Small Cap Value Report (Thu 14 Dec 2023) - BEG, CPI, STEM, CURY, ENSI, MMAG

14th Dec '23 by Paul Scott

66 comments 7869 reads

Good morning from Paul & Graham!

US interest rates - interesting news overnight, from the US central bank, indicating the likelihood of 3 interest rates cuts (of 0.25% each) in 2024, because inflation is now largely under control, albeit still above the arbitrary 2% target. This helped power the Dow to a new all-time high. It seems like a different world to UK small caps! Although looking at some of the early risers this morning here in the UK, I can see quite a few are interest-rate sensitive, highly geared companies like Mobico (LON:MCG) and S4 Capital (LON:SFOR) - maybe we'll see a dash for trash, as investors worry less about high gearing? Who knows.

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 well-financed (so low risk of dilution/insolvency), is trading well, and has a reasonably good outlook, with the shares reasonably priced. OR it's such deep value that we see a good chance of a turnaround, and think that the share price might have overshot on the downside.

Amber - means we don't have a strong view either…

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Peter T

14th Dec '23

Revolution Bars (LON:RBG) numerous 200000 share buys going through today. Maybe Eldose Babu from Dubai buying more. (I hold)

Pimlico on Thames

Also, the option for management to use the treasury shares to fund acquisitions with no additional borrowing costs for the share element.

jonno

Brickability (LON:BRCK)

Further to my earlier post I have added to my holding at a little over 50p. To do so I trimmed my holding in Howden Joinery (LON:HWDN) at a moderate profit, an excellent company where I still retain a reasonable position but felt that the value on offer at Brickability (LON:BRCK) was too difficult to ignore and where I consider the potential for a re-rating as interest rates fall is much greater.

As Andy Brough has often said shares are for buying and selling. Hopefully this sell and buy will go to plan over the next 12 months. Fingers crossed!

MrContrarian

Oh yes! It's like a 5 year old went mad with a plastic flower set.

Michael C

planetx - Why don't you use level 2?

SundayTrader

The story I hear is that business for recruiters generally is dropping vertically at the moment. I believe SThree (LON:STEM) with its contract focus is better positioned than most, but I would still be avoiding the sector as a whole. No position.

Tortoise investor

Re Begbies Traynor (LON:BEG) they are doing an investor meet company presentation next week so I am going to ask them about what they exactly mean on deemed remuneration as I have not been clear on this for some time. I hope it is simply performance-related payout acquisition costs.

BnB

The story I hear is that business for recruiters generally is dropping vertically at the moment.

Yes, perm is in deep doldrums, I could be wrong but I'm reminded of that saying of Warren B's. Note that recruiters are already 25% off the lows of the year. It could be bear rally of course. But market participants are asking the question.

davidjhill

Nibbling at MPAC (LON:MPAC) today. FY24 forecast at 39p EPS with net cash position so 220p feels anomalous particularly if interest rates are moving down. New CEO and old CFO both bought some though very small to be fair so not sure I will be reading too much into that.

Has been hanging around 210-220p level for a while so I am hoping it’s formed a base and a bowl, staying above 50MA. This was a top up today for me.

Monty Carlo

I've been invested in the brick manufacturers in the past & keep an eye on the sector with a view to buying back in.

I have to say the recent Berkeley group (LON:BKG) results concerned me a little. Whilst I suspect they were playing to the gallery to make a political point, they pretty much threatened not to commence any further major schemes:

"it has become increasingly difficult to progress this form of development as changes to planning, tax and regulatory regimes have created an increasingly uncertain, unpredictable and burdensome environment. This is driving investment away from urban areas"

New builds aren't just about developer supply and buyer demand - councils seeking to grab a chunk of the planning gain and demanding more affordable housing can stop the market from functioning at all.

moolahcoast

looks like an increase from 10% to 12%
https://newsfile.refinitiv.com...

garbetklb

EnSilica (LON:ENSI)

The FD ain't at the wheel - the CFO resigned on 11 April, a temporary CFO appointed, and there's no RNS announcing a new appointment - 8 months on. Their website has a awful lot of non Board Directors of technical areas but none of the 18 person Directors / Leadership team is said to be looking after finance.......

The Exec Chairman, Mark Hodgkins, was the FD at Trackwise - who had the opportunity to raise a serious buffer when the shares shot up to 300p+ on the back of optimism over their contract with Arrival. But they didn't - and subsequently ran out of cash. To be fair to MH, I believe the CEO's reluctance to be diluted was the driver - but MH had a ringside learning opportunity.......

Bouden54

Agree with you on Brickability (LON:BRCK) looks very good value and long term prospects should be good. You seem to have also sparked a bit of interest in the stock - I see it features number 2 on the most viewed in Stockopedia and perhaps even helped finally push the share price a bit!

Indie

Brickability (LON:BRCK) has popped up in the multi bagger chat too, so it’s on the radar.
(I hold)

Hi Bouden54

Brickability (LON:BRCK) Hopefully my reading of the runes is correct. I believe that they are, but ultimately each individual has to take responsibility for his or her investment decisions. I think that we will have to wait a little for a more benign announcement on interest rates before the share price starts to move more decisively. Although Andrew Bailey and his colleagues at the Bank of England don't exactly fill me with confidence.

The Jayman

15th Dec '23

Always? The old adage is certainly that they climb a wall of worry. It more true that markets generally turn before the good news consistently starts arriving . . . . .

Jonniegul

Hi Indie, FWIW, I think it's worth the extra. You don't need to wait for renewal either, the cost will be pro-rata for the remainder of the year. I'm wondering if to add Europe...

Regards, Jon

Thanks, Jon. Hope our outcomes are good, whatever we decide.

Benson212

Yes, always! Every bear market in stock market history was caused by some "doom or gloom" in the media or the wider economy. And every subsequent bull market bottomed out and emerged when the doom & gloom was still in the news. The pandemic crash of 2020 was a perfect example, the market bottomed and raged forward despite the global economy in lockdown. There is always something to be concerned about, which is why investors need to switch off the news and focus on the price action or the company fundamentals (depending on how you invest).

The markets are very sensitive to interest rates and are pricing in a return to lower interest rates and the subsequent economic recovery. Every time central banks keep interest rates on hold, it strengthens the case that QT has peaked and that QE will commence next year in order to strengthen our economy and avoid a potential recession.

TamzinPiworld

SThree (LON:STEM) Graham thanks for your comments on the FY23 TU . Here is their analysts' meeting recording video & podcast. Main points:

Engineering strong +18%
Technology holding its own +1%
Life Sciences down 14%
Perm net fees -22% from reduced life sciences and focus on contract, especially in the US and UK. Perm headcount down 17%
Germany: Engineering growth offset declines in technology and life sciences. The Netherlands holding up with net fees up 6%.
Spain has grown 82% driven by technology, it's from a small base but nonetheless interesting
Middle East and Asia aside from restructuring looks relatively strong. Japan was up 6% driven by Engineering and Life Sciences
Overall Engineering is up 17% driven by energy, particularly renewables, now 10% of group net fees
Life Sciences are down 21% but still ahead of pre-COVID levels
The rollout of the Technology Improvement Programme is on track and on budget. Fully operational in the US, next is Germany in early 2024. We should hear more of the KPIs to look for from this in the FY23 results. This is where they will aim to increase efficiency and hence reduce costs.

Small Cap Value Report (Thu 14 Dec 2023) - BEG, CPI, STEM, CURY, ENSI, MMAG

Explanatory notes -

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Paul Scott

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