Small Cap Value Report (Wed 20 Jan 2021) - ALU, PEBB, BOOM, ELCO, WIN, WJG, TMG

20th Jan '21 by Paul Scott

96 comments 12887 reads

Good morning, it’s Paul here with the SCVR for Wednesday.

Timing - today's report is now finished.

Agenda - here are some updates from yesterday, which I prepared last night:

Alumasc (LON:ALU) - Trading update - big share price rise yesterday

Pebble (LON:PEBB) - My first ever look at this company. Trading update FY 12/2020

Audioboom (LON:BOOM) - Trading update FY 12/2020 - not a basket case any more?

Eleco (LON:ELCO) - Trading update FY 12/2020 - resilient performance

Watkin Jones (LON:WJG) - investor presentation is worth a look

On to today's news:

Wincanton (LON:WIN) - probably the best trading update today, materially ahead

Mission (LON:TMG) - Trading update - good recovery in H2, more than recouped H1 losses

Alumasc (LON:ALU)

Share price: 137p (up 21% yesterday) - mkt cap £49.6m

One of yesterday’s biggest risers, so we should have a look at it.

I reviewed its FY 06/2020 results here, but the cash-hungry pension fund deficit put me off. Pity, as it’s risen 63% since then.

Trading Statement

Alumasc, the premium building products, systems, and solutions Group, today provides a trading update for the six months ended 31 December 2020, ahead of publication of its half-year results on Thursday 4 February 2021.

This looks impressive, especially the large increase in profitability -

Further to our AGM Trading Update on 22 October 2020, which reported a strong performance in the first quarter, we are very pleased to report that conditions in our markets have remained positive and that the Group's trading performance has continued through to the end of the first half of the financial year, with a record profit for the period being achieved. On an unaudited basis, for the first six months of the year:

· Revenue increased 11% versus the prior year to £45.6m

· Underlying PBT increased significantly, from £2.3m to £6.0m

· Cash generation has also been strong in the first half, with net bank debt reducing from £4.3m at 30 June 2020 to £0.2m at 31 December 2020.

Other points -

Helped by catch-up demand following lockdown 1, and Govt support measures
Won market share & “encouraging” export sales
Margins helped by prior year cost savings of £2.4m
Levolux turnaround going well
Entered…

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Albertos

20th Jan '21

City of London Investment (LON:CLIG)

Like all holders (presumably) I was very happy with the TU today. Topped-up infact.

However, the RNS once again included this information:-

"The Company wishes to inform that, subject to being in an open period, Barry Olliff, Founder and Director, wishes to refresh his selling intentions to sell 250,000 shares at each of 475p, 500p and 525p. In addition, the Company will no longer provide trading intentions for Mr. Olliff post 30 June 2021, which is the Company's year-end."

This is not new news, and I was aware of his selling intentions. What I can't decide is whether this formulaic exit (it sort of sets ceilings which might put off new investors) is better than a one-off placing.(this obviously would be at a discount and have a one-off impact, but would remove the overhang in one go and then everyone can move on).

Wondered if any others had any thoughts?

Phil

Gromley

What does he mean by long term?

In the context of : "over the long term defensives outperform and the quality and value are more important than momentum."

I presume that by long term, he means that if you hold only one "type" of share (Factor if you will) over a full cycle (whatever that really means) defensives (QV) will outperform Momentum.

Whether that is actually true and whether or not it is unchanged by the much more rapid dissemination of market information compared with 2 or 3 decades ago - I cannot say.

However even if it is true; if one can judge the market cycle, then one will invest in then one will do even better by investing in the appropriate factor at the appropriate time.

Ed Croft made a similar point the last time we were all together at Mello that over the full cycle "conservative" stocks will outperform "speculative" stocks. However during a raging bull market (so called "risk on") speculative investments will roar ahead. During a bear ("risk off") speculatives will significantly underperform.

Even the pandemic hasn't really shaken the market out of the decade plus Bull market. In fact with the confluence of a good time for speculative tech & biotech stocks together with the appearance of the generation of "robin hood" investors has reinforced the bullish sentiment.

Do I think we are heading for an uncomfortable 'bust' (that may be a bloodbath for the unwary)?

Yes. Yes I do. But as ever (I wrote something quite similar a few years ago) I have no idea whether it will be next month, next year or next decade! I do know that it is closer today than it was yesterday (but only by one day).

Caution - imho - is always a virtue for investors, but I am not convinced that there is a lot of it about at the moment.

Silver Moon

Hi Paul, of course I'm aware of that but you are the wake-up call to Stocko's followers if you don't mind my saying so. I could be a lot richer were it not for the fact I never have any spare cash, always have to sell another stock to buy one that flags up and I reinvest dividends more or less as they come. But I do look in at 7 am every day of the week and take note.

Silver

GN100

I saw an interview with one of the Market Makers (Winterfloods) who commented that they read Simon Thompson and react accordingly. Especially noticeable when most of his recommendations trade on SETSqx. I'm an IC Alpha subscriber and I haven't noticed him publishing there first.

rogerh

Also happy to move the thread to the Discussion area, though not sure how. It seems to hold a lot of old postings going back to 2011. Interesting reading through the first one from 2011 that Parsortix was intended to come to market many years ago...

Andy Astbury

Thornabian
I also bought a very small position in £CHRG Wisdom Tree ETF for battery solutions, to get exposure to the emerging and existing Battery companies. Appreciate its not a small cap, but for info. DYOR of course and swipe down if no interest.

Zipmanpeter

Given conversations on this blog re Saga (LON:SAGA), see headline below from than respected investor information source the Daily Mail.......

"Saga becomes first travel company to require all passengers to be vaccinated - as cruise customers face rush to get TWO jab doses before first voyage on May 4" https://www.dailymail.co.uk/ne...

Firs cruises also put back to start April (Ship 1) and May (Ship 2). However seems to be confidence in finding passengers so maybe an extra 5-$10Mn incremental loss at most against ever increasing likelihood of a restart from some point in Q2 as vaccines roll out. Hence prices continuing edge up. (I hold)

Mark Simpson

Thanks for the kind words IGPJ.

Just to be clear, although I am a QV investor, I do think Momentum works since there is a fair amount of academic evidence for it, just that no strategy works all the time. So momentum faces these big draw downs periodically as do all successful strategies. In fact, I’d go as far as saying that in order for any strategy to be successful over the long term it must be difficult in some way or others would arb it away.

What is key is to find a strategy that suits your unique personality since this is one you will stick with during the inevitable periods of underperformance. One of the things I attempt to do in my book is give people the sight into how their personality may affect the strategy they should choose.

That said, I agree that valuations look pretty stretched across the board. At the end of the day, regardless of how strong momentum is, a company is worth the discounted stream of future cash flows returned to shareholders. If a company is on a very high P/S it must grow rapidly for a long time to be worth buying whatever its other positive attributes such as high gross margin or strong share price momentum. In the long term, the maths on this is inescapable.

That's okay - I'm sure we all remember even if you forget!!

Only joshing :-)

Personally, I always assess critically the argument that ANYONE presents and act or respond accordingly - anyone that decides "oh yes he's a clever chap and he says X, so the answer must be X" deserves all they get. So I think the disclaimer is unnecessary, every posters views should be treated with suitable scepticism.

Except of course for my views, which should be followed without question! I am after all a very stable genius - biggly.

JohnEustace

April and May didn't make any sense to me in terms of timings given the twelve week gaps between first and second jabs in the UK so I looked on the Saga website and that says sailings will start in May and June.

In order to allow our guests sufficient time to be fully vaccinated, we have decided to delay the restart of our cruise programme which was due to commence on 3rd April with Spirit of Discovery. Instead our programme will begin with Spirit of Adventure’s inaugural voyage on 4th May and our Secrets of Corsica and Sardinia cruise aboard Spirit of Discovery will now sail on the 2nd June. We will be contacting all guests affected to discuss their options.

I still think they are being optimistic. According to this online calculator a 70 year old with no underlying conditions will get their second jab between April 22nd and May 10th.

MiserableJacktPotato

Ha, I didn't realise you posted here :)

Thanks for responding. I hope I didn't butcher your thoughts too much and I am still working my way through it, I try to do a little at a time so I can let the thoughts sink in and think about what changes I could / should / don't need to make :)

Boon

There's nothing wrong with Simon Thompson or the IC promoting stocks.

As long as he discloses whether he holds them, or profits directly from promoting the stock.

If you can prove either way, I'd be happy to connect you with journalists as it would be a big scoop.

Social media influencers - that's where it gets more dodgy as many do front-run and profit from their pump and dumps, without disclosing to their followers.

LoL Gromley !

To me you are always Mr Filtronic for those three crazy months in 2018. I suspect some remember me for my vigorous defense of Plus500 (LON:PLUS) prior to them discovering the "drafting error" in their previous accounts.

Have to admit I always assume people posting on specific companies are long in them - simply because probably about 80% of my posts are - the remainder are on what I'm watching and a minor bits of random stuff I've become aware of. The reason is simple - what I hold is what I know about. I do try and follow the convention of disclosing when I hold but no doubt sometimes I forget. I do think it's worth pointing out I see very, very little evidence of ramping in this daily report (which I presume is the main reason for disclosing), but do see a lot of people wanting to hear a contrary view - the battle against confirmation bias is continual and good to see.

As you say everything should be subject to your own research - I don't even take what Paul says on face value and he's good.

Keep up the good work.

Phil

They see trade being totally back to 2019 levels in 2022. I don’t believe a word of it...

But why not? After the Nov lockdown ended, pubs were thronged. So much so positive covid cases leapt, and the government had to do a massive full u-turn and shut down... you guessed it... pubs again.

We have a nation of alcohol loving people (stretch too far to call them alcoholics?). Who like beer. And sitting in pubs with their friends and family (or alone). JD Wetherspoons occupies this niche. Cheap beer, for those that need to drink frequently.

J D Wetherspoon (LON:JDW)

Yes, safe to assume May as the earliest date now.

Looking at Carnival, Norwegian, Royal Caribbean... they're also guiding around that.

But that's the minimum date. And if you need everyone on the cruise vaccinated before it sails - when are the crew getting vaccinated? They're all in the 20-30 age group....!

Well two points. I never named anyone and didn't accuse any of those named by others of doing anything wrong and it's quite clear in my post I am being generic about the lack of oversight in the markets recently. One of the rules of justice is not just that it should be done, but that it should be seen to be done. Regulators should regularly communicate how many investigations they are conducting and some generalities about what they are investigating to give confidence to market participants they are keeping an eye on what's going on, at all levels, from small PIs to big institutions.

I do note that it is mentioned in the post I replied to that prices are seen to move before the information is published, that needs investigating, which is my point one. And by investigating, we first need to establish if the prices are moving in an unusual way before the information is published and then we respond appropriately once we know for sure one way or t'other. I would highlight there are many people involved - I used to play trading card games that regularly released new sets of cards - despite the best efforts of the producers of the game and the people they employed in their supply chain, often someone somewhere would leak images and details, it's in some human's nature to reveal a secret that isn't their's to reveal, but that doesn't mean we should accept it especially when there's gains and losses involved.

Point two, I would state that selling a tip and then releasing for free some time later that you have tipped something to allow the people who pay for your services early access at lower prices is, morally questionable. If you think your information could have the effect of moving the price, my opinion is that one is duty bound to act ethically and not create false markets. And I would say the same for any publication - they should disclose which shares they have tipped in a timely manner to all market participants. The reasons why they have tipped it, sure, keep behind a paywall, all information they use should be public anyway.

Gostevie

I hesitate to add a post that is only vaguely related to small cap shares but I wanted to, in a polite way, respond to this.

Before I took early retirement in August of last year I spent the last 20 years of my career in the charitable sector, and during that time came into contact with many alcoholics. I have also been a regular user of pubs for almost 40 years. The fact is that very few alcoholics drink in pubs. They either do it on their own at home or, sadly, on the streets or in parks. Pubs, or at least the sort that we as private investors might be interested in such as J D Wetherspoon (LON:JDW) or Fuller Smith & Turner (LON:FSTA) or Marston's (LON:MARS) , would soon bar them anyway. Their managers have reputations and licences to think about, plus not wanting to offend regular customers who drink sensibly and spend money on meals as well.

Regarding Saga (LON:SAGA) , as a reasonably affluent 57 year old I would probably be in its target market for a cruise, and I must admit I quite fancy the idea of one. But I'm not likely to get the vaccine until late summer at the earliest, so even if the cruises start in April or May, for the time being I would give them (excuse the pun) a wide berth.

Gostevie

Paul Scott

Hi Dan,

I had a quick look at Bonhill (LON:BONH) but it's very small at £8.6m market cap, and the company's history seems rather lacklustre. It quotes an EBITDA profit, but I'd be interested to see whether that would turn into proper profits! It used to be called Vitesse Media.

For those reasons, I didn't think it was worth spending any more time on it, sorry about that.

Regards, Paul.

intuitive6191

21st Jan '21

Re CLIG - as you say this is not new news regarding Barry Oliff's share sales. He has set out structured selling of shares for a number of years as his retirement became closer and this seems to be his method of working.

I also hold

Mr Filtronic! Shheesh.

Yes those were a fun few months.

And then less so!

Thankfully I'd gone through my fledgling phase of believing I had the midas touch a couple of decades earlier so I was sized appropriately!

Small Cap Value Report (Wed 20 Jan 2021) - ALU, PEBB, BOOM, ELCO, WIN, WJG, TMG

Alumasc (LON:ALU)

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Paul Scott

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