Small Cap Value Report (Wed 13 Nov 2019) - ACSO, IDEA

13th Nov '19 by Paul Scott

27 comments 6481 reads

Good morning, it's Paul here.

Estimated time of completion - about 3pm. Update at 14:28 - I can't find anything interesting to write about, and want to give some support to Ed & the Stockopedia team on the their stand at Mello, so will sign off early for today. Therefore this report is now finished, sorry it's a bit half-arsed.

It was great to chat to many subscribers at yesterday's Mello Investor Show. I'm walking wounded today, so probably won't be going back for seconds today (OK - some time later - retrospectively that didn't work out quite as planned)

accesso Technology (LON:ACSO)

Share price: 590p (up 13% today, at 11:40)
No. shares: 27.6m
Market cap: £162.8m

Further update on the formal sale process

accesso Technology Group plc (AIM: ASCO), the premier technology solutions provider to leisure, entertainment, hospitality, attractions and cultural markets, provides the following update on its announced formal sale process (the "Formal Sale Process") under the City Code on Takeovers and Mergers (the "Code") which remains ongoing.

There's been a 13% bounce in share price today, alleviating some of the suffering for beleaguered shareholders, who've seen their investment drop by about 80% from the peak. Amazingly, in the last year, it's scrubbed off all the previous gains since 2013. Which begs the question, was the surge to almost 3000p share largely a speculative momentum-driven bubble? It looks that way to me.

The sale process seems to still be active, so today's announcement is being seen as having increased the chances of a takeover bid;

Following receipt of a certain number of refreshed indications of interest over the last several months, the Company and its advisers are continuing to engage in discussions with several parties to determine whether a potential offer for the Company can be delivered at a value that the Board considers attractive to shareholders.

The interested parties remain engaged in financial and operational due diligence.

Due diligence normally only occurs when there is serious bid interest. That's because it's expensive to send in teams of accountants & lawyers. Or sometimes, it can be a good excuse for a competitor to run their eyes over the detailed figures that they wouldn't otherwise be able to see.

My opinion - Accesso is extremely difficult (impossible?) to value, because the…

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rmillaree

13th Nov '19

J D Wetherspoon (LON:JDW)

simoan

Yes, he maybe an entertaining old windbag but in his diatribe on Corporate Governance he mentions his best buddy NEDs, himself, his employees, his customers, but not once does he really mention other shareholders in J D Wetherspoon (LON:JDW) - It's like they don't exist, and that's quite telling. But then the Corporate Governance code is their to protect them so it wouldn't really help his argument.

That's not how i read the comments today , to me the whole point about the comments today was talking directly at the main shareholders (who voted neds off the board) and explaining reasonably clearly his view on things and why it is the way it is (governance possibly not strictly speaking being by the book on all measures) - he is obviously upset that the rules that are in place dictate that someone who knows the business well is forced to leave simply due to their having been there x years - and he is saying the rational of why what they do in theory goes against good governance - whilst also pointing out the shareholders voting don't follow the ethos they are voting against. It is plainly ridiculous that Tim Martin should not be Chairman as he has been there over 9 years. I would say having a strong questioning independent NED presence on any board is of preference to me, however i just don't want the board in the company i own to be a revolving door of bods booking a fixed period of easy money then leaving. He mentioned that at the many shareholding meetings he has had corporate governance has never really a problem flagged up by shareholders. Note J D Wetherspoon (LON:JDW) are a fairly investor friendly company - simply fill in the Investor contact form on their website if you have a question and i would be gobsmacked if they didn't respond in full as appropriate.

hagon

Ocean Wilsons Holdings (LON:OCN) please, they have just released their quarterly update. Group revenue is down 7% compared to last year.

dmjram

"he is obviously upset that the rules that are in place dictate that someone who knows the business well is forced to leave simply due to their having been there x years - and he is saying the rational of why what they do in theory goes against good governance"

The flip side of course is that the board becomes a cosy club dominated by group think. Which is what the governance rules are trying to prevent.

None of the NED's seem to have challenged Martin on his political advertising on beer mats which is likely to have influenced the shareholders in removing them.

Zipmanpeter

Appreciate a view on Renold (LON:RNO) which has been harshly judged (again) this morning, down a further 10% to 19p and now on a downtrend for over 2 years. Personally, I thought the results perhaps showed some longer term company positives in a short term toughening macro-environment?

Topline revenue was down 2.8% and mood music for the near term was cautious/negative (esp in US/Europe) and reported debt was up.

The big issue of pension was much worse with the reported deficit increasing to £111Mn (despite a reported helpful spike in deaths of retirees - its odd what helps !). However, cash cost of payment to pensions gap seems manageable over the timescale involved. The issue of misstatement of accounts (fraud?) in a subsidiary seems to have been fully dealt with.

Positively, cash from from continuing operations (excluding pension costs) was sharply up and non pension debt is only 1.4X EBITDA towards the end of an investment cycle that has consolidated, built or updated factories and a loss making SA business exited (to mgt). Stockranks is 98 on value and Quality should improve going forward as self help plans build and embed.

I hold a scrap to keep abreast of a potential turnaround that sadly remains a losing contrarian bet so far.

£dmjram

The flip side of course is that the board becomes a cosy club dominated by group think. Which is what the governance rules are trying to prevent.

I would 100% agree with these comments too - to me there is the middle ground that can be had in this regard so that a company can be run by experienced bods doing their jobs as long as shareholders are happy with that situation - rather than having forced change just for a tick box. Note J D Wetherspoon (LON:JDW) do have Harry Morley on the board and he i chair of the audit committee and a member of the nomination and remuneration committee he seems fairly independent based on his other board appointments and he has only been on the board since 2016 so it's not the fact that the entire board have been around forever. Perhaps they could do with one extra spot on the board being a spot that would have a fixed term period so that there is a little more real independence.

To me i look at the board and how they are acting and vote accordingly by either staying as shareholder and leaving (my vote will rarely matter in any other respects) - there have been plenty of companies with long term appointments i have shied away from - just look at the joke that is Stobarts and what used to go on there - to me its more about the actions of the board and how they deliver that i want to judge the company by rather than a tickbox dictating to me i must have shiny new bods running the company when i was perfectly happy with what i had.

SundayTrader

Surely the essential point of Tim Martin's comments is that the rules specifying maximum length of term for executive board members are not sensible. As an investor, whether wisely or not, I try to look at length of service of the executive directors - if they have been there a long time and the company has been doing well, it suggests good management. What is wrong with cosiness if they are demonstrably running the company well? The time you want to see fresh management is if you are looking at a turnaround situation, or a business stuck in a rut. But there is always an extra risk with new management - there have been some major corporate disasters - take GEC for example.

andrea34

Ideagen (LON:IDEA) please - the trading update is very positive, with significant growth seen (partly due to acquisition), increased recurring revenue, etc.

Vsihv

I tend to agree with this - also cosiness might actually make management more willing to try things - if they know chairman is not going to get rid of them for a mistake (for example)
Would love to have a pint with TM - he comes across as a very interesting fellow and a good egg

sharw

Talk about revolving boardroom doors triggered by Tim Martin reminds me of a saying of Peter Lynch along the lines of it being best to buy shares in companies that could be run by monkeys because sooner or later they will be!

Paul Scott

Hi garbetklb,

Thanks for flagging J D Wetherspoon (LON:JDW) results. I always enjoy his commentary!

Will print that off and read it on the train later, no doubt chuckling away to myself.

Regards, Paul.

14th Nov '19

Ok I think it’s thursday now
Norcros (LON:NXR) interims out.
Everything seems a ok here. Pension deficit down again now under £30 mill and capitalised expenditure nicely under control. This company needs to nothing other than tick over and meet expectations for the balance sheet to materially strengthen and de risk the business. I guess we should continue to expect more acquisitions when the time is right let’s hope anything in that direction is not over ambitious.

Portmeirion (LON:PMP)
Further deterioration for current year with a very late new “material miss” with only 6 weeks of the year left.
They have tried to mitigate the bad news by being optimistic with regard to 2020 - without any firm numbers I am not sure I believe that 2020 numbers will not be downgraded - from here if they can get back to 2018 numbers in 2020 I think that would be best I can hope for with 2019 being a complete w/off. Seems very late in year to be saying what they are saying now seeing as it’s a continuation of issues they knew about. I am sure price will open down - the damage will likely dependent on what 2020 expectednumbers look like with updated broker forecasts.

Fegger

Process of appointing and waiting for new CEO in September may have caused this late in day notification . I think in profit warning terms it is fixable. But probably as you say more likely in long rather than short term and the broker forecasts will be key

Howard Marx

This is a continuation of the South Korean problem first identified by the company 6 months ago (May).

The Portmeirion (LON:PMP) share price is down 42% since this original announcement.

Surprising that investors are still selling on a repeat/continuation of old news.

Ref brewdog (not listed last time i looked) - i always regret never investing in this business back in the day as i think their valuation has since skyrocketed.

anyway they have an a most excellent bond offering for those that like a tipple and a return on their money. Their bond is paying 3% cash and 3% beer returns not bad if you spend your bucks with them- this was a company going places last time i looked so i would guess risk is reasonably low albeit one would need to do further research.

Each BrewDog Bond will cost £500 and the brewery promises “each BrewDog bondholder will receive £20 BrewBucks to spend in the company’s 90+ bars and venues worldwide, a free copy of BrewDog’s book ”Craft Beer for the People”, as well as a free beer on their birthday for every year they are a bondholder”, on top of the interest rate.

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Portmeirion (LON:PMP)
Howard Marx
Surprising that investors are still selling on a repeat/continuation of old news.

I am not surprised at all - this is a further material miss on top of the previously announced bad news. I think the shareprice rebound will only happen when the market knows that 2020 (or later) number forecasts are decent and there is some evidence this is not just wishful thinking from the bods running the company. When sales are lost its always tricky to try and regain ones mojo - sometimes they are simply gone for good. I think if we say £7 mill profit 2020 (thats glass mostly full) 12 times multiple thats 77 mill market cap - thats pretty much where we are. I think the company will need to deliver something above that to see the sharerprice get back to its prior higher levels. I have held onto these against my better judgement i had a sell order in that never got filled when the share price stabilised in the mid 900's silly boy - if it doesnt feel right sell and move on - hopefully the company will regain its mojo quicker that i think may be the case :).

timarr

Surprising that investors are still selling on a repeat/continuation of old news.

I imagine people invested / held on the basis of the brand and the problem being fixable short-term. At least the update today explains the underlying issue - distributors in countries outside South Korea re-selling into SK in competition with the company.

There's an upside and a downside to this. The downside is that sales and demand outside SK may be exaggerated, so prior earnings are probably at least partially overstated. The upside is the demand in SK is still strong, it's just that resellers are taking market share. On balance this isn't too bad - either sales ex-SK are lower margin, so the outside distributors are arbitraging the difference or SK demand is sufficiently strong to warrant higher prices.

The steps being taken - delivering SK only product and better tracking of where distributors are selling to - will turn this round, but it'll take a year, I'd expect. Distribution problems are fixable, with decent management, as long the brand is undamaged.

I remain a holder, will consider adding more when the immediate sell-off has run its course. At these prices it's got to be looking attractive to would-be acquirers.

The Portmeirion (LON:PMP) share price has fallen 42% in the last 6 months since the issues in South Korea were first reported.

In 2018 Portmeirion (LON:PMP) achieved £8.2million of revenue in South Korea - this equated to just 9% of group turnover.

Investors have hence arguably over-discounted this trading difficulty.

16th Nov '19

Following up on J D Wetherspoon (LON:JDW) trading update.

One sentence mentioned trading.

The rest of it was common-sense commentary from an owner-managed, brilliant, entrepreneurial business. Anyone who can't see that, is crazy, and almost certainly hasn't run a business themselves.

Small Cap Value Report (Wed 13 Nov 2019) - ACSO, IDEA

accesso Technology (LON:ACSO)

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Paul Scott

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