Small Cap Value Report (Fri 9 Dec 2021) - RNWH, RBN, PHTM

9th Dec '21 by Paul Scott

101 comments 9696 reads

Good morning, it's Paul here with the last SCVR for this week.

Agenda -

Paul's Section:

Lengthy preamble about current market conditions, and how I see the outlook for small caps, and areas of concern.

Renew Holdings (LON:RNWH) - another set of impressive results from this infrastructure support group. It's been a 25-bagger over 11 years, and still looks reasonably priced, considering earnings keep rising. Balance sheet still quite weak though.

Robinson (LON:RBN) - a profit warning due to higher costs. Profits expected to improve in 2022, as cost increases are passed on to customers. Surplus property disposals are imminent, but that cash looks necessary for debt reduction, which is too high. Overall then, it doesn't interest me.

Photo-me International (LON:PHTM) - reassuring update, trading towards top end of existing guidance for FY 10/2021. Looks great value on a PER basis. Might be worth a punt, but I'm not sure about the long-term outlook.

Paul’s Market View

When markets are turbulent, I tend to be deluged with messages, asking for reassurance about particular shares (e.g. BOO & SAGA - two of my largest positions, which have been poor performers of late), and what my market view is.

I always emphasise that I don’t know (and don’t try to guess) what market prices will do in the short term - nobody knows, and I particularly dislike it when people comment that “this will happen”, etc, when we’re all just guessing. I prefer “could”, or “might” happen. Although it is easy to accidentally slip into overly confident language, so I’m sure there are plenty of examples of that to be found here in our archive too! We all tend to become over-confident in bull markets.

Small caps seem to have been absolutely dire in the last few months. As is often the case, many charts look strikingly similar. This is how I see things over the last couple of years -

Late 2019/early 2020 - what they called the “Boris bounce” - removal of uncertainty over Brexit fuelled a big rally
Massive sell-off in Feb/Mar 2020 when covid originally struck - wave after wave of panic selling, globally
Strong recovery from April 2020 - driven by huge Govt stimulus & support packages (e.g. furlough), and re-opening in the summer
Drifting down in the summer/autumn of 2020 - valuations extremely cheap by then
Huge “everything…

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About the Author

Paul Scott

Premium Member

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

101 comments

Lucky dip

10th Dec '21

I own Scs but and my stop loss is 200.

raggedtp

10th Dec '21

Oops, not £BEPT but £BPET!

dhannaway58156

10th Dec '21

I'm not sure what to make of that. It will be interesting to see the analysis in a few weeks.

I've just read through this thread on twitter which also provides reassuring reading.

The nutshell is that deaths are significantly fewer in the latest wave in South Africa. Possibly attibuted to greater immunity in the local population rather than a milder strain even allowing for the younger infected population. The caveat is that it is still early days and the death rate is seemingly a way from the peak.

Also cases seem to be nearing a plateau (or a limit of testing).

https://twitter.com/jburnmurdo...

davidjhill

10th Dec '21

I think the Silver Bullet Data Services (LON:SBDS) platform is designed to sit above the DSP layer. So the advertisers who are looking to better target their adverts plug into the platform and it then uses its proprietary data algo's to allocate to the supply side. Agree there may be other competing services but what drew my attention to them was the current and growing client list. They are clearly doing something right on the advisory side and that feels like it may well translate into take up of the 4D platform. If it does I could see them as a take out target for someone like Tremor International (LON:TRMR) perhaps.

Dragon

10th Dec '21

You may be less likely to die but more likely to catch it, which may increase the burden on the NHS. That is the main reason for the restrictions.

Raman_D

10th Dec '21

Brilliant Paul, thought provoking article to recap the very purpose of Investing versus Trading and the purpose of Stockopedia.com website, at times, I forgot it in the "go along with the crowd" tide.. Thanks again.

timarr

10th Dec '21

You may be less likely to die but more likely to catch it, which may increase the burden on the NHS. That is the main reason for the restrictions.

Correct. People are still ending up in hospital, but for less time and with less severe outcomes.

So far Omnicron has only been seen at scale in younger populations who are mainly unvaccinated but previously infected. It looks like Omnicron can evade natural immunity, and we are waiting with baited breath on what level of protection vaccination brings and the levels of hospitalisation among older, vaccinated groups.

If the vaccination firewall holds then probably Omnicron is good news. If not, then we've got another miserable winter ahead while the vaccines are tweaked.

EDIT: in fact the first data is out, albeit on a small sample. Protection against Omnicron from two doses of Astrazenca and Pfizer is very low after 25 weeks (10% for Astrazeneca). That protection rises to 75% with a booster jab.

https://www.theguardian.com/wo...

timarr

peterg

10th Dec '21

Following up Paul’s superb market view and comment today, I wonder what readers here think of this information?

https://www.cityam.com/anxious...

There's certainly some promising news in that link. However, it's probably still too early to say if the death rate from Omicron will really be that low. It's only 16 days since first reports. Up till now really severe infections have usually taken two weeks or so to develop, and deaths seem to lag by about 3 weeks from rises in infection.

It's certainly beginning to look as though the severity of infection is less with Omicron than Delta, but given it's much greater transmissibility there remains a very real risk of a big increase in hospitalisations.

Wimbledonsprinter

10th Dec '21

I also hold Royal Mail (LON:RMG) - I think the relationship with the CWU (most of the frontline postal staff) is much better than with Unite (which represent the management levels - and where many of the recent cuts have been). It is Terry Pullinger (Deputy General Secretary of the CWU) who is put in front of the investors on the results.

Clearly strikes have plagued Royal Mail for decades and the current job market with pressures on supply chains and truck drivers is not ideal for Royal Mail. There is a new round of negotiations about to kick off. But on the last results call it was stated that Royal Mail was not seeing too many problems and it was more their competitors who were now being forced by market pressure to start offering terms and conditions closer to those currently offered to regularly employed Royal Mail staff.

Suita5

10th Dec '21

Stocko has been saying £Boo is best ever investment and a no brainer for ages......!!!!!!

Surrey Steve

10th Dec '21

Hi David

I can't fault your analysis of the value in Electra Private Equity (LON:ELTA) (I hold) but as IGotPoesJacket points out there is an uncertain overhang of stock from institutions (who only have mandates to hold Investment Trusts, don't want to hold such a small cap, cannot invest in AIM listed entities). Hopefully patience will be rewarded!

Boon

10th Dec '21

On Photo-me International (LON:PHTM) the hidden value would be if governments decided to also collect biometric data for passport applications. I believe this is what is happening in Japan (hence why the boom for them as all ID applications had to go via a booth?) and also in France with e-signatures? I remember reading in my research some time ago that many countries are moving to collecting more data (signatures, fingerprints, etc) for ID documents. Which will mean a market for "booths". But of course there is the data privacy opposition to that.

They key is the chairman and de-facto controller of the company. Who has been buying steadily throughout the 2020s and 2021s, which is a strong vote of confidence.

JohnEustace

10th Dec '21

Another possibility is Tufton Oceanic Assets (LON:SHIP)

http://www.tuftonoceanicassets...

Zipmanpeter

10th Dec '21

Re Electra Private Equity (LON:ELTA) (really Hotter/Unbound!) - I have followed the same logic (and hold). If accounts correct, and nothing changes (except an 8% Mgt dilution at demerger) then in round terms, on x10 5mn EBITDA, I put the value in £Mns at (5x10) -5=45; 41.4*0.92 vs 26 today .

If they had listed 6months ago when online was hot and the market more optimistic.....

My only concern (beyond an all male core Mgt team and an MD with a suspected man bun focused on over-55s female core audience!) is that fixed costs are still quite high. I hope that is because they have an infrastructure to support growth.

I really like the table of strategic drivers and target market (old/rich/underserved online whilst going online fast). If they do build any kind of platform or eco-system, they will become an attractive target to someone like Saga (when they are themselves generating cash!).

Robert W

10th Dec '21

If it's a million cases a day, it will all be over by the end of January.

Tommy H

10th Dec '21

Would you like to buy my buy high, sell lower, buy back higher and then sell even lower training courses? :)

Sorry late at night and just nice to see an honest I beeped up comment rather than an hey look at the amazing profit I made on this am I not a genius?

Tommy

ps. I hold neither

pps. I hold some good companies that are in green (Stocko +ve)

ppps. I hold some even better companies that are in red (Stocko -ve)

Tommy H

10th Dec '21

Paul, apologies you will be enjoying life and I am catching up with what happened a long time after the markets closed and the kids are asleep.

Thank you for taking the time to give your thoughts, they are always appreciated and I have been here a long while it would seem and you are a big part of that.

Jack, you are an upcoming star and keep up the performances!

Tommy H

10th Dec '21

Dear All

The second comment is we all have our own investment style, choices, ideas and thoughts. There is no right, no wrong. There is always I could do better, and I made a good choice. It is always about being opened minded, knowing your bias, being prepared to listen and to be prepared to change.

Having learnt painfully through the last couple of years, to do your own thing, to make your own choices, is very hard.

To give my personal perspective of telling my 79 year old mum having taken over from a BEEP BEEP BEEP BEEP BEEP wealth manager wish I had done it 10 years earlier when even knowing nothing I would have saved her 10's of 1000's, that her pension (all ISA) has gone down >30% and the low point was July 2020, got out, went back in and watched it all go down further...we are still in recovery mode and are still below January 2020, we got close in September but not there yet. But to be able to say this week if Australia opens up next year you can go and visit your big sister for the last time (having lost her brother last Christmas and sitting in her front room watching the funeral on my work laptop) and if Aunty Flo is not there go see your Katie and Pru (nieces) and just get Business both ways there is the money there, if not I will cover it is a good thing. We have enough to cover your basic lifestyle (state pension + forecast dividends), and it is 50:50 income:growth.

I will say from a personal perspective, sometimes being totally in cash is the right decision, if that means you sleep at night (ok not a lot and you are answering calls and messages but you try), get your kids breakfast, iron their uniforms whilst they eat and get them to the school gate before it shuts, and be there to listen to your wife in tears at her mum's bedside whilst she is dying (having lost her gran 1 year earlier and her dad 2 years earlier) and then turn up and deal with a stressful day at work, before walking out to get the girls from the school gate and go I will do the other hours after they are asleep, and don't forget to load the washing machine as they have no clean uniform! Yes I missed rises, but I also missed falls, but then I did with hindsight what was the best decision I could make at the time? I was there, I was not perfect, I made lots of mistakes, I was grumpy and cranky, I had 3.5/10 days for my girls but in 20 years time what am I going to think I should have not sold £ZYX or I should have bought YXZ I could have made or not lost?

I still remember @Carmensfella giving a lovely message and an invite to Mello, yes I eventually watched the catchup at a similar time at night to this message, but the feeling that someone cared enough to say here is something to hopefully make a positive in your day is massive. Yes I want to subscribe because they are amazing events, but I just physically do not have the time in my day right now, this month, next month. And that right now is a massive positive to me knowing that I cannot do everything and admitting that. I am a full time dad, I try to be the best husband I can be, I am kind of holding down a full time job and in between I am responsible for my mum's sisters and own financial wellbeing. Oh and daughters and nephews...

Currently I am still trying to apply my Lent resolution, to be Content. It is not easy.

I am incredible lucky. I have a wife, I have two lovely daughters who know their dad and are in the bedrooms either side of me. I have a job. I have a house in what I feel is a nice place. I have a pension (Fidelity and Aviva, as I am not at the point where I can emotionally or mentally go to a SIPP but I hope that I will be able to in 2022 or maybe 2023), I have cash savings and I have an investment portfolio.

If I go simple numbers, Pension 60%, Property 30% and Investments 10%. Yet the 10% sometimes can drive emotion disproportionately.

There is only one person locally I talk money too locally, a friend of my wife's and her daughter is friends with my daughter. She knows the facts of where we are as a family, and trusts me to help her to help her family get there too. How to learn about money, finance, investment when your own parents know nothing. Now that is scary too, what do you tell others? But she wants to extend it to other mum's, I am not an IFA and part of me says run away and do the opposite to what I do. But then she never claimed Child Benefit and lost several years of state pension as a result, so maybe I am not as stupid as I sometimes feel I am and maybe I do add value to others? I was there to talk through remortgaging options when her husband was not...

But I also have responsibility for my mum's ISA - which is her pension. My sisters ISA/Shares, and currently trying to sort my dad out him having talked to my sister 2 weeks ago finally asking for help at 82...

But right now I am 8 working days from Christmas. The job I am working on feels a total car crash (or appropriate description) and who knows if I will be made redundant again in the New Year, or offered an assignment that I will never take.

My glass is so overflowing that I am stood knee deep in a beverage. But there are days I feel that it is empty or I do not have a glass.

I think to the people I work with, manage, supervise I cannot be honest with my current financial circumstances, we are just too different.

So to conclude as I need to go to dad's in a few hours and try to work out what is wrong with the chimney so why they can have a fire, obviously they will not accept putting the heating on and me just buying them another tank of fuel oil (rural Cumbria here).

We all have our right decisions and wrong decisions. What is right for me might be wrong for Paul or Jack. What is right for Paul and Jack, might be wrong for me. But the ideas, creativity and thoughts on here are amazing, please keep inputting your ideas, I am choosing not to name the stars in a reasonably priced car (does that show my age?)

Just to read today's report I have five companies, and trusts to have a look at and think about written on my note pad. To go with the other pages of notes, maybe I will make something, do nothing, or lose lots, but that is next weeks decision. Or maybe next months.

My sister is 50% cash, mum 15% and me 40%. But I sleep at night - ok badly but I get some, I still have a job, the girls have clean and ironed uniform and breakfast and my wife has a brick (apparently that is not an acceptable modern word for emotional support)! We are all slightly up this financial year (sorry I go from 6th April due to tax). So glass filling up. But not as high as June or September...

And the last part is, Hambleton Food bank has just had an electronic transfer as my Christmas gift to those who actually need, sorry this delayed the posting. That is only one part my realization that I, we, have an obligation to society, yes we pay too much tax and do not get me into a rant on government and organizational inefficiency, yes I give to selected charities on a monthly basis on a percentage of net take home (I could give more), but we have a decorated tree with presents underneath, we have family plans with those still alive, but there are those who's needs are far greater than ours, and is our >50% loss is just a dream to them. When you actually talk to the people who run the charity, they do not want Tesco Finest in the foodbank bin, they would rather have three Tesco Value (or supermarket chain of your investment choice - I do not hold any) because that is three meals not one.

So Paul your support of Zane is thoroughly encouraged, is it worth doing another pitch pre-Christmas? Jack what is your charity of choice? Not that we are tugging the heart strings but really can you not give away £10 to a good cause this week?

Ok time to switch the laptop off.

Thank you everyone, I am so grateful to be a part of this group.

Tommy

Ps. I hold

pps. I do not hold

pps. I bought too high

ppps. I sold too low

Paul Scott

13th Dec '21

We all base our opinions on the facts and figures as at that point in time. Can you predict the future with certainty? If so, what's your trick? A time-travelling spaceship? A crystal ball? Tealeaves?

gmtrader

14th Dec '21

Tommy, you sound extremely stressed. I also live in Cumbria. Would you like to meet for a chat? I understand your situation. It gets better. In time you will look back and wonder what you worried about. Cumbria is a great place to live. It’s like having won the lottery. Go climb a hill or two. It will help put life into prospective. This is my therapy.
Please do feel you can talk to someone. Money does matter but it is not everything. I know this because I have lost it all in the past. You have a wife and kids, sit back and watch them. Nothing is more important. I was married once and I miss having kids. I had 3 kids. The eldest will be 30 now. We have spoken once in 5 years and that was at my second sons funeral 3 years ago. It is my second sons birthday today. He would be 28. But I still have my daughter and a3 yo granddaughter. So I’m lucky I invest and trade so hopefully I can leave her a sizeable fund. The beauty of investing is it is long term. A few days won’t make a difference.
Keep smiling.

Small Cap Value Report (Fri 9 Dec 2021) - RNWH, RBN, PHTM

Paul’s Market View

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Paul Scott

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