Small Cap Value Report (Tue 7 Sep 2021) - TED, CNC, MIDW, LUCE, MEAL, RNWH

7th Sep '21 by Paul Scott

50 comments 9870 reads

Good morning, it's Paul & Jack here with the SCVR for Tuesday. Welcome back Jack, and thank you to Roland for covering, much appreciated, as it makes my workload a lot more manageable, especially welcome when I'm away from home.

Today's report is now finished - we covered 6 companies, trying to focus on the more interesting ones. Apologies if we missed anything you like, there were far too many companies reporting today to cover everything.
Agenda -

Paul's Section:

Ted Baker (LON:TED) - a lacklustre Q2 trading update, in my opinion. It's in line with expectations, but it's expected to be loss-making this year. Not much sign of online growth, and store sales still well below pre-pandemic levels. An unconvincing turnaround so far, in my view, so why get involved?

Luceco (LON:LUCE) - sparkling interim results - this company has done amazingly well in the last year. Fascinating commentary on supply chain issues, and cost inflation - worth everyone reading, as it has read-across for many other companies.

Parsley Box (LON:MEAL) - this niche ready meals company has flopped since floating about 6 months ago, with the price now roughly half the peak. Slower growth, and heavy marketing spend combine to produce a thumping H1 loss.

Renew Holdings (LON:RNWH) - another strong update, materially ahead of forecast for FY 09/2021. Impressive!

Jack's Section:

Concurrent Technologies (LON:CNC) - solid company with a multi-decade operating track record but pedestrian growth in recent years. This is a good company with a strong balance sheet and decent longer term potential, but management is clearly communicating short term headwinds.

Midwich (LON:MIDW) - specialist audiovisual distributor reporting improving trading momentum. It has scale on its side and a busy acquisition pipeline, but business is relatively low margin and a recent c40% rerating limits the attraction

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to cover 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 stick to companies that have…

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peterthegreat

7th Sep '21

Yes, plenty of recent action at Science. As the placing and CEO share sale were at a small premium to the preceding market price, and the CEO still owns over 20% of the company, I don't feel worried by these developments but would welcome any other comments. It makes sense to do the placing and CEO share sales at the same time but I note that the CEO had to get permission to sell his shares just a few weeks before the relevant lock-in period expires so I wonder if there is an element of urgency with the placing (to do with Sciences accelerating acquisition activity?). Perhaps the press release was also hurriedly written as it says the CEO gave the lock-in undertaking on 30th September 2021!

gus 1065

Deleted.

Bouden54

Really don't agree with that - I think there are still many great opportunities out there if you look. Lots of good quality companies that are way too cheap - a random selection from my own portfolio includes Harworth (LON:HWG) Scs (LON:SCS) Secure Trust Bank (LON:STB) Saga (LON:SAGA) Phoenix Group (LON:PHNX) Sylvania Platinum (LON:SLP) B.p. Marsh & Partners (LON:BPM) Capital (LON:CAPD) Premier Miton (LON:PMI) Vertu Motors (LON:VTU)

Denzil Morgan

Are there any opinions on Redx Pharma PLC which is on an astral trajectory following a Sunday Share Tip?

rmillaree

Phoenix Group (LON:PHNX)

Yep the pressure really is now on the CEO to deliver an increase in shareprice and or chomping dividends !!!!!!! - his missus has just splashed out 400k buying shares in the company !!- for his sake lets hope he delivers poor lad as if he didn't have anough pressure running the business!

dereksp

I am surprised and disappointed that you have not commented on the BGO results today. The market cap. is £160m which is much more than Parsley Box and CNC so your priorities confuse me. I would appreciate your assessment on BGO....negative or positive. You also did not comment on CNIC last week so I wonder are you giving fast moving international tech growth companies a miss!?

peterg

Maybe she's more patient than you

timarr

I am surprised and disappointed that you have not commented on the BGO results today

A quick sweep this morning suggested about 20 companies reporting news that would fit into the SCVR remit. Obviously not all of those can be covered and the writers will generally write up the reports that interest them most.

So if anyone has a company they especially want considered then they should get in early and write something interesting to pique Paul or Jack's interest. For instance - what is especially interesting about Bango (LON:BGO)?

CamRaid

dereksp - I hope you make a full recovery. :-)

"Maybe she's more patient than you"

You are deffo quite possibly correct in that regard :)

mevans6890

Absolutely - if you want something covered it is up to you to make a persuasive case as Paul has said on many occasions. Obviously Paul and Jack have finite time and have to be selective.

Harry Hindsight

Redx Pharma (LON:REDX) - personally the lads could try and put lipstick on a pig, but without specialist aka insider knowledge then if its in the Stock Rank red zone then why waste the time. Get nearer to SR50 then it's not a blind punt.

Northbridge Industrial Services (LON:NBI) - lots of fingers in oil and defence my current interest points (I'm the contrarian ESG :), but maybe when the moving averages start to take off over 200p then worth looking into.

Vistry (LON:VTY) - builds houses on low margin and large cap. There is money in them their hills but I just can bring myself to buy into housebuilders. Morgan Sindall (LON:MGNS) warming to.

KevinS1

I agree........am waiting for a few of them to pop as well. Looking at their fundamentals and ongoing TU's many of them seem ripe for a rerate. The big unknown is the impact of the shipping costs & delayed products and the lost chips. Hopefully mitigation plans will mean the CEO's have done their homework and all will be OK.

dereksp.......I think you need to give Paul a reason to look at a share if it isn't on his own personal investment horizon. If you explain why you got into it, what you see as interesting, how you interpret the results etc etc then I am sure he will help out.

There are so many companies reporting on a daily basis you've got to give the man a reason to invest his time into it.

Alternatively ask for others views - there are a lot of very knowledgeable people on this site who I am sure will assist if their interest is piqued.

MiserableJacktPotato

This is largely a self help community. If you want to share some thoughts on Bango, I’m sure others here will have a discussion with you. I know a couple of the posters are very negative on the stock and think NHN will be siphoning out revenue and profit via the JV to the detriment of BGO

I take the opposite view and think the NHN JV is a positive.

Paul Scott

8th Sep '21

dereksp,

Bit of a life hack here - if you start any comment, to anyone with "I'm surprised and disappointed that you have not..." then you'll immediately piss them off & they won't want to help you.

There were about 20 companies reporting yesterday, we can't cover everything, simple as that. We report on things we know & understand, profit warnings & profit beats, as priorities.

I did have a look at Bango in the evening, out of curiosity, and it's a tiny, speculative company, that doesn't actually make any significant or genuine profits, once you take into account capitalised development spending. Eking out modest revenues from a tiny cut of payment processing.

As the title here suggests, we come at things here from a value investing slant. On that basis, it's difficult to see any value at all in Bango at current levels of revenue, certainly nowhere near the £160m market cap. Why is it valued so highly? Because growth is strong, and people are forecasting profits in future.

I'm not in the business of forecasting/guessing what growth might be, and what profits (if any) it might end up making. Hence we can't add any value here by reporting on Bango. We'll stick to our knitting.

If you think it's a great company, then feel free to do a write-up yourself, however brief, on Bango. That's the idea, we all throw our ideas into the pot.

Bango could grow into something good, or it might not. I've not got a crystal ball, so don't have a view on it. But the valuation rests entirely on hopes for future growth, because there's no value in the company as it stands, were revenues to stall at the current level, in my opinion.

Given the fuss you made, I'm also surprised & disappointed - that the figures weren't more appealing! Oh well.

Paul.

Appreciate your response and comment that valuation depends entirely on future growth. I was surprised and disappointed....no more ..no less...but you seem to have taken umbrage to that comment. That was not my intention. I stand by my comment that you commented on 2 companies with much small market caps...that is a fact...so stay cool and keep smiling.

Bango (LON:BGO)

Thanks for taking the time to add your comments Paul much appreciated. I also had a look last night too and came way feeling quite positive here ref where business is trending (50% sales growth is good for any business type?) . My original summary thoughts are on wednesdays pages as i hadnt seen your comments here.

Overall i actually came away reasonably impressed actually - if you compare their growth and potential for operational gearing kicking in on the bottom line as sales increase and excellent customer base its certainly interesting. Data of the kind they will hold on transactional data is highly saught after nowadays - so it does seem even based on the reasonably modest expecationsfor next year - revenue growth from only from £15 mill to 18 mill they will do 5p EPS next year (we are only 4 months away from that being this year too) - if we take the viewpoint they are investing to grow it really does look like this has potential to ramp up that 5 eps number quickly if sales take off and flow through to the bottom line. It is all a bit opqaue though payment processing and data anslysis etc and i do have doubts about their moat - i dont normally invest in early stage tat this does seem to have some attractions i must admit in that it seems like it shouldnow be in phase where profits and cashflow should be trending very nicely going forward. In summary it looks like this company may be on the cusp the nice step change into real profits and real positive cashflow

Small Cap Value Report (Tue 7 Sep 2021) - TED, CNC, MIDW, LUCE, MEAL, RNWH

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Paul Scott

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