Small Cap Value Report (Tue 27 Aug 2024) - IGP, PLUS, FLO, BELL

27th Aug by Paul Scott

86 comments 8419 reads

Good morning from Paul & Graham, suitably refreshed from the long weekend!

Summary spreadsheet - for those of you who find this useful, I've got it up-to-date and there's a new link in the explanatory notes below, flagged as being the live version (which you might want to bookmark if you use it regularly). The idea is you can quickly look up any share we've covered here, using CTRL+F and the ticker.

I'm delighted to say we have already achieved our goal of covering more shares than in 2023. So far the tally is 610 unique companies in 2024! Some are only quick comments of course, but even so, that's a good proportion of the whole market that we're reviewing at least once in 2024 to date. I hope some of you find it useful anyway.

Explanatory notes -

A quick reminder that we don’t recommend any shares. 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, investment cos). Although if something is newsworthy and interesting, we'll try to comment on it. Please bear in mind the "list of companies reporting" is precisely that - it's not a to do list. We typically cover c.5 companies per day, with a particular emphasis on under/over expectations updates, and we follow the "most viewed" list of readers, so if you're collectively interested in a company, we'll try to cover it. Obviously with the resources available, we can't cover everything! Add you own comments if you see something interesting, and feel free to discuss anything shares-related in the comments.

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…

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jonno

27th Aug

Jet2 (LON:JET2)

The shares appear to have gained some friends today; up 4.6% on reasonably good volume for the summer 'doldrums'. Any reason why or is it just the market being its usual whimsical self?

Perhaps its all those millionaires leaving and booking economy class to save a few bob, as opposed to BA first or business class.

Viz

I'm not sure that a lot of public sector schemes are unfunded. I had a short stint in the Local Government and given that most people don't have jobs for life, then what you are seeing is that many people are working less in these schemes, say 5-8 years rather than doing a whole 40 years + and forward looking the actual costs come down. It was a few years ago though.

andrewdb

Land value tax...

Mark Carter

BNZL 3470p + 8% Since no-one else has mentioned it, I thought I might as well.

Obviously the mkt liked the H1 report. "British business supplies distributor Bunzl BNZL.L
raised its annual adjusted operating profit forecast on Tuesday, as it
benefits from acquisitions and demand for its own brand stays strong." https://www.stockopedia.com/sh...

Revenues were down 0.4% on constant exchange rate, statutory operating profits down 2.8%, and PBT down 11.9%.

I've held shares since Dec 2021 at 2945p. It's been a volatile share, going up and down and nowhere, although it has know shown something of a performance for me.

I was attracted by the quality and growth of the company. Revenues had been growing at 5.4% pa over the last 5 years, and net profits by 10% pa. Stocko gives it a Q score of 88, suggesting good quality. It has an average ROCE of 14.3% and a ROE of 20.6%. This is high. Interest cover is 8, which is reassuring.

Fwd PE is 16.4, which is obviously not cheap, but I think it acceptable for what I perceive as a good quality company. P/FCF is 12.9, which is pretty good. I'd consider paying up to 20, for example.

So yeah, onwards and upwards. Fingers crossed.

(Bonus content and minor plug: you can check out my thoughts on the Macfarlane (LON:MACF) earlier today . tl;dr : I think it will benefit from its increasing scale, its disciplined acquisition strategy and it is on an attractive valuation).

Wimbledonsprinter

There is an interesting article from Sunday on the problems (and Olympic marketing success) for Nike on Sky News headlined "Has the Nike trainer bubble burst?" https://news.sky.com/story/has...

Seems relevant for Zotefoams (LON:ZTF) whose Nike contract makes up around a third of revenues and (I would guess) a much higher percent of profit. (No position in either stock).

BenHazz

Worth noting only about 1% of Nike (NYQ:NKE) shoes utilise the Zotefoams (LON:ZTF) tech. The highest end running shoes only. So unlikely to be effected in the same way as more generic nike trainers.

sjones33449

I’ve looked at New Zealand but you need to have loads of money and be at least 66 next was Italy which is much more doable but you would need to speak the language some of my family have Irish connections which looks the easiest if you are leaving the sinking ship

NewInvestor1972

easyJet (LON:EZJ) Up 6.6% today too, good day for tour operators

Richard Goodwin

H & T (LON:HAT) were impacted a few quarters ago. They said they had reduced stock levels due to volatility in the second hand watch market. Last report imported that second watch values now improving though.

SCI20

Hi planetx, where in Java would you consider?

Lochinver

Hello Paul

Just a brief note to say that I listened to your podcast today for the first time and thoroughly enjoyed it.

It made a one hour car journey feel like only a few minutes !

Very easy to understand and follow, good humoured and informative - not only about the companies you cover but also your views on the macro economic situation.

I will now become a regular listener

Thanks again

Bunzl appear to be the absolute masters at making bolt on acquisitions - they make dozens and dozens of them and have been doing it for years . From my experience as an FD in similar businesses, that is really not an easy art to get right. So well done to them. They should publish a book on how they successfully do it !

And I can see why you see parallels with Macfarlane. Personally I’m not totally convinced by them. I know historically they have done well, but no growth forecast from 2022 to 2025. Great to see them improve margin mix through clever acquisition but it would be great to see some organic growth as well

Ben

Thanks and that is a very good point.

It is worth pointing out that the Sky News article does in particular mention that Nike has struggled in performance running shoes (a market it has long dominated) and mentions competition from HOKA's thick foam soles and ON's "cushioning system technology" which the article says "has proved popular with casuals and professionals alike". I don't know anything in detail about these shoes (whether they are competition to Zotefoams (LON:ZTF) 's technology that goes into the 1% of Nike performance shoes) but from the article they sound like high performance shoes.

https://www.on.com/en-gb/explo...

littledavesab

You never know they might just be employing the modern capitalist idea of kitchen sinking. Is obviously useful to counter the ingrained idea that Labour always wrecks the economy, can then paint a better picture plus it's a reason to avoid big spending those further left would want. That's the positive view!

Jeremy Rea

28th Aug

@ sjones33449, you may want to look at the Irish tax system. Graham can advise better than I, but I believe they tax dividends at 52% and there is zero allowance for them. So, if you have, say, £10k in dividend income, the Irish tax authorities take £5,200 of it.

The top rate of tax, 40%, also kicks in at 42k Euro, circa £35k.

Paul Scott

Thanks Lochinver, nice feedback, I appreciate it :-)

Boon

Pimlico... Can you add some extra insight/comment on top of just copy+pasting the RNS?

I get you're excited about this RNS as a shareholder (so am I) but comments should be about adding value...

Redrichmond

23rd Sep

Intercede (LON:IGP) - "Microsoft Entra ID" - This is basically active directory security renamed Microsoft Entra ID in the cloud.

Companies use Active directory on site and manage themselves but when they move to the cloud they are forced to use Microsoft Entra ID.

Moving to the cloud is more expensive. So although this is good news its only dependent on firms that use the cloud. I think a lot of firms get dragged into the expensive cloud migrations as a Fear of missing out. You can scale up and down servers when you want, rather than upgrading servers and infrastructure cose.

It depends on the organisation. Big firms like netfix it makes sense but smaller firms its more expensive. It could take 10 years for the majority of firms to move fully into the cloud and use Microsoft Entra ID.

30th Sep

Intercede (LON:IGP) How can you split out the true value of these bitty renewals or sales?

"Partners" resell on behalf of Intercede, whats their cut? Be great in the accounts if there was some lvalue to show the skimmed off amount. Different partners,different discounts

Selling software is so difficult to value

Brothersinarms

The amounts are the net amount to Intercede (LON:IGP) .

Small Cap Value Report (Tue 27 Aug 2024) - IGP, PLUS, FLO, BELL

Explanatory notes -

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Paul Scott

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