Small Cap Value Report (Wed 3 Nov 2021) - ELTA, NGHT, BMS, ZTF, WIL, CHLL, NANO

3rd Nov '21 by Paul Scott

82 comments 10392 reads

Good morning, it's Paul & Jack here with the SCVR for Wednesday. Today's report is now finished.

Agenda -

Paul's Section:

Electra Private Equity (LON:ELTA) (I hold) - I have a bit of a rant against Numis & brokers generally, who presided over the day 1 flop of this demerger (and the grotesque £11m advisor fees)

Zotefoams (LON:ZTF) - an in line trading update reassures. Increased 2022 earnings seem likely, as its markets recover from pandemic disruption. A new recyclable packaging product, ReZorce piques my interest. Potentially interesting.

Wilmington (LON:WIL) - an in line trading update. This seems a decent business, at a reasonable price.

Chill Brands (LON:CHLL) - a dismal Q2 trading update, with minimal revenues. The company doesn't reveal how much cash is left in the bank. Risk:reward looks terrible.

Nanoco (LON:NANO) - rather frightening results for FY 07/2021. There's just enough cash left to keep the big litigation against Samsung going. No evidence that it's a viable business, with only £2.1m revenues reported for the year. Just a complete gamble, why take the risk?

Jack's Section:

Nightcap (LON:NGHT) - 'significantly ahead' trading update brought forward ahead of final results scheduled for the 15th of November. The portfolio has roughly doubled in size to c20 sites after a placing and acquisition of Adventure Bar Group. The short term 'invest in bars' thesis is obvious but which operators go on to create enduring value is harder to say, which makes me more cautious given the valuations we are seeing. Trading is certainly strong here, though.

Additional comments from Paul about NGHT follow Jack's section.

Braemar Shipping Services (LON:BMS) - shipbroker benefitting from favourable conditions. The valuation looks modest considering, but it's a cyclical business and trends can always revert. The group is streamlining operations, disposing of non-core operations, and wants to double in size over the next few years. All in all, it looks interesting, but I do think there are risks to pay attention to as well.

Explanatory notes -

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JESSE LIVERMORE

3rd Nov '21

Yep, it's just the major shareholders in original Electra restating their shareholdings:

snavira

So does this mean we can buy £JKX at 37p (current offer) and then tender at 42p for a profit ?

JohnDoe2378

Same here, same issue. Though at the moment, i want to sell both!

laurie

I did...that is, buy Jkx Oil And Gas (LON:JKX) at <37 to tender at 42. Things can go wrong, so I haven't bought loads, but that kind of return in two and a half months is fine for me and I wouldn't be terribly unhappy to hold for a while at that price.

JKX is not for widows and orphans. Do spend some time looking over old RNSs before you buy if you don't know the company.

gus 1065

Presumably yes, although the £JKX share price was 42p when I made my comment so why the 13% fall later in the afternoon? If you don’t know who the patsy is in a poker school ……

Looking at the RNS again, the EGM is being asked to approve a tender offer of just over 40 million shares, about 23% of the share count. Not sure whether there are 77% of the other shareholders that want to stay in the take private (e.g. presumably some of the II’s will not be able to hold unlisted shares) so it may be a case of “sell now, ask questions later” for some of the bigger holders that don’t think all their shares will qualify for the TO. If this is the explanation and all small shareholders are covered (I think a “basic entitlement” of 500,000 shares/£210k is mentioned in the RNS) then it may well be a decent arb for the PI. Anyone know a good lawyer?

Gus.

chelsea

£:MORE is it just me but every time I try and Load Hostmore on Stockopedia it gets stuck a cm from the end of the page. Any other stock is fine

Roger Baron

Annoyed that Tekcapital (LON:TEK) didn't offer discounted shares to existing private investors. Big discount - what a surprise it was over subscribed!

Even more annoyed as I bought some Tekcapital (LON:TEK) for a NAPs portfolio yesterday afternoon at 33.5p!

MiserableJacktPotato

I have the same, but if you put in in a portfolio and hover over it you can see that there's no data anyway. Just need to be patient I guess as the data providers get in gear.

gmtrader

what is others views on £snx?
a nice contract win today. This share looked very risky at the start of covid but has weathered the storm well, reducing costs and managing to stay afloat. I’m liking the look of where this company is going and bought in yesterday for a small holding.

While we’re applying a cold towel to figure out what’s going on with Jkx Oil And Gas (LON:JKX) , just noticed the mooted reorganisation and take private of the Daily Mail And General Trust P L C (LON:DMGT) rump has been announced. Offer for shares, special cash distributions and shares in Cazoo (yippee!), it’s like Christmas has come early.

https://www.investegate.co.uk/....

Fun evening to be spent working this one out, although comfort in the fact the Daily Mail And General Trust P L C (LON:DMGT) share price went up 3% on the news. Any other holders out there?

Last but not least ….. after hours announcement that Escape Hunt (LON:ESC) is reinventing itself as a themed bar/food operator under the name XP Factory with an acquisition and discounted placement at 30p.

https://www.investegate.co.uk/...

What ever happened to making announcements at 7.00am? We’ll have to ask MrContrarian to put in a night shift …….

Gus.

timarr

Fun evening to be spent working this one out, although comfort in the fact the Daily Mail And General Trust P L C (LON:DMGT) share price went up 3% on the news. Any other holders out there?

I think it's a bit north of £12 a share - 255p from the Rothermeres, 568p special dividend, 17.3p dividend = 840.3p plus 0.58 of a share in Cazoo worth (I think) about 390p = £12.30. A very satisfactory outcome.

I can't say I want shares in Cazoo, tbh, but I'll see how the share price moves in the morning.

Thanks timarr.

You’ve just given me back my evening!

You’ve just given me back my evening!

It might be worth cross-checking mind :-)

Phil117

Yes. I hold or rather held (until this afternoon) £DMGT. If you look at the small print they helpfully give an estimated offer value of 1263p. It's basically 255p (Offer Price) + 568p (Special Dividend) + 17.3p (Final Dividend) + 0.5749 Cazoo Shares. Based on today's Cazoo share price of c. $9.25 and spot FX I make that c. 1229p at current prices. Daily Mail And General Trust P L C (LON:DMGT) closed today at 1122p, which means a potential 10% premium for holding to completion for any arbitrageurs out there. I've taken the money now and swallowed the associated discount because I have things I want to redeploy into right now, and frankly am sceptical of the Cazoo valuation, like much of the new issue market. Perhaps the market is nervous too based on that discount? Still, nice to see the SOTP value finally (partially) recognised. Arguably the Rothermere family are getting a good deal. But with a dual class share structure that was inevitable

Paul Scott

Escape Hunt (LON:ESC) - Well done gus, great spot re ESC reinventing itself.

Don't expect any immediate analysis from me, as I'm busy emptying the minibar at the Savoy Palace Hotel, here in Madeira - which like all cost-conscious travellers, I manually filled last night from a nearby convenience store. There's no way I'm funding a hotel's c.90% gross margin on minibar supplies.

ESC did not have a convincing business model, so they're doing something a bit different. Good idea!

This follows on quite well from what we were discussing earlier today. Do you pay a premium for a roll-out of something new, or do you buy something generating massive cashflows like Revolution Bars (LON:RBG) that investors hate because they're looking backwards?

For me, it's always about following the money, not the hype. That said, my approach doesn't necessarily work.

Regards, Paul.

Stocks123456

£eskn feels a bit like £saga with one part of the business paying for the losses of the covid affected part. How much would you pay for the biomass business? Ebita of £18-20m is higher than pre pandemic. Not sure what multiple to apply to that.

Tommy H

Hi IGotPoesJacket

I would concur on the long term decline and delay coming from Halifax, a couple of dividends I even had to chase and then get eventually a reply saying they are in process - to which I reply and where is my interest and money please?

I have moved one of the three accounts held with them (mine) to iweb, which lets be honest is the same system just an upfront payment for lower costs, and as I am a low volume trader works right now. But then I also have stuff direct invested through Fundsmith and Vanguard too.

It is on the list to do more research and then move the other two accounts, but also the 12+ week delay in transfers, as mostly the money is in ISA is an off putting thought right now.

Tommy

4th Nov '21

Give it a few days, and all the data, tickers, etc, drop into place for a new listing.

Small Cap Value Report (Wed 3 Nov 2021) - ELTA, NGHT, BMS, ZTF, WIL, CHLL, NANO

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Paul Scott

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