Small Cap Value Report (Weds 31 March 2021) - NXR, TPT, Deliveroo, CALL, GATC, AQX

31st Mar '21 by Paul Scott

91 comments 12105 reads

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

Timing - we're both on the case early, so should be done by 1pm.

Agenda -

Paul -

Norcros (LON:NXR) - a positive trading update, with clear guidance, profit up about 10% on previous guidance, which should trigger broker upgrades. Still looks good value, even after strong recent rise.

Topps Tiles (LON:TPT) - H1 trading update. Good Q1, weak Q2 (due to store closures from lockdown). Overall, looks priced about right to me, I can't get excited about this share because the company was struggling before covid.

Deliveroo - IPO has flopped. My comments on IPOs generally.

Cloudcall (LON:CALL) (I hold) - FY 12/2020 results. Costs are rising faster than gross profit, and that's set to continue in 2021. Not good.

Jack -

Gattaca (LON:GATC) - FY20 Covid hit for this engineering and technology recruiter, but improving leading indicators suggests rerate could continue. US Department of Justice risk remains a concern.

Aquis Exchange (LON:AQX) - maiden profit and successful integration of NEX exchange

Paul’s Section

Norcros (LON:NXR)

256p (pre market open) - mkt cap £207m

Norcros plc ("Norcros" or the "Group"), a market leading supplier of high quality and innovative bathroom and kitchen products, today issues an update on recent trading.

Further upgrade: strong momentum sustained…

a further improvement in profitability. Consequently, the Board now expects underlying operating profit for the year to 31 March 20211 to be no less than £31m on a post-IFRS 16 basis which compares to our previous underlying operating profit guidance for the year of no less than £28m.

Very good. Nice clear guidance.

Net debt - has disappeared!

The balance sheet remains very strong, and we expect to end the year at 31 March 2021 with no net debt (on a pre-IFRS16 basis) compared to net debt of £36.4m at 31 March 2020.

We’re not told if there’s any creditor stretch, or whether this is a sustainable position.

Valuation - Norcros’s interim results (6m to 30 Sept 2020) showed underlying operating profit of £12.8m. Full year guidance is now £31.0m+, which implies a strong H2 performance of c.£18.2m u/l operating profit.

My sums show that this approximates to 26p EPS for the full year.

Reasonableness check - existing broker consensus…

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davidjhill

31st Mar '21

I have sympathy with the young on this and agree with Tim. They are relatively unaffected health wise by Covid but have been forced to isolate for a year fundamentally to protect the over 70's. Consequential effects on mental health; and for Students one of the best years of their educational life has been ruined, not to mention the stress for those doing/not doing exams; a lack of social interaction at a time when they need it. None of that is good.

It is indeed a bit rich then that they see the Oldies all vaccinated miles ahead of any being offered to them and then told that they won't be allowed to travel when those vaccinated will be.

You may have guessed that I have two young adult children in this category and I can tell you that the younger generation are seriously p***ed about it and feel pretty screwed over. Personally I sympathise.

sharw

Hi gus

Thanks for the link relating to Aquis Exchange (LON:AQX) It is very unclear but looks to me as if they are talking only about shares traded only on their exchange (prefixed OFEX). What is not fathomable is whether there is a Chinese wall between trading that set and trading the shares whose main listing is on AIM, which is what I quoted experience of. Both sets they inherited from Nex.

Laughton

"The festivals this summer are sold out, but presumably a lot of twenty somethings aren't going to be able to go because they won't have been vaccinated."

So, I'm guessing that was tongue in cheek, timarr.

Phillip Arghebant

Dear Paul

It is the first anniversary of my joining Stockopedia since retiring last March after forty seven years in the wealth management industry. It has been a steep learning curve in trying to replace institutional research now no longer available, as well as finding new systems enabling me to keep in touch with global markets.

Over my career, I have always been interested in smaller companies and have been fortunate enough both to own a number of highly successful businesses over the years and, latterly, backing several very good small company fund managers. I want, however, to offer my thanks to you and your colleagues for the excellent small company analysis you provide together with the Stockopedia screening process. Alongside astute comments from many of your subscribers, it has once again opened my eyes to the opportunities that exist in a largely under-researched area of the market. And I am still learning!

Kind regards
Phillip Arghebant

gus 1065

Primary Bid offering secondary placement for Best Of The Best (LON:BOTB) at a 16% discount of £24.00 only via their App. Time limited offer likely to sell out quite quickly. Looks like founder shareholders liquidating some equity. No position.

Gus.

willhampson

I saw this as well, while liquidity is an issue for Best Of The Best (LON:BOTB), it never fails to amuse me when management dress up a very nice pay day - £60m in this case - as improving “liquidity”. Management will retain a huge percentage after the secondary placing but I do wonder if they are selling out at an optimal time (I’m probably alone at raising my eyebrows to some of the cited growth potential for BOTB). All the best to any holders. Will

nevphillips

See what comes of the LON:BOTB Primary Bid offer. It accepted my offer, but did say depends on allocation. Bit of a bargain I feel.
Nev

abtan

Best Of The Best (LON:BOTB) (I hold)

I welcome the secondary placing.

Aside from the fact that I think a payday is well deserved, the biggest risk I had with this holding was the founders themselves and their ability to do whatever they wanted with their extremely large holding.

It looks like their holding will be reduced to 47%, so just below that all important 50% mark. Personally I'd prefer if it was much lower. but this is a good start.

As for the announcement of new directors to replace the founder's family member (from memory I think it is his dad), I'm not holding my breath. I noticed that they recently appointed someone who seemed like a friend from their university days, though that could have been a coincidence that they all seemed to have gone to the same university at exactly the same time.

Suspicious director appointments aside, I'm still a happy holder (and I do appreciate the responses I have received from the company in the past), and for those who follow my workings on this company, it's looking like a decent finish to their financial year.

Cheers

barnetpeter

Best Of The Best (LON:BOTB) I have applied too. It might mean the silly spread is reduced although the company has not raised any new money. In THIS case I can imagine institutions saying "look, we cannot buy any stock so it is pointless us talking to you". I can also understand the point that having a quote seems wasteful if no-one can buy or sell more than a handful of stock. Of course the shareholders want to cash in too. "A further 41,666 Ordinary Shares will be available for purchase at the Placing Price via the PrimaryBid platform" so I don't expect too many!

Thornabian

Just Eat Takeaway.com Nv (LON:JET) would have been profitable if it didn't have one-off merger costs.

EBITDA is growing well and top line growth is solid with expansion into many new markets.

They now enter a new city every 3 months and run a marketplace business model as they only deliver 15% themselves.

It requires a judgement on future market size and growth organically and in new markets to value, rather than the value of something like BP in a mature market.

These early stage industries and companies can grow the bottom line exponentially. You need to make an assumption on that and factor that in to any DCF of the business.

Just Eat received $2.3bn offer for their Brazil business alone due to the potential size of the market but turned it down.

It's not everyone's cup of tea as it seems risky but personally I think Just Eat is cheap atm.

Deliveroo is a very different business though, it delivers all orders so little leverage other than data. The IPO pricing was a mess, free offers were used to boost sales pre-IPO and Amazon sold down their stake.

Deliveroo deliver 100% vs Just Eat Takeaway.com Nv (LON:JET) 15% so it has much higher operational leverage.

Just Eat is also leading or second in all markets but the US.

I would have a premium on Just Eat Takeaway.com Nv (LON:JET) and quite a decent one.

Doesn't mean it is a suckered stock. That is just a guide.

Many early stage companies are ranked the same way, it doesnt mean they won't generate strong returns as the bottom line matures as expenditure for growth slows down.

Plus500 has been +90 stock for a year and has been stuck around 1300-1500 range. I bought £TW when stockopedia ranked it at 34 because the momentum dropped so much back last April at 115p-ish. It is now 180p.....

doctormc2

Yes. It’s totally plug and play. The only thing it doesn’t do (that BT do) is the ‘guaranteed wireless in every room’ offer. Not a problem for us but if you are heavily invested in BT’s Wi-fi then you might find you need some expert help. Buyer beware.

Tommy H

Best Of The Best (LON:BOTB)

Well after I put the kids to bed it was closed, after having to log into the web account as it had lost my iWeb account, had the account just not the iWeb bit, but figure it had done before then. So good look to those who were able to do things quicker than me

Tommy

Hi Roger,

I have found just put a question in on the green face thingy in the bottom right hand corner (old laptop, new site, using some version of Windows or other).

Folks there are very helpful and sometimes can give very good answers, or just say data provision...

Hi Joe

Looked on iWeb, and probably me just using an antiquated dealer service, but it cannot even find it, then again neither can this site when I search...

Gromley

Back in my day we had to keep ourselves amused for the whole summer holidays with just a cardboard box and a piece of string!

To be fair Graham, if you are of a similar generation to me - we did have the very excellent Why don't you? to tell us how to get best value out out of that cardboard box and piece of string.

Happy days!

scottgrady

1st Apr '21

Good Morning, would you be able to run through the LDG end of year results posted on Tuesday. Obviously not received well with the share price plummeting. Thanks

Paul Scott

Thanks Phillip, what a kind message. Much appreciated by me, Jack & the rest of the Stockopedia team! :-)

Regards, Paul.

Joe Turner

Hi Tommy,

Here's the link to their website : https://www.tisegroup.com/mark... You won't find TISEG listed on the London Stock Exchange or here on Stockopedia as their shares are listed on their own exchange, the Guernsey Stock Exchange. There is a market for their shares and anyone can buy them. You'll need to contact TISEG's official broker, Ravenscroft. They're based in Guernsey and are the market maker for the shares. Their website is : www.ravenscroftgroup.com. TISEG is a fantastic little company in my opinion, monopolistic position (as most exchanges are) with strong recurring revenues. The KPI for them is how many listed securities there are on their exchange, that's how you judge their performance. They've been steadily rising for a while now.

Good luck,

Joe.

Small Cap Value Report (Weds 31 March 2021) - NXR, TPT, Deliveroo, CALL, GATC, AQX

Paul’s Section

Norcros (LON:NXR)

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Paul Scott

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