Small Cap Value Report (Thu 20 July 2023) - CBOX, LOOK, PMP, FAN, PDG, FSTA, FNX

20th Jul '23 by Paul Scott

95 comments 9007 reads

Good morning from Paul & Graham.

Today's report is now finished.

Quick comments -

SKY News said last night that Cake Box Holdings (LON:CBOX) has received a low-premium 160p bid approach from an Australian cheesecake company, so it will be interesting to see if that's true or not (it usually is with SKY, who for some unknown reason has now become the pre-RNS go to place to leak news). The founders probably have enough shares to block this, so it would need to be an agreed bid. There have been too many slip-ups (being polite about it) from CBOX, so even though it looks an interesting growth company, personally I wouldn't lose any sleep if it went private, because I don't trust management.

UPDATE at 09:50 - no RNS from CBOX as yet, so it's not clear what's going on. Perhaps SKY can update us?! Share price up 5% to 158p.

UPDATE at 10:30 - CBOX has rejected the bid approach, issued at 10:00, here's the full text -

Response to Press Speculation

The Company notes the recent press speculation.

The Company confirms that it received an unsolicited approach from River Capital to acquire the entire issued and to be issued share capital of the Company (the "Indicative Approach"). The Indicative Approach was made in early June and with an indicative price of 160 pence a share.

The Board unequivocally rejected the Indicative Approach as materially undervaluing the Company and no further discussions with River Capital have taken place.
This announcement has been made without the consent of River Capital.

Paul's view - pretty much as suspected, the controlling shareholders are not interested in selling out at 160p. I think this rather strange approach (why was it leaked, and by whom?) seems mildly positive for the shares. At least shareholders now have some validation of the current price being seen as attractive to a potential bidder. That's probably why it was leaked.

Lookers (LON:LOOK) - many thanks to davidallen77 for flagging in the reader comments below that it looks as if the Canadian takeover deal might be off - because it's been announced that 19.2% shareholder Cinch has switched sides, and says it will now vote against the deal. This was a strange situation, and I've mentioned here a couple of times before that I thought banking the bid premium at…

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Harry Hindsight

20th Jul '23

Surely if want to up iron then eat baked beans, oatmeal, lentils, spinach, beef, almonds, egg etc. Understand supplements are popular with busy lifestyles but protein shakes and Huel etc are perhaps a better market to follow.

Or perhaps the obesity market - a bit expensive but Inmode (NSQ:INMD) is breaking out of $40.

ed_miller

Re: Somero

I agree dollar weakness is not great for Somero but I've seen it has the worst effects in companies reporting in non-dollar, stronger, currency - I thought selling 2/3 of your holding just because of dollar weakness was quite a strong reaction, but you confirm above you actually sold half, and any way there are other reasons to be cautious of Somero.

Nothingventured

Regarding Fonix Mobile (LON:FNX), I note that voting for the Eurovision song contest was by app only and I wonder how much more of this we are going to see. For this reason I took a heavy top slice a month or two ago.

If I was Fonix I'd design a bespoke app for each poll as an alternative to texting - you can scrape data maybe with something like this too perhaps?

Jim

Albm7

Lookers (LON:LOOK) (no holding) - Here is a link to a story suggesting a higher bid may come from Lithia Motors (NYQ:LAD) and that's why Constellation withdrew their support. https://cardealermagazine.co.u... Also Lithia Motors (NYQ:LAD) had tried to buy Pendragon (LON:PDG) last year.

rmillaree

Pensionbee (LON:PBEE)

Cheers for that - this one is starting to look semi interesting as they get closer towards being EBITDA positive - presumably even if growth in subcribers slows/stops one should expect that AUM would continue to grow as peeps ad into their pension over time. In theory one would guess the operation gearing could look very good here in a few years time if its mostly stuff done via automation. Does anyone here have a semi positive outlook ref this share. As its still obviously loss making for now i suspect most peeps may have looked at this one as being too risky? I am only keeping watching brief here - but will be intersting to see if they hoit targets or have growing pains.

Does anyone have views on this one ?

KiwiCam

Iron is prescribed by doctors in much stronger forms than supplements. You can be iron deficient from not consuming enough of course but most prescriptions are for clinical conditions where absorption or excessive loss of iron through bleeding is present (pregnancy, inflammatory bowel disease, coeliac disease, cancer, kidney disease etc). Iron deficiency anaemia is such a common problem and the current treatment is very poorly tolerated, causes GI upset, and is very poorly absorbed. Shield Therapeutics (LON:STX) has an incredibly novel treatment where you get high absorption and low side effects which is greatly needed (I'm a GP!). This is a medication so you wouldn't be able to use it as just a supplement.

planetx

Hargreaves Services and general

Very strange movement looks like the market just got squeezed on stock .

In the soace of 15 min big spike up with squeeze on stock, couldn’t buy many but could sell a lot .

My feeling is that there is a lot of money coming back into the small cap market that has been sat on the sidelines even a bit of FOMO

My quality holdings that haven’t moved anywhere in past 6 months but drifted all getting quick and strong upward bounces .

Wynnstay, Somero , now Hargreaves, Equals all have strong moves .

Those that have stayed fully invested will see these bounces .

Those say on cash will have to watch and try to tune the market .

I actually sold 10% of my Hargreaves holding at 4.80 level , My total holding by value still higher than at 9am this morning .

Sone strong moves I think a few big players are worried their are sat on the sidelines and the tide is turning ??

Somero Enterprises (LON:SOM)

That's not to say that dollar weakness is helpful, given the dominance of SOM's US sales, but it would likely be much more harmful to SOM's valuation if it reported in Sterling. (I hold)

Ed can you explain to a buffoon like me why the reporting currency should have any effect on valuation? If we take the viewpoint they would have the same income and funds in each currency anyway - i would have expected the valuations would mostly be the same whichever currency they reported in ?

Barry5

I can't for the life of me see how Paul can classify this as AMBER and say that it's not a disaster. A 25% fall today brings the SP down to 288p. It was over 500 2 months ago. Not having a go but isn't that view just a tad bit blinkered. Just my view. I sold when it dropped to 400.

Helvellyn

Hargreaves Services (LON:HSP)

It was rising steadily all day TBF and then spiked up near the close on much higher than normal volume even after the general market turned down. Something afoot maybe? or as you say just market sentiment changing for some stocks that could be seen as undervalued ?

cheeky_minnows

Hi planetx,

I too have been keeping an eye on HSP, I didn't have much cash left in my 'stage1' portfolio (I was waiting for another leg down to add to positions), so didn't act over the past few days. They have results due out next week, and I was willing to take a punt on it being positive (based on recent RNSs and their latest webinar). I checked today, and decided I had probably missed the boat !

(edit: i am not one of the few big players... just clarifying !)

mojomogoz

Good to have what I believe confirmed independently by a doc re Shield Therapeutics (LON:STX) …as I said earlier there are high execution risks here (and some past slips too) but I believe the upside is very significant. A stock with a real option payoff profile. My position is suitably small

not sure you have “missed the boat” Christopher Mills of Haywood Capital has a break up value around £7.00

BnB

I stick to what I know and enjoy that’s how I stay happy

And there’s nothing more important than that :-)

I would have to sell something, and if my conviction was not strong enough on the price 10% lower, then I shouldn't act now. If the price had dropped by the same amount, I would have acted. Probably wrong, but my discipline is getting better !

DutchSchulz

Hazarding a guess (I know, dangerous), I suspect that Paul takes a medium term (2-3 years) view on Portmeirion (LON:PMP. Within that time frame, unless there are further profit warnings, the share price should more than recover the loss incurred over the last couple of months. That’s the view I’m taking- for now. I may yet rue that decision :)

Buying pre earnings (26th July) risky. As a chartist would need to hold above 465 for more than a couple of days to be on the radar.

A takeaway from recent chats is that don't get too carried away with story's and management - DYOR can mean your trying to convince yourself rather than being contrarian.

The price and the chart tells the story. But if think some great opportunity and lock away in the SIPP then fair dues - my "coffee can" is rather large and rather worthless.

abtan

Litigation Capital Management (LON:LIT) (I hold)

Hi David (and Paul)

I'm a little late, but thought I'd respond with some comments.

I for one am slightly confused by the depressed share price after so many recent positives:

There's been a flurry of material case wins over the last few months.
Director continue to buy shares.
A 2.5p inaugural dividend has been announced.
Material cash balance at year end c £40m.

The market cap is currently c £110m.

The company regularly announces its case outcomes (well, at least some of the winners) and accordingly I calculate PBT for FY23 (June 30th, 2023) to be at least $30m AUD = £16m.

I personally would expect the share price to therefore be a little higher to reflect the seemingly strong balance sheet and ability to generate cash.

There are plenty of investments on the balance sheet too, so one would hope that there are more positive outcomes to come over the next few years, hopefully bolstered by the funds on the balance sheet yet to be invested.

The big risk here, ironically, remains a change in the litigation financing rules. For now though, I remain a content holder.

FOMO_mike

21st Jul '23

If been looking at #DRO - Droneshield

Any #ASX defence company, if it's a field your interested in then have a look

$200m Market Cap with orders now coming in

Drones, AI, Prison Services - recent order with the US and some background noise regarding NATO.... could be something in the water

muckshifter

The sudden rise in HSP could be caused by any of the reasons suggested here but my bet would be that it is connected with the German subsidiary - either a long awaited return of loans and retained profits to HSP or better still a potential sale of the business.

Small Cap Value Report (Thu 20 July 2023) - CBOX, LOOK, PMP, FAN, PDG, FSTA, FNX

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Paul Scott

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