Small Cap Value Report (Tue 21 Sep 2021) - COG, SIG, APP, SAA

21st Sep '21 by Paul Scott

76 comments 8846 reads

Good morning, it's Paul & Roland here with Tuesday's SCVR.

Agenda -

Paul's section:

Cambridge Cognition Holdings (LON:COG) (I hold) - interim results are strong, with revenues up 50%, and breakeven reached. Numbers are all as expected, from Aug 2021 trading update. This is an excellent GARP share, in my personal opinion. £44m market cap seems low, considering the progress made, the record order book, 80% gross margins, and industry tailwinds.

M&c Saatchi (LON:SAA) - complicated accounts, but there's good news today on trading. I need to do more research on this one, but for the moment reckon it's potentially interesting & worth a closer look.

Roland's section:

Sig (LON:SHI) : This construction material group is trading well, but facing the usual cocktail of rising costs. In my view, the valuation is probably up with events given the uncertain outlook.

Appreciate (LON:APP) : An upbeat trading update from this gift voucher specialist, suggesting that trading levels are returning to pre-pandemic levels. I’m attracted to the financial performance of this business, but have some lingering concerns about its growth potential.

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.

Paul’s section

Cambridge Cognition Holdings (LON:COG) (I hold)

140p (last night’s close) - mkt cap £44m

Interim Results

Cambridge Cognition Holdings Plc (AIM: COG), which develops and markets digital solutions to assess brain health, is pleased to announce its unaudited interim results for the six months ended 30 June 2021.

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Cisk

21st Sep '21

Know the comments here are more slanted towards retail / financials, but decent interims today from Alliance Pharma (LON:APH):

· The Group traded strongly in the Period with an excellent performance from Kelo-cote™, an uplift in revenue from Prescription Medicines and a significant contribution from recently acquired Amberen™

· See-through revenue in total up 24% (+28% on a constant currency basis ("CCY")) to £80.9m; like-for-like ("LFL") see-through revenue, which excludes Amberen, up 9% (+12% CCY); statutory revenue up 27% to £78.6m (H1 2020 £61.7m)

o Strong performance from Consumer Healthcare brands, with see-through revenue up 30% overall (+35% CCY) / Kelo-cote revenue up 54% (+62% CCY) / LFL Consumer Healthcare revenue up 8% (+12% CCY) / Prescription Medicines revenue up 12% (+12% CCY)

· Underlying gross margin up 4.7 % to 63.8% of see-through revenue (H1 2020: 59.1%), reflecting favourable changes in product mix; statutory gross margin up 3.1% to 65.6% (H1 2020: 62.5%)

· Underlying profit before tax up 24% to £20.1m (H1 2020: £16.3m); reported profit before tax £16.5m (H1 2020: £0.6m)

· Free cash flow £6.5m (H1 2020: £10.5m), reflecting the expected reversal of favourable working capital movements in Q4 2020 and the timing of sales within the Period

· Leverage reduced to 2.21 times from 2.43 times at December 2020 and expected to fall below 2.0 times by the end of the year

abtan

Alliance Pharma (LON:APH) (no position)

Thanks Cisk

I liked the results today too and I have a feeling that H2 will be stronger as society returns to "normal."

Whilst operating profits were good, I thought it might be better to wait for cash generation to come back up.

By my rough calculations free cash flow (for which I mainly exclude working capital movements) was c£17m for the 6 month period.

I'm hoping that this bumps up to £40m for the full year.

It might still be a little expensive for me at that price (a multiple of cx18 for an EV of £660m if leverage drops below x2), but given the core stable revenues + growing consumer healthcare brands, it might be worth paying up for this elevated multiple.

I would also hope that share dilution slows down as the company becomes more cash generative and is able to fund acquisitions using its own resources.

For now, I'll continue to keep it on the watch list and observe the share price as it undoubtedly continues to climb.

Cheers

ken mitchell

Final words on this mysterious removal of my post. It seems nobody at Stockopedia saw it or removed it so how my post was removed and replaced with a “this post is under review” warning in red is a mystery.

I might post it again tomorrow as it did get several quick recommendations before it’s mystifying removal, so a bit on value shares at bargain prices might generate a bit of interest and useful follow up comment,

Abtan, agree with your points, Amberen will be a key ingredient to drive growth and so far, so good. I hope (and expect) them to exceed leverage below 2.0, as I'm sure they are already looking at the next acquisition (although probably not as large as Biogix).

Breakout Trader

Is that the TGI Friday's @ Bas Vegas per chance? :)

Only one I know of in Basildon.

Harry Hindsight

They land fill numerous broken wind blades.

Royal Dutch Shell (LON:RDSA) - climate activists overlook the flaw in the green agenda: whenever one oil major is forced to pivot towards renewable energy, another will be there to pick up its dirtier assets. In recent months European companies like Shell have increasingly diverged from their US rivals, who continue to bet big on oil and gas.

Someone needs to keep the lights on and it won't be the politicians.

Brilliant Leader

Why not post it as a stand alone thread Ken?

Antehelion

Tommy H

Hey Ken

Please don't give up on one lost post.

We all have days when things do not go our way, I mean how many lost internet connection, restarting your computer, Microsoft Blue Screen of Death (showing my age here), computer totally frozen just unplug, hold the button down for a minute and go get a coffee and hope that autosave worked

Waffle over.

Thanks

Tommy

Ps. I hold!

yes, is the simple answer, it's an Indian power company.

my note on the UK was more just to call out that even here where we might think we are clean and progressive compared to some developing economies, we still really on coal power even in the UK.

GrahamScott

Hi Ken, I saw your write up earlier today and can see no reason why it was removed. There was certainly nothing contentious that would justify a removal.

BnB

I asked this question at the earnings presentation this evening. The reply from the CFO was a little forced and amounted to "we're probably being a little bit conservative with guidance but we did some big deals this and last financial year the momentum of which we can't guarantee will persist into the next year so we'd rather be cautious and accept that demand might take a breather". I don't have a problem with prudent forecasting and they see their TAM growing for some years at 15% pa, half of which they are happy to commit to.

Thanks Graham and TommyH

Stockopedia replies to my complaint about the removal of my post reveal that no one seems to have removed it, or indeed had seen it! So how and why it was removed /targeted for moderation is a mystery. But since it’s removal was not because of the (harmless!) content it’s just one of those things and so no longer a reason to be so angry about it, . Weird how this can happen though.

gwilli68

22nd Sep '21

Breakout Trader - Yep, that's the one!

Leebod

It was Basildon the other half went to funnily enough!

Many thanks for your thoughts Paul.

rmillaree

Ten Entertainment (LON:TEG)

Very solid update from Ten Entertainment - positively dripping with confidence (almost).

It looks like next year they are on track to be well ahead of the 2019 year that was PL (pre lockdown). So roll on a great PL (post lockdown) era. Hmmm not sure those acronyms will catch on - pre covid and post covid ? - err nope.

Anyway quick summary of where we are.

There was a minor early fundraising last year so share count has gone up 5% that is tolerable. Really i should have bought on the dip but i was too scared to push extra funds into a business so covid vulnerable.

They have proved me wrong in that i thought they might struggle with ongoing ask rules and the like - masks and minglingrisks dont seem to have put anyone off.

Overall covid could almost be seen as a benefit as they have transformed to a more digital way of doing things (2/3 of bookings online) i am guesing that is efficient , easy for the youth of today and makes direct trageeted marketing easy peasy. Customer database up 25%.

for 2022 they are targetting double digit sales growth compared to 2019 - i would neeed to do eexact comparative venue count but i am guessing new venues will provide decent contributionto that number - ie not all organic? - four new centres planned in 2022.

What about the debt - bank net debt is just under £11 mill - down from £12.6 mill 27/12/2020. With expectations of net profit of over £12 mill in 2022 they are in a hunky dory position of you "presume" there will be no more lockdowns. If there are aditional new extended lockdowns then the debt will deffo be a consideration - so not without risks if one takes the plunge here.

If we say they will beat the "current" stocky target for next year by 10% they could be on for EPS of 18p at 250p thats pe of just shy of 14. For self funding rollout for quality operator that seems cheap in a no covid world. Factor in covid and the debt combo and the shareprice is probably only mildly cheap and not without risks. When i bought this share pre covid it was a bit of a punt - i suspected Hollywood Bowl may have been the better business and there was slight worries about shareholder base. However operationally speaking i think management have delivered - not sure its up to the quality metrics of bowl yet but they are doing just fine compoared to where they were. Since i have held in March 2019 shares are up 22% compared to 11% of bowl - but i was lucky enough to buy on spike down at that time due to large seller - so i suspect the two companies are possible performing very equally with regard to shareholder returns generally speaking.

JESSE LIVERMORE

The three largest carbon emitters are China, the US & India.

Time will tell how individual country targets to reduce carbon footprints will impact coal consumption.

Interestingly, there are EIGHT US States that rely on coal to produce the majority of their respective electricity generation (incl. West Virginia 93%, Wyoming 79% & Missouri 78%). Biden will have a tough job convincing the States to switch to more expensive forms of fuel.

NB In the UK, coal now generates just 4% of domestic electricity generation. The government plans to reduce this to 0% over the next three years.

Rusty2

Is solar not cheaper in the states than coal?

Why is the US importing bitcoin mining from China?

China is planning to build 43 more coal powered power stations and 18 blast furnaces.

nice graphs, thanks :)

yes, I'm fully onboard that at some point there will be reductions in appetite for coal in India. In the short to medium term, there is a sweet (and highly profitable - 43% FCF/MCAP TTM according to stocko) spot perhaps.

About 70% of India's energy needs are met by the combustion of coal. This share may fall in future but the fossil fuel is set to remain the dominant source of power demand growth, and this would rise by 4.4% from 2020 through to 2030, according to Roman Kramarchuk, S&P Global Platts Analytics head of Future Energy Analytics

https://www.spglobal.com/platt...

Small Cap Value Report (Tue 21 Sep 2021) - COG, SIG, APP, SAA

Paul’s section

Cambridge Cognition Holdings (LON:COG) (I hold)

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Paul Scott

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