Small Cap Value Report (Mon 30 Jan 2023) - DPEU, INSE, 888, SPE, BXP, STEM

30th Jan '23 by Paul Scott

58 comments 9530 reads

Good morning from Paul & Graham!

Today's report is now finished.

Small Caps Podcast - went up on Saturday morning. I really enjoy doing these, so it's not a chore. However, typing it up is a chore, so I've decided to drop that - apologies for any inconvenience, but the current workload is so intense, something had to go. Seeing as most of the podcast is summarising the shares we covered during the week, all the info (apart from the short markets/macro bit) is already on my SCVR summary spreadsheet, so it felt like duplication typing up the podcasts, and it's a good 2-3 hours work typing, which I could do without at the weekends! I hope you don't mind.

This week I flagged 2 mystery shares (my best ideas during the week, just for Stockopedia subscribers), and have left a comment here in the comments section of Friday's SCVR to reveal them, and why I picked them. Also bear in mind that, unusually, I own both these shares personally (intended holding period: 1+ year, but dependent on future newsflow), so there will inevitably be bias, which there always is when anyone talks about shares they hold personally.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to review trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty. We are analysing the company fundamentals, not trying to predict market sentiment.

We stick to companies that have issued news on the day, with market caps up to about £700m. We avoid the smallest, and most speculative companies, and also avoid a few specialist sectors (e.g. natural resources, pharma/biotech).

A key assumption is that readers DYOR (do your own research), and make your own investment decisions. Reader comments are welcomed - please be civil, rational, and include the company name/ticker, otherwise people won't necessarily know what company you are referring to.

Paul's Section:

Inspired (LON:INSE)

9.15p (Friday’s close) - mkt cap £89m

Full year trading update

Inspired (AIM: INSE), a leading…

Unlock with Email

Unlock with Google

Already have an account?
Login here

Funnymoney

30th Jan '23

I listened to the podcast for the first time this week. Very good and really useful. I then went back and listened to all of them from late December onwards. I wish I'd been a listener earlier. Well done Paul and please keep it going.

Paul Scott

Hi Chris,

I was wondering where you had posted this, but found it in the comments to my website here: https://qualitysmallcaps.co.uk...

Have to say, I'm remarkably impressed with that auto-generated transcript, it's done a remarkably good job. Would you mind sharing which software you used, and is it free? If so, I think this would save me hours of typing when I do CEO interviews. I've tried other transcript software before, and it's hopeless usually, and takes the same amount of time to edit, as it would to type it from scratch, but your software seems tons better!

Thanks, Paul.

Thanks for that. Please could you let me know how you did it? Thanks

Wolf of Small Street

Topvest, that's a good summary. I'd bought some PGH in December, having previously held in 2021

Decent update I'd say, probably bottomed out now so growth this year should be very doable.

Cenkos cut PBT and EPS by 7% for this year but still looks decent growth compared to 2022. PE around 13.5x

I'll stick with it as long as the share price stays above 200p. Nice divi too.

Thanks Funnymoney! Wow, you must be sick of the sound of my voice after all that podcast catching up!!! ;-)

topvest

Hi Wolf of Small Street - thanks for the Cenkos update. Yes, I do think Personal group (LON:PGH) left themselves with a lot to do in H2 so pleased they made the numbers despite the Let's Connect business stalling. If they can keep the core business growing then its very good value, but they have disappointed before.

I think Martin Bennett (ex-Homeserve) as the Chairman has probably really helped kick-start the recovery - he's been in place for 2 years now.

Be nice to see them exceed expectations at some point in 2023, but maybe that's asking a bit much!

Share talk excellent as always Paul. My favourite part tho was "sorry, I lost control of my mouth there". Haha

Brackendale

Paul as usual top notch podcast, was only sad to miss the "macro" bit, which I love as I think you provide so much added value when giving your views on this stuff, quite often in unguarded moments. Anyway I digress - regarding the transcript - have you ever tried using the Word dictation feature? Click on the microphone in Word, and it transcribes everything. Surprisingly accurate even for my estuary English, and with your fine diction all the more so I would think. Would probably require 15 minutes editing afterwards. Just a thought - personally I love pretending I am a 1960's international CEO dictating to a beautiful and admiring secretary - each to their own!

iamflimflam1

I used something called whisper - unfortunately, it requires a bit of technical know-how to run it (you have to use Python and install it from pip - so if those words don't mean anything to you it might be a bit much...). The details are here: https://github.com/openai/whis...

I'd be happy to try and write some instructions to make it a bit more approachable if anyone wants to try.

LOL yes that was a good one! ;-)

Trouble is when doing the podcasts, I'm having to think, read, and speak, all at the same time. Which as us chaps know well, multi-tasking doesn't always go smoothly!! Still, it's great fun to leave all the mistakes & off the cuff stuff in there, as it's only a few hundred people listening, and none of it's exactly of earth-shattering importance.

Bluesky Ventura

https://uk.advfn.com/stock-mar...

888 to Offer GBP1.02 Billion in Notes, Borrow Up to GBP909 Million to Fund William Hill Deal.

It's not in Stocko yet as the company has not reported the detailed number for 2H of 2022 yet. 888 Holdings (LON:888) say it will cost them about 170M in interest payment in 2023.

Please feel enlightened.

Let me know if you don't feel like DYOR (doing your own research) again. I just do it for you.

BSV

I've just had a quick look at 888 Holdings (LON:888) and the big acquisition & debt splurge seems to have happened quite recently, so won't be included in the historic numbers yet.

For example, the 6/2022 interim results for 888 start by saying this -

"888 (LSE: 888), one of the world's leading online betting and gaming companies, announces its financial results for the six months ended 30 June 2022 (the "Period"). The acquisition of the international (non-US) business of William Hill completed on 1 July 2022, and as such, the reported interim results, and commentary thereon, reflects 888 only."

It does provide a brief pro forma P&L in the interim results statement, which shows that the business would roughly triple in size after the acquisition, so it's a huge transaction.

There doesn't seem to be a pro forma balance sheet provided within the interim results. Although it refers to pro forma figures being on the investor relations website, so it might be worth you looking there.

In any case, financial websites like Stockopedia wouldn't show the pro forma numbers anyway. It will just feed through when the next set of published accounts show the enlarged group.

Hence whenever there's a material acquisition or disposal at any company, it's vital to manually go through all the numbers.

Regards, Paul.

I just found this site that uses the same model, but does it all online: https://modal-labs--whisper-po...

lonsdale1

Beximco Pharmaceuticals (LON:BXP)

The LSE shares (or depository receipts) have, over the last five years, traded mainly in a range of 50 - 65% of the Dhaka price. Over the last six months, this has dropped to around 40%, suggesting a bargain. The dividend yield has risen as a result. It is not clear why the LSE price should now be trading at such a large discount, but one possibility is that a number of platforms now disallow holdings in an ISA, which may have contributed to selling pressure if investors are required by their platform to offload their holdings in lieu of moving to another wrapper eg a SIPP.

I was in the gym so it was infinitely better than staring into space whilst doing the various resistance machines!

I have some passing knowledge of Personal group (LON:PGH) from a few years back. They used to have an incredibly spend-averse culture which I assumed would still exist. A brief look at the figures makes me question this due to their lack of profitability in comparison. I do wonder about the new guard running things. I was very tempted at sub £2 a few years ago but failed to press the button. The positive is that the woman who runs it has quite a bit of stock, (partly because they took her company over?).

kando02

Many thanks BSV, but I still have no idea where I would get that info RNS ?

Boon

This might be one to put into the "too difficult" drawer?

But my rudimentary calculation of NTAV for Beximco Pharmaceuticals (LON:BXP) puts the current share price at 0.7x NTAV, which seems like a bargain.

So perhaps if one takes the current weak BDT currency as not likely to go lower, then that 5% dividend yield looks like it'll be a sweet 6-7% soon, and looks pretty secure given the reliable profitability and cashflow of the business over the years.

If I was going to continue investigating, I'd look into the shareholder structure, see if there is a dominant controlling shareholder (probably is), and/or whether there might be a take-private or strategic sale to an industry player at some point.

That will be the most likely route of "closing the discount gap" between the GBP DRs and the actual Dhaka listed shares.

Db47

it was Agronomics I was thinking of Agronomics (LON:ANIC)

Will Marsh

30th Jan

Thanks for this . I've held BXP for a while and my personal view is the share is on fundamentals, cheap. I guess the principle risk here is the massive impact of currency headwinds. In any event its not a bad divi stock with a reasonable yield which seems to continue to grow

Small Cap Value Report (Mon 30 Jan 2023) - DPEU, INSE, 888, SPE, BXP, STEM

Paul's Section:

Inspired (LON:INSE)

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

58 comments

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

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