Small Cap Value Report (Mon 9 Jan 2023) - FDEV, BWNG, NANO, DEVO, ANP

9th Jan '23 by Paul Scott

45 comments 8973 reads

Good morning from Paul & Graham!

Today's report is now finished.

Weekend podcast is here. Also the typed version is here for Stockopedia subscribers. Thank you for all the feedback, much appreciated! Most people seem to like them, and it's a useful process for me too, collecting my thoughts after each week's busy report writing.

My top 20 small cap ideas - I've also written another post here, which lists my top 20 watchlist ideas for small caps (with a value/GARP focus). I'll also publish another article with my top 20 speculative small/micro cap ideas, for more adventurous punters, next weekend.

When I spot good share ideas writing these reports, I add them to a watchlist, so I can monitor them, and consider a purchase. This weekend, I reviewed my watchlist, and thought it might be helpful to readers if I distilled it down to my best 20 ideas for companies that I think have solid finances, low risk of dilution or insolvency, are trading well, and look cheap or reasonably priced. These are listed in this article.

As always, I have no idea what the share prices will do, because facts, and market sentiment change in real time. Some shares on the list could do well, others won't - again, that is completely normal. But I hope it's an interesting list with some ideas for readers to research further, with explanations from me as to why the shares could be interesting. I'm hoping that about 60% might do OK to well, and 40% probably won't do well. As we're going into a recession, there's a heightened risk of profit warnings, so I'm fully expecting some to disappoint on earnings, especially in the first half of 2023. So it's not a list of trades, it's more solid companies that I think should do well medium to longer term, with some bumps along the road expected. There are also plenty of good dividend payers in my top 20 list. Anyway, check it out, and do leave your feedback, and your own lists (top 3, top 10, top 20, whatever you like!) of favourite shares (with explanations as to why) in the reader comments, so we can all share our best ideas.

As always our approach here is to do your own research & take responsibility for your own portfolios. So we're not recommending anything, just…

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JohnDoe2378

9th Jan '23

I agree. EBIT of 5m FY'24 against a current market cap of 200m, 40 times!!

Even half that would be generous! On my short list...

No position.

Regards,

Tommy H

Wynnstay (LON:WYN)

I agree a great company though now sat at a loss, and having that eternal debate on whether to exit and buy back, or hold and double up.

Obviously reading on a phone so answer will not be today.

Tommy

Thank you for sharing

I am an ex-holder of Anglo-Eastern Plantations (LON:AEP)

Thank you, will read later

I guess what is a return, so getting 3-4% for a 1 year bond versus 1% a year ago is good news to savers and to most the will think that is good, though when last looking ISA rates were still a lot lower (especially when transferring). My wife who is cash heavy (she equates buying shares to going to the local bookies and putting money on the 3:30 at Doncaster Races whilst blindfolded and wearing ear muffs), this is a very good thing as we move products over at expiry.

But when some of our main costs are going upwards at >10%, food and energy in the day to day bucket, petrol has come down a bit but still that gets eaten very quickly, and when you think about what university, weddings (kids not ours), care costs are going to be like it makes for a more nervous outlook.

As for investment yes I hold some fixed income things already and might slowly increase this year as a structured approach.

The Jayman

He's written articles for the FT about his small cap investing for over 20 years.

These give interesting insights on his own portfolio companies (historic and current) and more generic issues, such as companies needing to publicly announce sooner when receive an approach about a possible bid (which Paul S raised concerns on just last week).

Sadly these are less frequent that they once were and appear quarterly, next one due end Feb/beginning March.

So it is claimed Silver Moon.

Ditto re Titon - everytime it seems to be rising towards a fair value I then realise in hindsight was my missed opportunity to exit.

Reading his articles the shift is about an increasing focus on his income needs but in companies which can delivery this and growth.

Helvellyn

For any Team17 (LON:TM17) holders, this was released around 14.50 hrs, presumably in response to their 10% sp drop in response to the Frontier Developments (LON:FDEV) news this morning.

The Team17 (LON:TM17) price has recovered around half of it's losses so far.

Investegate |Team17 Group PLC Announcements | Team17 Group PLC: Trading Update

FREng

Gear4music Holdings (LON:G4M) is now up over 20% today. Was there a tip in the weekend papers?

planetx

If you still think it’s a great company then surely just sit and hold .

Pretty hard to time the market and jump in and out of AIM shares and with spreads I suggest hold unless you believe the investment case has changed .

Investing versus trading mentality .

I’m happy with Wynnstay though I’m going to have a good look at the numbers again today / tomorrow .

A lot of wild price swings in my portfolio at the moment Avingtrans, Somero, Hargreaves , Wynnstay and Sureserve are all bouncing around like crazy (most on the upswing apart from Wynnstay ) .

Luckily I added to avingtrans , Hargreaves and Sureserve at the bottom of the lows but not to trade just to top up .

Mark B

I think this shows just how bonkers market followers and traders are. The update said that everything was at least going to be as expected, so this means no downside to forecasts and there may even be an upside. But the lemmings dive. I wish I could take advantage and accumulate some more shares - maybe I will be able to in the near future. Opportunities come to the prepared mind. Just another example of the futility of predicting markets in the short term. Mental. Good though :-)

Crestchic

Samson Rock have just taken their holding to over 10% .

Bit strange wonder what they are up to .

Above my pay grade .

Anyone got any insights .

Clive44

Hi Paul

Thank you for your 'My top 20 small cap ideas'. Very useful indeed.

However, unless I've got it wrong (more than likely!) there's something wrong on the Wicanton row. Mid price at start of 331 doesn't compute?

BnB

I think you’ve misinterpreted the price movements on Team17 (LON:TM17) . The TU is a rushed missive issued mid-session to counter a sell-off prompted by this morning’s Frontier Developments (LON:FDEV) profit warning. And it looks to have worked to settle any nerves.

Michael Tee

Hello Planetx.

I am also wondering what Samson Rock Capital's plans are with regard to Crestchic (LOAD).

For some time now they have been mopping up any shares sold every day. I tried to find out more about them but their website requires a login.

For the takeover by Aggreko to go ahead 75% of votes must be in favour so I think if Samson get more than 25% or combine with others in a group of over 25%, they can prevent the takeover going through. Maybe they could agitate for a higher price than 401p or push for a different buyer.

I asked Peter Harris about the Aggreko offer. He told me they have a lot of irrevocables so there is a high bar for another bidder. If there was a higher bid, the board would of course consider it.

I have not sold any of my Crestchic shares so far. They are almost 20% of my portfolio.

I am also interested to hear any additional info on this.

Michael

I know the businesses are related but an understanding of both shows them to be quite different. Such a large reaction on the news of another's business is mental, but that's just the market. I was a little sad that I couldn't take advantage. Another time maybe.

The Phoenix

Will be interesting to see how it plays out I hold some from my early investing days when I used to fall for these 50-1 shots.

Personal feeling is given near zero revenues and fact its loss making theres at least 100 mil hope value in the price already and the backers are on 50% of any payout up to x (and no one seems to know what the x threshold is).

So i am thinking if the payout isi n the 100-200 mil area once you knock off the hope value already priced in and the backers taking their 50% we could be back to 30-35p level.

Its interesting on the advfn board some staggering examples of confirmation bias by some of the biggest believers on the run up to the recent announcements and even now they are trying to spin a positive outcome to themselves.

There will be some absolute scenes on their if this does end up in the 25-40p pay out range.

Lucky dip

10th Jan '23

Lord Lee has bought so many of his holdings over so many years ago that current prices may not justify.

I remember he bought Treatt and Anpario under £1 .

In his talk at Mello in November he described the Treatt and PZC at current levels attractive.

John Lee is a big fan of dividend and the three sisters: Legal and General, Aviva and MNG have provided plenty of that over the recent years.

Boon

It could just be that Samson Rock is an arbitrager, where they capture the discount during takeovers?

If you search their RNSes, they have built stakes in the last year in several acquisition targets, like Appreciate (LON:APP) as well. In Appreciate's case, they have also taken a short position in the acquirer (Paypoint).

However, Appreciate might be where they are planning to be more active, in trying to squeeze a higher offer price. They have built up a 20% stake. To my knowledge, Paypoint has only secured irrecoverable support from very few shareholders, so their 20% stake might be big enough to force Paypoint to up their offer. They have largely bought at around 5-8% discount to Paypoint's offer price.

(I hold Appreciate in the Boon Fund)

Small Cap Value Report (Mon 9 Jan 2023) - FDEV, BWNG, NANO, DEVO, ANP

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Paul Scott

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