Small Cap Value Report (Wed 22 Mar 2023) - SDRY, BOOT, HSW, FEVR, JDG, MPAC, BMS, ANP, BIRD, TEG, PDG, BYIT, NAH

22nd Mar '23 by Paul Scott

63 comments 9953 reads

Good morning from Paul & Graham.

Pretty much a clean sweep today, with 13 companies covered. That leaves us clear to focus on some backlog items from earlier this week in tomorrow's report. Sorry for the delays, but as you know, we can't cover everything. So today's report is now finished.

We're going to attempt to catch up today, with a few missed items from yesterday, but obviously we can't cover everything, especially if it's just trading in line with expectations (hence not price sensitive, so our previous opinion would usually be retained).

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 up to about £700m. We 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.

Here are our quick comments (i.e. no sections in the main report below), and what's left on the to do list -

Paul’s Section:

Superdry (LON:SDRY)

108p (pre-market)

Market cap £89m

Disposal

I’m rushing to get this section out before 08:00, as it looks significantly price sensitive - I suspect this share will open a good bit higher. Although it’s one of those RNSs where you have to read to the end, to get the full (good, but not quite so exciting as it initially looks!) story.

An upfront fee of $50m receivable by Superdry has been signed with a South Korean based company called Cowell Fashion Company Ltd, for the IP rights over the…

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55555

22nd Mar '23

I stand corrected and appreciate your insight. Many thanks.

davidjhill

They are not ex growth. Like for like was always going to moderate against strong comparatives but remember this is still a fragmented industry so there is a continued roll out of new venues ongoing to increase revenues and profits.

EPS should be 34p this year so it is on a 12m fwd PE of 8 (not 10 that Paul alludes to)

I suspect it will get bought out if the share price doesn't increase soonish. We are in a slightly bizarre market whereby PE will pay a lot more than the public market, which is historically unusual. Im afraid I just don't think the UK market has any liquidity anymore unfortunately.

Snowbum

You can change this anytime, click on the icon at top right, next to the 'Bell button', on the drop down menu select 'edit profile'.

Equity Development

Da nada , and be careful with gender presumption !!

cheeky_minnows

Yes, Andy could be a womans name, so my apologies. Imagine my surprise when looking on your website that I find Paul Hill is in your rogues gallery as well... dear me, what a web we weave.

Tufferx1

I watched the investor presentation and it sounds like they recognise that they should have delivered more commercially and are trying to address that with recent senior hires. They were cagey on pipeline but made it clear that they wanted to reveal more but can't. It's only a small position for me, and typically one that has occupied my mind far more than it should, so I'm holding because I think they can realise the tech's potential.

lukegallienne

Hi Pastybap this does look very interesting. Just working through the admission doc and I have noticed the following:

Ecopetrol’s Consent for the Tapir Interest Assignment
Samaria´s participating interest in the Tapir block and its ability to continue to manage operations and receive a 50% participation in revenues from the field derive from various private oil and gas agreements, and Samaria will not be a party to the Tapir contract until the interest is assigned by the relevant holder of record and approved by Ecopetrol in its sole discretion. There is a possibility that Ecopetrol could interpret the assignment of a private contractual interest as contrary to the assignment clause in the Tapir Association Contract.
Ecopetrol previously rejected the request for its consent to the assignment of Petrolco’s fifty per cent. (50%) participating interest and operatorship in the Tapir block to Samaria on the grounds that Samaria did not meet the technical and financial requirements established by it to qualify for the assignment which have not been made public by Ecopetrol. There is no guarantee that Samaria will be able to obtain Ecopetrol’s consent to the assignment.

Samaria being the following:

Samaria Llanos Exploration S.A., a Panamanian subsidiary of the Company conducting business in Colombia through its branch office, Samaria

That almost looks to me that at any point Ecopetrol could say unlucky you don't own 50% and it basically game over. I'm probably wrong as I haven't spent anywhere near enough time on this but thought you may have the answer.

Cheers

Luke

iain1234

Golly that's an angry post. Basic audible alarms already exist for 50 quid. I'm not saying there isn't a market, I'm saying the market for a camera and some software that monitors eyes is unlikely to be lucrative long term. Hopefully I'm wrong and a complete idiot!

Camtab

"good idea for Stockopedia to have two levels of subscription" - Surely it is for you decide who adds value to your own approach and who doesn't regardless of whether they are professional whatever that means nowadays. I have met many people who would call themselves professional but add nothing to my process.

ed_miller

Re: John Hussman commentary on current & past banking crises

Man, that's a long read - I gave up in the end.

What I did read and understood I found compelling.

Skipping to the conclusion: S&P500 current valuation far too high to expect good long-term investment returns.

Westway001

That's what I thought...

intuitive6191

"Car safety standards now insist on this type of product being fitted globally and there are really only two market players. Seeing Machines (LON:SEE) will ultimately take 50% of this market"

Interesting. How can this be stated so confidently?

"the lead time for adoption is measured in years to a decade,"

The auto industry can be very slow to adopt. Not sure investors would like to be reminded that it might be 10 years though.

No position.

Hi Camtab,

Yes you are quite correct, and I think that taking anything on a bulletin board chat at anything more than face value is a recipe for disaster.

I would say however that if companies (as that is what we are talking about here) use chat rooms as a way of 'providing information', it would be in their interests as much as anyone else to do this as transparently as possible.

To be honest, I get irritated at the mountain of clickbait I am faced with with nearly every financial service that I try. Motley Fool's tired 'If I had 10k to invest now this is what I would do....' is a typical example. Yes I try to ignore it, and I have alot of other work to do, so a quick check on Stockopedia to update with news, and read over the chat with a coffee - great stuff. Today my annoyance got the better of me.... so sorry about that to all concerned. I have no axe to grind here - to my knowledge, I dont hold anything that ED have promoted / highlighted

On a more philosophical note, as Ben Hunt points out - if you are the the only one at the table in poker who doesn't know who the stooge is, then it is you. I wonder just how incestuous the UK small cap market is, and how much the prices are manipulated (liquidity is very small). I wonder also whether this is linked to how the likes of WANdisco (LON:WAND) happen - if everyone is in each others pocket, it is not surprising that transparency isn't at the top of the list.

Probably best to move on to mid - large caps, and the US market, what a shame for UK small companies trying to get a foot on the ladder - because that is what I would like to support (my own ESD criteria if you will).

As Robbie Burns said (no, the other one), what a parcel of rogues.

Chris

wolfspirit

They've always been cagey on financials - lots of "winning contracts with the top producers in ...." but it could be just £100 pm. for them to try it, who knows!

They claimed they were years ahead of the market with their tech - many years ago. The business market doesn't seem to agree. I just don't think they solve a real problem, or they don 't solve it in a practical way. They only "solve" the problem of getting a salary and bonuses for the staff and directors.

If they have had world leading tech for 20 years and they are still unable to demonstrate benefits to buyers - one has to wonder why so many in the industry just don't see it, would love to see that feedback!

It is incredible that they have managed to persuade investors to fund their lifestyles and pensions for so long, without running out of cash. Got to have a bit of admiration for that.

Silver Moon

MassimoJ, those 2 words, 'finally' and seem' make me shake my head while saying nah like a cockney, when the company has treated the shareholder like part of the furniture and paid no dividends since May 2019. If I were fully invested in NAHL (LON:NAH) then I'd be visiting food banks but the directors see to it that they are doing alright.

I hold.

look at the European car manufacturer regulations and NCAP safety for a start.

The lead for a new competitor is a decade. Seeing Machines (LON:SEE) are already there with hundreds of thousands of vehicles starting to move off the production line. That's why it is tough for new entrants. The company is winning circa 70% of new RFPs globally by volume.

You can't just do this as iain1234 says. It is way more complicated than that and regulators wouldn't accept it and car manufacturers wouldn't put it in their vehicles. Thats why that post is nonsense.

whatmore1951

Thank you for this referral. I wonder how much read across there is for the UK market which is considered cheap at the moment. The US markets have seemed expensive to me for a long time and the prospect of a 58% slow collapse is certainly concerning. Perhaps the uk is around fair value and only looks cheap next to the US.

KevinS1

What would happen here if a SL had been hit on an a/c - either mainstream trading or a SB a/c?

Rambo

23rd Mar '23

Interesting article Ricardow although a lot of information to digest and somewhat indepth for my understanding as a newbi investor, eventually scan read. If you took this article at face value then I doubt if anyone would invest in the markets at the present time and I suppose it all comes down to timing. I would also think it depends on if "you" are a glass half full or a glass have empty person in your investing approach. The one thing that I have taken from the article is that it would probably be advisable to take a cautious approach in the market at the present time as things continue to be volatile and one never knows what is round the corner. Article link much appreciated.

Small Cap Value Report (Wed 22 Mar 2023) - SDRY, BOOT, HSW, FEVR, JDG, MPAC, BMS, ANP, BIRD, TEG, PDG, BYIT, NAH

Paul’s Section:

Superdry (LON:SDRY)

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Paul Scott

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