Small Cap Value Report (Wed 4 Mar 2020) - PHD, INTU, NANO, MPAC

4th Mar '20 by Paul Scott

53 comments 12353 reads

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

This is a placeholder post, to enable readers to add your comments from 7am. I'll be writing the main report throughout the morning, adding each section as it's written. Official finish time is 1pm each weekday.

Estimated timings today - I'm running a bit late, so will keep writing until 4pm.
Edit at 16:09 - today's report is now finished.

Let's start with the three biggest % fallers today, which are all struggling to find buyers or refinancing;

Proactis Holdings (LON:PHD)

Share price: 32.5p (down 31%, at 10:26)
No. shares: 95.5m
Market cap: £31.0m

Conclusion of Formal Sale Process (FSP)

Proactis Holdings PLC ("Proactis", the "Group" or the "Company"), the global spend management solution provider, announces the conclusion of the formal sale process ("FSP") announced on 29 July 2019.

No firm proposals have been received. That's clearly bad news - I tend to stay away from any share where the company has conducted a lengthy sale process and nothing has come of it. What does that tell us? That potential buyers have had a look, and don't think much of it. There's no other possible conclusion, in my view.

I last reviewed its accounts here in Oct 2019, which I found very poor - in particular the weak balance sheet, loaded up with too much debt, from poor acquisition(s).

Today's update tries to sound positive, with some figures on new business wins. However, there is no clear statement about performance versus market expectations. It does say this though, which some people might think is positive (I don't, because it side-steps the key issue, of how they're trading versus market expectations)

As communicated within our recent trading update, we have delivered a significant improvement in new business and dramatically improved retention rates and we expect a return to revenue growth in the second half of this financial year. Our progress in the short-term has been encouraging and we are confident that the long-term prospects are significant."

My opinion - nothing's really changed. It's still an over-indebted software group, with patchy performance. The fact that nobody wants to buy it, confirms my negative view of this one. Maybe it might recover, who knows? There are some positive noises made today. The strategy of abandoning the sale process, and concentrating on cost-cutting,…

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Trident

4th Mar '20

Good point fwyburd.

Re: Proactis Holdings (LON:PHD)

Wouldn't be the first time they had a poke from a material shareholder. See an old cutting about a previous occasion.

https://www.yorkshirepost.co.uk/business/proactis-slammed-major-shareholder-1876062

I think in the end a share price and a sell out of their interests, put an end to the argument,but I vaguely recall this was the first time I had seen a major investor using something equivalent to the RNS system to voice a disagreement with the Company.

Wilbraham

I recall for some years Nanoco (LON:NANO) was ramped by that buffoon-like ex-Daily Mail hack, Michael Walters. He who'd pushed 3DM, EDEN and other micro-cap stinkers. An immediate red flag in my book!

Thornabian

Central banks are always pro-active and they have a lot of room to maneuver, I think central banks and gov's everywhere will move to accommodate for this, if they all move in tandem, I would expect a quick rebound in markets. Remember the 10 biggest stock market gains have always followed within two weeks of the largest falls.

smig78

Stockopedia is showing MPAC as a bankruptcy risk

Mark Carter

For those interested, AROS is a free clone of the Amiga OS targeting Intel x86. Progress is, shall we say, slow. It is, naturally, a very light and nimble OS. I think it has an emulator that works, too, so you can probably run original binaries on it. AROS also runs on a Raspberry Pi using Linux as a host.

Running AROS is fun for awhile, and anyone familiar with the Amiga is apt to say "wow, that's really cool," before going back to whatever system they were using beforehand.

If anyone remembers Aminet, that's still going, too. It has over 80,000 packages, with new uploads every day. It's quite extraordinary that it's still going despite the demise of the Amiga.

Caper4

Don’t agree and I am doing the opposite. Bought quite a lot of Hsbc Holdings (LON:HSBA) today and will continue to purchase quality companies with strong balance sheets and a history of paying good dividends . Of course it helps that I am taking a long term view and it does not worry me if I miss the lows as I am sure the price will be much higher when I wish to sell in a few years or so.
I am not really a short term trader although it is really interesting reading all the comments on this excellent site.

The Phoenix

To be fair although not the kind of stuff I would get involved in these days he did rec 3DM at 5p and it went to about £2 plus trick was trying to jump off before it crashed back down and went bust get it right and you would have made a packet.

Rusty2

That what makes a market. I'm talking more about small caps though. I would not be buying banks, they tend not to do that well in recessions. I have some large caps which I hold mainly for income, yes I may top some of those up. But I want to have a fair proportion of cash so I can buy when this virus is sorted out. I see cases in the UK jumped to 85 today, up 34.

What can central banks do? Interest rates are already very low so not much room to manoeuvre there. I'm reading there is not much they can do. I would be interested in your opinion.

Watchdog

I really think that caution is required if one is considering buying MPAC. In addition to what smig78 has said, why would you want to buy shares in a company that Stockopedia is showing as having negative Net Profit, negative ROCE, negative ROE and negative Free Cashflow? Am I missing something?

I am neither long nor short.

a 7% drop today also, so results not well received to say the least.

Trillions of dollars are held by commercial banks at central banks so the injection of liquidity and reduction in rates which is happening now will push banks into a hard place because they won't want to go long duration at these levels and will most likely push this out into the munis, mortgage backed securities market and corporate bond market.

This will force less regulated financial services like pension funds to push even more into equities.

When the whole world is doing this in tandem, there is little risk short-term, but the market ends up with so much money that it becomes immune to risk - like buying Tesla at 100 year payback period ROI !

Fed has done it, bank of Cad has done it, BofE and UK gov are talking about it, IMF put up $50 bn, ECB and EU govs are talking about it a lot. So seems like more money is coming....

I think you are missing something, Stockopedia won't update its figures for a few days, anyway the results are in and they are not all negative. Are you looking at the TTM figures? I don't know the full history but this used to be Molins which was a tobacco machinery company but that was sold off in 2017. I'm not a share holder in Molins or MPAC (LON:MPAC), I'm sure there are others on here that can give you more information. Stockopedia is backward looking so some of the more recent changes may nor be reflected in it's information yet.

Sounds quite risky to me. But how will that help companies that are going under such as airlines, hotels, travel companies, entertainment and no doubt many others? Some countries are closing schools down such as Japan and Italy that will have a knock effect as some workers will have to be at home. Quite a few large companies are having staff work from home already. The UK govt. are warning that 20% of staff maybe off work it this becomes an epidemic. $50bn does not sound very much to me.

This is from one article I read in the Guardian "However, following the financial crash, central banks have few tools at their disposal to soften economic shocks. Interest rates are close to their floor and central bank balance sheets are still swollen by post-crisis quantitative easing, and it is not clear whether further asset purchases would be effective or politically possible. The burden of responding to the macroeconomic effects of the virus is therefore going to have to fall mainly on governments, using tax and spending tools, and not on central banks."

Cleeve

Can someone explain this anomaly - I have shares in ASLR yesterday stockopedia saw them rise and today crash but the share is suspended -what is happening - any ideas?

There were 2 announcements today which should explain what is happening. You can find them on the Stock report near the bottom under News announcement.

zipstuck

MPAC The nature of the business is project based and, by definition, variable month on month in terms of order intake. A strong focus on our prospects pipeline together with strategic initiatives of operating as a single entity business, 'One Mpac' and driving growth in recurring Service revenue is being implemented to mitigate against variable project demand and deliver consistent financial performance.

This is the coronavirus risk

Berksbee

5th Mar '20

I'm a long term holder. These are very decent results - divi reinstated and £19m+ of the Market Cap of £55m is in cash. The business - packaging in FMCG is not going away anytime soon. Cant too much on the pension side, but lots to like imo.

Pz Cussons (LON:PZC) got shares in PZC and am under-water with them. My wife went out to buy some Carex on Monday. Lloyds were out and Boots said it was selling as soon as it was on the shelf! Topped up as a consequence. Also got shares in Tristel (LON:TSTL) - they have absolutely flown since the corona issue took off. They do"antiseptic" in hospitals.

Tortoise investor

8th Mar '20

The Equity Development research note on Mpac (LON:MPAC) is worth a read. It is freely available.

On Coronavirus it notes 'Sure there is some supply-chain/demand exposure within AsiaPac (8% of 2019 revenues), but these can be managed. Moreover the vast majority of Mpac’stop line growth is coming from Healthcare(74%)within the US(58%). And besides, there may actually be a minisilver lining, given somecompetitors are located in NorthernItaly, where severaltowns are in lock-down, potentially affecting operations.'

No-one knows what the real impact of coronavirus/recession might be at this stage, but maybe Mpac (LON:MPAC) is more insulated given 75% of its revenue is from the healthcare sector. It'd be interesting to find out more about which companies in healthcare.

https://www.equitydevelopment....

Small Cap Value Report (Wed 4 Mar 2020) - PHD, INTU, NANO, MPAC

Proactis Holdings (LON:PHD)

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Paul Scott

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