Small Cap Value Report (Tuesday 11 May 2021) - ULS, ANG, MGP, AIR

11th May '21 by Jack Brumby

60 comments 9542 reads

Morning all, Jack here with the placeholder for today's report. Leave a comment below if anything catches your eye, and let us know why it's of interest.

I've been talking with colleagues about that old adage: 'Sell in May and go away, and come back on St. Ledger's Day'. I'm often skeptical of this kind of thing but studies show a 'remarkably robust' result, with returns on average 4% higher during the November-April period than during the May-October. The revised study above includes data from some 114 stock markets and takes into account almost 63,000 monthly returns 'start[ing] with the UK stock market in 1694 and end[ing] with Jordan which starts in 2006.' Sounds comprehensive but who knows what kind of regime changes and all the rest of it we might find in that data set. It's past 7am so I'm not about to check...

And then, of course, the past 12 months have hardly been typical. This will have a direct impact on the next 12 months in my opinion, almost a yin and yang effect with a slowdown and subsequent bounce (assuming we maintain the current course).

Uls Technology (LON:ULS) - ahead of expectations update from this conveyancing-focused software company with £24m of cash to invest.

Angling Direct (LON:ANG) - gross margin improvement and a swing to profitability for this online and physical store fishing retailer looking to expand across Europe.

Medica (LON:MGP) - Elective revenue heavily disrupted but month-on-month improvements, a post-Covid backlog, and a solid growth opportunity ahead.

Air Partner (LON:AIR) - record year of trading and the momentum continues into the new year.

ULS (LON:ULS)

Share price: 96p (pre-open)

Share count: 64,871,276

Market cap: £62.28m

Our coverage on ULS has been light so far so thanks to Simon for flagging it.

Uls Technology (LON:ULS) was admitted to AIM in July 2014. It’s actually figured quite well in terms of Ranks across that timeframe, although the share price has been volatile.

24r-Zd36ToyJQBFO9m7irAgw3DQU2mADOID8oXgB5vVnui3lqMbPHIH74205GIQVRv4Nns7QQD6z9Ui_dFUf0yEDiRrhApn9sS5kshsUlM62Gdlwiu98iP8Srkt5ZPaaLNmC0yLs

The group’s business was founded in 2003 and provides online services for consumers and intermediaries in the property, legal and financial services industries.

The central service is eConveyancer, a fully automated online comparison platform which enables customers to obtain residential conveyancing quotations from our…

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jonesj

11th May '21

Ref ULS Technology (LON:ULS)
Many of the "Director Purchases" in ULS are actually by Kestrel Partners, which is an investment fund. Stockopedia show them as purchases by Mr O.R.A. Scott, when they are mostly purchases by Kestrel who have put Mr Scott on the board.
A competing site shows duplicate entries for each trade, so their algorithms also don't get it quite right.

GN100

And for some nice visits to the races to 'invest' some of your cash from selling - especially the St Ledger. ;-)

sharw

re: SDI (LON:SDI) yesterday

It was mentioned in passing in the report - if you do a ctrl-f search you will find it

ken mitchell

Since nobody else has, I’ll reply to my earlier post on Revolution Bars (LON:RBG).

It’s surprising there has been no comment on what seems a very encouraging update today, bearing in mind the excellent coverage here from Paul and usually a lot of follow up to his comments.

Maybe most think, as seems the case with some hospitality and travel sector shares (e.g Greggs at all time high and OTB not that far off) that the good news is already priced in? But is it? The RBG share price is up 14% today o a big down day generally

I hope Paul will have time to comment if/when has the time to in case he too now thinks the share is fully valued. What really appeals is what seems a popular and improved offering along with fewer competitors with a clientele (as the RBG update confirms) itching to take advantage. So the next update could well be another good one.

GloucesterBob

Hi Ken,

I hold Revolution Bars (LON:RBG) and very happy with todays announcements. This is the fifth time I have held these shares and each time I have walked away with a profit of between 8 and 98% so no complaints from me, but as you can tell, they are not going anywhere near my coffee can.

42p would give me a 100% profit, but I am struggling to work out what would be a fair price today for them. I got involved in them a couple of years ago and the maximum price I have seen is around 80p, but there are more shares in circulation now, but I cannot work out how many shares were in circulation before otherwise I could probably work out what that 80p would equate to now per share. I believe Paul explained this information is available via Stocko, but cannot remember how to do it.

They have previously been around 200p but yet again a different share count. If we imagine there had been no dilution in the number of shares, then I can see no reason why they could not return to the 200p range, as the management is obviously top notch, they have survived covid, are a leaner organisation, and probably the opposition is now not so strong.

Do you have a target price, or does anyone know how to work out the shares in circulation at a particular time.

Bob.

ps. Thanks to Paul for sharing this gem with us, its been a ride, not always fun, but always come good.

OsullivanB

The horse race, the Saint Leger, is run in mid-September. But the feast day of Saint Leger (or St Leodegar), the martyr, is celebrated on October 2nd.

Berksbee

I hold LON:KMK - have for a while and am not in the black by any means. Interesting what you say about a very charismatic CEO. This can be a double edged sword as in my experience it can lead to toxic semi-cult that trucks no views but their own. Maybe we should have a rating on Stocko.

Anyone have any insider views?

GloucesterBob.

Paul explained about the increase in shares in issue (from 50m pre covid to around 125m now)) in his excellent SCVR analysis on April 13th which was the day RBG issued their results. Just get up the SCVR for the 13th April to find it.

As you say there’s no likelihood of the share returning to anywhere near £2 again (at least not until the distant future or if investors take leave of their senses) for a very long time, if ever,now that there are so many extra shares. Paul reckoned a placing around 50p makes sense and maybe that’s also a reasonable fairly short term target price too, though guessing prices is a bit of a mugs game.

Unless Paul or anyone contradicts this, as I see it 15% capacity and 48% of the figures for the same 4 weeks in 2019 hints that 30% capacity would just about match them. So, back to normal trading quite soon could well see another “better than expected” update ahead to give the share price another decent lift. The share doing so well today on a big down day reassures too.

john2

The stock market saying refers to the horse race. In the good old days of the pre-big bang City, stock brokers would up sticks at the start of May and either head off to the Mediterranean or enjoy the sporting and cultural delights of the English summer, the last of which was the St Leger race.

timarr

RE: Revolution Bars (LON:RBG)

I got involved in them a couple of years ago and the maximum price I have seen is around 80p, but there are more shares in circulation now, but I cannot work out how many shares were in circulation before otherwise I could probably work out what that 80p would equate to now per share. I believe Paul explained this information is available via Stocko, but cannot remember how to do it.

It's in the Stockreport, the next to bottom line "Average Shares". Shares in issue have gone from 57 million a few years ago to 85 million now - so a 49% increase in the shares in issue. Say 1.5 times for simplicity's sake. 50p would roughly get back to the pre-pandemic level.

But really that's not the way to look at it. Leases ought to be cheaper, although staff will be more expensive. There'll be less competition, but that will come back quite rapidly if we have a boom - which you'd think is quite likely this summer. But in any case this is a different company, with less bars but hopefully of higher quality.

However, the previous £2 high is artifical. That was on the back of the Stonegate bid that shareholders rather optimistically, perhaps foolishly, rejected. If they achieved even half of that I'd be deliriously happy. It's certainly not hard to see this north of 50p in a few months, assuming no setbacks with the route out of restrictions.

GrahamF

If you are a buy and hold type of investor Revolution Bars (LON:RBG) has actually been a disaster. I sold out on the big dip in 2017 and pleased that I did as it’s still 73% down from there according to Stocko.

It would also have been very difficult to trade in and out of successfully over the last three years if you look at the chart as it’s been mostly a downward slide.

If you’re already in it, then I can understand the view that the future is much rosier than the recent past. A mini boom associated with the end of lockdown is almost guaranteed and they have got rid of the most unprofitable sites/leases.

The notion that there is far less competition seems theoretical to me. Does anyone have a long list of cocktail bars that have gone out of business? The class act in this space is Be At One group, part of Stonegate, and they are still very much around. So, whether there is a significant reduction in competition is arguable. There’s also no reason that new cocktail bars couldn’t open as competitors now that the uncertainty is mostly over as there are few barriers to entry.

The other imponderables are how long the mini boom will last and how much wage inflation will they experience, given that many of the young migrant workers that worked in hospitality went back home during the pandemic?

So, yeah, no coffee can for this one, but if you are already in it, I can see why it’s a hold rather than a sell.

No position.

Ian33

number of shares :

Harry Hindsight

Kromek (LON:KMK) - Simon Thompson liked it. Zapping people for covid as they walk through airport terminals (like The Arnold in Total Recall) and other uses but a bit blue sky and govt prefer bits of faked paper etc.

Tortoise investor

what are 'management expectations'? Means nothing if we don't know what they are

Toad1957

Kromek (LON:KMK) the ultimate ‘jam tomorrow’ stock. They tell a great story (perhaps they could monetise that) but management fail to deliver year on year. I sold half my holding on reading the update today. The rest to follow on any glimpse over 17p.

Thanks for that, so if I have understood it correctly, (believe shares today is 125 not 85) taking the number of shares in a given year, multiplied what appears to be the top price you get

Year Shares Price Mcap

2018 57m 148 84m

2019 57m 103 59m

2020 50m 77 39m

2021 125m 36.5 45m

Ignoring 2020, It appears the market cap should be between 59m and 84m. With todays number of shares, that equates to a price between 47 and 68p.

North of 50p indeed looks doable.

abtan

Air Partner (LON:AIR) (I hold)

Beyond my usual analysis of this company I found the geographic splits quite insightful today:

Note the "normalisation" of US/UK/ROW (Dubai+Singapore) gross profit in H2 (£5.3m/£9.0m/£0.2m respectively).
I am hoping that there is more to come from the UK as the "Safety And Security" segment bounces back over the next 2 years.
I expect that Europe will bounce back at some stage too.

As covid-related activity shifts away, I am hoping that "normal" charter activities come in to fill the gap. Also, there's that US growth to keep an eye on too.

There's lots of hoping going on over here.

Personally I was a little cautious after going through these results, but having seen the significant +£2.1m cash generation in Q1 (mentioned in the IMC presentation slides*) I am hoping there will be some positive surprises over the next few months.

Fingers crossed.

*Net cash at the end of Q1 (i.e. April 30th 2021) is £12.0m, up from £9.9m at Year End
https://www.investormeetcompan...

Revolution Bars (LON:RBG) (I hold)

TABLE AVAILABILITY

"Unless Paul or anyone contradicts this, as I see it 15% capacity and 48% of the figures for the same 4 weeks in 2019 hints that 30% capacity would just about match them. So, back to normal trading quite soon could well see another “better than expected” update ahead to give the share price another decent lift."

When I first read this I was quite wary about 30% capacity equating to normal 2019 trading.

After all, the 15% capacity/48% sales vs 2019 took place during an exceptional period, probably more exceptional than the weeks that will proceed May 17th.

However, I've since looked at 1 other online bar booking system and there's pretty much no outdoor availability for the next 2 weekends and a lot of bookings 3 weekends from now (with several bookings during the week too).

I've checked quite a number of Rev Bar venues too and most look fully booked for at least several weekends. I'm sure any gaps will quickly fill up.

It's quite impressive that things are getting booked weeks in advance.

Of course the Euros start soon, and if memory serves me correctly, Revolution Bars (LON:RBG) isn't generally set up for live sports, so it will be interesting to see what happens then.

BOOKING SYSTEM

A terrible booking system.
I can't even make a reservation through the dedicated app.

DEBT

Net debt was indicated to be £29.4m on April 12th, when 20 bars opened up.
Net debt as of May 10th was £28.5m.
So they've made c£1m in 4 weeks of trading with only 15% capacity and presumably having spent a lot stocking up on booze for the coming weeks?

I imagine a chunk of this is deposits, but that still seems quite impressive.

VALUATION

With current debt levels the EV is c£70m.

I am personally applying a x10 cash generation multiple to this business.

If underlying annual cash generation can hit £7m (much lower than pre-covid and it should in theory be a stronger business now), then I would say the company is quite fairly valued at the moment (£7m * 10 = £70m).

There's upside of 47% and 76% respectively if underlying annual cash generation can grow to £10m or £12m respectively.

That equates to a share price target of 54p and 64p respectively vs today's 37.50p.

In summary, therefore I think the current share price - 37.5p - should be the lowest it should be, with quite a lot of room for an upward re-rating over the next 18-24 months.

Well I hope so anyway.

rmillaree

12th May '21

Rbg
Ignoring 2020, It appears the market cap should be between 59m and 84m. With todays number of shares, that equates to a price between 47 and 68p.

What about the net debt though ignoring leases - this is way higher than I can remember at any time in the recent past I think they were down to 5 mill at start of 2018 and 8.4 million at December 2019.

Per the recent April update they had the following to say - ref net debt - this company is significantly more indebted now than at any time I can remember. So from an enterprise value I don’t think the company is any cheaper now than 2018 or 2019.

By the end of FY20, due to COVID,net bank debt had risen to £22.0 million, and as at the half-year of FY21 was£21.0 million. Upon reopening, the Group will be focused on debt reduction.
As at 13 April 2021 net bank debt was £30.8 million, and total agreedfacilities were £40.3 million.

Obviously there is the bonus if they have a leaner business model going forward they may fare better than pre covid.

Rbg
Of course the Euros start soon, and if memory serves me correctly, Revolution Bars (LON:RBG) isn't generally set up for live sports, so it will be interesting to see what happens then.

All the more excuse for non footy fans to be in revolution bars sipping cocktails if the footy is hogging the tv. No doubt I will be crying in my beer come the end of the group stages - although based on past unluckyness in major tournaments I must say Scotland should win the tournament at a canter if the luck evens out - there is history here in that Greece lucked there way to the title in 2004 - and its an interesting fact that when it comes to the all important penalty shootouts Scotland have a 100% success rate.

Small Cap Value Report (Tuesday 11 May 2021) - ULS, ANG, MGP, AIR

ULS (LON:ULS)

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Jack Brumby

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