Small Cap Value Report (Mon 8 Jan 2024) - CMCX, SCE, CLBS, PLUS

8th Jan by Paul Scott

62 comments 9600 reads

Good morning from Paul & Graham! We're ready & raring to go, for a massively busy month from this point onwards with trading updates galore. We'll try to cover as much as humanly possible!

This (below) was how busy Jan 2023 looked on my spreadsheet here, which is a quick reference tool to compare with this year's imminent RNSs if you wish (hover over any cell in the spreadsheet for a summary - as you can see I'm hovering my pointer over TM17) - and please do remember that our view on shares is only on that particular day, using the facts, figures, and forecasts available at that time. These will obviously change considerably over a year, hence we subsequently change our opinions in response to later changes in the facts, figures & forecasts. So remember this is mostly reactive, rather than predictive -

(In case you're unaware, as with any image, you can enlarge this by right-clicking your mouse, and selecting "Open link in new tab", or similar)

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 (usually) between £10m and £1bn. We usually 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.

What does our colour-coding mean? Will it guarantee instant, easy riches? Sadly not! Share prices move up or down for many reasons, and can often detach from the company fundamentals. So we're not making any predictions about what share prices will do.

Green (thumbs up) - means in our opinion, a company is…

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Snazzytime

8th Jan

hi eParo

Silver Bullet Data Services (LON:SBDS)

Overpriced 2021 float
Post tax losses £5m+ each of last 4 years
Losses continuing at latest interims in September
Shares have 5 bagged since low of 26p mid 2023 (hope you got on at the lows)
But still showing 50% loss on float price (approx 275p)
Approx 10% dilution for existing shareholders at recent placing at 70p
Revenues are increasing but no sign of profits
Hence further placings and dilution likely
Weak balance sheet FY '22 with no NTA backing
£20m M/Cap so pretty illiquid and difficult to exit

Simply looks another high risk jam tomorrow share but good luck.

Snazzy

davidjhill

I am also long Silver Bullet Data Services (LON:SBDS) but a bit higher than this. I spotted the turnaround to break even down at about 20p but didn’t average down which has really annoyed me given it has 6 bagged since.

However, I can see this being multiples of current share price over next few years. Has very high quality customer base and should now be profitable. When it IPO’d it was too expensive. I told the CEO that who told me he felt otherwise. It went from 300p to 20p. I then thought it ludicrously cheap but was a bit concerned they might do a fundraise so held off….DOH!!!! They did but at 70p - a single investor took the whole lot.

As all the development has now been done on the 4D product the tech team has been reduced considerably. That, combined with big growth in US with blue chip clients means they should now be profitable both on a PBT and cash flow basis and that probably underpins current share price. However, upside here is potentially enormous. Risk/reward down at £3m market cap was bonkers - why I didn’t trust myself to take a large position is beyond me but hey ho!!!

Tommy H

Hi BSV long time no charts hope that things are good with you? Tommy

jonno

Hi Helvellyn

I recollect a quote from Peter Lynch which seems appropriate to the situation you describe, if you like a stock and think it represents good value don't 'nickel and dime' it. After all if one is right a couple of pence here or there on the entry point will make no difference in a year or two.

For what its worth I have just added a few more Bloomsbury Publishing (LON:BMY) at 476p slightly higher than I would wish, but from my research I wouldn't be surprised to get another ahead of expectations update prior to the finals. Irrespective the shares are hardly expensive at present and there is £39m cash looking for appropriate acquisitions.

All the best

Burnt Onions

MPAC (LON:MPAC) I also hold and would just like to add those eps numbers do not include any upside from the electric battery work. I agree the timing is a bit strange but the tone is overwhelmingly positive. Tried to buy more last week but the price kept going up and up on very thin volumes, clearly a tightly held stock.

Look again Snazzy

This is now profitable as I understand it. I completely agree it was way overpriced at IPO but is actually a good business. The losses were primarily funding development of the 4D product. Those costs have now been removed as dev is complete.

Look at the quality and growth of its client base. The funding was always coming as the gap between cash flow b/e and funding runway was tight (they did have just enough but too tight for any margin of error). That uncertainty has now been removed and as I understand it they are currently cash flow profitable.

Not a share for investors that don’t do their homework though - but that is where the opportunity lies, so people need to do their own research properly.

A single wealthy smart investor took all of the placing at 70p btw. That fact alone should tell one to look a bit further under the covers.

Yes - the Freyr opportunity should be treated as jam tomorrow as far as I am concerned. I ignore it completely personally. If it develops great but if not I want to know what I’m left with. As I understand it current Freyr work is a very small % of revenues and order book so core business is what we need to focus on.

Bouden54

CMC Markets (LON:CMCX) very encouraging trading update - they are now guiding to net operating income of £300m, which means they expect around £180m in H2 (having done £120m in H1). Operating costs in H2 are excepted to be flat at around £120m, which by my very rough estimates would translate to around 15p EPS for H2 - if they are able to maintain this level of income then they could be earning 30p on an annualised basis, which would put it on around 5x earnings. Obviously trading performance is extremely volatile so impossible to say what the actual figure will be.

Remember they effectively have £237m in net cash (i.e. cash in excess of regulatory requirements), so in theory this should put a floor on any renewed share price weakness. I can't see it falling much below 100p for any sustained period given this cash buffer, so I think the risk/reward profile looks pretty good from here.

Threepeat

Hi mjfgs

What exactly is Kill of Fill?.

I have a HL account and never really understood

StrawberryDreams

Really enjoying your podcasts too Paul and new to Spotify too!I always get there eventually.....Keep up the great work there too.Are we going to get one live from Wetherspoons one day..?I've been a big fan of Spoons' food & drink offerings for a few years now after being introduced by a mate.And did you ever snap up any J D Wetherspoon (LON:JDW) 's shares in the end?

Rusty2

The order will either be placed or cancelled. Say I order to buy 1,000 ME International (LON:MEGP) shares at 122p, if HL can place that order, it will go through, otherwise it is cancelled.

It does seem more effective than leaving limited orders. Because they have to actively try to place it. You can snag a bargain sometimes.

ken mitchell

Threepeat.

Adding to Rusty’s reply. H/L or whoever get the best price then available. e.g if you do a fill or kill buy order for ME International (LON:MEGP) at 130p and the H/L can get 120p or whatever, that’s the price the deal is done.

BenHazz

Thanks for your responses grumpy, BnB, dropside and TopVest. I've decided to wait for the update in the hope a poor update could force the SP further south, I agree BnB anything around 300p would be bargain territory and I'll be jumping aboard feet first. Interesting comments around the asset value of properties that I hadn't considered. Corteva (NYQ:CTVA) is certainly interesting, I would certainly like some exposure to food production, as mid/long term it has a lot of growth potential.

Zipmanpeter

Re Croma Security Solutions (LON:CSSG) - I think a closer parallel is Dignity, or Angling Direct (LON:ANG) where a relatively obscure, unfashionable retail niche with local Mom&Pop operations can be bought up cheap and have their economics transformed through centralised purchasing and back office and getting locations to focus on sales.

However, the issue is scale. They have just 16 stores now - how many can they absorb each year? They have the cash themselves already to fund up to 5 or 6 what do they need access to a capital market for. It looks a cracking business idea but the risk of de-listing must be high although I guess if they hang around for a few years then they will look for a takeover target.

ACounsell

Graham,

Had a very poor experience with Plus500 (LON:PLUS) trading platform. In my personal experience their excellent financial results reflect how they take cash from punters (mugs like me perhaps!!), not always strictly fairly, and redistribute it to shareholders via market cap growth, dividend and share buy backs. A much better share to own rather than trade through their platform. I only wish I had continued to hold the shares and not used the trading platform!

SundayTrader

In my experience a limit order will not necessarily be triggered, even though you can get a get a better price quoted to you while the limit order is on. I imagine market makers will be disinclined to fill a limit order if they can't match it. A fill or kill order forces them to deal or not deal.

Graham Neary

I am not surprised to hear you say that ACounsell. Thanks for sharing your personal experience. Concerns linger!!

I tried the trading platform on Plus500 (LON:PLUS) a few years back as well and gave it up immediately when I realised just how much they would take from me in spreads and financing charges alone. That said I made good money on the shares but haven't traded them for a long time since I sold despite them looking persistently cheap. I always wonder just how long that can persist. It seemed excessive compared to others like IG (at least at the time).

abtan

Bloomsbury Publishing (LON:BMY)

"I wouldn't be surprised to get another ahead of expectations update prior to the finals"

I agree.

Maas had 5 books in the Amazon.com top 20 most sold books list last week, and one of those books isn't even available until the end of this month.

https://www.amazon.com/charts/...

That's not happened in the last 2 years that I've monitored the list.

At the time of the Positive Trading Update released last month, Maas had 3 books in this list, which was already unprecedented as far as I could see. In the previous 2 years the most she ever managed was 2 top sellers in one week.

Fingers crossed.

Effortless Cool

9th Jan

Delisting is certainly a valid concern for Croma Security Solutions (LON:CSSG), Zipmanpeter, but I do not get any sense that it is on the agenda. Shareholder engagement was zero under the old regime but has stepped up following the divestment of Vigilant, with several Investormeetcompany presentations. Also, they are finally going to get some analyst research published, probably this quarter. This is not behaviour that is consistent with management considering delisting.

Small Cap Value Report (Mon 8 Jan 2024) - CMCX, SCE, CLBS, PLUS

Explanatory notes -

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Paul Scott

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