Small Cap Value Report (Weds 30 August 2023) - VTU, KBT, FLO, SDRY, OSI, INS, BELL, QRT

30th Aug '23 by Paul Scott

68 comments 8260 reads

Good morning from Paul & Graham!

Today's report is now finished.

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 £1bn. 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.

What does our colour-coding mean? Will it guarantee instant, easy riches? Sadly not! Share prices move up or down for many reasons, and can often detach from the company fundamentals. So we're not making any predictions about what share prices will do.

Green (thumbs up) - means in our opinion, a company is well-financed (so low risk of dilution/insolvency), is trading well, and has a reasonably good outlook, with the shares reasonably priced.

Amber - means we don't have a strong view either way, and can see some positives, and some negatives. Often companies like this are good, but expensive.

Red (thumbs down) - means we see significant, or serious problems, so anyone looking at the share needs to be aware of the high risk.

Summaries

Vertu Motors (LON:VTU) - down 1% to 68.6p (£234m) - H1 Trading Update - Paul - GREEN

H1 trading is in line with expectations, and it confirms FY expectations too. Surprisingly upbeat I think, considering tough macro. PER is only about 7x. Still lots to like here I think, so I remain positive.

K3 Business Technology (LON:KBT) - 116p (unch.) (£55m) - Interim Results (current trading in line) - Graham - AMBER

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Breakout Trader

30th Aug '23

Indeed.

Those kids grew up and became middle-aged pot bellied men, but kept wearing superdry :)

Wolf of Small Street

Thanks Paul. I try to add a mix of childish humour with some occasionally useful stuff :-)

Basically the top list filters out loss makers (one or 2 might slip through) Bottom list is everything. I used to trade penny shares for a few years, as you say every dog has their day , multibaggers can come from the most unlikely places.

Silver Moon

"I'm not clear what the difference is between the 2 lists you published?"

One list of Good, one list of Bad, completely opposite poles. I hold only NAHL (LON:NAH) and Hummingbird Resources (LON:HUM) in the first and OptiBiotix Health (LON:OPTI) and RTC (LON:RTC) in the second. HUM I doubled down on, successfully and feel there is more to come, NAH is a hopeless case (self-serving directors) and OPTI too having bought on a high while the same goes for my RTC investment but which is showing strong signs of life. So all in all, Paul could well be right with his comment.

mammyoko

Like others, you piqued my interest on this one. I particularly liked the way in which the market was absorbing sales. I was also interested in your assessment of Phil Reason and did my own research on his background which confirmed what you had said. I took a fairly large position in this as a consequence of your much longer term interest snd so owe you a huge thank you for bringing it to my attention here.

I’ve noted elsewhere a suggestion that Instem (LON:INS) may be of more value to a trade buyer and wonder if the price might be indicating a potential counter-offer from that direction? The discount to the offer price looks too small to be pure arbitrage. But perhaps it’s a done deal in current conditions. Like you, I thought it might have further to run than the take-out price so will probably continue to hold until it’s clear that there’s no other interest. I would have thought that there’s very little downside risk on this one.

Paul, many thanks for your valuable reply, I raided the current account to fund this which admittedly makes me a gambler. The gamble is on the newly added/changing Board who presumably need to hold some shares, accounting for the recent buys, perhaps I'm joining forces with chancers! Normally I would be putting dividend money into companies which pay nice dividends but there I go.

BnB

m&s food is a snowball - this is the real secret sauce that's re-vitalising them

Couldn’t agree more. I was in the prime central Manchester store food hall last week. It was so good I wondered if I was still in the UK. Well, until I chatted to the cashier anyway! Beautifully presented quality food. Well done to the management.

Paul Scott

Sure, I've had a quick look and posted a short section above. Looks quite interesting! Thanks for flagging :-)

MattH

The major shareholder holding over 50% has always put me off this after what happened with IBPO.

This is the reply from one of the AI bullshitbots. Sounds like the author at Flowtech has been on a course.

Question- "What the actual bollocks are Flowtech Fluidpower (LON:FLO) on about?

Our refreshed strategy (our journey to the future) sets out our ambition and has two key components

a) A world of motion

b) The power of one"

Answer- Flowtech Fluidpower (LON:FLO) is a company that operates in the fluid power industry, providing specialist technical fluid power products and services. The statement "Our refreshed strategy (our journey to the future) sets out our ambition and has two key components" suggests that Flowtech Fluidpower has outlined a new strategic direction for their future growth and success. The two key components of their strategy are:

a) A world of motion: This component indicates that Flowtech Fluidpower aims to operate in a dynamic and evolving industry. It suggests that they will focus on adapting to changes, embracing new technologies, and staying at the forefront of advancements in the fluid power sector. They may seek to expand their product range, improve efficiency, and cater to the evolving needs of their customers.

b) The power of one: This component emphasizes the significance of individual actions and contributions within the organization. It suggests that Flowtech Fluidpower recognizes the importance of each employee's role and encourages a sense of empowerment and accountability. They may focus on fostering a culture of collaboration, innovation, and individual responsibility to drive their business forward.

Overall, Flowtech Fluidpower's "journey to the future" represents their strategic vision and ambition for growth. It encompasses operating in a dynamic industry and recognizing the collective power of individual efforts within the organization.

sharw

Flowtech Fluidpower (LON:FLO)

Well, AI has got it wrong on the 'Power of One'. This was explained in detail in today's IMC presentation (recording now available ). It is all about making it one company. Nearly all the many acquisitions had carried on with their own brand name, own catalogue etc. but this is all being swept away as in this slide:

Deegee Eff

H & T (LON:HAT) .

I was wondering the same thing myself, whilst reading one of the many research reports (Hardman I think). By one of their metrics the shares should be worth over £7 if I remember correctly.

Recent figs were affected by huge rises in some costs they said, eg Insurance doubled, staff costs etc.

That Ramsden's not affected suggests not a regulatory issue.

Could be selling from speculative holders from the placing recently throwing the towel in ?

I will continue to hold .

Bouden54

Interesting table. Kicking myself for not buying some Marks and Spencer (LON:MKS) - had held on and off just before the recent surge. Looks obvious in retrospect - it was trading really well and due a big rebound.

fanmail

Don't worry about cost - the chinese are and will be seeing to that. Prices are falling sharply, just look at 2nd hand values.

Thank you sharw. Human beats A.I again.

BenHazz

An investment play on the slower uptake of EVs is certainly Sylvania Platinum (LON:SLP). I have held previously but sold out at 80p due to a swiftly declining Rhodium spot price. As an essential metal in the production of catalytic converters, if more ICE cars are required than projected, this could cause a spike in the Rhodium price, which would reflect very favourably on SLP. The Rhodium price seems to have stabilised at around $4000 per oz, if this starts to form an uptrend in the coming months SLP could be a nice mid-term play over the coming years. Current SP is 70p.

rmillaree

I think the main barrier to wider adoption of EVs is cost, rather than range

I would agree - some peeps really are getting ahead of themselves with EV's though - the reality is they are still very "niche" (less than 5% of cars on the road?) - expecting full infrastructure and facilities for everyone/"me" to be in place now is just plain silly. I would agree it doesnt help if infrastructure and planning are poor but for now the fact they are so niche still probably leaves a decent pool of peeps who may get one as next vehicle even if it aint for you anytime soon. I dont really see an particular technical hurdles for infrastructure to come on tap at a later date - in some respects going biggie to soon would probably leave us with outdated bits of kit. I cant see any reason not to presume we will be in very decent place in 5 years time just due to natural evolution and the infrastructure will appear even if it somewhat lags what we should ideally have - that time is probably arriving pronto based on % of new vehicles being sold tnow hat are electric (there may be a spike here due to very attractive benefit rules currently for electric cars)

What amazes me is that anyone could buy a non tesla electric car and then be surprised that they cant charge it up en route to cornwall on bank holiday weekend !

from reasonable pool of peeps i know who have a tesla they are generally stunningly happy with their choice of vehicle. Other electric car users seem to be mostly happy although it aint been what they thought it would be for all.

Zipmanpeter

Just like nearly all markets, EVs are going through a classic S curve.

The first people to buy are willing to pay over the odds for unreliable tech for the idea; over time the product improves, the price falls, more people buy in and competitors increase; eventually only the laggard consumers remain buying residual stocks.

The value equation becomes good for specific niches first (milkfloats!, golf buggies, virtue-signalling Hollywood A listers), then bigger ones (people with solar who can charge at home); and finally it goes mass market. Only Luddites and traditionalists still long for the horse and cart.

Long term EVs will beat ICE cars because they are intrinsically simpler and more efficient and thus will become cheaper.

So if you drive 500 rural miles everyday, enjoy the sound of an engine or like standing in a windy garage for 10mins filling your car, drive a diesel for another 10 years, no issue - but it will get ever harder to justify why you do.

Westway001

I’d like the down thumb back…

Michael Tee

Hi Mammyoko

It is very pleasing to me if my posts have been of benefit.

I think it is unlikely that a counter bid will be successful.

Phil and the board will want to ensure the company and employees continue to be looked after well. Archimed seem to be an excellent fit and have the funds to grow Instem (LON:INS) more quickly.

stevenhume

5th Jan

(LON:QRT) Whilst the shares look good value, what about the ownership i.e. one man owns >50% and none of the other major holders are institutions.

Small Cap Value Report (Weds 30 August 2023) - VTU, KBT, FLO, SDRY, OSI, INS, BELL, QRT

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Paul Scott

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