Small Cap Value Report (Wed 2 Feb 2022) - IGP, COG, BKS, WYN, BKS, WAND, CMH

2nd Feb '22 by Paul Scott

65 comments 10967 reads

Good morning!

Agenda -

Intercede (LON:IGP) (I hold) - wins an impressive contract, but it's already in the forecasts. So it's helpful, but not likely to move the price much.

Cambridge Cognition Holdings (LON:COG) (I hold) - a big contract win, coming on top of a positive trading update last week. This company is on a roll, and looks cheap to me.

Beeks Financial Cloud (LON:BKS) (I hold) - making it a hat-trick for positive updates from my small software holdings today. Revenues ahead of expectations, after a big contract win, but it's ploughing back the extra revenues into higher overheads, to drive growth - the right strategy in my opinion. This company looks quite special, but it's not cheap.

Chamberlin (LON:CMH) - I'm flagging the 31% discount on a placing announced today for this tiddler. I'm worried about market conditions getting a lot more difficult for fundraisings right now, so want to warn readers to be careful about holding shares with weak balance sheets, too much debt, and a funding requirement. Because you might wake up one morning and find you're being heavily diluted in a discounted fundraising, which also clobbers the share price. Do be careful!

Jack's section:

Wynnstay (LON:WYN) - I hold - record revenue and profit ahead of expectations for the agricultural supplier. It’s been around for more than a hundred years now, and has grown dividends consecutively for the past 18 of those. Low margins and sector cyclicality are risks, but the group has a strong balance sheet and a good track record of cash generation, leaving it well-placed to consolidate in a fragmented market.

Wandisco (LON:WAND) - good Q4 means full year results should be in line. It’s heavily loss-making though and has a history of equity dilution, while broker forecasts have been reduced recently. Market cap of nearly £200m on about £8.6m of annual revenue and £37m of net losses. Perhaps sector specialists might be able to identify an opportunity, but I’m not convinced.

Market comment from Paul

I see that US markets (especially tech) have put in a very powerful rally in recent days. The trouble is, we don't know yet whether a bottom has been put in, or whether this is one of the big rallies that typically punctuate bear markets, before…

Unlock with Email

Unlock with Google

Already have an account?
Login here

PROVEN SOLUTIONS

(LON:IGP)

Discover examples of MyID software deployments where we continue to help governments, federal agencies and large enterprises issue and manage secure digital identities at scale.

MJP. Maybe at cross purposes here? There are all sorts of attacks on companies and data breaches identity theft, ransomeware etc, which result in massive disruption and huge fines, like an oil supply in Africa which had to be closed downcast year costing millions of dollars. Not to be confused with anti virus companies supplying individuals protecting Pcs.

The Prime minister warned companies only last week to increase security.

Paul Scott

2nd Feb '22

Here's today's agenda which Jack &* I drew up from the RNS today:

As the sun came out, I downed tools late morning, and went off to Bou'mth beach. Say hello to the goats!

TAbernethy

I work in the Travel Industry in IT. We manage reservations. I would say, that people are straining at the bit to go on holiday after 2 years of being stuck at home, and that seems to be reflected in strong bookings. People will be cautious, to be sure, but hopefully things will improve. Speaking personally to colleagues and friends as well, they seem very keen to be jumping on cruises and overseas holidays as soon as they feel safe, and to get away this year. I think barring a black swan event, that there will be at least a modest recovery in the Travel Industry, although I agree, it will take some time to recover to pre-pandemic levels.

Michael Tee

Hi Epilson,

I agree with Paul Scott's comments regarding small companies and Stockopedia stats. They are historical and do not take account of turnarounds where there is a lot of recent progress with balance sheet, revenue growth and contracted order book.

If you wait for the Stockopedia report to change, you are likely to miss a large part of the price action.

Michael

Simon Rowan

I am loving these morning preambles Paul, very useful, please continue with these.

Very kind, thanks Nursemaid. I only do those market comments if I think it's interesting, although am sounding like a broken record at the moment, repeating the same themes.

Above all, I do want to stress that I have no idea which way markets will go! My predictive powers are close to zero! So it's only ever just views, discussion points, etc.

Given how much positive feedback we've been getting on my general market comments, will definitely try to do more of that, and maybe put it ahead of comments on boring companies that are just in line with expectations. Although that's pretty much what we're doing now.

Thanks again for all the positive feedback, we're only human, and it makes us want to work harder for you :-)

Best wishes, Paul.

Hi Revs8,

Yes thanks for flagging that Canaccord has dropped from 10% to 5% of Somero Enterprises Inc (LON:SOM) (I hold). That's usually Hargreave Hale, very shrewd stock pickers. So if they're selling SOM, I'd be curious as to why.

djones08

Hi Paul, how are you valuing "Cambridge Cognition Holdings". Can you share workings?

See the archive.

EDIT: which is extensive: https://www.stockopedia.com/sh...

Simon, just to correct one small, recurring, error. (why?)

It is not "Meet the Company"

It's: InvestorMeetCompany - one of several excellent, free investor presentation services. I also love Mello, and PIWorld.

Davidcox

The strength in Wandisco is in its technology, not yet in its balance sheet. Although it has plenty of cash. It is the only company in the world that can transfer data from on premise to the cloud whilst its still being used, and collected on premise or cloud without interfering with its accuracy. Hence its contracts with the big cloud providers such as Microsoft, Amazon, IBM, Google, Oracle etc, who have included it in their cloud offerings. Gradually in my opinion, companies as they switch to the cloud, will realise what savings they can make, It has started to happen now, and will accelerate in years to come. Companies need to be in the cloud. It will become a flood, having a monopoly and massive moat.

A_Private_Investor

I agreed with the story quite some years ago and bought in. However, after several years of management saying 'next year ...' and then it not happening. When they said "in the next six months" and then substantially disappointed, I decided the management couldn't be trusted, so sold out on a peak.

If you are an investor, I hope you are right !

(LON) IGP, Thanks Paul for the correction. Investor Meet Company. 'Recurring error why?' Maybe its the bit after 'Meet and Engage with the company you invest in' that sticks in my memory more. I agree they are an excellent way for companies to present and answer shareholder questions. Pi World is absolutely brilliant. Director Talk is another useful interview. Personally I like to keep my distance from rose tinted bespectacled directors! I think Webinars are far better and great references, especially with IGP. Way too much to take in in one go.

MJP . Funny you should mention NHS. They have had 3 cyber attacks in recent years. The one in 2017 cost us over 90 million pounds!

MiserableJacktPotato

Can't say too much, but an expensive identity facilitator in that case wouldn't have helped much.

What happens when all the data is migrated? Sure somethings are super sensitive but most cases you can create a geo-stretched cluster and load balance it. Which is what I suspect most organisations do and why there hasn't been a massive surge of demand - good enough, is, well, good enough.

Thanks. I work for a major IT company and have a healthy dose of cyber security as part of my day job. None of what you said detracts from the fact the premium Okta and Azure AD identity offerings secure the identity layer very well. Verified identity is pretty niche - someone's going to have to go a long way to intercept a device, and intercept the second factor and get past all the internal identity protections and access controls restricting what can be accessed, by whom, from where and then session controlling what can be cut and paste / downloaded etc.

It's widely understood that security starts with identity, it's the golden ticket after all, and from there is a whole series off cyber layered defences that stretch way beyond merely the identity layer.

It's super niche. Yes it may well be a viable business, but it's not going to rewrite internet security as we know it.

Revs8

Hi Paul

Glad I’ve understood correctly. I watch the Somero Enterprises Inc (LON:SOM) charts and flagged a while ago that I thought someone was drip feeding shares at a very controlled rate resulting in a very low volatility and tight spread.

Next obvious question is why and are they selling the other 5%?

You asked the question, why is the share so undervalued? In a previous SCVR. Now we know. The share price is being suppressed by a whale!

Staggered by the volume you and Jack are covering recently. Thank you.

Also noted your point about being more proactive when share prices move.

I came to the same conclusion and now trade around a core holding of my favourite investments.
Being nimble is one of the advantages we have over the big guys.

I enjoyed that. Thank you Simon. You sound slightly eccentric, which I enjoy very much!! Bring it on!

Boon

Latest from the FB Q4 results. Interesting data for Best Of The Best (LON:BOTB) holders. It looks like ad rates (globally, all sectors) reduced from Q3 to Q4. I infer that from the steep decline of Q4 vs FY, and the fact that most of the ad price inflation happened in Q2-Q3.

"Ad impressions and price per ad – In the fourth quarter of 2021, ad impressions delivered across our Family of Apps increased by 13% year-over-year and the average price per ad increased by 6% year-over-year. For the full year 2021, ad impressions increased by 10% year-over-year and the average price per ad increased by 24% year-over-year."

There's a better way to do this by digging out FB Q3 results but I'm lazy on my sofa at 11pm and personally, I don't think ad rates have come down in the UK in Q4. Dec was strong.

Is it a niche requirement to have the same data on-premise and in the cloud, synced real-time? How many companies have this requirement?

And if this was "known" as a solution to the market a few years ago already, and many companies are already using cloud (see AWS and Azure revenues reported by Amazon and Microsoft), then the cloud market isn't very convinced of the need for £WAN . Otherwise their revenues would be more than the 7 digits it is currently.

It might be a shiny new toy that can flash colours and flip and do more than other toys, but not all shiny new toys can make profits?

Caper4

3rd Feb '22

Possibly but considering how much they have fallen, I am confident that they are a very good buy at today’s prices. Particularly £IAG who during Covid retrenched many pilots and other staff and are clearly now in a very strong position relative to competitors .

Small Cap Value Report (Wed 2 Feb 2022) - IGP, COG, BKS, WYN, BKS, WAND, CMH

Market comment from Paul

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

65 comments

PROVEN SOLUTIONS

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

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