Small Cap Value Report (Weds 18 Nov 2020) - BOTB, WYN, BEG, HFD, SDY, FCAP

18th Nov '20 by Paul Scott

100 comments 12876 reads

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

Agenda - today I’ll be covering;

Best Of The Best (LON:BOTB) - Trading update & update on FSP (formal sale process)
Wynnstay (LON:WYN) - positive trading update
Begbies Traynor (LON:BEG) - Trading update
Halfords (LON:HFD) - Interim results
Speedy Hire (LON:SDY) - Half year results
Finncap (LON:FCAP) - Interim results

Best Of The Best (LON:BOTB)

Share price: 1400p (pre market open)
No. shares: 9.38m
Market cap: £131.3m

(I hold - but only a small position)

Trading update & update on FSP

Best of the Best plc, (LSE: BOTB) the online organiser of weekly competitions to win cars and other lifestyle prizes is pleased to provide an update on trading for the interim six month period to 31 October 2020. The Company will announce the date for the release of its interim results shortly.

Trading update -

The Company is very pleased that trading for the period has remained as strong as previously announced on 16 September 2020 and that momentum remains within the business. The Group's online strategy has continued to gain traction.

Looking back to the 16 Sept 2020 AGM trading update, my notes are here. Even though BOTB said it was once again trading ahead of expectations, the broker forecast doesn’t seem to have moved. Therefore, I speculated whether c.100p per share EPS might be on the cards for this year, FY 04/2021. So it will be interesting if the house broker updates its forecast today or not, because it didn’t seem to update its forecast on 16 Sept.

Outlook - sounds good;

The early signs are that the second half of the year will be strong and the Board remains confident about the prospects for the business in the second half of the financial year.

There must be some extent to which BOTB benefits from lockdown, since some customers may have more disposable income available, given that we can't eat out, go on holiday, or go to the pub.

Update on formal sale process (FSP) - still ongoing, with several parties;

The Company, together with its advisers, remains in ongoing discussions with interested parties from a number of sector verticals and including private equity.

My opinion -…

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Boon

18th Nov '20

Today's update on Begbies Traynor (LON:BEG) is good, but there is one glaring omission.

Paul sort of picked it up with his comment: "First time contribution from prior year acquisitions (no figures given)"

The glaring omission of how the business is performing like-for-like, excluding acquisitions from the prior year, is worrying. They could have said something like positive like-for-like revenue, or positive organic growth in revenue. But they didn't say either in the trading update, so there's a red-ish flag for me about their growth prospects going forwards.

Based on that, paying about 12-14x current year PE seems a bit of a stretch.

Even if company insolvencies pick up in Jan-June 2021, the revenues from that will probably only feed in a few months later. So H2 results I would say have limited scope for earnings beat.

KevinS1

Felt I had to respond & give an uptick - as someone had given a downtick for "Thornabian" simply giving a view. Not great behaviour.

Dojosan

Saga (LON:SAGA) my timing is brilliant I dare say. Having profited the past 2 days (trading in and out), on Tues evening I bought in at 215p nearing closing time. Being the guru that I am, I sold out at 225p in anticipation that the SP could not longer rise given its projectory over the past 3-4 days and that I could buy back again at a lower price. If only my walls were clad with foam, when throughout the afternoon, to my horror, there was little to no retracement. Now I know what it means when people say "don't time the market". :)

ISAallowance

"I think that 5% of cars being electric is an overstatement. Does that not include hybrids, which are basically internal combustion with a green fig leaf?"

Regardless of where you sit on the spectrum regarding green issues, that statement is not really accurate for the majority of current hybrids. It fits a few which are basically an almost unmodified 4x4 with a small battery to dodge the congestion charge, but the majority of hybrids, and the hybrid concept generally, is so much better than that, particularly in this country (no long Alpine ascents).

The standard ICE basically has to be sized for peak power demand, generally acceleration. This power demand is vastly higher than that used in almost all normal driving under normal traffic conditions. But the oversized engine has to be run in all traffic conditions, using far more fuel than required which you are paying for at the pump. Some mitigation is possible - autostop at lights is now common, and a few engines can selectively disable a piston(s), but that is complex and rare.

A well designed hybrid though, even non-plugin, can do much better than this. The engine can be sized for much lower demand, and the battery can supply the extra when peak demand is required transiently, and then be topped up by the engine as required. Because the engine is smaller less fuel is used, and because transients are less harsh (the battery handles them instead of the engine) less harmful tailpipe pollutants are emitted. In addition, a small petrol engine is typically used instead of a larger diesel engine in the non-hybrid alternative, resulting in less harmful tailpipe emissions since the petrol engine running stoichiometric with a three-way catalyst cleans up so much better than a diesel. And finally, battery life in a non-plugin hybrid is generally excellent, since the charging limits and profile are under the control of the ECU, and hence can be controlled far better by the engineering designers than a plugin hybrid or pure electric vehicle can be.

There's a good reason why diesel Passats and Octavias are much more rarely seen these days as private hire and Uber cars, replaced instead by Toyota Priuses, and it's not because of fig-leafing. They're simply more economical to run, even without subsidy.

Where this falls down of course is when peak demand is required for sustained periods of time beyond the battery capability, such as towing, or long Alpine ascents. Then the hybrid can be underpowered. That's unlikely to be an issue for most in the UK.

I'll stop now, and try to stick to shares in future!

Gromley

maxistaxis - I think we all have at least one story like that to be told. So my advice is don't beat yourself up too much about it.

On another site I wrote a couple of weeks ago that it in my view it was not yet the time to buy hospitality shares - just Pfizer/BioNTech announced their vaccine results.

I doubled down and wrote later that I thought the market had over-reacted (in the specific context of pubs & restaurants) and Moderna announced their results!

One just has to take these things on the chin and reflect on whether you were wrong or just unlucky. If the former learn from it, if the latter shrug shoulders and move on.

FWIW I still stand by my call on Pubs & Restaurants, whilst I do get that the market is (supposed to be) forward looking; I do not think the market has adequately priced in how awful things may be for this sector before we get some vaccine relief in the spring. In fact it seems to me there is a very real chance that the government bungles another start-stop-start and really damages hospitality before we get to spring.

On the other hand (not wishing to seem smart) I think the holiday/cruise sector is largely banking on some semblance of normality from the spring - which imv is looking increasingly possible.

Thornabian

Last time I went to an ACCA conference they said the same but I don't think shareholders really pay that much attention to the 200 pages of CSR to be honest, let's face it, most care about pounds and pence and ROI.

mammyoko

Hi Paul

Re Best Of The Best (LON:BOTB) - not sure if they are precluded from updating their forecasts during a FSP but it seems as if they have refrained from doing so on another identical occasion recently. Redcentric (LON:RCN) initiated a FSP on 2/9/20. They issued a TU on 15/10/20 and ended their FSP on 12/11/20. FinnCap did not issue a morning note for Redcentric (LON:RCN) TU on 15/10/20 in the same way that they haven't done so today for Best Of The Best (LON:BOTB) .

Wilbraham

Fully agree, ESG does represent the current direction of travel, see eg https://www.professionalpensio... or

https://www.investmentweek.co....

But (sorry for the tobacco analogy) it's been a very slow burn. It's almost 30 years since I sat through a presentation on the concept by an earnest young lady from Jupiter (Bonham Carter??) with a reactionary old phart like me thinking she was from Mars! But now I think you'll be hard pressed to find a decent occupational DC fund that doesn't include any ESG options.

Interestingly, China is keen to paint its ESG credentials to the mast https://www.ey.com/en_cn/china...

Another trend on the horizon is the concept of firms acting in the interests of all 'stakeholders' as opposed to shareholders (ie considering employees, customers etc). Radical for some, but there is an underlying logic. Funny how trends like this can rumble along in the background for ages then suddenly break out and gain real traction. Next decade should be fascinating.

Saga (LON:SAGA) Could this have been the culprit behind the meteoric rise today ? - hTTps://www.bbc.co.uk/news/health-54986208#:~:text=The%20coronavirus%20vaccine%20developed%20by,all%20ages%2C%20races%20and%20ethnicities

Thanks Gromley for the encouragement. Overall, it was a probably a good day for my portfolio, albeit it would have been a super duper day had I kept £SAGA. Could have bought my future cruise tickets for me and missus with the forgone profits!

Then again Carnival (LON:CCL) down 0.75%. So perhaps not the explanation for Saga (LON:SAGA) 's rise.

Equity Development

19th Nov '20

Tatton Asset Management (LON:TAM) It is all covered here, grumpy5, at 8.30 mins and 44 mins. Look back over the last three years, you can see it's simply the knock on effect from such a low charge last year. https://www.equitydevelopment.co.uk/research/investor-presentation-covering-interim-results

Laughton

A bit more reading for those interested in producing hydrogen from water (already being done) - recently published government plans for "Green Revolution" - see Page 11 for specific reference to ITM Power (LON:ITM)

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/936567/10_POINT_PLAN_BOOKLET.pdf

Etonkush

I remember when Paul Scott said that Best Of The Best (LON:BOTB) was a hold forever Stock, looking at £40 to £50 a share. Then he sells most of his stock & wants in cheaper???

Harry Hindsight

3rd Dec '20

Best Of The Best (LON:BOTB) - I will regulate my tick up. A valid point but there are no 'recommendations' and as they say DYOR so no flak on anyone. I would just like to understand the process this annoying share has been in for a long time now. As a newbie it's hopefully a learning curve - but sometimes like 'learning to swim in the shark pool'.

Newbie here. Carnival CCL $23 on a 'teacup' to $27 with $5 upside be compared to Saga (LON:SAGA) £3 upside - so seems a good correlation (as I will lose $2 in FX etc or more).

Looking for the US blog or dare I say China - would like to invest in Company No. 65483 - sounds enticing (sorry - just scrambled some numbers).

Mostly used on pavements which I thought was illegal - but hey ho - until plod have them the no worries.

Test and Trace a billion (telephone numbers) and what is HS2 all about (why would I want to go to Birmingham when could zoom/MST or possibly (sold today) Loopy.

What happens in 5-7 years when the battery no longer charges - like the little AA's in my torch. Buy shares in car crushers. My 6yr old Audi good for 250k but worthless come next November (in London) - makes a mockery of recycling a plastic bottle. The direction is great - the execution is politics.

When the boat sets sail - whoop whoop.

Small Cap Value Report (Weds 18 Nov 2020) - BOTB, WYN, BEG, HFD, SDY, FCAP

Best Of The Best (LON:BOTB)

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Paul Scott

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