Small Cap Value Report (Thu 12 May 2022) - BLV, JD., CNC, CCT, SDRY, EMR

12th May '22 by Paul Scott

55 comments 8359 reads

Good morning! It's Paul & Jack with you today.

Agenda -

Paul's Section:

Belvoir (LON:BLV) announces it will be attending Mello in Chiswick on 25 May. Do come along too!

JD Sports Fashion (LON:JD.) - a mid-cap, but interesting because its trading update today mentions supply chains improving.

Concurrent Technologies (LON:CNC) - good results for 2021, blunted by an increased tax charge. Fantastic balance sheet, very strong indeed. Component shortages seem likely to delay product deliveries, impacting H1 2022 results. Overall therefore, I'm happy to sit on the sidelines.

Superdry (LON:SDRY) - (I hold) a not very helpful trading update, but I found the IMC webinar this morning much more informative. It sounds like the company is near enough to market expectations, so no profit warning. Subjectively, I discuss the reasons why I think the turnaround here could be working. Obviously macro headwinds are a sector-wide worry.

Quick comments (no sections below) -

Empresaria (LON:EMR) (I hold) - Unchanged at 69p - mkt cap £34m

A solid update today for FY 12/2022 today -

The Group has had an encouraging start to 2022, continuing the progress made in 2021 by delivering strong growth in net fee income. The Group remains on track to meet market expectations for the full year.

Singers has 8.8p forecast EPS for this year, so that’s a PER of 7.8 - cheap, but the whole sector has sold off (again) recently.

I think we tend to prefer Robert Walters (LON:RWA) and SThree (LON:STEM) here at the SCVR. But EMR is also worth considering - performing well, and cheap.

Jack's section:

Character (LON:CCT) - revenue up 22% but the mix (more FOB and US sales) means gross margin has fallen. Profit is down year on year but is up if you strip out last year’s property sale. The company is buying back stock and paying out dividends, so it has its attractions for investors, but there are also a few headwinds in the short term.

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…

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Norfolk'n'Good

12th May '22

£VTU

Just circling back to yesterday's SCVR and in particular Glen Keedy's comment,

Glen KeedyYesterday 10:25 am

Great results from Vertu Motors (LON:VTU) I believe car prices will be higher for longer than the market thinks so still more good news to come.

I agree that due to supply constraint, there will still be disruption to the supply chain of new vehicles - and more importantly so does Robert Forrester, CEO of Vertu. What this means in real terms is (at least) two fold for Vertu, 1. New cars don't need to be discounted, 2. Lack of supply of new vehicles supports second hand prices. This should help support gross margins in both cases.

Looking at broker forecasts, Liberum are forecasting £35M PBT for FY/E 2/23. Vertu are saying they have managed net profit of £19.1M for first two months of this financial year!! Yes March and April are traditionally strong months for car sale and of course increasing costs are going to play a part but Vertu have an excellent track record in managing those costs. Surely this PBT forecast is conservative at best?

In summary I agree with Paul that this company simply shouldn't be trading below NTAV (currently 66.8p p/share).

John Gibson

I’m a recent investor in Golden Prospect Precious Metals (LON:GPM) and I’d just echo your comments- it’s a great way to get a spread of gold miners without the stress of trying to pick (and hold!) winners. Also it’s only one purchase fee as opposed to multiples.
min my research on them I thought the investment trust fee and payments to directors etc were on the high side, but as a 3-5 year investment I thought the benefits outweighed this.
I also picked up £GDX and £GDXJ, two etf’s that seem to be the standard miner etf’s that are referenced a lot.
Also i ran the holdings of all 3 through stockopedia UK, US and Australia to get a handle on the stockopedia metrics for all company’s in those jurisdictions and was happy with the results. (I subscribed to US and Australia just for this purpose). This covered most company’s, the major exception being the Canadians.

RutlandRam

Volex (VLX) Any thoughts on why JD, I’m also perplexed ?

China supply concerns, general smaller cap sell off, worsening economic outlook ?
I wonder if some of their products are too ‘commodity like’ and interchangeable for competitors’

Or is it a good time to top up ?

Tommy H

Hi John

I had sold Volex (LON:VLX) just before the results came out, and an obvious kicker watching them bounce back up to what would have been green again. This was manual stop loss (>10% down from purchase) and I had bought again because I felt they were a very good price.

Whilst I am not a "trader" I am trying to learn more about the whole chart approach currently, and when you look at Volex (LON:VLX) it is showing as a classic "Stage 4" now from some of the texts that I have been reading.

Ok for my simple mind there is a lot of this within the Smaller Caps world, and come to that Mid and Large Caps too, nothing materially changed about the company doing what it does, still making stuff, making a profit, buying more companies and all that. But for me personally right now (might have changed my mind again due to FOMO by 16:28) I am not trying to fight Ze (or pronoun of your choice) Market when the price is declining. You have to make your personal choice that either you are happy to ignore and figure in the long term it will be all right, or you cash in and draw up the list of companies you want to buy and some will be cheaper, some will be more expensive, but when you are comfortable you hit the button to start the buying.

Sometimes no matter what you personally thing, or the rationality of it all, the Ze Market goes against you... or with you just after you press the button so sell in my case

Tommy

Zipmanpeter

Re £NXR - Just seen much more detail on the acquisition on the website https://www.norcros.com/files/...

KevinS1

Hi NF&G,

With regards to Vertu Motors (LON:VTU) the risk for me is that the market simply dries up and total sales drops off and therefore they don't make the profit they forecast.

With the economy on such a shaky peg there will be millions of people who suddenly become fearful around the future prospects, maintaining their jobs and increasing costs related to inflation on everything we use.

The purchase of a new car will therefore drop very quickly down the priority list and people will "sweat" their current model.

I appreciate those on PCP's who have no option but to hand it back will need an alternative - a new replacement PCP at a much higher price or a more expensive 2nd hand model (also at a higher price). But the big unknown is the sweating of those people who own their cars outright.

Personally I have just cancelled an order for a new car as its delivery date remains unknown (not before Sep/Oct 22, having first ordered it in Oct 21). I've found a 2nd hand model instead and am now trying to offload my old car - I am sure I am losing out all over the place with higher 2nd hand prices and lower offers from the internet types like M/Way or We-Buy-AC.

Time will tell, but Vertu Motors (LON:VTU) seem quite cyclic to me and therefore I'll stay away for the present. I was previously in it but felt the long-term may not be as rosy as everyone kept saying.

Hi Kevin

Thanks for replying. Strangely enough, despite forecast doom and gloom everywhere there is a general shortage of labour, at present - there are literally thousands of vacancies in all sorts of industries/trades that remain unfilled at the moment, not usual for a recession, although of course technically we are not as yet in a recession. Indeed Robert Forrester CEO of Vertu was bemoaning the very fact as a major headache for them currently.

Secondly, Vertu have a very strong relationship with a number of vehicle manufacturers and have said that whilst the sourcing of new vehicles is improving it isn't back to 'normal' as yet, thereby enabling manufacturers to pass through price increases. Of course anyone keeping hold of existing vehicles will still need repairs, servicing and MOT's - most of which is more lucrative than actual vehicle sales in any event.

I take your point re new car sales - I am currently waiting a delivery date on an EV ordered late last year and as yet have no build/delivery date - very frustrating. From my experience I think there is enough pent up demand for new and nearly new vehicles for demand itself not to be the problem - I feel supply will still be the dominant issue for the next 6-12 months, thereby helping to support these 'bumper margins'.

mojomogoz

My prior life was travelling around the world analysing and interviewing asset managers with a view to allocating significant sums to them sometimes inc seeding. Phone or zoom fine for some info but when a soft capability is involved (ie taking risk as individual and unit) the meat of assessment needs to be in person. What is not said, by whom and when is always the most important information...as is any other incoherence that can be observed of whatever sort. People always reveal most in what they don't do or say...or what they flinch at (which you don't see online). Also, observing power relationships tells you a lot...

...the receptionists have info and how they deal with you etc. I decided not to pursue a Brazilian investment any further after being met from the lift in Sao Paulo by two very large men with hands on weapons (not pointed at me thankfully). Turns out the macro fund manager I was meeting had a lot of land in the NW area ("personal account"...not client accounts)...where cartels had interests too....

davidjhill

If you look at the CNN Fear Index it is currently at "Extreme Fear" rating and on a value of just 7 !

That matches the financial crash of 2008 and any subsequent event. On every occasion the fear index has gone to 9 or lower it has acted as a very strong contrarian buy signal with 100% success I believe.

Now I'm not dismissing current events or the prospect of continuing volatility but if anyone is looking for a chink of light the fear index is often one to watch.

Can I ask a general question ?
Why are Stockos share price information so behind the market ?

piersmahoney

Pistonheads is an excellent website to off-load your old car. Highly recommended.

Rusty2

How do you mean? Stocko prices are usually 20 minutes behind, sometimes more, the other morning was over 30 minutes before yesterday's prices were updated.

Albertos

Golden Prospect Precious Metals (LON:GPM)

Used in the past for gold exposure. Problem is that at the moment the market seems to have gone seriously off gold/silver miners - monoliths Newmont and Barrick both off @4.5% and GDXJ off over 5% as I type -following and more the drop in the gold price. Since mid-April this seem to have been the story.

Which is a pity since I like Goldies.

Phil

rmillaree

Hallowed are the Ori - i believe in this one

GrahamF

Boon

And how many times has the fear index gone below 9?

Thanks Piers!

Exactly . Wonder why .

Quilleron

Real time pricing is expensive and as Stocko is not a trading platform and I guess they don't consider it worthwhile. However, and amazingly, Google finance, which allows you to set up any number of lists of shares, is as near real time as you can get for FREE.

HL and IGG are free and live prices but need to register and sign in. Stockopedia prices are misleading because they based on the last trade, which could be a buy or sell trade, I find this really annoying.

Yes it is because of cost which is understandable.

Small Cap Value Report (Thu 12 May 2022) - BLV, JD., CNC, CCT, SDRY, EMR

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Paul Scott

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