Small Cap Value Report (Wed 14 Aug 2019) - Negative interest rates & Gold, DUKE, LOOK, IND, EQLS, XSG

Wednesday, Aug 14 2019 by

Good morning,

There isn't a whole lot in the RNS today but we do have:

Negative Interest Rates

Since the RNS doesn't have too many stories which interest me, I thought I'd spend some time reflecting on the fact that 10-year fixed-rate mortgages are now being offered at negative interest rates in Denmark.

If you go to the source for this story, you'll find that there are disclaimers: due to set-up fees and other costs, the Danish bank which is offering this deal says that "you are not exactly going to make money borrowing".

Even so, this feels like an escalation of the "ZIRP/NIRP" phenomenon. It is almost certainly unprecedented.

(For context: the Danish krone is pegged to the euro and its official interest rate is -0.65%.)

Bank shares have achieved little for investors in recent years and when you read stories like this, it's not hard to understand why.

Until recently, many economists thought that negative interests rates weren't possible. Why bother giving money to someone, if they'll give you less back?

That logic is still quite sound, in my view! Low interest rate environments do have real effects on people's decisions. We are discouraged from saving and incentivised to spend the money on present-day consumption, instead.

But even with very low or negative interest rates, not everybody can consume all of their savings straight away. There are plenty of institutions and individuals who need to wait some period of time before consuming their savings, or who are forced to lend their money for some structural reason, and these are the ones forced to suffer negative interest rates.

Rediscovering Gold

These days, almost anything looks like a better investment than cash and bonds. Any real asset is inherently superior to paper assets.

But when you consider the negative interest rates and the unprecedented monetary conditions, there are strong reasons, at least in my mind, to focus on the prospects for gold. 

The reason for this is gold's historical basis as a currency and as a foundation of currency strength.

This means that when central banks have stopped debasing their currencies and…

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All my own views. I am not regulated by the FSA. No advice.

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59 Comments on this Article show/hide all

MrContrarian 14th Aug 1 of 59

My morning smallcap tweet:

Gfinity (LON:GFIN), Green REIT (LON:GRN), Secured Property Developments (OFEX:SPD), Xeros Technology (LON:XSG)

Gfinity (GFIN) gives up on Australian JV. All spending has been expensed so no write-off.
Green REIT (GRN) gets rec cash offer of €1.9135, a 25% premium.
Sports Direct (SPD) Grant Thornton resigns as auditor effective 11 Sept. A FTSE350 co w/o an auditor soon?
Xeros Technology Group (XSG) seeking to raise £5m to £10m. £10m is expected to fund the business through to cash breakeven. Progress on moving to licensing model.

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runthejoules 14th Aug 2 of 59

I've got a £50 sports direct voucher. Should I be rushing to spend it do you think,or holding on for the closing down sale? :-/

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rmillaree 14th Aug 3 of 59

Duke Royalty (LON:DUKE)

Pleasing steady as you go "on track" update, they seem reasonably confident for the future and a reduction in future financing costs is good news, as is the mention of positive operational leverage - Nice to see Pearl and Dean one of their clients returning to where they were 50 years ago in terms of audience viewership - I always have a smile when the pearl and dean adverts come on in my local micro cinema (its not 100% micropubs in my town but close to it).

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Gostevie 14th Aug 4 of 59

Promising looking Operational Update from Duke Royalty (LON:DUKE) this morning:

(I hold.)


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rmillaree 14th Aug 5 of 59

Secured Property Developments (OFEX:SPD) Secured property developments.

I feel sorry for this innocent company that has the same ticker symbol as sports direct, seems like even they aren't immune from the bad news that comes with being linked with Mike Ashley in any manner, as the shareprice is down 30% from the recent highs before Stockopedia starting confusing the two ticker symbols. Presumably the shares will be back at 25p once that incorrect default to them being sports direct ticker wise is removed. Perhaps they should have been blaming Ashley rather than brexit in their most recent results.

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sharw 14th Aug 6 of 59

Interims from Indigovision (LON:IND) - return to profitability. Looks interesting on forward p/e 7.3 and SR 94. Going for share buyback rather than return to dividend.

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barney100 14th Aug 7 of 59

Very pleasing operational update from Duke

Short on numbers but good detail with acquisition bedding in well, improved access to cheaper financing, royalty payments ratcheting upwards and a pipeline of further investments.

DUKE returned 6.4% divi last year and are on schedule for 7.4% this year (paid quarterly which is nice)

Final results September 9th

This increasingly strikes me as a well run, lean and agile investment and I remain a happy holder.

I believe Graham that you are still a holder and with you being a little more prudent and risk averse than myself and my rose tinted specs would welcome your opinion.

Thx for all the hard work you and Paul put in here …. much appreciated

Someone please remind me how to reference tickers here … I thought it was &DUKE but that don't seem to work

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Sully8786 14th Aug 8 of 59

In reply to post #504421

I think its £DUKE barney.

Company: Dave Sullivan - Talking Stocks
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Sully8786 14th Aug 9 of 59

In reply to post #504421

But it doesn't always work :(

Company: Dave Sullivan - Talking Stocks
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JohnEustace 14th Aug 10 of 59

In reply to post #504371

Tempted to say I’ll give you £20 for it, but the deal has to close quickly. But I don’t actually want it.

It’s an adventurous super stock with a stockrank of 93 so I’m sure everyone is worrying about nothing....

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JohnEustace 14th Aug 11 of 59

In reply to post #504441

Not working on the new version.

Testing £DUKE

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sharmvr 14th Aug 12 of 59

Morning Graham, Morning All,

I wanted to request coverage of Georgia Healthcare (LON:GHG) if I maybe so bold

- a critical part of the healthcare ecosystem in Georgia - for the long term, I think it is one of the best sectors given demographics.

12% revenue growth with operating cash flow at 73% of EBITDA
Cash generative business who have completed a relatively large CapEx plan - going forward this should improve ROIC and Cash ROIC. Free cash flow has been held back by past CAPEX, but now they are starting to pay down the debt.
Small dividend but expected to double by 2020

Stockranks don't think too highly of it - understandably but I can see the quality rank improving over time.

Many thanks,

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FREng 14th Aug 13 of 59

£SONG has decided to withdraw the proposed extension to their borrowing limits and to raise equity instead. No impact so far on the SP.

" Hipgnosis announces that, following consultation with its major shareholders, it will withdraw the resolution at the General Meeting to be held on 21 August 2019 to increase the Company's borrowing powers and is instead contemplating an equity raise in Q3 of 2019 to finance its growing near-term pipeline of opportunities.

The Company has now committed its available capital resources to catalogue investment opportunities. The Company will therefore use the net proceeds of any equity raise to fund further investments in line with its investment policy, with a view to delivering increased value for its shareholders. A further announcement will follow in due course.

As a result of withdrawing the resolution at the General Meeting to be held on 21 August 2019, the Company will continue to operate under its current investment objective and policy including its current borrowing policy."

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FREng 14th Aug 14 of 59

I didn't notice this RNS-Reach yesterday from £BGO. Might be significant?

"Cambridge, UK, 13 August 2019 - Bango (AIM: BGO), the mobile commerce company, and Spotify, have entered into a business partnership to increase access to the world's most popular audio streaming subscription service. By partnering with Bango, Spotify makes its streaming service available for operators all over the world to bundle with mobile and fixed subscription plans allowing millions more fans to enjoy their favorite artists.

This partnership will enable millions of customers to select a Spotify subscription bundled with their mobile plan, or as a bolt-on. Bango Resale technology delivers a single, powerful solution that will enable Spotify to reach new customers, and ensures active customers enjoy seamless access to their services. In addition, Bango data insights supports with targeting specific customers with new offers to generate higher customer adoption.

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tomps3 14th Aug 15 of 59

Duke Royalty (LON:DUKE)

Interview with Neil Johnson, CEO by James Lynch, Fund Manager, Downing, (March 19).

James elicits the key investment attractions of DUKE, and Neil gives a great overview of DUKE, royalty finance, the market place, risk management and much more, to answer many of the questions investors may have.

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Sully8786 14th Aug 17 of 59

In reply to post #504421



Think I need an adult to help.

Company: Dave Sullivan - Talking Stocks
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sharw 14th Aug 18 of 59

In reply to post #504516

"£duke" = Duke Royalty (LON:DUKE) but I am writing this on the old site - those who write on the new report that it doesn't work. Also note that it needs a space after.

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Steves cups 14th Aug 19 of 59

Hi Graham
RNS from Equals (LON:EQLS) which used to be called FAIRFX or FFX, announcing a placing and open offer to fund growth and further acquisitions, akin to the small bolt ons they have made so far. Things seem to be going well

Any thoughts?

I hold


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About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »


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