Small Cap Value Report (Wed 10 June 2020) - PMP, QUIZ, RTN, EAH, FLO, CGS, VP, PHTM

10th Jun '20 by Paul Scott

35 comments 9797 reads

Good morning, it's Paul here with the SCVR for Weds. Please see the header above, for the list of companies that I intend to cover today.

Estimated timings - there's loads of interesting news for me to cover today, so I've started at 7am, and will just keep going for as long as needed. There should be plenty of material in this report by the official finish time of 1pm.
Edit at 13:01 - I have to stop now, for an appointment, and to fetch some groceries for Mum. If I manage to finish off the last 3 sections later, then will ask Graham to flag it in tomorrow's report.

Portmeirion (LON:PMP)

Share price: 385p
No. shares: 10.64m + x new shares TBC
Market cap: £41.0m (before placing)

Proposed Placing, Subscription & Open Offer

Portmeirion Group PLC, the designer, manufacturer and worldwide distributor of high quality homewares under the Portmeirion, Spode, Royal Worcester, Pimpernel, Wax Lyrical and Nambé brands...

Another day, another fundraising! It's an accelerated book build, which tend to complete very quickly - because the deal is largely done behind closed doors, by the time the announcement comes out. I'll update this section later with the precise details, when the second announcement is published, probably later today.

Key features;

Placing size - raising £10m, so that looks to be about a 25% increase in issued shares.

Price - "not less than 375p" - which is a modest discount, therefore existing shareholders have nothing to complain about.

Subscription - this looks like an additional subscription for new shares, small at £0.66m

Open Offer shares - only £2.0m, which is too small at just 20% of the placing. I think companies should offer more than this, ideally 50%+ of the number of placing shares. I say this because PMP shares are so illiquid, that it would be difficult for anyone but the smallest shareholders to buy more in the open market. More attention needs to be paid to looking after the interests of smaller shareholders. A good recent example of this was Revolution Bars (LON:RBG) (I hold), which did an open offer of 67% of the size of the placing, in order to look after its private investors.

Background - this is a turnaround under new management. Obviously it has suffered reduced sales due to covid, but new management…

Unlock with Email

Unlock with Google

Already have an account?
Login here

simoan

10th Jun '20

Re: Spectra Systems

The share was marked down heavily by the market makers, but is recovering now.

I laughed and cried in equal measure watching the open today. Whoever hadn't done their homework and panicked got a rotten deal. Properly ripped off. I hope it wasn't anyone here.

Though obviously disappointing to lose the bid I was actually impressed with the decision by management. I know how this feels because I work in a similar line of business and where someone is totally price driven (almost always the case in my experience with Asian based customers) rather than quality driven, and where you clearly have the best technical solution, you have to maintain price discipline and margins. It could also be that the other bidder is desperate for the work and doing it at, or below, cost. In these cases it's best to just move on - good luck to them!

All the best, Si

Tonysaparito

Happy birthday for tomorrow Paul

Richard Goodwin

Happy birthday and thank you both for making me smile and for your perspicacity in putting announcements in to context - from a soon to be 49 year old.

kgb1953

I think an ETF like I shares gold producers is simplest, cheapest way to do this. Interesting podcast by Preston Pysh - We study billionaires - says that in Gold terms the US market is down 16% this year.

Simon Rowan

Moodys downgrade or about to, Wagamama. About the only thing worth buying it for. Once management realised they were not going to be able to roll out expansion of that brand across the globe, that was pretty much game over for me. Now it appears to be a damage limitation exercise.

FREng

Indeed, Si! As John Ruskin never wrote:

There is almost nothing in the world that some man cannot make a little worse and sell a little more cheaply - and those who consider price alone are this man's lawful prey.

TamzinPiworld

Tr Property Investment Trust (LON:TRY) video or podcast of yesterday's excellent presentation (piworld webinar) by Marcus Phayre-Mudge. Marcus gives a good overview of the fund. (4% yield. 9% discount to NAV.) Further, an insight to commercial property during CV19. Recommended listening.

Separately, don't miss Robin Griffiths, guest on tomorrow's piworld Thursday webinar, 11.6.20, 1pm. Robin will give his macro overview, and what that means for markets. Get Robin's view on where best to invest. Robin's highly experienced, bio on link, he uses technical analysis, economic modelling and algorithms, to reach interesting conclusions, published in an (expensive) newsletter. Glean a lot of his thinking, for free, tomorrow. Register here.

Mark Penney

Not that this needs to be said -but enjoy your birthday when it comes along Paul

barnetpeter

I recently mentioned Metro Bank (LON:MTRO) as a short squeeze with 9 per cent short holding. Up today on heavy volume. Bid rumours are never far away from this challenger bank. Maybe of some interest on what seems to be a rather quiet day (disclosure; I hold).

Re: Portmeirion (LON:PMP)

Open Offer shares - only £2.0m, which is too small at just 20% of the placing.

So it turns out the placing price was 380p and the open offer is 2 shares for every 41 held.

https://www.investegate.co.uk/portmeirion-group--pmp-/rns/results-of-placing-and-notice-of-general-meeting/202006101334515664P/

I agree with Paul. A 2 for 41 offer is a complete joke and almost a case of why bother - come results you'll likely be able to add below the 380p placing price.

Personally, I am more interested in the situation at Churchill China (LON:CHH) which is a higher quality operator but with high exposure to the hospitality industry. Rock solid balance sheet and good management but obviously a highly contrarian idea...

ben316

Agreed MTRO does look v interesting (As far as banks go) I bought a good few after they collapsed to 70p a month or two ago. thinking risk/reward looked good.

Paul Scott

Hello Si,

Thanks for filling in the gaps re the Portmeirion (LON:PMP) placing. I've been out all afternoon, so away from my screen & keyboard.

I think Churchill China (LON:CHH) and Portmeirion (LON:PMP) are very different businesses. CHH is focused on supplying restaurants & hotels with crockery. Whereas PMP is mainly about collectable, semi-ornamental special occasion crockery (plus diversification into candles, etc.

In the current situation, I'd rather back PMP's prospects, than CHH. Because PMP doesn't depend on the hospitality sector to buy its products, whereas CHH very much does.

Regards, Paul.

Thanks Tony! One year closer to death!!!

Nice synopsis!

Momoko Miyamoto

sales is vanity, profit is sanity. AO has lots of the former and little of the latter (although same applies to the retail part of Amazon). Probably quite a few investors have had a telly or fridge delivered by them recently and pleased with the service. Profit margins are tiny however.

Re: Eco Animal Health (LON:EAH)

Bought some recently after spotting it on a value screen. It’s core product is an advanced antibiotic for use in pigs and poultry. It has a very wide moat in a similar way to a blockbuster human drug with a massive addressable market. The SP has been hammered due to epidemics of African Swine Flu but I believed its sales would recover because globally people will still find a way to raise and eat similar quantities of pork & chicken.

The company’s main weakness is the over reliance on one product (which may be superseded by a rival alternative one day). It is trying to develop animal vaccines to widen the product range but success not guaranteed at present. Sales of the antibiotic are growing as it continues to win regulatory approvals in new countries.

Another odd aspect of the antibiotic sales is that the pricing (and therefore profit margin) varies according to meat prices. The company’s performance is geared to pork and poultry prices.

Laughton

In a way, not really. As you've managed to get this far your remaining life expectancy increases a little each year (if that makes any sense).

So at 51 you "should" live to 81.25 years whereas at 52 you should live an "extra" 36 days"

Keep going and you could cheat it until you're well past 100.

Scary isn't it?

Have a good one Paul - unfortunately there are no hostelries open in this country in which to celebrate.

Yes, and Portmeirion (LON:PMP) has an on-line retail presence which Churchill China (LON:CHH) does not if you are looking only at the short-term. I am just looking at a potential longer term holding, although Churchill China (LON:CHH) is more exposed to Europe, so a potential no deal Brexit is still a consideration. It's not cheap enough yet but is on my watchlist of beaten down quality companies. Let's see what they have to say in the AGM statement tomorrow.

GrahamF

11th Jun '20

Lifestyle factors probably more of an issue. e.g. more than 21 units of alcohol a week

"Lifestyle factors probably more of an issue. e.g. more than 21 units of alcohol a week"

What are you trying to say?? ;)

Small Cap Value Report (Wed 10 June 2020) - PMP, QUIZ, RTN, EAH, FLO, CGS, VP, PHTM

Portmeirion (LON:PMP)

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

35 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...