Small Cap Value Report (Tue 22 Sept 2020) - SDRY, AUG, JDG, TRI, PRV, IDEA

22nd Sep '20 by Paul Scott

75 comments 9361 reads

Good morning, it's Paul here with the SCVR for Tuesday. I'm up early today, to catch up with a couple of stragglers from yesterday.

Timings - looking to finish about 4pm today, but there's plenty up already.

Agenda - as usual, I've selected the results/trading updates which fit my criteria for small caps, and where I know something about the companies. Plus I've included a couple of reader requests. But please bear in mind that I can't cover everything, and getting a deluge of requests every day tends to overwhelm me.

Judges Scientific (LON:JDG) - interim results

Trifast (LON:TRI) - AGM statement (trading update)

Porvair (LON:PRV) - trading update (9 months)

Ideagen (LON:IDEA) - final results

Ergomed (LON:ERGO) - interim results

Tandem (LON:TND) - half year report

If there's time, I might also briefly mention a couple of micro caps

Superdry (LON:SDRY)

133p (down 12% yesterday) - mkt cap £109m

Many thanks to a reader who emailed me an up-to-date broker note on SDRY, that was very helpful. I know we're not mean to pass around broker notes, but how on earth can I write these reports, if I can't get access to research forecasts? Actually, I'm probably better off making my own estimates, as the latest broker note doesn't make any sense at all to me.

It forecasts current year FY 04/2021 revenues of £690m, down only 2% on FY 04/2020 actual, reported yesterday. This doesn't make sense, because we were also told yesterday that revenues in the first 20 weeks of FY 04/2021 across all channels, are down 27%. The trend has worsened within that, in that the latest 7 weeks saw a deterioration to -30.3% revenue shortfall against last year.

H1 revenues were £369.1m last year, so if the company ends the half year down 27%, this year we would see an £85m drop in sales to £284m (for H1). That would result in a heavy loss, because last year H1 was only breakeven.

Since the broker is only forecasting a full year drop of £14.4m revenues for FY 04/2021, this implies recouping about £70m of additional revenues above last year's in H2. How likely is that? Last year H2 FY 04/2020 was £335.3m revenues (hit in Q4 by covid, for the last…

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SaarfLondon

22nd Sep '20

They are a right shower , a few weeks ago I had to phone in a trade (which has higher charges) the price I was quoted was 25p (10%) higher than the actual market price (I was slightly above NMS) If i was a cynic I would say they were skimming a margin to mug punters .I made a formal complaint and just got an apology .Beware.

Paul Scott

You're forgiven, Chris! :-)

xcity

Re Boohoo (LON:BOO)
The instis will have got themselves into a tiz about the supply chain. They hate the idea of looking bad. I'm sure this is all about patting them on the head, looking concerned and respectable and saying everything is OK.
Sensible thing to do. Last thing holders want is instis panic selling.
PIs are less likely to worry about how holding them looks, only about the facts. And they're less likely to move the market if they sell.

RAMO

Augean’s profit: Presumably there is extraction of soil gravel etc. which can be sold. Someone will pay Augean to fill the hole with Landfill and maybe Augean can cream of the energy that comes from the gases etc. At least three ways of making a profit.

sunny1978

These services are mushrooming but does anyone know how they make money?

A_Private_Investor

In order to position myself for the coming recession, I looked at Monolete and Begbies Traynor. I came to the decision not to invest in the Manolete due to the negative cashflow.

ricardow

I know that SCVR is not interested in Natural Resources stocks, but in case anyone else is, I have done a Note called Horses for courses in Natural Resources - Power Metal Resources plc (POW), just published on the Discuss page. I hope you enjoy it, and would welcome comments/feedback/views.

FREng

Re A J Bell. I have had uniformly good experience with them to date, apart from yesterday's website slowdown. When there isn't an online trade available at the size I want, I have often give them limit orders that are significantly above the offer price and had it filled quickly inside the spread. On the basis of this experience, I don't believe they are taking a dishonest margin.

Tombholliday

This comment has been moderated

davidjhill

Bit harsh!!

Paul merely said it was an area he didn't understand and therefore wasn't interested himself but for those that do know the area it appeared like a decent value business worthy of further research.

Absolutely. Clear the market is full of mistrust. However, I take comfort from the fact that the current CEO is US based, has built up and sold this type of business before creating lots of shareholder value along the way. Clearly knows what he is doing, where the market is heading and has a trustworthy track record from what I can glean. The company is a merger of Taptica and RythmOne so plenty of DD was done on both companies so seems inordinately harsh to value it almost at a suspicion of fraud level.

Value will out though so having seen todays results I am more than happy to wait for it to arrive now.

Rusty2

Why ask for him to comment then? you can’t please some folk. .

pj8

The point is to aid understanding of the businesses - take SCVR. Paul will often confess to gaps in his knowledge about companies - sometimes he meets management alone to explore these and to learn more from them what makes them tick. He reports back in this column - but what he says is never inside information, but more his improved perception, which might have allayed some of his reservations, or explained apparent anomalies. The purpose of investor relations is to provide those in the market with sufficient information to allow them to form a realistic opinion of what the company is worth.

LumpedOn

Agree with your experience. I moved to them last year from a full broker service and to be honest got a bit frustrated with the online trade sizes and lack of ability to get what I wanted. But, after a couple of phone calls I have become proficient in the limit order system, and with careful monitoring of spot prices (via IG) I find it pretty easy to pick a price that gets filled quickly. Great service for £9.95 a trade.

alexdonnelly

Hi Paul, are you still going to have a look at Ergomed

thanks

TStubbs

Thank you Paul, your opinions are very much valued, and you’re generous with your time. I have a feeling you haven’t been feeling the love recently so I thought I’d let you know it’s there

jonno

Hi Jasper

I don't know much about Litigation Capital Management (LON:LIT), but agree with you on £RBGP. the latter has a number of potentially diverse revenue streams, although in fairness it is the original RBG legal practice that is currently taking the strain.

It is still early days for the litigation finance division, recently branded 'Lionfish' it currently has 9 cases in the pipeline, 3 executed and 6 approved for funding. The company states that litigation investments are held at fair value which is cost or thereabouts and that it does not account for unrealised gains.

Convex Capital constitutes the third potential revenue stream. It was purchased in September 2019 and has been heavily impacted by the pandemic . It focuses on facilitating the sale of owner managed businesses, where the founder/entrepreneur wishes to exit.

Neither Lionfish or Convex Capital contributed to profit for the 6 months to 30 June. As you say litigation finance takes time to come to fruition and is likely to result in profits being somewhat' lumpy' and erratic. I suspect the same is true of corporate finance transactions.

In my view it looks to be very good value when compared to its peer group. I hold, but as always the usual caveat of DYOR applies.

All the best

Michael Tee

23rd Sep '20

Thanks Paul

Agree with you.

Looks like it's doing very well

Following in the footsteps of IXI

john652

Hi Paul & MichealFBS
Thankyou for your replies broker access. I too think the webinars now available from Tamzin etc are one of the biggest steps forward of recent times. When actually getting access to a update with city analysts i am often surprised at the poor questions and almost apologetic phrasing used. For instance when a company drops its previously championed KPI, i mean come on the the obvious question, but they often dont or give a leading question to soften it. Rubbish!!
I think though that you have to question the quality if analysts of small caps, its not the pinnacle of the analyst job ladder so what is the quality likely to be, junior analysts or journey men who are not very good. As such i have little time for broker research as so much conflict of interest and why the access to management is so important.
I have no idea how to research the ‘quality’ analysts, i assume there are some?
As for IR i find some good, some completely hopeless, Zues just rude. In general its not a good sign for me if there is no direct company contact numbers for IR - a personal hate is the IR contact being the general info@ - says a lot.

25th Sep '20

Thanks TS :-)

Small Cap Value Report (Tue 22 Sept 2020) - SDRY, AUG, JDG, TRI, PRV, IDEA

Superdry (LON:SDRY)

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Paul Scott

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