Small Cap Value Report (Tue 25 May 2021) - SOS, TED, PMP, MTC, DWF, LOOK, CLX
Good morning, it's Paul & Roland here with the SCVR for Tuesday. Sorry for the late start, Paul overslept & sleep-snoozed his alarm.
Timing - we have to be finished before noon today, as I have my niece & nephew to entertain for lunch at "Crabs" - Bournemouth's finest fish restaurant, a bit later. Today's report is now finished.
Agenda -
Paul's Section:
Sosandar (LON:SOS) (I hold) - fundraising - inevitable, but executed very well indeed - nil discount, and only 13.6% dilution. £5.24m raised pre-fees (£4.93m post net). Share option scheme being rejigged - suck it up, because the 2 founders are the business. My view - on the cusp of solvency, and they've done well to defer fundraising for a year, now raising from a position of strength. Well executed - this is how it's done - hats off to the ladies at Sosandar, and the team at N+1. I hear there was strong demand - as evidenced by speed, and no discount.
As we've seen with Staffline (LON:STAF) and several others, there are some nasty fundraisings coming through, where the institutions & high net worth flippers are demanding deep discounts. So brace yourselves, I've been tipped off that some horror stories are in the pipeline, but can't say any more than that at the moment. Be very careful - the days of easy fundraisings are over, I've been told. If anything looks financially distressed, and in need of a placing, it's pot luck whether private shareholders get diluted heavily or not.
What a terrible system - we need to campaign for reform in the UK to mimic the Australian system, whereby shares are suspended briefly, and fundraisings are done quickly, and openly - prioritising existing shareholders.
The UK system is inferior, and arguably corrupt - a false market exists whilst placings are being undertaken behind closed doors, yet hundreds of people must know that a discounted placing is being arranged. This has to stop.
Ted Baker (LON:TED) - bank facilities renewed.
Portmeirion (LON:PMP) (I hold) - a positive-sounding update. Looks a good recovery share, and still reasonably priced on broker forecasts.
Mothercare (LON:MTC) (I hold) - a reassuring update, but the pension scheme overpayments scheduled look to swallow up pretty much all of the future profits, on current guidance. Impossible to value.
Dwf (LON:DWF) - a good trading update - 15% ahead of expectations. Looks potentially interesting.
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Roland's Section:
Lookers (LON:LOOK) - a promising update from this car dealership group, which is trading ahead of expectations. But I feel there may be better choices elsewhere in this sector.
Calnex Solutions (LON:CLX) - maiden full-year results from this telecoms testing equipment provider, which floated last year. Strong numbers but some uncertainty over the outlook for the current year.
Ted Baker (LON:TED)
New banking facilities are signed off today. I wonder if this was the real reason for audited results being delayed, as reported yesterday? Could be - auditors require secure funding for 12 months from the date of signing off the accounts, in order to meet the "going concern" requirement. I checked out the company's balance sheet yesterday, and it looks fine. It will be interesting to see how the company fares once Govt support measures (especially business rates suspension) are withdrawn., taxes all have to be paid up-to-date, and working capital normalises.
Ted Baker Plc, the global lifestyle brand, is pleased to announce that it has signed an extension to its revolving credit facility with its existing lending syndicate.
The new agreement extends the revolving credit facility maturity to November 2023 and amends the covenants. Combined with Ted Baker's strong net cash position of £66.7m at the end of the financial year 30 January 2021, this ensures the Group has the necessary cash and liquidity to continue the successful delivery of its transformation plan.
Under the new agreement, the existing RCF of £108m maturing in September 2022 and restricted RCF of £25m maturing in January 2022, will be replaced by a new RCF of £90m reducing to £80m in January 2022 until maturity in November 2023. The existing lending syndicate continues to show ongoing support to the Group.
The amended revolving credit facility includes among other changes amendments to the adjusted EBITDA covenant tests, providing further financial flexibility for the Group.
Banks might be supportive in a crisis, but they're going to want shareholders to take up the risk & repair balance sheets as the economy recovers. Banks are not charities, and they tend to avoid risk. Strong liquidity now, may not look quite so good once working capital has normalised, and stretched creditors repaid - that's a general point, not specific to TED.
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Portmeirion (LON:PMP)
(I hold)
680p (up 1%, at 08:38) - mkt cap £93m
Portmeirion Group PLC, the designer, manufacturer and worldwide distributor of high quality homewares under the Portmeirion, Spode, Royal Worcester, Pimpernel, Wax Lyrical and Nambé brands…
We are delighted to report that we have had an excellent start to the year. Our sales for the first four months of the year (to 30 April 2021) have increased by more than 50% on the same period in 2020.
On a like-for-like basis, our sales for this period are slightly ahead of pre-Covid levels achieved in the same period in 2019.
- Ongoing disruption from covid (“some” - so sounds annoying rather than disastrous)
- Reminds us of strong H2 weighting - almost all the profits tend to be made in H2, from memory
- Pipeline of exciting new products for launch in 2021
- Confident about growth opportunities globally
Dilution - it’s such a pity that PMP did a (panic?) fundraise during the pandemic, as the share count has gone up from 11m to 13.8m, thus curtailing the upside on the share price. Still, it’s easy for me to be wise after the event. In the midst of the pandemic, management must have been under great pressure & uncertainty, here and at most other companies for that matter.
It’s difficult to remember just how bad everything looked back in March 2020. Who could have predicted that we’d be looking at something akin to an economic boom now, just 14-15 months later?
Valuation - today’s update is a bit vague, not saying anything about profitability. Reading between the lines, the upbeat tone, and positive revenues suggests that we might be heading for in line, or above, market expectations, perhaps?
I can see why they wouldn’t want to push the boat out re commentary in the seasonally soft H1, but I imagine today’s upbeat comments increase the likelihood of forecasts being raised later in 2021. That’s guesswork though, on my part.
Many thanks to N+1 Singer, where Sahill Shan has written an update note published this morning. No changes are made to forecasts, but he suggests risk is to the upside.
Adj EPS is forecast at 36.4p for FY 12/2021, and 56.8p next year. This makes the 680p share price seem good value to me.
My opinion - I like the still fairly new, more ambitious management team here. The strategy to focus on eCommerce, and make the business more efficient, strikes me as the right way to go.
I’ve got a display cabinet half full of “Botanic Garden” crockery. Every time PMP emails me (rather too often actually), I can be tempted to buy more seconds (which look almost perfect to me). It’s not recurring revenue for PMP as such, but it’s definitely repeating revenue, and of course every now and then something is broken & needs replacing. Customer lifetime value must be pretty good.
On fundamentals, I think this share is worth more than 680p, and the chart looks promising too -
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Mothercare (LON:MTC)
(I hold)
16.0p - mkt cap £92m
A reader quipped the other day, that I seem to hold shares in practically everything! It’s fair to say that I have been recycling profits into buying more & more shares over the last 6 months or so, and a portfolio pruning is probably overdue. Trouble is, companies keep putting out good updates, and forecasts go up, and nothing in my portfolio looks over-priced, so I’m pretty happy with things, and the outlook seems good too.
For background, I did a fairly thorough review of MTC shares here on 6 April 2021. The pension scheme overpayments are massive, that’s the elephant in the room. More work is needed on that, when time permits.
On to today’s news.
Mothercare plc ("Mothercare" or "the Company"), the global specialist brand for parents and young children, today issues a pre-close trading update for the financial year ended 27 March 2021.
The highlights are self-explanatory - this is copy/pasted (my bolding added), to save me re-typing it all -
- Unaudited net worldwide sales of £326 million for the year impacted by varied approaches to Covid-19 in franchisee markets
- Significantly reduced net debt of £12.1 million at the year end
- Performance over the recent period is in line with expectations and the Group anticipates reporting a small EBITDA profit for the financial year, against previous guidance of a small loss
- New asset light operating model providing ongoing financial benefits
- Further overhead reduction planned from a further reduction in distribution costs and a new ERP system
- Encouraging feedback to new, bespoke product strategy for international markets
Strange that they say it’s in line with guidance, then in the next bullet point, say they’re ahead of guidance! Confusing, but it’s positive anyway.
FRC review of last year’s accounts - concluded, with no material changes required.
MTC reminds us of the business model change, whereby products will be bought by franchisees direct from factories, a terrific idea which means that MTC won’t be funding inventories.
Outlook -
the Directors believe that Mothercare remains on track to return to profitable trading levels in the short to medium term…
... the steady state operation of our retail franchise operations in more normal circumstances could return to annual operating profits of £15 million in future years.
Pension scheme - notable by its absence from today’s update. A reminder of the cash over-payments as currently scheduled -
FY 03/2021: £3.2m
FY 03/2022: £4.1m
FY 03/2023: £9.0m
FY 03/2024: £10.5m
FY 03/2025: £12.0m
FY 03/2026: £15.0m
FY 03/2027: £15.0m
FY 03/2028: £15.0m
FY 03/2029: £15.0m
FY 03/2030: £5.7m
Total: £104.5m
That’s going to consume most/all of the cashflows generated by the business, as things stand. So I wonder what's left for shareholders?
My opinion - the opportunity here is if the pension scheme liabilities melt away, which is possible.
If they don’t, then the business is basically existing for the main purpose of funding the pension scheme.
Therefore, as things stand, I find it impossible to value this share.
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Dwf (LON:DWF)
101p (up 6% at 10:59) - mkt cap £329m
I’ve run out of time for today unfortunately, but just want to flag up this legal services business.
Shares are up 6% on what looks like a good trading update, including -
Adjusted profit before tax of £34m exceeds market expectations by c.15%1
1 DWF believes consensus PBT, prior to this announcement, was £29.3m
The PER & dividend yield look attractive on the StockReport, and with forecasts set to go up 15%, those metrics are going to improve further.
I don’t have a view on this share, but it might be worth readers taking a closer look at it, if you’re happy to invest in legal services shares.
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Roland’s section
Lookers (LON:LOOK)
64p (pre-open) - market cap £250m
Car dealership group Lookers has provided a trading update today. It’s ahead of expectations and also confirms that the group - which is emerging from a difficult period - has been able to renew its banking facilities and is (finally) ready to publish its 2020 results:
Lookers plc ("Lookers" or the "Group"), one of the leading UK motor retail and aftersales service groups, today provides an update on trading, the renewal of its bank facility and notice of the announcement of its 2020 Results and AGM.
Trading
Lookers says that trading since dealerships reopened on 12 April has been “strong”. The company reports strong customer demand and “significant market out-performance”. Profitability has also improved, with higher gross margins as a result of cost cutting.
Although the company stresses that uncertainty remains due to Covid-19 and supply constraints, underlying pre-tax profit for 2021 is now expected to comfortably exceed current market consensus.
This chart shows sales for the first four months of 2020, versus the corresponding period last year.
Although the LFL numbers appear strong, I’m not sure these LFL numbers offer a very meaningful comparison.
Lookers’ retail sites were mostly closed from 23 March until May last year, and prior to that there was a well-documented slump in retail new car sales linked to the diesel emissions backlash. In contrast, click-and-collect trading remained strong through the lockdown earlier this year.
Even so, these figures do seem to show that Lookers is bouncing back.
Renewal of Bank facility
When Lookers’ shares were suspended due to accounting problems last year, Paul commented on the risk that the company’s banks might withdraw their support. Fortunately, this hasn’t happened.
The company says today that it’s been able to renew its banking facility with its existing lenders. The revolving credit facility (RCF) now runs until 30 September 2023 and is for an initial amount of £150m.
This is significantly less than the RCF of £238m reported in the 2020 interim results. This may indicate a reduction in lending appetite by Lookers’ banks. But it may also mean that the company’s requirements are lower, following a string of property disposals and site closures.
Net debt is said to stand at £4m currently, so the overall situation seems fine, as far as we can tell at this time.
Notice of results
The banking facility renewal appears to have been an important step towards getting the company’s auditors to sign off on Lookers 2020 accounts.
Audited results for the year ending 31 December 2020 are expected “in the second half of June”. That’s very late, but Lookers is still recovering from the accounting problems of last year and is also working with a new auditor, BDO, who I suspect is being very thorough.
Lookers didn’t manage to publish its 2019 results until November last year and the 2020 interim results weren’t published until January 2021. So I guess this year’s June date represents progress.
Reassuringly, the group plans to return to a more normal reporting schedule from now on, with interim results due in September.
My view
After last week’s strong update from Marshall Motor Holdings (LON:MMH), I’m not all that surprised to see another car dealership group reporting strong trading. Cars seem much easier to buy and change than they used to be, mainly because hardly anyone actually owns them anymore - PCP financing is all about paying the depreciation.
However, I have read some interesting commentary recently, suggesting that new and used car markets are starting to face serious disruption as a result of the global semiconductor shortage and unusually low defleeting volumes from the big rental companies (after last year’s slump).The concern is that this could cause shortages of both new and used cars, plus rising prices.
It remains to be seen how this situation plays out, but Lookers shares have had a strong run over the last year and are now trading ahead of pre-pandemic levels:
After today’s update, my sums suggest the shares are valued on around 9.5 times 2021 forecast earnings.
For contrast, Marshall Motor Holdings (LON:MMH) - on which we reported last week - is trading on about 8.5 times 2021 forecasts. Vertu Motors (LON:VTU) is on eight times 2021/22 forecast earnings. Both of these companies have been more reliable performers for shareholders than Lookers in recent years, with solid balance sheets and reliable dividends.
If the car market stays strong, I think Lookers could have further to go. But in my view, there’s better, safer value elsewhere in this sector.
Calnex Solutions (LON:CLX)
116p (-1.7%) - market cap £102m
Full-year results from one of last year’s more interesting IPOs, technology group £CLX. This Scottish company provides test and measurement solutions to telecoms network operators.
Calnex specialises in tools for timing and synchronisation and network emulation. Both are increasingly important areas for managing highly interconnected, physically dispersed networks.
Jack provided an excellent introduction to this business back in February.
Buyers who spotted this opportunity early have doubled their money since October’s IPO:
The shares aren’t as cheap as they were, but Stockopedia’s quality metrics suggest to me that if growth can be maintained, this business could justify a strong valuation:
With this in mind, let’s take a look at today’s results.
2021 results
Today’s results cover the 12 months to 31 March and appear to show strong growth on all the standard metrics:
EBITDA: I do not often say this, but I think that in this case, underlying EBITDA is a superior measure to the non-adjusted statutory EBITDA. The reason for this is that Calnex’s underlying EBITDA includes the amortisation of R&D costs (statutory EBITDA does not).
The amortisation of R&D costs reflects past spending that’s been capitalised to the balance sheet. It does not reflect profits from trading activity. Subtracting this amortisation gives us a more credible view of cash coming into the business, in my view.
Pre-tax profit: Once again, I think Calnex’s adjusted pre-tax profit figure is quite credible. The adjustments made to statutory pre-tax profit relate to one-off IPO costs and discontinued businesses.
Profit margins/ROCE: Today’s accounts show a statutory operating margin of 21% and a return on capital employed of 19%. Using adjusted operating profit, these numbers rise to a margin of 29% and ROCE of 26%.
Calnex appears to be an above-averagely profitable business. This suggests to me that its products have decent pricing power and some competitive advantages.
Net cash: The balance sheet looks strong, with net cash of c.£12m. There’s no mention of a dividend in today’s results, but the company does say that it will consider acquisitive growth.
Free cash flow: This appears to be a cash-generative business. There were some large and favourable movements in working capital last year. Excluding these, my sums suggest Calnex generated underlying free cash flow of £3.8m last year. This represents 110% of the company’s net profit for the year - a nice result.
Customer concentration risk: One thing that’s caught my eye in today’s results is that this business appears to depend quite heavily on a small number of major customers.
According to today’s report, Calnex’s top 10 revenue-generating customers accounted for 49% of revenue last year (FY20: 52%). The biggest “underlying customer” was said to be responsible for 12% of revenue.
Fortunately, customers do appear to be loyal:
- In FY21, 80% of revenue came from existing customers.
- The average length of customer relationship across the top 10 customers is said to be nine years
- 176 existing customers have placed repeat orders in the last five years.
I don’t see this risk as an immediate concern, but as the company continues to grow I would hope to see customer concentration reduce. As things stand, losing a top 10 customer could result in a big hit to revenue.
Outlook: The market reaction to today’s results has been fairly cool. I think the reason for this lies in the company’s trading commentary for the year.
Although the overall impact of Covid-19 is said to have been minimal, some customers pulled forward orders into FY21. As far as I can tell, these are not expected to be repeated in FY22.
According to CEO and founder Tommy Cook, despite expected underlying growth in FY22, overall results may be flat this year (my bold):
"We are confident that our breadth of product offering, depth of customer relationships and the strong underlying market drivers mean Calnex is well positioned and we anticipate that results in FY22 will be consistent with FY21, representing further growth when taking into account the impact of COVID-19 on FY21 through accelerated revenues and travel savings. We see a significant opportunity for both organic and acquisitive growth in the medium term and look to the future with confidence."
House broker Cenkos has published a new note this morning (available on Research Tree) which suggests that revenue could fall to £17.2m this year (FY21: £18m), while adjusted pre-tax profit could fall by 14% to £4.4m (FY21: £5.1m). Both measures are expected to return to growth in FY21.
If accurate, I’d imagine this outlook might limit the scope for near-term share price growth.
My view
Is this another well-timed flotation? Time will tell. I’m inclined to give Calnex the benefit of the doubt as a potential long-term investment. This business appears to have attractive products that enjoy consistent demand in a structural growth sector. This view is echoed by research cited by the firm in today’s results:
The global market for telecoms test and measurement equipment for mobile networks alone is forecast to expand at a CAGR of 11.5 per cent from 2020 through to 2024 (Frost and Sullivan). The Board believes this provides favourable market conditions for Calnex for the foreseeable future.
Assuming that Calnex’s product range remains relevant and competitive, I don’t see any reason why it shouldn’t benefit from these favourable market conditions.
I’m also reassured by the presence of founder and CEO Tommy Cook on the shareholder list. Mr Cook remains the company’s largest shareholder after flotation, with a 21% stake. Clearly he should be incentivised to deliver sustainable growth.
On balance, Calnex looks a little like a smaller, niche alternative to FTSE 250 firm Spirent Communications (LON:SPT).
Like Spirent, Calnex appears to generate high returns, selling products that are essential to network operators. On a medium-term view, I would expect Calnex to benefit from telecoms capex cycles but be prone to lumpy order flow at times.
If you’re interested in learning more about the opportunities the company can see, there’s plenty of detail in today’s results about the technical demands of 5G and cloud computing networks. It makes for interesting reading and seems to support the growth case for this business.
I like what I’ve seen of Calnex. What might tip the balance and make the stock a potential buy for me would be the introduction of a small dividend. The company’s cash generation suggests this should be affordable, and I would see a dividend as evidence of financial discipline and shareholder focus.
However, although I like this business, I’m not sure how much near-term upside the stock offers, given the cautious outlook for this year. At current levels, I’d say the stock is probably at a fair price. I think this might be a good stock to pick up on any market wobbles over the coming months.
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69 comments
Today was literally my second worst day ever in the markets because I recently topped up SLP and THS. Realistically, I don't have an edge in mining.
I just thought the valuations looked good and the SPs weren't moving up in line with platinum prices. Odd that they should then tank when the platinum price drops.
I subscribe to VectorVest and it has Avery high rating on SLP.
I will add to mine this week.
Stay confident Transport_Tycoon.
It has caught a few of us for going "off script".
I am tempted to borrow from my xxxxxxxxx funds if there is more weakness to average myself down... Commodity prices would surely have to correct back up before too long.
Shame on mgmt
Does anybody know if it is possible to create a list or screen with a rule that filters for stocks whose current share price is below what it was on a given date in the past (for example, 2 years ago)?
turbo,
Apologies I don’t. That said with the amount of share dilution that has occurred over the past 12 months a comparison of share price isn’t a great metric.
MS.
I hold £clx and agree with mepfish, the riddle talking in the outlook is somewhat unhelpful!
Personally I am cautiously optimistic that clx is sandbagging with today's outlook. Here's why:-
- In it's short listed life clx has already established a pattern of guiding forecasts low and then smashing them. At IPO (with a bumper H1 already in the bag), the initial 2021 forecast was set at an undemanding £15.4m. When the scintillating interims were published an ambiguous outlook was given promising H2 in line with H1 - the forecast was dutifully left unchanged. However the inevitable 'beat' IMS duly arrived in January, at which point the forecast was hiked a massive £2m - as we have seen today even that was comfortably beaten
- £spt and £cer operate in the same markets as cls. Neither has talked about orders being pulled forward because of covid. As we know spt is clx's main distributer. Cer recently confirmed it is experiencing a bonanza (just like clx did this year)
- Intuitively I don't see why the natural response to covid of the pseudo-utility telecoms industry would be to rush out and splurge capex, in fact I would have thought the opposite
My theory is calnex is trying to set up a boohoo/kainos pattern of deliberately guiding analysts low so they can easily deliver good news. Incidentally it would be an interesting thread to discuss why analysts are prepared to play that game - what's in it for them I wonder?!
For these reasons I am forecasting 25% growth across the board for 2021/22 but I recognise this is risky with clx being so opaque.
In the prospectus a divi was promised for 2021/22 but no mention was made of that today.
There was a lot of unnecessary detail in today's statement but some obviously important information was left unsaid (meaningful outlook, backlog, divi).
Revolution Bars (LON:RBG) Placing @20p to raise £21m
Thats a total stinker. 41% discount. Over 100m new shares.
Buyers controlling placings. Anyone holding shares with weak balance sheets over next few months is braver than me.
Revolution Bars (LON:RBG) Only 5m shares for existing holders
That is very very poor and a complete slap in the face to existing shareholders that both bailed them out mid pandemic and also stuck with them. I have to say that's a huge thumbs down to management from me and suggests a poor corporate culture and attitude towards its stakeholders. Unimpressed
Revolution Bars (LON:RBG) ( I hold) prophetic words from Paul this morning, I didn't think it was going to happen so soon! Looks like the banks are wanting to de-risk and shareholders are footing the bill. It would appear that the institutional investors know they are in a tight spot and playing hard ball on the price.
and there you go:
" there are some nasty fundraisings coming through, where the institutions & high net worth flippers are demanding deep discounts. So brace yourselves, I've been tipped off that some horror stories are in the pipeline, but can't say any more than that at the moment"
and
"The UK system is inferior, and arguably corrupt - a false market exists whilst placings are being undertaken behind closed doors, yet hundreds of people must know that a discounted placing is being arranged. This has to stop"
I'm totally digusted by the insider dealing here, no wonder the price was falling after the 'above expectations' update. On the plus side I do however see this as a long term good hold (I now have no choice) and will probably add in the meagre open offer.
I will probably complain to the FCA and ask them to investigate insider dealing fwiw
Sent today to FCA >complaints.scheme@fca.org.uk<
"Sirs
I would ask you to investigate suspected insider dealing in the Revolution Bars Group Plc (ticker RBG) share placing today.
On 11/5/21 RBG submitted an rns entitled "Re-opening update", within the strong update was the phrase "we now expect that our full year performance for the year ending 30 June 2021 will be ahead of previous management expectations", the share price consequently and understandably rose sharply on the day. It then started to fall away every day from a high of 41.60p to a close today (25/5/21) of 33.10p, a fall of 22% on a strong update.
After close today we are greeted with an rns confirming a firm placing from RBG to raise £20m with 100m shares at 20p per share, "The Issue Price represents a discount of approximately 41.2 per cent. to the closing price of an Ordinary Share on 24 May 2021".
I would respectfully suggest that clear insider share dealing has been at place here from insiders 'in the know' that the placing was coming and I would respectfully request that you investigate the dealings from sellers between 11/5/21 and 25/5/21
Thank you & Best regards"
Sylvania Platinum (LON:SLP) down 7.46% today.
First time I've had a negative holding on my books in more than 7 months.
This is how things used to be before the bug scamdemic where one would probably hold 7 winners and 2 losers-waiting-to-become-super-winners. Nobody is panicking.
Thanks for your thoughts on Calnex Solutions (LON:CLX) Roland. As a newish shareholder I find myself desperately trying to interpret the tea leaves on an outlook statement. Are they the sort of management team that are naturally cautious or is this the best (FY22=FY21) they really hope to do? Time will tell I guess.
Thanks Roland, I think you’re doing a great job.
Published this month, the Johnson Matthey market report on PGM metals (free to download):http://www.platinum.matthey.com/
The chart on page 26 shows that up to 2019 the price of rhodium was well under $5k/Oz.
I am very much looking forward to SLP's next set of results.
Hi
Does anyone have ideas or knowledge that I do not know about the sell off's at Sylvania Platinum (LON:SLP) and Tharisa (LON:THS) today?
Nothing on the news and just assuming those after a quick return are leaving the dance floor as it retreats from year highs...
But appreciate some wisdom.
Thank you
Tommy
ps. I hold Sylvania Platinum (LON:SLP) and Tharisa (LON:THS)
A recent few days of oil weakness coupled with China scrutiny on iron ore and general commodity speculation, has probably dragged commodity prices down (a guess).
Re Sylvania Platinum (LON:SLP) - my 10% gain has evaporated and I am about to go negative on this.
Its quite an alarming and fast drop, with no news that I am aware of, apart from soft commodity prices (which is surprising), and comments from China (the CCP) condemning commodities speculation, and thus putting a dampener on prices and supply-stock-pilling.
My instinct would be to top up at this price but I don't have spare cash to counterweight today.
Hopefully we can ride this chop out.
Thank you, similar depending on the holding (run mine, mum's and sisters) to what is or is not left in terms of profit...so concur, happy to hold as think ok longer term, just a question of whether to add and at what point, though note Will's point below at point prices.
Definitely a top up opportunity and as I bought this stock about two years ago it does not concern me at all that it has dropped a little in the last few days . This is a long term hold for me.
Just remember that all miners, natural resources companies are price takers so this is out of their control mostly (unless you're OPEC but that's another discussion).
The price of Rhodium has fallen back a fair amount in the last few weeks from a high of $29,000 to circa $20,000 today (depending on your data source, which is tricky for the more niche PGMs). I'd expect that is why both have fallen a bit of late.
Thank you Will
Rhodium price is down 15%+ today so I would imagine this has an impact on the likes of Sylvania Platinum (LON:SLP)
But still well above what it was even at Christmas.
The same with Jarvis securities.
Market maker at play here.I added more.
I bought £Look last year in the high teens and then sold for a profit before their suspension. I bought in again when the suspension was lifted. I am reassured that the books and records of £Look have been poured over in detail and the investigation of its financial credit operations has finished and no fines were imposed.
The completion of these exercises is worth a small premium over sector competitors IMHO.
I was just looking at the Open Table stats on dining:
As of yesterday the seated diners number was up 45% on 2019.
https://www.opentable.com/stat...
It'll be interesting to see if this lasts or it's just initial pent-up demand.
timarr
There could also be an effect of forced reservations in some areas. I had never used OpenTable before lockdown.
There could also be an effect of forced reservations in some areas. I had never used OpenTable before lockdown.
I believe the OT stats cover all diners in a restaurant, not just the ones booked through them online. It includes walk-ins as well, for instance. It's a reservation system, so when someone walks in, they're booked into their table, or if you phone up they use it to make the reservation on your behalf.
I haven't researched this in any great detail, mind.
timarr
Cheers, I had no idea it worked like that.
Who owns OpenTable then? (Booking Holdings Inc. - NASDAQ:BKNG)
Lon:SOS . Sosandar - I was scaled back by 45% in fund raise. Looks like decent demand at 20p.
Sosandar (LON:SOS): Nice pop eventually of 17.5%. Speculative still as no view when profit breakeven is reached. sales stopped on the website so perhaps confidence of consumer demand is better?
Hi Paul
Re Mothercare (LON:MTC) and your comment that, "Therefore, as things stand, I find it impossible to value this share.", presumably you have some minimum value in mind that is above the current SP?
Best wishes, Martin
While we wait for Paul's write up (hopefully) on Mothercare (LON:MTC) some figure to to look at from todays news:
* Unaudited net worldwide sales of £326m
* Net debt reduction of £12.1 million at year end
* Recent performance in line with expectations
* A small EBITDA profit for the financial year expected (previously forecasted small loss)
* New asset light operating model providing ongoing financial benefits
* Overhead reduction from distribution costs and a new ERP system
* Encouraging feedback to new, bespoke product strategy for international markets
* Unaudited net worldwide franchisee retail sales for fin year to Mar 2021 of £326 million, 40% (£216 million) below previous year
* At year end net debt of £12.1 million; cash £6.9 million, drawdown of £19.5 million from the new facility announced last November,
* £19 million of shareholder loans into new ordinary shares on the 17 March 2021.
* now expect to report a small EBITDA profit (before adjusting items) for the year ended 27 March 2021
Any comment on Air Partner (LON:AIR) results today please Paul?
The results were reported a couple of weeks ago - today is just Annual report AGM stuff so nothing new. Cheers
Yes, just realised, but can't delete! Thanks
It's just publication of the Annual Report. The results were previously published on 11 May 2021. Jack reported on the results here.
I see that Mothercare (LON:MTC) has announced a return to profitability (albeit small) and is predicting possible returns to £15m in the future (1yr? 50yrs??). I know Paul covered it recently but I wondered if todays news answers any questions he had previously?
Sales are down massively this year (40%) but I wonder if all the lockdown shagging (so I'm led to believe - I'm over 50 so well, you know...) will produce a covid baby boom? I mean we've had puppies and new cars and houses so surely a surge of sprogs is next?
Actually looking at the data suggests the complete opposite - births are down pretty much everywhere and have been on a downward trend over the last 8 years with pandemic pushing it even further (Italy for example down 15.9% last year and with the world on average down between 7 -23%). Experts predict this is going to continue for some time https://www.telegraph.co.uk/gl...
As vaccines work their magic and we move to a new normal and hopefully a bit more certainty around jobs I wouldn't be surprised to see a big uptick in births next year with all those couples who put off starting a family last/this year go ahead.
It's difficult to see how they are doing from the UK as the partnership with boots is new and the website looks a bit sparce compared to the likes of mamas and papas as an example though mothercare pricing on prams is significantly lower and independent reviews I looked at gave very good reviews and considered them excellent value for money.
I don't own and on the fence at the minute.
I was tempted to do some deeper research into Mothercare (LON:MTC) but then like you saw that birth rates in UK and globally will be challenging this year, as well as into next year. So might as well wait for a bit later on, to see that turnaround is working, as this year's revenues ain't gonna shoot the lights out.
Funny old world - Ecsc (LON:ECSC) results show no real surprises, but shares have dropped some 14% this morning. But volumes are fairly low - perhaps some people were expecting more? Edit - sorry - no new results til 1st June: share drop must be rumours
Not aware of Ecsc (LON:ECSC) before so thanks for that. I'm sure it will get hoovered up by someone - he even alludes to it at some point in the latest presentation in response to a question regarding 'Why are you listed?'.about 15 mins into..https://www.investormeetcompan...
Having people in Australia as opposed to shift working in the uk strikes me as a bit odd especially as it costs the company more to do so (makes a change from Bangalore I suppose). The rational given is staff don't want to work shift work in the uk hmmm maybe.
The dent in revenues seems to have been a Q2 blip that they have managed to reverse pretty well since then. Spread is horrendous and the drop you mention seems to have dissolved a fair bit - I was quoted 86.8p from HL.
Paul you are so right about the UK system, the closer you get the higher it smells. Much change is needed quickly to fix it before the SPACs fill their boots with UK listed companies.
Here are my SCVR heat maps for today (prices as at ~9:40am).
I share these heatmaps with the intention of giving a visual indication of what is going on in the SCVR world: who’s reporting (and it's impact on the share price); and what’s moving more than 'normal'. There are no associated recommendations, implied or otherwise, just information. How, or indeed if, you choose to use that information is up to you. Please feel free to ignore them if you don't find them useful.
Please read my heat map thread for a great deal of explanation of how the heat maps are formed and how I use them to guide me with my research, and for a full key to the contents.
I very much welcome feedback so if you do have any feedback, not already covered in the heat map thread, it would be very helpful if you could post your comment in the heat map thread rather than the SCVR thread. The more specific and constructive the feed back is, the more that likely it is that I will be able to act upon it. Thank you all for the feedback so far.
Small / Micro Caps reporting today:
Big movers today in the SCVR world (moving more than a 20d EMA of the ATR against either yesterdays close, or today's open):
Warm regards, stay safe, and best of luck!
greensiax
Edit: Updated with later data to pick up missing news items
Hi Paul and stockopedia subscribers,
I appreciate you flagging Electra Private Equity (LON:ELTA) and yesterday Gresham House Strategic (LON:GHS) – I bought into Electra Private Equity (LON:ELTA) after doing my own research.
I wanted to flag a similar situation I’ve bought into at Cip Merchant Capital (LON:CIP) and would really appreciate readers’ views on whether it looks interesting or if I’ve made the wrong investment decision here. This is a closed-end investment management company trading (c. 55p) at about a c.36% discount to NAV per share (85.27p). It owns small percentages of mostly listed small caps. Its sometimes referred to as a private equity company but it’s more like an investment company. Net cash was around £11m in March. Simon Thompson at Investors Chronicle is also a fan.
This company is a bit of an oddity. Corporation Financière Européenne S.A. recently put an offer on the table of 50p a share – well below NAV per share and was not supported by Cip Merchant Capital (LON:CIP) management. In the process CFE has built up a shareholding of around 17% of £CIP. The offer period has ended so it remains to be seen what they do next.
The management (which seems to consist in practice of about two directors) communicates quite poorly with shareholders. Although they do update shareholders weekly on the NAV per share, its website doesn’t tell you what their current holdings are(!), meaning you have to dig through past RNS' to find out, and we’re still awaiting the results for year ending 12/20 which it said would be due out this week... Surely they can’t take almost 5+ months to put together? The fees for the two main managers also seem to be extortionate for what is essentially something I do for fun (picking and buying/selling shares): 2% of the NAV each year PLUS, if I read the IPO documentation correctly, 20% of realised cash profits from individual holdings also go to the two managers. Shareholders have raised concerns about numerous aspects of the company at AGMs.
Despite all these negatives, the 36% discount looks too big to me. Their shareholders are a bit of a mixed bag as you’ll see below. Getting some of these for a 36% discount seems like a bargain (e.g. Redde Northgate (LON:REDD) and Caretech Holdings (LON:CTH)). I am less of a fan of e.g. Hss Hire (LON:HSS) for reasons stated on SCVR previously but the cash and discount to NAV per share at Cip Merchant Capital (LON:CIP) seems to cover off downside from individual holdings going wrong.
Holdings
I have shamelessly copied this breakdown of their holdings from the interestingly named ‘hugepants’ on ADVFN from the start of May – I hope they don’t mind but it saved me the effort of going back through previous RNS’ to calculate their shareholdings (the pence figures equate to the holding's value in Cip Merchant Capital (LON:CIP) share price terms):
Net cash = £11M (20p) CareTech Holding plc (CTH). £7.75M = 14p HSS Hire (HSS). £5M = 9p Orthofix Medical Inc (NASDAQ:OFIX). £4M = 7.5p Alkemy SpA (BIT:ALK). £3.85M = 7p Coro Energy plc (CORO). £3.5M = 6.25p Ixico PLC(IXI). £2.9M = 5.25p Redde Northgate plc (REDD). £2.5M = 4.5p Proactis Holdings plc (PHD). £1.9M = 3.5p Happy Friends. £1.8M = 3.25p EKF Diagnostics Holdings PLC (EKF). £1.6M = 3p Brave Bison Group plc (BBSN). £0.8M = 1.5p Vertu (VTU) £0.65M = 1.25p
This probably shouldn’t be trading at NAV given the management expenses, but does the current share price offer too big a discount or does it fairly reflect governance issues and questions about how funds could be redistributed to shareholders? The potential upside here is not nearly as good as Electra Private Equity (LON:ELTA) but that discount just feels a bit too big to me.
I think the one thing missing to make this a good investment would be a catalyst for the discount to close. Otherwise it will keep on at a large discount for the reasons you have spoken about. Should they reduce their fees, improve comms or look to wind up the vehicle (or even have activist shareholders who will agitate for this) it would then make it a compelling investment for me.
I have bought this too because of the discount to NAV. I agree the costs look high but the stock picking ability has been encouraging. I think with Corporation Financière Européenne S.A building a stake we will eventually get the catalyst.
Tremor International (LON:TRMR) ( I Hold) Recent Stocko Investment Club pitch May 17th.
Wow what a Q/E result! 'Problem' here is that Finn Cap have upgraded forecasts six times since September so that even though today's Q1 end 31st Mar 21 trading update is nothing short of stellar (Net revenue growth +96% and EBITDA increased 4,935% to $27.5 million (Q1 2020: $0.5 million) the share price has only gone up c5%.
Should management take a leaf out of Boohoo's book and under promise and over deliver?
One thing's for sure the full year forecasts are already looking under pressure!
Been holding this for about a year and still struggle why its not trading much higher than this given the growth and actual starting of profitability. Yes there are risks to this as all companies but they are delivering consistently.
re Tremor International (LON:TRMR), reason is history and sentiment, right or wrong, that revenues are volatile and could evaporate. I also hold, though I am a long way from calling it a conviction buy.
Tremor International (LON:TRMR) quarterly trading update shows ongoing explosive growth with 84% revenue growth re a year ago. There is net cash of 130m dollars. Strong positive market reaction to update
Hi Paul, can you comment on the Mothercare (LON:MTC) trading update today? It looks to be good news for this turnaround business, with heavy inside ownership.
Thanks for the tip, adding to my watch list. I didn’t even realise they were still trading.
The retail presence they left behind is still an opportunity. - father of young children
Sosandar (LON:SOS) - I had hoped naively for organic growth but I guess fashion retail has its inflection point at some point when it needs to ramp up inventory. Bit nervous but the website is constantly refreshing ranges so appears to be moving in right direction.
Hi Paul, would be great to get your take on Calnex Solutions (LON:CLX) if you have chance. Thank you.
Hi Jedi, I'll be taking a look at Calnex Solutions (LON:CLX) next.
Roland
Thanks Roland - appreciate the detailed write up.
Portmeirion (LON:PMP) although sales slightly ahead of 2019 the equivalent trading update in 2019 was a profit warning so I would say although progress is somewhat promising its promising against very week comparatives so still work to do to get back to levels pre 2019 woes imho. I will continue to hold in hope that trend in trading improvement is still going the right way.
Portmeirion (LON:PMP) (I hold)
rmillaree - I take your point and its well made. Things were not going well in 2019 Primarily due to the long running South Korean grey market saga? If I remember correctly the 2019 trading update was -10% versus 2018 sales. But the H1 was actually less than that at -5%? 34.895m versus 36.895m (2018). The 2019 sales will exclude Nambe ( acquired July 2019) and the recent but, small, 50% of canadian jv.
I am little more positive on this update than you I think.
My back-of-the-envelope calculations assuming slightly up as 2.5% and that the slightly up continues for the remaining 6 weeks is for £35.7m but that exludes Nambe (around 7m in 2020H1) and 50% of canada - so I'll pencil in £42.7m H1 . Which is a good way back towards the 2018 figure and well above including the effects of acquisitions? Certainly above my expectations?
As you say - hard to tell from the 50% up on 2020 what this means. With 10 weeks of 'normal trading' followed by 6 weeks of lockdown - but the interims revealed that Jun was only -9% on 2019. A finger-in-the-air of 50% up for H1 would be 48m, well above my rough estimate based upon 2019 figures and seems too high to me. All depends upon how May and Jun continue - but I'm more than happy with the £42.7m figure for now - well above my expectations.
But what effet upon margin? All of this does not take into account a continued shift to higher margin direct on-line sales. cost savings and efficiency improvements in the pottery factory and warehouse.
My impression is that the new management (CEO) has a clear vision and is transforming the business rapidly from a moribund pottery to an on-line prestige homewares business. Which does make me more optimistic for H1 and for the full year.
cheers
Mark
Re Portmeirion (LON:PMP) I absolutely agree - it is becoming a far better business than a few short years ago. Critically, it is finally beginning to get its online operations right - both in terms of its product range (more gifting and products better tied to promotable occasions) and its online execution.
The quality of photos and even basic background issues like fonts and headers is improving (IMHO as ex-FMCG Marketing Director) although I still think they run too many 30-70% promos which cheapens the b.rands
Importantly, on an InvestorMeetsCompany webinar the CEO said online not only grows sales but is 10% net margin better. On top of this, they are finally automating more of the non-creative factory operations like applying mug decals so costs should start to fall.
With better online sales, full year sales from Nambe and shops re-opening, plus the launches of new lines like the new hand sanitiser and moisturiser ranges and Sophie Conran products , I will be disappointed if sales do not exceed 2019's £92.8MN and I expect it to (just about) break £100Mn in sales in 2022.
Only the 20% dilution from the in the end not needed Placing at 380p last year is a negative - but that leaves next to no debt and room for investing properly in growth or even opportunistic acquistions. That's how they picked up brands like Spode coming out of the last recession. But even without that, lots of opportunities to drive organic sales. The new CEO seems on top of it and has invested in the new hires necessary to bring the skills that the business was lacking before.
I hold and bought more recently.
A couple of points of colour on the Portmeirion (LON:PMP) update from the N+1 Singer note. First, the comparison with 2019 adjusts out the Nambe acquisition and the change in Canada from JV to sole control (so actual turnover to date will be more than slightly ahead of 2019). Secondly, online is continuing to grow (implying better gross margins). N+1 Singer leave their forecasts unchanged in particular because of the strong H2 weighting, but they have sales below 2019 and earnings well below 2019 and say risks to the upside.
Morning all,
Very good maiden results from £CLX. A notable earnings beat too...
Regards.
RE: Calnex Solutions (LON:CLX)
They say that sales have been pulled forward from 2021, indicating (I think) that they're expecting this year to be flat.
The residual concerns here remain. The reliance on Spirent Communications (LON:SPT) for distribution and Kelvinside for manufacturing, and as far as I can tell, there isn't really any recurring revenue - it's a manufacturing company. Although there is a lot of repeat business, which is a good sign.
That said, it's a good set of results and a decent company in a growth sector.
timarr
Paul can you comment on the SOS placing?
My morning smallcap tweet:
Gaming Realms (LON:GMR) Telit Communications (LON:TCM) Portmeirion (LON:PMP) DWF (LON:DWF) Restaurant (LON:RTN) Lookers (LON:LOOK) Ted Baker (LON:TED) Epwin (LON:EPWN) Webis Holding (LON:WEB) Sosandar (LON:SOS) Zegona Communications (LON:ZEG), River and Mercantile (LON:RIV) NAHL (LON:NAH)
Gaming Realms (GMR) gets Interactive Gaming Manufacturer Licence in Pennsylvania. It allows GMR to provide its Slingo Originals game content to the State's licenced online casino operators. [SP=41 Cap=118m]
Telit Communications (TCM) rec offer of 220p, a 9% premium. [SP=202 Cap=272m]
Portmeirion (PMP) Jan-Apr rev up over 50%. LFL slightly up on 2019. [SP=662 Cap=93m]
DWF (DWF) guides FY(Apr) rev up 13% and adj pretax £34m, 15% above mkt exp. [SP=95.6 Cap=310m]
Restaurant Group (RTN) both Wagamama and Pubs rev 85% of 2019 in outdoor only period, Leisure was 60%. Indoor dinding period: Wagamama up 22% and Leisure up 21% on 2019. [SP=128.4 Cap=982m]
Lookers (LOOK) guides FY U/L pretax comfortably above mkt F/C of £34m. [SP=64 Cap=250m]
Ted Baker (TED) financing deal to Nov 2023. [SP=180 Cap=332m]
Epwin (EPWN) AGM stmt - trading still 'strong'. [SP=106.5 Cap=154m]
Webis (WEB) WatchandWager.com received one-year betting license approval from the West Virginia's (1.8m population) Racing Commission. [SP=3.99 Cap=16m]
Sosander (SOS) [last night] yet another placing, £5.3m at 20p, a nil discount. [SP=19.58 Cap=38m]
Zegona Communications (ZEG) [last night] to return 153p/sh. "Following the capital return and payment of Zegona management's LTIP, Zegona expects to have a net cash balance of c.£11m, equivalent to £0.05 per Zegona share. Together with the capital return of £1.53 per share, the total value for shareholders is expected to be £1.58 per Zegona share." [SP=136.5 Cap=299m]
[edit] NAHL (LON:NAH) FY. Current trading in line. Looking at selling its "repositioned profitable Residential Property business". I hold.
In line: River and Mercantile (LON:RIV)