Small Cap Value Report (Tue 9 April 2024) - GMR, W7L, GHT, SCE, SUS, ORCH, SBDS, IPX

9th Apr by Paul Scott

76 comments 8733 reads

Good morning from Paul & Graham!

I've got to finish a little earlier today, so I did a section on GMR last night to compensate. Today's report is now finished due to time constraints. I'll circle back to a couple of the interesting companies reporting today, later this week.

Looks like it should be a good day for my 2024 share ideas, with a takeover bid for Gresham Technologies (LON:GHT) although the premium looks disappointing, and an ahead of exps update from one of our favourites, Warpaint London (LON:W7L) . Can I catch up with Graham?! (EDIT: drat, just realised W7L wasn't on my 2024 top 20)

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 (usually) between £10m and £1bn. We usually 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 necessarily know what company you are referring to.

What does our colour-coding mean? Will it guarantee instant, easy riches? Sadly not! Share prices move up or down for many reasons, and can often detach from the company fundamentals. So we're not making any predictions about what share prices will do.

Green (thumbs up) - means in our opinion, a company is well-financed (so low risk of dilution/insolvency), is trading well, and has a reasonably good outlook, with the shares reasonably priced. OR it's such deep value that we see a good chance of a turnaround, and think that the share price might have overshot on the downside.

Amber - means we don't have a strong view either way, and can see some positives, and some negatives. Often…

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StrawberryDreams

9th Apr

I assumed tax too as Jersey is one of the more respectable global havens.I'ma bit annoyed i missed the lows in Windward (LON:WNWD) as i had my eye on them pre the conflict.I think the fact they mentioned a broking company spooked naturally.I assume they mean share broking and not any other kind of brokerage like shipping registered there or some other company he owns.Long shot perhaps.I doubt he would sell substantial amounts after this reaction though....

Burnt Onions

MPAC (LON:MPAC) (I hold) A 25p exercise price I believe and we are only talking about 224,000 shares for the whole board, so just over £1m at current market price of £4.37.

That's not much dilution and an absolute bargain if they deliver cumulative EPS of £1.50 in the next 3 years. As Davidjhill suggests, the management must see rising EPS over the next 2/3 years for them to structure it this way.

A decent incentive for them to deliver and worth every penny if they do, I whole heartedly support this CEO and his bullish ambition for the business.

unbelievablejeff

There's a 5,053 on the bid at 100p

There's a 13,806 order on the ask at 102p

planetx

Not as good as buying shares in the market as a sign of confidence and still a bit of a freebie .

But apparently that’s how you motivate senior teams to deliver exceptional performance , or at least we are told so .

All party of the gravy train but at least in this case the gravy train has to get up to a decent speed .

Still think it’s largely bullshit and entitlement but that is Unfortunately the drivel we lap up .

Don’t think warren buffet and Charlie were fans on share options schemes let alone at a strike price hugely below market rate .

Still the greed in us condones it as we take the “if I get rich I don’t mind “

But to be fair not the worst, the RBG scheme of a few years back was totally outrageous yet they “got away with it” though if they completely screwed the company so no one got anything yet they lost nothing but shareholders did .

Have to disagree with you there Planetx, share options attached to decent hurdle rates are, in my opinion, the fairest way to align the interests of both the management and the shareholders. People should be incentivised, nothing wrong with that.

That's how I see it anyway and if I were in their shoes I too would want a decent pay day if I delivered the goods for my shareholders...

Let's just hope they do because this has now become my largest holding.

davidjhill

Hi Planetx

I also like Director buying in the market and the directors have bought some themselves previously though small I think.

Not all options are bad. There is an appropriate remuneration amount that should be calculated on a total compensation basis for a board member. I’d rather less of this in fixed salary and cash bonuses and more of it in options structured the way these have been done by MPAC (LON:MPAC) . It incentivises management without heavy dilution and is aligned to my interests as a shareholder. The set levels are ambitious but not unrealistic and reward sustained success in a restrained way. This is the sort of reward that I see as being good for everyone.

I dislike companies like Tclarke (LON:CTO) where director comp vastly outweighs any benefit derived for shareholders - and that’s not option related either. Then you get some very greedy options as you say that don’t penalise failure but reward success disproportionately. This is really the responsibility of the NEDs to control. They don’t get options and should balance that on behalf of shareholders. Unfortunately too often that is not the case.

topturkey

Just bad timing with results next month for CFO to suddenly depart with no prior warning??

Yes that’s fair topturkey. Timing could be better.

Oh dear oh dear Planetx - I hope you have not been hallucinating on the concoction you’ve been making and consuming all day :D

Maybe LUSER is better (Losses use someone else’s research).

I thought you hated Asset Management stocks?

Hi Roger

I haven’t bought any European Green Transition (LON:EGT) as I don’t have any visibility over what assets they may or may not buy. I will watch it though and see if I see any value. It’s an odd one as it is outside of Cathal’s usual modus operandi which concerns me a bit - buying undervalued pharma assets is not the same as buying distressed green energy assets. I’m sure he will be talking it up so I will watch and wait.

Saga (LON:SAGA) I haven’t added to yet. Suspect I will kick myself but it’s had too many false starts in this recovery phase so I want to see some optimism from the new CEO. I’d like to see him buy some shares too!

carmensfella

Just to mention that European Green Transition (EGT) are presenting on the Mello show this coming Monday MelloMonday 15th April 2024 – Mello Events

NewInvestor1972

Seems to be a big old rampfest post Avacta (LON:AVCT) presentation.

What are your thoughts Paul Hill?

Know you're a big fan.

I hold a few, just in case

Yes but the strike price should be market price !!!
not 90% below it

I do hate them

But I love you

Love beats hate

Callum Cowan1

Just bought my 2 day ticket, thanks for the link with the discount

Never been to anything like this so really looking forward to it

Staying for 3 nights in the hotel with my wife and looking forward to hopefully putting a face to the stocko name of some members maybe even while having a beer

Is there educational aspects to these events? Or is it pretty much only companies trying to sell themselves

Either way I'm sure I'll have a much better time than being at work

Callum

Huwster

Good decision

Cohort (LON:CHRT) seems to be doing okay [I hold] as does Avon Protection (LON:AVON) [I don't hold but wish I did]

I bailed out of Silver Bullet Data Services (LON:SBDS) at 160p after a great run - I think they are going to need to do another fundraise. Once that happens though I may be back in.

I work in the life science industry and the risk reward profile on Avacta (LON:AVCT) [I hold] is now better than it's ever been in my opinion with enough cash to progress their lead asset to a value inflection point after a painful fundraise. The therapeutic window on AVA6000 looks very promising with greatly reduced toxicity on their FAP targeted doxorubicin warhead vs standard chemo with early evidence of efficacy. Yes, there is a lot of attention on this one but that doesn't mean the science isn't solid but with all drug development the risk is high and moderating my exposure (5% of portfolio).

jamesalastair

10th Apr

Might be worth while checking out the goliath in this industry Kongsberg Gruppen ASA (STO:KOGo) which is a chunky long-term hold for me and which has 5-bagged over the past 5 years. I cannot see how Windward (LON:WNWD) has the global credibility in this space, notwithstanding their recent contract win (for which they don't appear to have the FCF or capital to implement). I just cannot see where their competitive advantage lies. Open to all comments / ideas as always and could be wrong.

Small Cap Value Report (Tue 9 April 2024) - GMR, W7L, GHT, SCE, SUS, ORCH, SBDS, IPX

Explanatory notes -

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Paul Scott

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