Small Cap Value Report (Wed 23 Dec 2020) - BOO, AVAP, IMMO

23rd Dec '20 by Paul Scott

137 comments 10269 reads

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

Timing - I'll leave it there for today, as Countdown is about to start on Channel 4 (a nice way to de-stress after 7 hours of market & writing stress). I managed to get all but one of the numbers rounds right yesterday, and both conundrums too (pressing pause helps!). So I declare today's report duly finished.

It's quiet for newsflow today, but I've got some backlog items that I'll write about, so you won't be short-changed! In all honesty, I haven't really got anything else to do today that is pressing, so I'm quite happy to do some writing here instead.

Live Xmas harp recital, tonight (and tomorrow)!

Last chance for a unique, live Christmas harp recital (45 mins), from my sister-in-law, Lauren. We got very positive feedback from everyone who joined in her last harp recital of Xmas carols, live on Zoom. It's a really nice, feel good thing to do, with your friends & family., even if you just have it as beautiful, soothing background music (there's no audience participation, so everyone can relax!)

Goodness knows we need something to get us into the Christmas spirit, and if this doesn't, then nothing will!

Tickets are here. It's only six quid. I'd be very grateful for your support for my family, a struggling, but incredibly talented musician. It's not really about the money, she could just do with some moral support right now, with almost all her usual gigs having been cancelled this year.

The arts is a sector that's often overlooked, but the people in that sector have been devastated by covid/lockdown, destroying their livelihoods. To be blithely told to re-train isn't very helpful (a Govt website suggested my brother, a professional saxophonist, should re-train to be a bomb disposal specialist. Seriously!). Lauren applied for jobs in supermarkets, stacking shelves, to make ends meet, but didn't even get an interview. So it's not easy for middle-aged people steeped in the arts, to switch to something else.

Boohoo (LON:BOO)

First, our daily Boohoo (LON:BOO) (I hold) update

The Guardian are at it again, with yet another article highlighting low wages & poor conditions in a factory (this time in Pakistan) which seems to have been an unauthorised subcontractor, making garments for BooHoo.…

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davidallen77

23rd Dec '20

wsbn i got 200k at 1.35p 5/8/20 traded it up to 10.43p in and out, out since 4/11/20 should of held would be worth32k£ today but i have to work... a screen for small market cap, less than 100million shares in issue and a penny share required.

Dojosan

Santa rally - yay!!!

Spl183

Westway001

Sorry to hear of this !

I've gone the other way where I've recently gone long in a $BTC Trackers, Warrants and a few Canadian Miners ($HIVE/$HUT8/$BITF) via DeGiro. I am also pondering a SB on $ETH and just leaving it to run during 2021 (with a very low stop level).

$BTC these days just requires too much margin, so instead will think about SB positions in the Miner stocks ... ahead of 6th Jan.

I am relatively bullish about prospects in 2021. A real shame that you weren't clearly advised by your broker, leading to a premature close of your position. But still time to re-enter if you also are bullish about the near future ...

Best of luck
Spl183

Gromley

isnt some of the [£82m] cash [on the SCS (LON:SCS) balance sheet] customer deposits?

Some yes. It is an example of what I think of as the myth of cash.

(If you believe in cash on the balance sheet then My Cashley was paid several millions to take ownership of Game Digital.)

Here's a breakdown I often look for.

Cash	£82m

Trade Payables	-£21m
Payments received on account	-£36m
Other taxation and social security payable	-£13m
Accruals	-£13m

Surplus Cash	ZERO (roundings)

As far as I know, they don't explain what their "accruals" are but at least we know that they are money that does not belong to the shareholders.

Westway001

Thanks but think I’ll give that one a miss!

david - in that case I would probably agree with you - as I said I hadn't actually looked as whatever company this is we are talking about - I just thought wimbledonsprinter had made a different point to the one you were responding too.

#theperilsofjoiningaconversationinthemiddle.

Stocks123456

Re SCS (LON:SCS) ... If the company is profitable and can comfortably service its debt/liabilities then the enterprise value could be MV net of cash?

Stocks123456,

What do you mean by "enterprise value could be MV net of cash"?

I am perhaps somewhat renegade on this point, but if (to quote) "the company is profitable and can comfortably service its debt/liabilities " then why look at the balance sheet?

UK_Investor_8888

I am trying not to brag!

I broke my first investment Million this month, closing @ 1,001,137.71 tonight.

The figure fluctuates + or - 6% all the time so I'm in and out all the time presently.

I estimate growth (across all my businesses combined) to be 40% this year, 100% since Jan 2018.

My error rate - the amount of mistakes and regrets - is at least -10 to -20%.

As Paul so aptly said, anyone would have probably achieved the same thing by good luck using the Stockopedia StockRank toolkit. A rising tide raises all boats.

Today, I reduced Scs (LON:SCS) as Sir Paul bought.

At 1628, I placed all my cash (£38K) on £SUK2 . Sir Paul is hedging. My intuition suggests we've had a good few days; Lockdown III and I think we may have some "chop".

Not sure there maybe an EU deal.

In @ 642p.. Trigger @ 660p.

Really not happy with myself for selling Boohoo (LON:BOO) @ 290p.

SpinBin

The statement that Scancell's vaccine 'approach to offer combined T cell and antibody responses,,,,ultimately leading to better protection' sounds like a load of BS. All vaccines are supposed to do this and for Scancell to actually demonstrate that its vaccine offers better protection (compared with what??) will require long and expensive clinical studies.

I used to work in the pharma industry and knowing the enormous failure rates in product development, will never invest in individual start-up pharma/biotech companies. Even if a product completes all the clinical trials to get to commercial launch, only 10% of them make any money.

The issue for me with Scs (LON:SCS) is that its second from bottom on my book in terms of gain. 2.5% is an underperformer compared to my other 8 stocks. I bought in too high.

Anyone filling their boots when SCS was 180p and lower will probably feel very remunerated.

You can see 2.5% in a day from other stocks. SCS took the furlough dole-out where as the winning shares did not. As lockdown III drags on, we move another quarter away from good news and dividend resumption.

Hi Gromley, thinking about this again, if i were to sell this business, how much cash could i extract without affecting the business ? I suppose that would be the value of the net assets.

Thornabian

You can buy exposure to Bitcoin on Revolut ('fintech' bank). They also have fx interbank rates either no fees. It is brilliant, I use it whenever I go away and just pay in the local currency on card as normal.

with no fees*

Domestically focused (Mainly the ftse250) will certainly outperform but they are all down trodden so even a 5% rally in £ won't offset the 17% difference to other index in YTD performance. The FTSE is trading significantly below usual averages to earnings.

Ahh thanks Stocks - I just didn't understand the abbreviation you had used.

Based on what I have looked at today my (provisional) answer to "if i were to sell this business, how much cash could i extract without affecting the business ?" would be zero - I do not see any evidence that they have surplus cash.

Paul Scott

Hi millbank71,

Welcome to Stockopedia, and I'm glad you like the SCVRs!

Best wishes, Paul.

Hi Gromley,

Surely your analysis of SCS's balance sheet is looking at a shutdown situation? i.e. all the cash would be needed to settle the unwinding of creditors. In reality (even with covid) that didn't happen - they continue selling online, and have the buffer of a big order book to continue manufacturing & delivering. Then when allowed to re-open, the showrooms saw massive pent-up demand, and the order book rapidly refilled.

Therefore, I think the business model for SCS has been battle-proven, and it could probably use some of the cash for, e.g. a sensible acquisition.

As long as they can keep rolling the working capital, then there should remain a large cash pile all year around (fluctuating somewhat seasonally).

Of course, DFS took advantage of the cash, spent the lot, and took on debt too. Then they ran into trouble, and had to do an equity fundraise during the crisis.

For me, the SCS (I hold) cash pile is very nice, a big plus, but it's cheap on an earnings basis too, and well set up to pay bumper divis in the next few years. Hence a good value share to hold for the long term I think.

Regards, Paul.

24th Dec '20

Hey Paul,

I over-simplify for effect to be honest.

My point is essentially that people seem to automatically associate net cash (or negative net debt) to free cash being 'available' to shareholders.

In most cases it is really just part of the working capital equation. (Absent a full drill down, it look like that may the case for SCS).

The reason I mentioned My Cashley was that (from memory) GMD had an apparent negative EV which I think caused some to draw entirely the wrong conclusions.

I'm certainly not averse to SCS (LON:SCS) - it is on my list for a more detailed drill down with a mind towards a potential buy, but the apparent "cash pile" doesn't wash for me.

I'm actually quite a fan of businesses that can operate on negative working capital (having worked on one for much of my first career) however I don't see it as being automatically positive in investment terms.

Small Cap Value Report (Wed 23 Dec 2020) - BOO, AVAP, IMMO

Live Xmas harp recital, tonight (and tomorrow)!

Boohoo (LON:BOO)

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Paul Scott

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