Small Cap Value Report (Tue 29 Mar 2022) - TMG, DRV, SUS, XLM, LTHM

29th Mar '22 by Jack Brumby

63 comments 8920 reads

Good morning! It's Paul and Jack here, with Tuesday's SCVR.

Agenda -

Paul's section:

Mission (LON:TMG) - final results are out for this marketing company. Signs of impressive profit growth are a plus, but the balance sheet is cause for concern and companies in this sector are vulnerable to clients tightening the purse strings when the economy slows.

Driver (LON:DRV) - a profit warning from this construction and engineering consultancy. Immediate changes seem to have arrested the problem but the jury's out on whether this share is simply too small to be listed or worth a punt at the current price.

Jack's section:

S&u (LON:SUS) - I hold - a strong rebound following exceptional FY21 conditions. This is a well managed operator that thinks long term and prioritises its shareholders, yet the stock is neglected by the market and trades on a single-digit multiple of forecast earnings. The group is investing for growth and, while the general macro outlook is mixed, I would expect it to fare better than most.

Xlmedia (LON:XLM) - turnaround continues and the shares are up this morning. The business model was badly hit in 2018, so I have reservations over the robustness of earnings. The US sports betting market could be a very lucrative opportunity and the shares appear cheap, so I can see the bull case, but I’d need to have more confidence in the stability of this opportunity.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to review 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 are analysing the company fundamentals, not trying to predict market sentiment.

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…

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MichaelFBS

29th Mar '22

Thx Bullygig

“…profitable”. I wished I could say that about the rest of the portfolio currently!

Regards

Michael

davidjhill

Circassia (LON:CIR) interesting to see the board have started to buy chunks of shares. Bodes well I think

Howard Adams

This is an insightful 4 minute read (longer if you reflect on the words), from James Anderson as he departs from Baillie Gifford.

For those not familiar with the name, James Anderson was/is the power house behind the Scottish Mortgage Investment Trust (LON:SMT) trust (and other BG trusts).

Scottish Mortgage Investment Trust (LON:SMT) has been an extremely successful investment trust focusing on innovation around the globe.

Many of Anderson's observations are counter intuitive, which has been an underpinning of his success.

Anderson elaborates on the many great thinkers who have inspired and informed his own mental models over the years.

The paper might interest some of you.

https://magazinebailliegifford...

Howard

The Scribe

Didn't see anything on James Latham (LON:LTHM) today, though it was mentioned in the days Report Headline. Will that be included tomorrow?

gmtrader

You can see the cup and handle on a weekly chart as well. Short term though I expect it to be a little volatile. Short term there is a reversed cup and handle on the daily which could see it drop as low as 1800. Whether it will or not who knows. Currently it has bounced off support at 1895.

Snowbum

Indeed, the spot price volatility is why I prefer to take my exposure via mining stocks rather than spreadbet.

Also, if the monthly cup and handle plays out, I would expect it to rise to 3000. But being so long term it could be 2023 when it plays out.

Many gold miners will be cash machines at current prices, so dividend paying mining stocks will give a return in the meantime while we wait. They are all ridiculously cheap just now.

Fishcake

There's a whole section on it, there's just no summary - hit CTL-F and enter LTHM and you'll find it (or just scroll down a lot)

proffittpar

Aquis Exchange (LON:AQX) - Agreed that results today look good and better than expected but share price has barely moved. Share price in line with a lot of small caps has taken a bit of a battering around 25% down but fundamentals look okay but would appreciate some more detailed coverage if possible from Paul or Jack similar to BKS which does seem to be grabbing a lot of attention.

JASVFS

Thanks very much for your Driver comments Paul, I particularly enjoyed "I can't see why anyone would want to own this share" Ouch, the truth sometimes hurts. After a decent few years I've got too many left where No would be the answer to the question - Would you buy this now? That's why I love Stockopedia, I get facts not fiction.

Silver Moon

I missed it too gmtrader, I'll wait for the recording to come out, I had added some more Shanta Gold (LON:SHG) before I went out on my bike, came off it and broke my wrist. Only just got back from the hospital now, c'est la vie.....

Sorry to hear that. If it’s any consolation I’m battered and bruised with a sprained ankle after writing my car off last week.

BnB

I think the reaction reflects the fact that the good parts were historical rather than forward-looking, ie a beat on profit forecast but no raise on expectations. Quite a high proportion of sellers today according to the level 2 data although that did not move the price downward at all. If there are any sellers tomorrow though it may slip back.

Simon Rowan

Ace analysis as usual Jack. SUS:L. Definitely my vote for quote of the year so far from the Chair!

In times scarred by the global pandemic, looming environmental disaster and now a war in Ukraine, anyone claiming to see the future with any certainty risks appearing a charlatan or a fool.

Hence, without possessing any supernatural powers of foresight, I am at least pleased to see that my prediction last year of "a return to S&U's habitual levels of success" in 2021 has indeed now come to pass… Priceless

Thanks for that. Saw it’s name in the headline, didn’t see a summary and skipped to the bottom and didn’t see anything, so, wrongly, as it turned out, assumed nothing had been written.

Paul Scott

Sorry yes we forgot the summary for LTHM.

Hi eighthwonder,

Hi Jack/Paul. Do you have any plans to look at Ten Entertainment (LON:TEG) ?

Sorry, we didn't get round to looking at this one.

Apologies, Paul.

Hi The skier,

Xaar (LON:XAR) great results today. Looks like a rosy future.

Are we looking at the same numbers? It delivered a loss of £(0.6)m for 2021. Hardly "great"!

On the upside, £25.1m net cash is good, and outlook sounds upbeat.

£190m market cap seems very ambitious.

Regards, Paul.

I didn't realise Aquis Exchange (LON:AQX) shares were listed on AIM, it's not one I've looked at before. Jack covered its results here a year ago. On a quick look, results today for FY 12/2021 do look good, thanks for flagging this. I've made a note to try to circle back to it this Friday, catchup day.

Small Cap Value Report (Tue 29 Mar 2022) - TMG, DRV, SUS, XLM, LTHM

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Jack Brumby

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