Small Cap Value Report (Thu 3 Dec 2020) - SBRY, CLG, OMG

3rd Dec '20 by Paul Scott

124 comments 11882 reads

Good morning, it's Paul here with Thursday's SCVR. Jack is busy with other things today & tomorrow, so it's just me here.

Re-opening day in Bournemouth yesterday wasn't madly exciting. I did enjoy going to my local branch of Revolution Bars (LON:RBG) (I hold) though, for some cocktails, 2 for £10, or £8.50 each, so you're practically obliged to have 2. That reminds me of my favourite joke about cocktails - but it's probably going to offend someone, so I'd better not tell it.

Timing - update at 14:48 - I'm working on the OMG section now, which should be up by about 15:30. Today's report is now finished.

Agenda - not a huge amount of interesting small cap results today;

Clipper Logistics (LON:CLG) - interim results (done)

Oxford Metrics (LON:OMG) - Preliminary results (done)

J Sainsbury (LON:SBRY)

Has today followed Tesco (LON:TSCO) yesterday, by foregoing c.£450m of business rates relief saying;

Sainsbury's sales and profits have been stronger than originally expected, particularly since the start of the second national lockdown in England and we have therefore taken the decision to forego the business rates relief on all Sainsbury's stores....

As readers commented yesterday, these decisions by Tesco & Sainsburys might be connected to their desire to pay divis, which would look pretty awful if they had just been heavily subsidised by the taxpayer.

... the Board believes that shareholders should not bear the full short-term financial impact this year of the business making the right decisions for customers and colleagues through the COVID-19 pandemic. Therefore, when considering free cash flow allocation this year the Board will prioritise payment of dividends to shareholders over net debt reduction

As a consequence, while we expect to make good progress towards our target of at least £750 million net debt reduction in the three years to March 2022, we now expect to achieve this target by March 2023

I wonder if other supermarkets will follow suit? It will be very difficult for them not to.

Many thanks to Wimbledonsprinter for pointing out in the comments below, that Wm Morrison Supermarkets (LON:MRW) also waived its business rates relief in full yesterday, totalling £274m. These are huge numbers, for businesses to be voluntarily returning to the taxpayer. Would this have happened, say 10…

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The Phoenix

3rd Dec '20

Thanks Timarr again its one of those situations where client money is ring fenced er until it isn't, those administrators sure know how to charge though.

Following on from Martin's steer the average shares in issue is another gem shows those companies diluting share holders into oblivion.

Regards Andy

gari en desti

this might help. big spike in internet searches for 2021 Saga cruises

Helvellyn

i noticed that !!

xcity

We won't get Moderna until spring.
iirc Pfizer is 4m a month to us, so that's 2 million a month being vaccinated.
Which leaves Oxford to be approved and distributed in time to cover your numbers. Other candidates are later.

Chriskay

What seldom gets mentioned when comparing investment platforms is functionality especially if you are trading frequently. The IG investment platform is simply stunning especially when compared to AJB which offers the bare minimum accessed with the absolute maximum of clicks and kerfuffle. One only has to read the excellent investment summary by the Stocko Investment Club to hold Ig Group (LON:IGG) posted today to see that IG are an incredibly switched on company which provides excellent operational capability. However I do appreciate that performance in the more demanding transactions can often be poorly executed by these on line platforms and maybe they are not ideally structured to provide it - just a thought.

Laughton

No ulterior motive here but I seem to remember discussions a while ago about insurance cover for the vaccines and given the "warp speed" that these have been developed, whether this would be underwritten by governments or under the regular PI that the various vaccine companies carry?

Does anyone know the answer?

JohnEustace

The UK government is taking the risk here, for the Pfizer and Astra Zeneca vaccines at least.

Dojosan

Ixico (LON:IXI) - 1/ PE ratio current of 50+ - probably PIs view it as expensive for a nueroimaging business and 2 / CEO cited "consolidation" to take place in FY 2021 (in Aug / Sept update) - not sure whether he changed this view in latest investormeetcompany presentation a few days ago.

thanks. I'd never clicked the "full quote" link before as I thought it was just a comment on their stock listing. that's very useful, but maybe the name should be changed to something more suitable like Trades Info.

Wimbledonsprinter

Thanks. I had forgotten that Walmart had agreed in October to sell (the majority of) Asda to the Issa brothers. To be super-pedantic that sale has still not completed - and is dependent on regulatory approvals, expected in H1 2021.

GibboP

Thank-you

Cleeve

I did mention some months ago EUA as a share worth looking into - Inhave sold 95% of my shares today at 42p, bought in at 2pm 3p and 4p so one of my better deals - it is now over a billion pound company and whilst the T/O may go higher I just can’t see it doubling from here so have invested in DEV which I think has room to grow hugely in the coming months

simoan

Sorry to burst your bubble but IG can't even pay dividends on the payment date for those holding share dealing and ISA accounts. If you hold small caps, as discussed hereabouts, you can wait for anything up to three weeks for the dividend to hit your cash account. That's just totally unacceptable. It doesn't just effect small caps either - I had an Intel dividend with payment date of 1st June that didn't get credited to my account until the 2nd week of July.

I've never had this issue with any other broker except the special situation with Somero Enterprises Inc (LON:SOM) at AJ Bell which has now been fixed. I have a formal complaint about this issue in progress with IG currently...

All the best, Si

Boon

All very well having precautionary measures for cruise ships like testing.

But tests can be faked. They might not accurate. Someone could catch covid in the days between test and embarkation.

The largest cruise ships can fit thousands of passengers. Lets say 0.1% of positive tests are either false negatives, or the person catches it after testing, or even a few days before testing (where it doesn't show up on the test). On a 3000 passenger ship, that's still 3 people with COVID.

And we all know what happened to cruise ships when there is COVID on board... the cruise ship shoulders all the costs of quarantine, a PR disaster, and refunds all round, etc.

IMO cruising will only be commercially viable when everyone is vaccinated. However, that's likely only early summer, autumn time. Even then, its only 95% effective.... and if you do the maths again, you might end up still having small outbreaks of covid on ships. If you're an obese 65 year old, with another condition... even if you were vaccinated, would you take the risk of cruising? After all, who knows, you might be in the 95% where the vaccine was not effective.

Food for thought.

I have the opposite experience with IG.... I think the majority of the time, the pricing I can get on IG is much much better than I had ever gotten on Youinvest or Interactive Investor.

abtan

4th Dec '20

Boohoo (LON:BOO) (I hold)

Hi Paul,

A follow-up comment on logistics for Boohoo (LON:BOO) .

One of the few areas where the company has lagged Asos (LON:ASC) is in its lack of warehouse investment.

COMPETITORS

ASOS have invested hundreds of millions of pounds over the last few years setting up warehouses in America (and in Australia/Berlin too I believe, though I would need to re-check this).
Next (LON:NXT) already have an extensive warehouse network around the world, which was one of the big reasons I bought into them.
As most readers know, BooHoo runs distribution out of a couple of warehouses in the UK only

WHY IT'S IMPORTANT

I've seen data that shows that both margins and customer satisfaction rates are materially higher where the product is closer to the customer

It's therefore a future capex spend that seems inevitable if the company wants to keep up with competitors in the long run, especially big players already based in the States (eg Fashion Nova).

DELIVERY TIMES

For reference

ASOS is able to offer Next Day Delivery in some areas in the States.
Fashion Nova is able to offer Next Day Delivery in some areas in the States.
The fastest Boohoo can ship across the pond is 5-6 days.

This gives companies like ASOS/FN a significant advantage over Boohoo (LON:BOO) .

INCREASED CAPEX + CASH DRAIN

Boohoo know the above, which is why on their last call (around October 1st 2020 when I made my notes) I heard for the first time that they were mulling setting up a warehouse over in the States.

They certainly have the resources to do it, but it's going to drain a lot of their cash in the next few years.

I have no plans to sell, but I do remain wary of that cash drain

Cheers

mark1308

Is the Steak big and juicy or prone to shrinkage !!!!

CamRaid

ezlifeme - you are right in my opinion. It is a matter of when rather than if. What I like about Saga is it will almost certainly survive to reap the benefits of the return. It’s insurance division covers the burn of travel. It was profitable without the £60m write off of goodwill for the travel arm.

UK_Investor_8888

5th Dec '20

peterthegreat

Re Hargreaves Lansdown

Just had a message from HL regarding a another request from a partner's business opening a trading account.

HL staff are working from home (due to the COVID-19 scamdemic). They have shutdown certain functions (less core) to their business for operational and bio-security reasons.

I can be fairly confident that this isn't incompetence, neglect or that they don't love you, but the (stupidity of) HM Government (and The Media and Socialists) bounced them into this.

Clearly, don't die: its very inconvenient, especially if you die on corporate premises.

Small Cap Value Report (Thu 3 Dec 2020) - SBRY, CLG, OMG

J Sainsbury (LON:SBRY)

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Paul Scott

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