Small Cap Value Report (Tues 13 July 2021) - SNWS, CIR, SOLI, HOTC

13th Jul '21 by Paul Scott

50 comments 8614 reads

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

Timing - TBC

Disclaimer -

A friendly reminder that we don’t recommend any stocks. We aim to cover notable trading updates & results of the day and offer our opinions on them as possible candidates for further research if they pique your interest. We tend to stick to companies that have news out on the day, and market caps up to about £700m. We avoid the smallest, blue sky type companies, and a few specialist sectors (e.g. resources, pharma/biotech).

A central assumption is that readers then DYOR (do your own research) and discuss in the comments below. The comments, incidentally, sometimes add just as much value as the articles. We welcome all rational views, whether bull or bear!

It's helpful if you include the company name or ticker within reader comments, otherwise some readers may not be aware of what company you are commenting on.

Agenda -

Paul's Section:

Smiths News (LON:SNWS) (I hold) - an unexpectedly positive trading update, from this distributor of newspapers & magazines. Obviously an activity in structural decline, but it's now a cash cow, with lucrative dividends in the pipeline. PER of just above 4 looks too low, now that legacy issues have been fixed. One for value investors.

Hotel Chocolat (LON:HOTC) - an impressive update, with performance ahead of expectations for FY 06/2021. Lots more detail about growth plans. A little light on numbers, but there's no doubt the company is trading well, and making impressive gains online & internationally. Still expensive, but I'm warming to this share.

Jack's Section:

Circassia (LON:CIR) - Ex-pharma co (now medical devices) in turnaround mode but with costs reduced and EBITDA to be ahead of expectations. Still loss-making and market cap is well ahead of continuing revenue, but the group has a dominant asthma testing product in the form of NIOX that it can now focus fully on.

Solid State (LON:SOLI) - shares down on today's update. You might argue that the price got a little ahead of itself in recent weeks but this strikes me as a well run company with potential for steady long term growth.

Paul’s Section

Smiths News (LON:SNWS)

(I hold)

42.5p (last night’s close) - mkt cap £105m

Trading Statement

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Bouden54

13th Jul '21

Nb Private Equity Partners (LON:NBPE) today reported a 6.5% increase in latest NAV to continue their very strong run. Looks very good value on an almost 30% discount.

JohnEustace

I wonder if the CLIG outflow is from the US business Karpus that they merged with last summer. Reverse synergies?

No if you look at the table in today's update there are outflows across all strategies (Karpus are broken out as separate strategy so you can see it wasn't just that part of the business).

tim boddington

Smiths News (LON:SNWS) I hold.

Revenues are down by 11% and an organic decline of 5% was anticipated as more news moves on line. Most of the decline has come from the non operation of their travel outlets during lockdown. Set against that there has been some very strong and effective cost reductions and the company is clearly very resilient, EBITDA is down by £1.25 Million. There is a limit as to how much cost can be taken out of any business. However, the business model is strong with 43 distribution centres to over 30,000 retail outlets and this is adaptable to other products. Apparently they do have some very advanced IT to manage their newspaper and books delivery services. They have a long term contract with the largest newspaper publisher News International. Voted top media supplier in the UK for the last 5 years.

I bought in May 2020 and the share value has increased by 89% over the last 15 months. I would probably not buy now as I do not expect a repeat of the share value gain this year, but I will hold for a further 6 months.

1MCF

I read The Art of Execution last year and really enjoyed it. I also recommend Excellent Investing by Mark Simpson, which offers practical guidance for building and maintaining a portfolio.

nicobos

I’ve looked at the Radio Times before - the key metric is the increase in cover price to offset the death rate of the underlying customer base !

Wimbledonsprinter

Ecsc (LON:ECSC) cannot quite seem to reach takeoff. Cash burn has been significantly reduced - hopefully the company can continue to grow without the need to come back for shareholders for more funds now. But growth seems lacklustre, with H1 revenues flat on H2 last last year, despite the seemingly positive background of continued cyber attacks. I hold given the cheap valuation and the chance for the share price to rise sharply, if the company can show sustained strong growth.

davidjhill

Given how quiet it is today.... anyone given any thought to the new Lords Group IPO?

A mini version of Travis Perkins albeit with a diverging strategy given the latter sale of the plumbing business and de-merger of the Wickes DIY business and Lords Groups plans to consolidate.

Has been well received and oversubscribed by institutions, raising £30m for future expansion and £20m for existing shareholders so doesn't seem like a top of the market grab for cash. CEO is largest shareholder I think so still plenty of skin in the game.

Haven't found any road show or IPO docs on it yet so not sure of profitability levels - if anyone can point me in direction that would be helpful and any informed thoughts on it?

Seems to be some very strange price action today - don't usually bother about short term movement's but see Redde Northgate (LON:REDD) just went from 453 to 413 in a few hours (a drop of 9%). A few other of my holdings seen similarly inexplicable falls - Vertu Motors (LON:VTU) was down 6%.

IncredibleMosesLeroy

I noticed same for Sylvania Platinum (LON:SLP) a drop of 6% on no news. I can only think it's re-opening jitters (Netherlands recently tried a 'big bang' re-opening and R number went to c.6), but I would think prospect of further restrictions would help Redde Northgate (LON:REDD)

Matthew Cp

There were posts on a couple of bulletin boards about takeover rumours earlier in the day. It sounded like twiddle twaddle. Hopefully so as I want to keep REDD in my portfolio for the long-term.

abmo

Sylvania Platinum seems to be taking a beating over the last few months, again on no news. The price of Rhodium has dropped by nearly 50% from its highs earlier this year but still, the business remains significantly undervalued.

I know there is political instability in South Africa at the moment which will no doubt make some investors nervous. AA might be selling in the background too. Lots going on without any real news from the BoD at SLP.

Either way, business is ridiculously cheap considering EV stands at £260m with £60m cash in bank, generating £90m net profit this year potentially and even more cash.

joshwood976

The Vertu Motors PI presentation was rescheduled from today to 17th August without any comment on why and has probably spooked a few people. Hopefully completely innocuous

Ahhhh right, the SA violence is probably the cause. Good shout.

Patrick L

Yes Redde Northgate (LON:REDD) speculation is here but I have no idea of the legitimacy of this website

TheGob

always interested in anything Richard Leonard has to say

The Phoenix

Decent trust but the spread can be wide at times but occasionally nearer 1% bid offer so timing the buy/sell can be tricky

I think Betaville is an ex FT Alphaville writer and I regard the site as credible. Unfortunately so as a Redde holder who wants to keep holding.

I wondered if it was the actual prices or the reporting that was erratic. Something was odd - I was getting quite different prices from different sources on a few shares.

I noticed Belvoir (LON:BLV) was down about 4% as I watched their very upbeat presentation on Yellowstone at noon. I added a few and happily they closed up a little on the day.

KevinS1

Hi Tamzin,

All of your investor interviews have been great and I always look forward to the next one being published. Please keep them coming - even if they don't always give some great ideas for further investigation the wisdom and experience of the interviewees always leaves me with a few points of learning and some great macro overviews.

Small Cap Value Report (Tues 13 July 2021) - SNWS, CIR, SOLI, HOTC

Paul’s Section

Smiths News (LON:SNWS)

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Paul Scott

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