Small Cap Value Report (Tue 6 April 2021) - RCN, MTC, WIN

6th Apr '21 by Paul Scott

92 comments 11291 reads

Good morning, it's Paul here with the SCVR for Tuesday. Hopefully you had an enjoyable long weekend.

Timing - should be done by 1pm today. Today's report is now finished.

Agenda -

It's very quiet for news today, so I'll cover a few stragglers left over from last week, in addition to today's relevant news.

Redcentric (LON:RCN) - in line with expectations trading update for FY 03/2021. Upbeat tone to commentary. PER of about 19 - difficult to see much upside from here.

Mothercare (LON:MTC) (I hold) - several readers have asked me to review this share. Looks potentially interesting, but beware the huge agreed amounts to be paid into the pension scheme. Not enough info for me to form a sensible opinion here.

Wincanton (LON:WIN) - Positive trading update from last week. Lovely company, but big pension scheme cash outflows.

Redcentric (LON:RCN)

132p (pre market open) - mkt cap £206m

Trading Statement

Redcentric plc (AIM: RCN), a leading UK IT managed services provider, today announces a trading update for the year ended 31 March 2021 and the sale of a non-core business unit.

This update is worded in very upbeat-sounding language, but it’s only in line with expectations, so logically shouldn’t have much, if any, effect on the share price. Mind you, logic went out of the window a while back, this is a roaring bull market now, so anything could happen.

Revenue and adjusted EBITDA for the financial year ended 31 March 2021 are expected to be in line with the board's expectations...

As an aside, I do want to stress that we’re not trying to predict short-term share prices in these reports. That’s down to unpredictable market sentiment. In markets this bullish, there are often a lot of new entrants (e.g. spread betting companies are reporting large numbers of new account openings). Inexperienced punters tend to chase stories, fad stocks (e.g. anything bitcoin-related, or cannabis, etc), and often have no idea how to value companies, just following prices up, buying on tips, unaware that they’re often participating in a bubble. A lot of money can be made from that type of speculation in a bull market, so good luck to them. The trouble is, people learn a lot of bad habits, which result in them losing the money afterwards,…

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Richard Goodwin

6th Apr '21

Supermarket pricing power and petrol pricing are occasional topics for the Competition and Markets Authority and it's predecessors so be careful what you wish for...

Also I think in this context the issue is trust rather than price per se. The goods had one label taken off and another written on so the brand image of a differential in quality was clearly a nonsense.

shanklin100

With ISA contributions for the 21/22 tax possible from today, I presume volumes are higher than usual. IMHO, as somebody who has used Hargreaves Lansdown (LON:HL.) for many years, they are consistently pretty hopeless at providing a reliable trading interface if dealing volumes are at all elevated. Essentially, since its a perpetual problem, one can only conclude that they have made a conscious decision not to invest properly in their trading platform; at least that's the conclusion I have drawn.

This contrasts greatly with say Cmc Markets (LON:CMCX) which has happily paraded their 99.97% platform availability through the pandemic, as per https://www.investegate.co.uk/...

...but AIUI do not yet support ISAs or SIPPS. I am hoping this will change as they roll out new functionality.

Its not just Hargreaves Lansdown (LON:HL.) that is deficient. Ig Group (LON:IGG) has also come in for a lot of stick over the last year or so but that's not a platform I have ever used.

UK_Investor_8888

RNS now up for Xlmedia (LON:XLM)

EGM All Resolutions passed.

Open Offer over-subscribed.

£27M raised

New shares enter the Market tomorrow 07/04/2021.

Its going to be interesting / err exciting for Xlmedia (LON:XLM) long share holders.

Tony Drew

you forgot to include global warming!

Leonard Vi

Thanks for taking the time to respond to this post with such detail, really useful and interesting insight

Camtab

I do wonder if it is a good idea printing your top 20 holdings Paul. Forgive me everyone but the point is Paul gives us insight and considered reflection on these shares. A top 20 list makes it feel like a tip sheet and in my experience people just buy those stocks and then complain like mad when they don't perform. We are supposed to be doing our own research and investment.

Ken Peare

Wincanton have a new management team with apparent good pedigrees. I reviewed their recent webcast and was more than impressed with their grasp of the business, their understanding of where the best margins lie in their 4 sectors and the growth of their B to C business. I believe they have the opportunity to enhance their PBIT as a % of sales which could result in a substantial increase in EPS? It may take awhile but , in the meantime, very solid basic business.

fred9566

I disagree with hiving it off - I am more in agreement with your comments this morning and I quote

Hence why I do (usually!) enjoy the discussions here with readers, it's fascinating to see a range of opinions, then we can weigh up the pros & cons.

Boon

On Mothercare (LON:MTC), one tip I would advise anyone looking to buy, is to check out the birth rates in their key markets.

I know in some countries birth rates have gone down in early 2021, and expected to stay low for the rest of 2021, due to COVID.

However, I have also read hypothesis/theories that birth rates would be going up, due to so many people having time on their hands at home...

Either way, birth rates are important as they will be the macro drivers for demand for Mothercare products in the next year or two.

Johnnycomelately

Paul

Maybe Boohoo sent this stock for re-labelling and three items weren't re-labelled properly. It is three items only.

timarr

Mahmud Kamani owns nearly 13% of Boohoo shares. That is certainly not a small stake. Mahmud Kamani has the majority of his own personal wealth invested in Boohoo shares.

Let's hang Boohoo for getting three items wrong in their hundreds of thousands of items.

Three items.

Gromley

Nerdy Analysis alert!

Mahmud Kamani has the majority of his own personal wealth invested in Boohoo shares.

Certainly his stake is not trivial, but your statement did cause me to have a quick look.

The Liverpool Echo reporting on the Times 2020 rich list (I don't have a Times subscription to check the source) reports that Kamani and family were worth £1,030m; £929m of which was Booho shares.

Other info in the short piece infers a share price of c. £2.16 which suggests a valuation date in either March 2020 or July 2020.

On that basis I cannot make sense of the £929m valuation (implying about 33% of the shares - 430m shares) .

Anyway it looks to me superficially that the Rich List may have arrived at their "net worth" calculation by taking their valuation of the shares and adding it to the c. £100m that Mahmud received from selling shares in December 2019.

If so then the Rich List calculations assume that Kamani has no other assets (property etc) and received nothing from the flotation of Boohoo in 2014.

Actually I had not intended to go off in such a forensic analysis, but I got drawn in by the numbers!

The point that I was trying to look at was whether it was safe to assume that the large director shareholding meant that directors interest were aligned to those of other shareholders. I have made the mistake of assuming that in the past.

The anomalies I note above, mean that I cannot really validate whether it is true that the majority of Kamani's wealth is tied up with Boohoo shares (but I doubt it given that there is so much that the Rich List does not see). So I cannot easily establish how closely Mr Kamani's interests are aligned with ordinary shareholders.

I'm sure that some will read this as an attempt to dig up some dirt and failing to find it, if so fair enough; I genuinely have no skin in the game in any direction here. I just get curious when I see signs of blind group-think emerging.

Let's hang Boohoo for getting three items wrong in their hundreds of thousands of items.

Three items.

{sigh}

Yes johnny just three items , that accidentality :

Had their original labels crudely obliterated.
Individually had new labels stitched into them.
Were individually repriced on the online platform.

There are potentially plausible and defensible explanations for what has gone on; but if you believe that this is about "just three items" I think you need to take a breath and sit and think in a darkened room.

Stocko was slow this morning too.

Maybe first day of the New Tax after a long weekend shutdown after a sort-of lockdown releasing announcement with corporate news excited the investortariate?

Laughton

"Stocko was slow this morning too."

Don't forget, it was very cold.

jonesj

Supermarket pricing power ?
Within a 20 minute drive, I have Tesco, Sainsburys, Morrisons, Asda, Waitrose, M&S, Lidl, Aldi, Budgens, CoOp plus a range of specialist shops. The customer can very easily move from one to the other.

Compare with stock brokers, where once I have my account, complete with just "nominee" holdings, it's pretty difficult to move accounts if they put the fees up. Yet nothing ever gets done about competition in this sector.
Arguably they ought to legislate for either overnight in-specie transfers when changing brijers, or better still abolish the nominee systems and make direct holding standard.

Dojosan

Tbh - Argentex (LON:AGFX) is valued roughly a few % off from where it was before it fell off the cliff. I picked it up at the bargain price (or so I thought at the time) at 140p ish - only for a bad write up by SCSW (apparently) to lead to sell off to 130ish level - just before the nose dive. Interesting sector ....with a few players trying to knick clients from banks .....Alpha Fx (LON:AFX) , Equals (LON:EQLS) , Transferwise (about to ipo)

That's nothing to do with the point I was making, which was that he doesn't hold anything close to a controlling stake.

10th Apr '21

On bearish side, Norwegian Cruise has given up running any cruises departing the UK this year.

Small Cap Value Report (Tue 6 April 2021) - RCN, MTC, WIN

Redcentric (LON:RCN)

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Paul Scott

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