Small Cap Value Report (Wed 23 June 2021) - BOOM, G4M, JOUL, VTU, MRL, MANO

23rd Jun '21 by Paul Scott

36 comments 11778 reads

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

Could I ask that subscribers please don't copy any content from here onto any other websites. It's subscription content that people are paying for here, so it shouldn't be plastered all over the internet for non-subscribers. Thanks.

StockSlam - is tonight! A fun, free, social event online. 10 pitches of 3 minutes each, from private investors, talking about shares they like. Details here.

Timing - today's report is now finished.

Agenda -

Paul's Section:

Audioboom (LON:BOOM) - trading update from yesterday. Impressive revenue growth here, but no profits yet. Looks interesting, but how do we value it?

Gear4music Holdings (LON:G4M) - I had a short phone call with management, here's what I asked them.

Joules (LON:JOUL) (I hold) - trading update for FY 05/2021. Slightly ahead of market expectations. I plough through the detail. This is one of my favourite long-term holdings. Priced probably about right for now, but big increases in earnings are forecast. Strong growth from Friends of Joules ecommerce marketplace. Stores now re-opened and trading ahead of 2019.

Vertu Motors (LON:VTU) (I hold) - more profit upgrades. This looks astonishingly cheap, on a PER of c.8, and fully asset backed with freehold property. It's also up-to-date with eCommerce, and has twice as many cars for sale online as competitor Cazoo, which is currently valued on the NYSE at $7bn!

Jack's Section:

Marlowe (LON:MRL) - strong adjusted results and runrate revenue already comfortably ahead of FY21. Management is executing at pace but there's a lot to keep on top of at this buy and build operator.

Manolete Partners (LON:MANO) - good growth in case numbers and potential for more insolvencies as government support relaxes, but liquidity is an issue and there is a degree of subjectivity required in the accounts.

Audioboom (LON:BOOM)

900p (up 2% at 15:18) - mkt cap £141m

Trading Update

Audioboom (AIM: BOOM), the leading global podcast company…

Revenue expected to be significantly ahead of current market expectations … and an increased adjusted EBITDA

Revenues, not profits note.

Key points -

High demand for ads has allowed a 22% rise in average ad unit pricing - sounds encouraging

Greater than 97% fill rate on the…

Unlock with Email

Unlock with Google

Already have an account?
Login here

dcon85

23rd Jun '21

I had a look at this yesterday as there was a downward spike in the SP (which quickly recovered). Both RNS state that the request for extra time to publish accounts came from Deloitte (in the first instance specifically naming COVID, the second RNS states "further to" so I read the same reasoning). - Both statements reiterate that trading is in line.

It seemed they were ready to roll with the presentation following results on the 17th until they pulled the plug the day before. They didn't issue another date which suggests to me they don't want to further damage confidence in the market until they are certain they can publish.

Reasons for caution: There were accounting issues in 2019 (pertaining to the years 2017, 2018 & 2019) which are likely weighing on market sentiment to the news.

https://www.investorschronicle.co.uk/tips-ideas/2019/07/10/renold-discloses-accounting-error/ [may need to copy and paste this link]

Reasons for calm: Deloitte have postponed results at other companies

https://news.bloombergtax.com/...

On balance I’ve decided to take the RNS at face value (noting that their statements don’t preclude problems yet to be revealed) and continue to hold.

Paul Scott

Is it ok to copy it in the notes sections on stocks in my stocko folder? I notice they don't stay there which means it's a lots harder to quickly check points you have made and I want to reference in the future? They are staying in Stockopedia.

Of course! Please feel free to copy anything for your personal use, or even to send to a friend, etc. I'm just saying please don't copy Stockopedia content onto free bulletin boards, that's all. :-)

Best wishes, Paul.

Hi FuzzyHaha,

I've had a quick look, and the striking feature is the low premium mooted in this possible bid from DBay for Anexo (LON:ANX) - only about 9%, a long way short of the customary 30%+ for takeover bids.

I see DBay already owns 29%, and the 2 Directors mentioned who might become joint offerors, totals 35%. That's 64% in total, so they can do whatever they want with the company.

So it looks like small shareholders could be about to get your upside removed, for a paltry bid premium. Very unsatisfactory I would say. Not many people hold a share for a maximum upside of 9%.

That said, looking at the StockReport, Anexo looks pretty awful - big profits & low PER, but little cashflow, and only tiny divis. Whereas Redde Northgate (LON:REDD) (I hold) is an absolute cash machine, paying out lovely big divis, year after year. So it beats me why anyone would want to hold Anexo in preference to Redde. Maybe a takeover bid would provide a nice clean exit, for a share that has failed to inspire investors since it floated in 2018.

Regards, Paul.

bryans1311

With all the discussion lately on ridiculous changes in company names ( £AMO springs to mind), Vertu Motors (LON:VTU) is one that might actually benefit from it. The PLC name’s a bit stale- even “Click2Drive” could highlight the online offering. Otherwise, I can see the price sitting on a PE of 7/8 for eternity!

WDWombat

I sold my MANO in 2019 but I had a very quick look at the figures which reminded me how difficult it is to piece together the business from the figures. But we might mention that the government 'pandemic' intervention in terms of business support has helped thousands of businesses survive and that these measures are being curtailed and (I believe) expected to be permnently removed by September. This might provoke a rash of insolvencies. As a reminder that all is not well in businesstravel majors were understandably bleating for more support on this morning's news. I also wonder how difficult it is to actually get paid by people who have owned insovent businesses at the moment. There was a very noticeable large rise in trade receivables (over £10mn) over the year to March 2021 and a concurrent sharp drop in cash at hand. I would like to know why this happened though I didn't read all the text accompanying the results.

However, I will say that one of the factors in the price decline has simply been that the share went up too much after listing. I also understand Mr Winnfrith has been conducting an 'anti-MANO' campaign and directors' sales haven't helped so there is a slight poor odour around the company, as there is with most of the litigation firms. They attract short sellers. But finally I also note that MANO continues to do company presentations - which initially attracted me to the company - which is I suppose a good sign.

gwilli68

Yeah I must admit I agree with this bryans1311 - have been thinking the same lately when comparing them to Cazoo and Motorpoint. If there's an eventual go to place on the internet to buy cars, then I feel their brand names / domains work much better than Vertu Motors or Bristol Street Motors. I hold.

MrBeak

VTU is a share i have looked at a few times recently without using the buy button. The tiny margin and nebt debt i find quite concerning? Appreciate anyones thoughts

Hi MrBeak,

tiny margin - this is a red herring I think. Car dealers, most of the revenue is just pass-through. It's the margin made on each car that matters, gross profit. So, a bit like staffing companies, I would focus on gross profit, not revenue.

nebt debt i find quite concerning? - debt is to fund the inventories. Offset the two, as both could be quickly eliminated if needed. That's why lenders like lending against cars. Then you're left with a great pile of freehold property, in the case of VTU, which is why it's so attractive to value investors.

Hope that helps.

Otherwise, I can see the price sitting on a PE of 7/8 for eternity!

I remember saying that about Dart Group, when it was about 100p per share! It 20 or 30 bagged after that, I think. It's all about patience.

Boonboon

With regards to Vertu Motors (LON:VTU) it's interesting to see how many used cars they actually offer. Bristol Street and Macklin both offer 7836 used cars so presumably it's the same stock on both. Vertu motors have 2398 used cars. I believe this stock is included in the Bristol Street number.

Having a separate website which looks to all intent and purposes as a pure online player like click2drive should be simple to achieve and might be easier to market.

Indie

I bought Renold (LON:RNO) recently, just before the downturn, so I'm hoping that the RNS just now saying that 'Ocorian Limited as trustee for the Renold plc Employee Benefit Trust' going to 3.38% voting rights from 'not applicable' is good news.

rmillaree

Boohoo (LON:BOO)
bit ot but it is after the witching hour of 4.30pm. Boohoo are almost back at my target buy some price of 310p.
I am a complete numpty when it comes to charts but but i prefer a good looking chart to a bad un given a choice.

Does anyone who can read the tea leaves (charts) have an opinion on the boohoo chart - it looks distincly wonky at present - it looked like it has always been on an uptrend from a basic midpoint straight line average since early 2019 which has always given me comfort - however if a put some of the fancy parallel lines in that chartists use it looks like its outside of the that upwqard trending zone now and it looks like the current midpoint line i would draw from the start of 2021 is in a downward trajectory albeit reaosnably gentle. I would say each time the price has got to the low 300's level it has bounced stongly so it may be that there is resistance at around the 300-310p level.

Thanks Paul, great advice

FuzzyHaha

Thanks Paul,

with hindsight £:REDD would have been a better investment. It was the Dieselgate windfall and ironically the DBAY involvement that helped the investment decision back in February

abtan

Manolete Partners (LON:MANO) (no position)

"There was a very noticeable large rise in trade receivables (over £10mn) over the year to March 2021"

Wasn't this related to the £9.3m case they won back in November 2020, from which:

all of the revenue was recognised this year;
but as it's paid over 10 years (i.e. little cash received yet), it has resulted in the increase in trade receivables?

sharw

rmillaree with respect you are probably better off asking that question on the Boohoo (LON:BOO) thread that Paul set up:
https://www.stockopedia.com/content/boohoo-boo-trading-update-q1-3-months-to-31-may-2021-discussion-823109/

Harry Hindsight

Boohoo (LON:BOO) is in a channel an undecided zone. Until Mr Institution can decide its good for the ESG portfolio then Boohoo will sit in the doldrums.

378p a good alert (can set it in stocko so dont need to watch) and then 400p go unfurls the sails, but watch out for the white whale.

We don't do advice!!!! Thanks for reminding me re the disclaimer.

shamusj

What’s more concerning to me is the tiny top line growth over many years, compounded with profit drops pre-covid.

Probably a good buy out target due to its low valuation but for me it would be too much of an opportunity cost against faster growing industries.

mark1308

24th Jun '21

Paul , another great find I hope. Your comments certainly have made me want to do some more research. Many thanks.

Small Cap Value Report (Wed 23 June 2021) - BOOM, G4M, JOUL, VTU, MRL, MANO

Audioboom (LON:BOOM)

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

36 comments

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

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