Small Cap Value Report (Tue 5 Jan 2021) - Lockdown 3, SAGA, BOO, NXT, IGP, SCE

5th Jan '21 by Paul Scott

156 comments 13006 reads

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

Timing - I've barely paused for breath, and 5 hours has gone! It's amazing how time flies when you're immersed in RNSs and market action. Update at 12:20 - I've got plenty more to do, and want to fit in a walk in the sunshine at some point, so let's say 4pm finish time today. Today's report is now finished.

Lockdown 3 is upon us, which shouldn't come as a surprise to anyone - it was obvious that restrictions would have to be tightened further, so it really shouldn't make much difference to share prices. If anything, it was slightly better than I expected, because the Prime Minister said that the most vulnerable groups should be vaccinated by mid-Feb, add 3 weeks for the vaccines to take effect, which implies an easing of restrictions somewhat possibly in early March? Previously we had been told it would be end March, early April (Easter time). He also talked about schools re-opening in mid-February.

Despite widespread criticism of the Government, the authorities here in the UK have at least so far been highly effective at approving, ordering, and administering, vaccines. Compare that with lamentable progress in France & Germany, where there is uproar at the sluggish, indecisive, and clearly incompetent approach of combining their efforts via the EU Commission (at the insistence of Merkel apparently, who seems to have lost the plot completely, once again putting political dogma before the interests of the people she's supposed to be representing). Leading to Germany, the country which was pivotal in creating the first vaccine, not ordering enough for its own people. Things are going at a snail's (!!!) pace in France too. All rather ironic, given that we were falsely warned that it was supposed to be the UK experiencing shortages of medicine after Brexit! Layers of unnecessary bureaucracy don't tend to make things more streamlined, in my experience. So this seems a good example of where we can do a better job on our own. So well done to the authorities in the UK for being more nimble & effective than the lumbering EU bureaucracy. Sorry if this upsets anyone, but it's clearly true, and the truth hurts sometimes.

In terms of profitability, I calculate that many retailers & hospitality companies would be probably no worse off closed & claiming furlough grants, than open…

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MiserableJacktPotato

5th Jan '21

Confirmed correct

https://www.boohooplc.com/inve...

FuzzyHaha

New product line for Boohoo for middle aged men?

Rusty2

It may depend which site, device and settings you have, I can only see 3 replies.

Best to put in the £ticker then it’s clear what share you are talking about, there have been too many posts, in the last year, that don’t say what share they are talking about.

Wimbledonsprinter

I hold Triad (LON:TRD) and sold some today into this incredible rally.

As far as I can tell (looking through some message boards) the reason for the rally is related to the bitcoin surge and Triad’s supposed emphasis on blockchain. If you remember, on 9 Jan 2020 - Triad announced a framework agreement with Stratis Group (as seemingly previously foreshadowed in the HY 20 results - released 20 Dec 2019). As far as I am aware, Triad has not mentioned blockchain in any of its RNSs since the Stratis framework agreement. Therefore, I cannot see any concrete justification for the 46% increase in the share price in the first two trading days of 2021.

Having said that, even at 73p - the market cap is still only £11.6m and with £4m of cash, you could argue that you are not paying much for the option that there might be something behind the gossip.

timarr

I completely disagree with the analysis of Johnson's decision making.

With exponential infection rates you have to get ahead of the game. If you lockdown early you can open up early. If you wait until Sage forces your hand by declaring a level 5 situation giving 21 days before the NHS exceeds capacity then you're already in a crisis situation. This is straightforward exponential replication in action, it's not novel science, none of the first alternatives were ever going to work.

The only real excuse is the virus variant that's triggered a cascade of infections - but if you try to manage the crisis by running the NHS at near capacity you're not giving yourself any margin of error if anything goes wrong. Plus you offer the virus fertile ground for mutating.

Anyway, we are where we are. History will be the judge, or maybe the electorate in another four years.

timarr

Harry Hindsight

I only subscribed to IC for Micheal Taylor and Simon Thompson - well at least till he tipped Kromek (LON:KMK) - I should have listened to Stocko "sucker"

usingar

I totally agree.

Boon

On a Value basis, Getech (LON:GTC) does look interesting. £3m+ cash at the last statement, £2.4m freehold property (at book value), so not paying much more in terms of market cap.

Of course, have to take the risk of how much were losses and cash burn in the last few months. And whether this meagre £563k contract was all they managed to sign, since this is all they announced.

Clearly very leaky ship with lots of insider trading as the last two trading days had huge amounts of trades and share price moving upwards.

Gromley

With exponential infection rates you have to get ahead of the game. If you lockdown early you can open up early. If you wait until Sage forces your hand by declaring a level 5 situation giving 21 days before the NHS exceeds capacity then you're already in a crisis situation.

I totally agree timarr, there has been no clear and decisive leadership - but that is what you get from a populist, weakly shifting and squirming to satisfy as much of your 'base' as possible and limiting the alienation to the rest.

To be fair, I think it requires a massive amount of hindsight to criticise the first lockdown as being too late.

The last few weeks however have been totally shocking.

Threatening in the week before Christmas to sue any LAs who allowed remote learning in the last week before Christmas (when very little actually learning takes place anyway).

The "Christmas relaxation" had looked increasingly unwise for several weeks, but to cancel / downgrade it so late, was laughable (in a dark humour sense). My casual observation in my tier 4 area was that compliance was less than 80% as people had already made their plans and many stubbornly stuck to them.

The latest lockdown however, really take the biscuit. The data (just that which is published) clearly supported the conclusion for several days before. But the desire to appear "strong" and keep the schools open was such they indeed did open - for one day (to prove a point?)

As late as Monday morning when they reopened - Schools were safe, although kids mingling in them might not have been. What kind of insanity is that?

This might seem like a bit of a political diatribe (and maybe to an extent it is), but IMV there is a positive investment narrative perhaps coming out of this.

The eventual action has been stronger than I expected. The current lockdown will not be review (excluding more U-turns) for SIX weeks - I was expecting 2-3 weeks and then a review. Lockdown one had earlier reviews than that.

Economically no-one wants to see business shut down for too long. From my perspective, however, I think the real killer for many businesses has be the stop-start nature of things (especially for those businesses had sell short shelf life product).

So six weeks until the next review, does finally feel like strong(ish) leadership at last.

Will six weeks be enough? Maybe, if the vaccine programme starts to deliver; but if it is not perhaps now the Government will at least give some credence to the idea that opening up retail & hospitality with a substantial risk of needing to close them again within days would be a death knell for credibility.

It has been a roller-coaster, but I am actually now feeling more positive about UK facing businesses than for a few weeks.

Mark Carter

Yeah, I'm aware of what Monte Carlo simulations are, BTW. My comment about "rolling dice" was facetious. My underlying point, though, is that it's very easy to kid oneself when using sophisticated analysis.

I'll never forget hearing an interview with Greenspan. He said that he monitored things like the price of vacuum cleaners, and that if you wanted a simpler job than being chairman of the Fed Reserve, then being a quantuum physicist would be easier. The sheer conceit of the man! See, this is kind of nonsense these people come out with. They may have been factoring in the price of vacuum cleaners, but completely failed to see the real problem of mortgages being granted with chance of being repaid. So much intelligence applied with so little wisdom.

Stonethecrows

I’m living in Sweden and it was our idiot health leader, Tegnel, that Johnson had a meeting with in September or October regarding looking at the ‘Swedish model’ . He chose to stay open in September and not do any circuit breaker moves. In Sweden right now we have no lockdown, no masks and never even had a lockdown. Shops are all open, though we are ‘advised’ not to visit them. Just colleges and uni’s closed.
The virus is completely out control here. In the school I work in , alone ,we had 23 of 50 staff off before Xmas, half with corona. The hospitals are at breaking point and still they do nothing. At least they do something in the uk, but Boris is guilty of a bit of a balls up listening to our man Tegnel.

GrahamF

If you’re Boris, how do you decide who to listen to?

There were loads of people on here after the first lockdown saying that we should have followed the Swedish model.

Timarr

I agree. You are right. Unfortunately, there is a very vocal contingent who continued to shout long and hard that there were no excess deaths and this was just a “casedemic”. There was another contingent that insisted that a large number of positive tests were simply false positives. Then there was yet another group of very vocal business people who expressed huge outrage at any further restrictions. Then there were the others demanding a short circuit breaker lockdown (the type that was tried in Wales but found not to be effective).

The great British public, business community, politicians etc. are just too obstreperous to accept the unpleasant medicine before it’s too late. But they are very happy to complain about it afterwards.

davidallen77

Paul you go to get the staff to work on ships (non uk/eu normally) and will they be vaccinated will ports be open for ships and facilities ashore?

Phuntt

Saga (LON:SAGA)

I’m the same betjeman - has been on my watchlist for 6 weeks now as following the excellent commentary here has convinced me there is a real opportunity there. Made the decision to wait today though - working through the logic of the new lockdown I find it very hard to believe the cruises will now start in April. At the very least, there is a material risk that there will be a story or rumour to that effect during the next period. My guess the price will take a step down at that time and I can make a buying decision then. Could mean I miss the boat (Boom Boom) but that seems like the wisest decision to me.

Mark B

6th Jan '21

Shows you this is a game. I don't confuse it with Investing. Investing performance should be measured over decades and is a life-long pursuit.

peterg

Hopefully that won't be the case, but it certainly exists as a possiblity. And one thing is clear - the more the virus circulates in a population the more mutations will occur, simply because more replication is occurring. So one of the key issues in reducing the chances of dangerous mutation is to keep overall incidence of the virus down. Which is why assumptions, implied in Johnson's broadcast the other night, that once over 70s are vaccinated life can return to normal or close to it, are likely mistaken. If it's allowed to spread through younger, and less at risk, parts of the population, who may mostly (thought certainly not all) have mild symptoms, then the chances of mutations occurring that spread more easily, bypass existing vaccinations, impact younger people more ... increase. Vaccinations need to continue as fast as possible until the great majority are vaccinated, which will minimise spread, and some restictions are going to be needed until that is the case.

Counter intuitively I would’ve thought we want the virus to mutate.

Viruses that kill their hosts are unsuccessful viruses. It has been reported the HIV has mutated into a way less deadly strain, and the common cold and influenza were almost certainly deadly when they first infected humans.

kenobi

7th Jan '21

following up because I saw this article today in the mail, (ok, ok), by an editor from the German paper Bild, interesting to see the perspective from the EU side, especially the German view of countries like France, again not anti eu, just a counter balance to people who thought it was a terrible decision when we opted out of the EU scheme to secure vaccines together. It must be said there's an element of luck that the Oxford vaccine which is the one we bought most of, turned out to work, where as others, didn't. But the UK did seem to spread it's risk relatively well. Credit where due, if they can just roll it out quickly perhaps we can get back close to normal, and pass on the excess vaccine to countries who need it.

https://www.dailymail.co.uk/de...

Bluesky Ventura

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Small Cap Value Report (Tue 5 Jan 2021) - lockdown 3, SAGA, BOO, NXT, IGP, SCE

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Paul Scott

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