Small Cap Value Report (Wed 18 March 2020) - CV19 Estimates, SOS, JDG, ALT, RBG, AIR, ANP, CNCT, SIS

18th Mar '20 by Graham Neary

157 comments 14897 reads

Good morning!

Today we have updates from:

Sosandar (LON:SOS)
Judges Scientific (LON:JDG)
Altitude (LON:ALT)
Revolution Bars (LON:RBG)
Air Partner (LON:AIR)
Anpario (LON:ANP)
Connect (LON:CNCT)
Science in Sport (LON:SIS)

Cheers,

Graham

These are shocking times. Does it remind you all of 2008-2009, when a general catastrophe affected nearly every company?

We continue to see unscheduled updates from all sorts of companies, to tell us how the Coronavirus situation is affecting them. Few, if any, parts of the economy are left untouched.

CV19 Estimates

Let me preface this analysis by saying that every death is a tragedy. I want to look at some of the numbers.

Yesterday, the Government's Chief Scientific Adviser said the "best-case scenario" was for 20,000 people in the UK to lose their lives to the new coronavirus. It would kill two or three times as many people as the seasonal flu.

For context, 540,000 people were recorded to have died in England and Wales in 2018. So there are probably around 600,000 deaths across the UK as a whole every year, including Scotland and Northern Ireland.

In this "best-case scenario", therefore, the virus would increase the total number of deaths in a year by only around 3.3% (excluding the double-counting effect, where another underlying illness would have caused death instead).

More bearish projections were issued by academics from Imperial College. Assuming the virus is allowed to spread rapidly, they predicted that 250,000 people could lose their lives, i.e. about half the number of total deaths per year from all other causes.

That scenario would involve a "single, relatively short epidemic". I guess the rapid spread of the disease would bring about a faster immune response from the population.

However, I'm not sure if that 250,000 number is possible. The Chief Scientific Adviser appeared to agree with Jeremy Hunt that there could be roughly 1,000 cases for every 1 death.

If that's true, then the mortality rate is only around 0.1%. So given the total population size, the maximum number of deaths in the UK is…

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Rusty2

18th Mar '20

Tesco (LON:TSCO) is currently selling all it's Thai and Malaysian shops which should be around £8bn, about £5bn will be paid out as a special dividend. But WM Morrison Supermarkets (LON:MRW) which was up 10% today, is not down, it's up. J Sainsbury (LON:SBRY) was up over 12% today, Tesco (LON:TSCO) is lagging behind those 2 now.

Interesting figures, I was just looking at them earlier today and it did look like the 90-100 was worst performing from the charts.

But not all 90-100 are Superstocks, some will High Flyers and Style Neutral.

aflash

Indeed

Chinese stock market (Shanghai Composite) is still only down 13%

From April 2015 to Feb 2016 it declined 75% and then rallied over 80% to Feb 2018. It has declined 47% from that high. In the last year, however it has done nothing spectacular. I am short.

Mark Carter

Some interesting late news for you:

Dow closes below 20,000.

Oil falls to an 18-year low. "Dismal oil demand outlook, Saudi-Russian price war lead to 'atomic-bomb'-like environment for oil".

"At no time in human history has silver been this cheap relative to gold" (video). The narrator explains that in order to make margin calls on stocks, people have sold precious metals, preferring to sell silver ahead of gold.

Sleep tight.

Berksbee

Hi Chris, I noticed the super stocks phenomena too. Says to me the QVM theory is just fine until M goes into reverse. Always had a (psychological?) problem with M and prefer QV - but that has hardly be a walk in the park either. Additionally if you take the last 2 months the super stocks drop is even more significant.

jonno

Love the use of the word 'poltroons'. Was a favourite disparaging term used by Tony Hancock in the long running and much missed Hancocks Half hour

Kevin_T

19th Mar '20

Graham, really appreciated your comments on Sosandar (LON:SOS), Revolution Bars (LON:RBG), Judges Scientific (LON:JDG) amongst others. You correctly predicted previously Sosandar (LON:SOS) would need to raise funds and they did!

BIACS

Decomm. liabilities are notoriously difficult to predict with any certainty though (that's why companies are desperate to offload them - this makes far more sense than trying to deal with them efficiently yourself (otherwise the majors would hold onto these assets themselves). I have seen countless failures over the years of smaller offshore oil & gas businesses which had been set up with convincing -sounding plans to try to take advantage of their more 'nimble' and efficient approach to decomm. where they thought they could save money over what oil majors would have to spend and invested in late-life fields to try to take advantage. The latest was Northern Oil & Gas Australia who took over a field from Woodside thinking they could make a killing - with the same old result - it went bust.

Also bear in mind that North Sea decomm. dates and predictions will be rapidly brought forward if the oil prices don't go back up VERY quickly - an uneconomical field (due to extraction costs being above oil revenue receipts) costs horrific amounts to keep open and burns huge sums of money every day. Once the field life projections are updated to account for new lower oil price environment I think we'll see the North Sea oil industry rapidly declining - it's one of the highest production cost areas anywhere in the world - it will not be viable in a $20/$30 oil environment and the only option then is shut down and decommissioning...

Sorry to hear you got caught up with the RRE sell-off. It has been brutal out there.

Yes as I said to Ed, momentum can quickly reverse and this is what we have seen recently. Be interesting to see which styles are the best performing over the 1 and 2 months.

Do you have figures for all the Superstocks?

GIZMO

I think you missed out EMIS in your report today. It is in the right sector undoubtedly, and with lots of cash, 80% recurring revenue, NHS Digital opportunities and control of UK pharmacy software - a UK company worth some comment.

I don't know if anyone is interested but following Ed's NAPS article in January, I set up 2 folios, one was the top 20 VM shares and the other was the top 20 QM shares on Stockopedia.

The VM folio is worth only 46% and the QM is 62%, so Q has held up better than V which maybe surprising. Down 54% is surprising, the worst ones in VM are: Premier Oil (LON:PMO), Mitchells & Butlers (LON:MAB) and RockRose Energy (LON:RRE). In Qm it's:
Hyve (LON:HYVE), Rank (LON:RNK), Vistry (LON:VTY). No shares are in profit.

I also did a NAPS, not same as Ed's but a more original based one, it is now only 58.4%, worst shares are : EnQuest (LON:ENQ), Maintel Holdings (LON:MAI) and Prime People (LON:PRP).

Indivior (LON:INDV) is showing a slight profit.

simoan

Let's play a quick game. Everything else is red in my portfolio (currently down 19.5% ytd) but I hold one share that is up over 25%. Anyone care to name it?

All the best, Si

EmptyPockets

Thanks for your input yesterday Michael I understand I do make my own calls it's just the voices out there all come up with the same chat stay long . my examples of RR. & Lloy were reasons why not too. Thanks.

timarr

Team17 (LON:TM17)?

smatthews1

I also share your sentiments at this time, and sometimes when it comes to investing and decision making I think its very valuable to just switch off as many distractions as possible and give your self adequate time to slowly asses your own portfolio, preferable when the market is closed, and come up with a plan, which is detailed with each stock. whether the market falls further, flat lines, or suddenly rebounds. Each stock has to be valued on its own merits, demand, financing, wages, supply chains, logistics etc etc the list goes on.

For example anything in my portfolio with with an immediate concern over current trading and/or questionable debt is getting the chop. but this is just my plan. This is detailed around a timeframe which it can survive without significant financing or help. I have much more work to do on this yet. The haunting issue for me, and is already well detailed on these discussions, is the trade off between how long could the government support business's and society before it goes completely broke, versus what if restrictions are lifted what efforts will it need to put in to cope with the huge numbers of sick walking through the doors at hospitals?

The idea is that decisions are made with logic based on the current facts we have rather than emotion and speculation. sounds simple but it takes work.

best of luck.

While this is true in the short term, we don't necessarily eat more, in fact I would go far as to say some people will be rationing. So once calm has eventually restored will we not see a flatline to sales as consumer deplete their own stocks before heading out again?

Team17 (LON:TM17)?

timarr

Nope! I'll give you a clue; it's US listed. Now up only 20% ytd. It's been a dog sitting in my portfolio for several years. Every dog has its day it would seem.