I just give my opinions on shares, warts and all. I'll have a look at that later, and formulate a response.

It's absolutely fine for companies to have a right of reply, especially if I've been critical of the company & its track record, as in this case. So once today's news is out of the way, I'll take a look at what he says & publish something about it. Or it may be tomorrow, depending on timings.

Six years after listing, and having generated little meaningful revenues (let alone profits), it's no wonder the heat is on, and he wants to shoot the messenger.

Gattaca (LON:GATC)

I've had another snotty email, from the PR to this staffing company, demanding a correction re its net debt. Again, I'm happy…

Unlock with Email

Unlock with Google

Already have an account?
Login here

Terry Dickens

21st Jul '20

Thank you, Howard, that's very interesting and it puts all the speculation into perspective. I will now go and read the link.

How wonderful is Stocko.

Laughton

re Covid - interesting and encouraging take on immunity and how long it might last from Dr John Campbell. For those who haven't come across him before, he's been following the course of this pandemic from the very early days. Of particular interest perhaps to those who've recovered (PS):-

https://www.youtube.com/watch?v=R3_wSU1JnTE

Man of Steel

Like Paul I think there are some sensible ideas baked into the £AO. Value Creation Plan, but the share price growth seems massively ambitious and unlikely to be achieved. AO is one of those companies whose services I've used and valued which led to look into them as a potential investment. All I can say is that it looks better to be a customer than a shareholder! Whilst the growth is solid, the margins are miserable, and the current valuation already looks high. The idea that this might rise a further 5x over the next 5 years seems hard to believe, but I've been wrong before, so what do I know! In it's current form it's a distribution business trading on razor thin margins. Any valuation or multiple should reflect this.

I like the business model, but not the valuation at either today's price or the aspiration set for the future. For me this is a shorting candidate, even at the current price...

Breakout Trader

Bidstack is an interesting one. I hold a few shares, having been sucked in by some fervent ramping last year.

Reality then set in, and the shareprice tanked. I should be grateful, as it's one of the experiences that made me decide to overhaul my investment strategy to something more robust.

It could go either way with Bidstack. So far, they've developed the irritating habit of over-promising and under-delivering. This latest update is pretty much as expected. Revenues nowhere near enough to cover costs, but an improvement on last year.

The next update will be key. They have to start delivering on the promise. I'll keep some powder dry, because if they do start generating meaningful revenues, it could be a rapid ascent.

abtan

Re. Bloomsbury Publishing (LON:BMY) does anyone know:
a) What the gross margins for Digital revenue is, and/or
b) the investor relations contact email address? The website only appears to have phone numbers.
Ta
A

Simon Rowan

Axs have lot of good credentials in carbon foot print area. I have been looking into the more practical sides of its use and comparisons with alternative timbers. I have known many architects and never once heard them mention Accoya and have never had it specified. Some claim it is as durable as teak and more stable than many hardwoods, less shrinkage or expansion. On the other hand it is still a soft wood and apparently more susceptible to damage from heavy use or traffic. I've always liked cedar it smells great and looks and ages beautifully and like Accoya it doesn't need treatment or a finish. It is comparable in price to many quality timbers. So not cheap. I can't say its the most naturally beautiful looking wood but would be interested to see how it ages left untreated to the elements. I can imagine it being most ideally suited to the construction of doors and windows for which there is obviously always going to be a huge market. Making windows and doors out of softwood can be a nightmare and not at all stable or durable in the long run. Cheapness not always being the best route in economy over a long period. Unfortunately I can't see this being of interest to major house builders as cheapness and lack of quality are indeed key ingredients to their criteria. I do remember when this came to market and rather bizarrely the then unadveturous Majedie Investment trust threw all caution to the wind and started investing in companies like this. Looking at their appalling investment record over the 20 years this might have been one of their slightly better investments but they have substantially reduced that investment which they seem to have the knack of doing just as a company is about to lift off. It takes a long time to get established in this industry. I would hope 15 years is long enough for this to appeal to the more discerning craft builders both in new builds on a wider scale and restorations where permissible. Very interested now but possibly glad I waited 15 years.

djack

I hold a small position and really do want this to work! When I worked at an agency ten years ago I flagged up in-game advertising as a potential revenue generator. Bidstack (LON:BIDS) are putting the work in to make a lot of moving parts work seamlessly together, so I'm hoping they get this right and fly as you have said. Only other option is they run into financial problems and a big ad brand comes in, secures the IP at a cheap price.

Leebod

I don't think you can say it didn't work - it's licensed in twenty countries and clearly works BUT it works better on those who have had previous exposure. As it stands there doesn't appear to be proof that the drug was responsible for the extra deaths mentioned in the wiki page but what was also clear that the net effect of people not inoculating for other diseases caused outbreaks including polio and measles.

As for mercury in vaccines. Thimerosal (a preservative that contained mercury) has not been used in the UK for over 10 years BUT even if it was used, it's a miniscule amount - the equivalent you'd get in a tin of tuna.

Please don't tell me we are getting anti bloody vaxxers on here too!!

Caper4

well the guy in charge of the project at Oxford University said it would probably be ready by end of the year . Speaking on CNN last night. Of course not ready for the public until maybe another 3 to 6 months after that as it takes that long to manufacture the 5 billion plus vaccines and distribute them.

Michael Taylor

"The CEO reached out to me, with a slightly ill-tempered reply to my negative article about his company yesterday. Bizarrely, he accused me of lying, and having an agenda against Tom Winnifrith!"

Short indicator?

timarr

well the guy in charge of the project at Oxford University said it would probably be ready by end of the year

And this is what Professor Sir John Bell, Regius Professor of Medicine at Oxford University told the House of Commons Health committee today:

"The reality is that this pathogen is here forever, it isn't going anywhere. Look at how much trouble they've had in eliminating, for example, polio, that eradication programme has been going on for 15 years and they're still not there.

"So this is going to come and go, and we're going to get winters where we get a lot of this virus back in action. The vaccine is unlikely to have a durable effect that'll last for a very long time, so we're going to have to have a continual cycle of vaccinations, and then more disease, and more vaccinations and more disease. "So I think the idea that we're going to eliminate it across the population, that's just not realistic".

Professor Sir Jeremy Farrar at the same committee was clear that "things will not be done by Christmas" and that we'll be living with the virus for decades.

Rather more positively, there's an article in the Guardian today about how the UK is leading the response for treatments for Covid-19:

https://www.theguardian.com/co...

Bluesky Ventura

I expect Tom Winnifrith is not a friend of Pauls.

I'm pretty septical of most commentators and bloggers. It appears they are just as septical of each other.

BSV

Gromley

I love the Freudian spelling mistake!

Without commenting too far, I think it is fair to say that Tom Winnifrith is Marmite double plus!

I know though that at times both Paul and Graham have said good things about Tom, not sure the reverse is true.

Ben1

As it is now clear the people at risk of serious illness are overwhelmingly those with pre-existing health conditions, why would the healthy take the chance with a vaccine that is being rushed through?

I think many people have missed that the ONS has been publishing for some time the deaths with and without pre-existing health conditions and even in the older age groups the vast majority of deaths were in those already ill with something

On the one hand I agree that there is a tendency for some people to over emphasis the risk of catching covid-19. On the other hand, there is early research out there suggesting that people that have had the disease even asymptomatically may suffer lasting (permanent?) lung damage and also findings of damage to other organs. Until we know more about this it is hard to access the risk of virus vs vaccine.

As things stand though personally I would sway quite heavily in favour of being vaccinated; but each to their own.

well I prefer the opinion of the Professor leading the Oxford team . Of course I am an optimist

bohenie

Simon - As I understand, the Accoya and Tri process changes softwood into very durable 'hardwood' and as such it needs virtually no treatment once installed - So it is used a lot in commercial applications - public bldgs where initial cost is not as important as savings in future maintenance.... See their website for examples.

mark1308

22nd Jul '20

A love truth honour ????

Mike888

Re AO, I'd say a stroke of genius, what has this done, quite a few things actually :

1 - signaled to retail investors a share price target that could generate buying pressure on the stock, regardless of maybe more measured reasoning, it may get there, who knows.
2 - a lot of free publicity, eg air time on radio 4 this morning
3 - not cost the company a penny (yet)
4 - potentially incentives/retains its workforce, TBH time till tell on this
5 - gives AO a warm feeling of doing right by its staff

Edinburgh Investor

27th Jul '20

Here is the cnbc article I think Paul was referring to. It suggests people are now looking for cheaper alternatives. So one could argue people cancelling their expensive memberships may look for cheaper no contract alternatives. Pure gym and Gym (LON:GYM) could be a beneficiary of that https://www.cnbc.com/2020/07/2...

Small Cap Value Report (Tue 21 July 2020) - JDG, TED, SDI, BIDS, AO., BMY, CTO

Optibiotix Health (LON:OPTI)

Gattaca (LON:GATC)

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

107 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...