[SharePad] Small-Cap Spotlight Report: CAKE BOX

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21 January 2022
By Maynard Paton

Oh dear. I had expected this article to celebrate a dynamic growth company that had commendably prospered during the pandemic.

I find myself instead relaying some unusual financial reporting after digging deep into a few annual reports.

Read on to discover:

  • An erroneous £2 million entry within the cash flow statement;
  • The inconsistent disclosure of related-party transactions;
  • The delayed reporting of a website breach to the auditor (and customers);
  • Historic errors” with stock control;
  • The auditor resigning after becoming “concerned about the robustness of the Company’s control and governance frameworks“;
  • The peculiar disclosure of trade payables and receivables, and the level of receivables versus revenue, and;
  • Bookkeeping curiosities such as overdue tax, R&D tax credits and regular revaluations of distribution centres.
(Source: SharePad)

Let’s take a closer look.

Read my full Cake Box article for SharePad.

Maynard Paton

PS: I have provided more Cake Box observations on the Quidisq forum.

M WINKWORTH: Exceptional H1 Sets New £2m Profit High As Record Quarterly Dividend Plus Third Special Payout Underpin ‘Busy’ FY 2022

13 January 2022
By Maynard Paton

Results summary for M Winkworth (WINK):

  • An “extraordinarily active” sales market led to an exceptional six-month performance, with the H1 £2m profit exceeding WINK’s peak annual profit from FY 2014.
  • Subsequent trading updates then lifted FY 2021 expectations and announced a record quarterly dividend alongside the third special payout of the year.
  • Market-share gains versus London rival Foxtons plus very encouraging progress at the company-owned Tooting office underpin the prospect of a “busy” FY 2022. 
  • The accounts remain in good order, with this H1 showing a super 38% margin and net cash and investments supporting close to 20% of the share price.
  • Near-term earnings may well subside if housing activity cools, but WINK’s reliable dividends may limit the downside with a possible 5% income. I continue to hold.

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Q4 2021: Up 24.5% For 2021

01 January 2022
By Maynard Paton

Happy 2022! I hope you profited from last year’s strong market and you continue to find my blog useful.

A summary of my portfolio’s 2021:

  • Total return of +24.5% (Q4: +4.6%)*;
  • 8 holdings recorded a gain while 3 holdings recorded a loss;
  • Returns ranged from up 104%, for System1, to down 20%, for Bioventix;
  • Two shares were topped-up: System1 and M Winkworth, and;
  • No new shares were purchased and no shares were sold.

(*Performance calculated using quoted bid prices and includes all dealing costs, withholding taxes, broker-account fees and paid dividends)

I publish a portfolio review after every quarter (Q1, Q2 and Q3), and this post recaps my October/November/December activity and my 2021 performance.

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My Portfolio: Year In Review 2021

01 January 2022
By Maynard Paton

Happy New Year!

I trust you enjoyed the festive break and are now ready to battle the market for another twelve months!

This 4,609-word post provides a ‘year in review’ of my current holdings. I recap how each business performed during 2021 as well as provide a few remarks about valuation. 

These reviews are very useful to write, not least because they help ensure I am still invested for the right reasons. Any upsets I will suffer during 2022 will most likely be caused by the shares I already own rather than any new shares I will buy.

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[SharePad] Screening For My Next Long-Term Winner: ASHMORE

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15 December 2021
By Maynard Paton

Shares offering ‘Quality At a Reasonable Price’ have been hard to find during the last few years. But recent market conditions might be presenting a few fresh opportunities.

Specialist fund manager Ashmore could meet some QARP-type criteria. At present this £2 billion mid-cap offers:

  • Impressive financials, including a majestic 66% margin and ‘surplus’ capital of more than £600 million;
  • A reliable dividend history, with the payout never being cut during the banking crash and pandemic, and;
  • A reasonable P/E of 12-13 alongside a dividend yield of 5%-plus.
(Source: SharePad)

Let’s take a closer look.

Read my full Ashmore article for SharePad.

Maynard Paton

FW THORPE: £27m Acquisition Spend Underlines New Expansion Ambitions After Special Dividend Complements 19th Consecutive Annual Payout Increase

14 December 2021
By Maynard Paton

Results summary for FW Thorpe (TFW):

  • A remarkable recovery following a factory fire ensured a satisfactory FY 2021, which included a record H2 and a special payout to complement the 19th consecutive annual dividend lift.
  • Customers seeking “tried and tested” manufactures alongside ongoing demand for SmartScan counterbalanced component shortages, the pandemic and Brexit.
  • £27m spent on new acquisitions has underlined TFW’s expansion ambitions and signals a firm desire to earn greater returns on the group’s £76m cash hoard. 
  • The accounts remains in good shape, although the record 47% gross margin may be short lived if supply difficulties and rising costs continue. 
  • A P/E of 30 feels generous, but might reflect operational reliability, a positive ‘buy and build’ strategy, significant ‘ESG’ attractions and/or potential growth beyond lighting systems. I continue to hold.

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CITY OF LONDON INVESTMENT: Net Client Withdrawals Of $752m Continue To Limit Re-Rating Potential Despite FY 2021 Showcasing Record $11.4b FuM, 49% Margin And £26m Net Cash

25 November 2021
By Maynard Paton

Results summary for City of London Investment (CLIG):

  • The Karpus merger ensured a record financial performance and a 10% dividend lift, although funds under management (FuM) during H2 (+4%) did not enjoy the buoyant market gains experienced during H1 (+31%).
  • Further client ‘rebalancing’ led to FuM withdrawals of $752m — almost entirely negating the net client inflows of $758m received during the previous five years. 
  • The absence of fresh client money and investment gains lagging the MSCI World index — as well as staff using paper payslips and fax machines — could be evidence of a business rather stuck in its ways.
  • A startling 49% operating margin, net cash at a hefty £26m plus small demands on cash flow confirm the accounts remain in good shape.
  • Although the possible P/E is 10-11 and the yield tops 6%, the shares have been rated modestly for years as major new clients remain very elusive. I continue to hold.

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[SharePad] Small-Cap Spotlight Report: AQUIS EXCHANGE

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21 November 2021
By Maynard Paton

Investors love ‘disruptors’. Find a pioneering upstart that is stealing market share from industry dinosaurs, and your portfolio may enjoy a huge stock-market winner. Amazon of course is the textbook example.

One company that could be a genuine disruptor is Aquis Exchange, a £180 million small-cap trying to revolutionise share trading and taking on the likes of the London Stock Exchange and Euronext.

(Source: SharePad)

Let’s take a closer look.

Read my full Aquis Exchange article for SharePad.

Maynard Paton

BIOVENTIX: FY 2021 Results Unveil Record H2 Profit (+14%) While Finite Troponin Income Shifts Longer-Term Perspective Towards Pyrene Project And Alzheimer’s Research

05 November 2021
By Maynard Paton

Results summary for Bioventix (BVXP):

  • Acceptable annual figures that included a record H2 profit (+14%) despite the pandemic continuing to disrupt demand for routine blood tests.
  • Mixed progress from vitamin D and other established antibodies leaves near-term growth dependent mostly on the fast-selling troponin product. 
  • Additional research efforts suggest pyrene biomonitoring and detecting Alzheimer’s disease may be the more likely long-term pipeline winners.
  • A 19% dividend lift, another special payout, 70%-plus margins and low retained-profit requirements underlined the wonderful economics of collecting antibody royalties. 
  • Troponin’s finite income and a resultant sum-of-the-parts valuation do not indicate an obviously tantalising £36 share price. I continue to hold.

Read more

TRISTEL: Pandemic-Disrupted FY 2021 Admits H2 Profit Down 36% But Also Re-Introduces FDA Timetable As Sector Rival Implies $180m US Market Opportunity

29 October 2021
By Maynard Paton

Results summary for Tristel (TSTL):

  • A disappointing pandemic-disrupted performance, with H2 revenue and profit down 15% and 36% respectively on the preceding H1.
  • Progress was curtailed as NHS outpatient clinics closed and orders “dried up“, which left certain UK product sales running at a six-year low.
  • Overseas revenue up 3%, a resilient 16% H2 margin, net cash of £10m and a 2% final-dividend lift suggest the business is not broken just yet. 
  • A re-introduced timetable for product launches in the United States provides hope of the seven-year FDA process concluding during 2023.
  • The £236m market cap remains elevated, and is supported by a sector rival implying the US market for ultrasound-probe disinfection is worth up to $180m. I continue to hold.

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[SharePad] Small-Cap Spotlight Report: GOODWIN

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20 October 2021
By Maynard Paton

This quote from Richard Beddard caught my eye the other week:

If something truly special is incubating, we may profit from our investment for decades.”

I am always up for profiting from an investment for decades.

Richard was writing about “pivots” — companies that are adapting to change by “incubating another better business“.

He highlighted four examples and today one of the quartet — Goodwin, a £277 million market-cap engineer — goes under my SharePad microscope.

Richard described these pivots as “decent but humdrum” businesses, but do not let that put you off. Goodwin has 30-bagged during the last 20 years and a heritage of family management could indeed lead to decades of further profit.

(Source: SharePad)

Let’s take a closer look.

Read my full Goodwin article for SharePad.

Maynard Paton

S & U: Record H1 Profit Prompts Welcome 50% Dividend Rebound And Management Talk Of Loan Volumes Increasing 25%

19 October 2021
By Maynard Paton

Results summary for S & U (SUS):

  • A record H1 profit performance supported by a “lower than normal” bad-debt provision and the dividend rebounding 50% to pre-Covid levels.
  • The main car-loan division has recovered well from the pandemic, with collection rates (94%) and on-time first payments (98%) now standing at multi-year highs.  
  • The fledgling property-loan operation enjoyed a bumper six months following the government CBILS scheme.
  • Interest charges at 3%, increased borrowing facilities and headroom of £65m indicate no obvious funding concerns.  
  • The £28 shares are close to an all-time high and may already reflect management’s webinar talk of car-loan volumes increasing 25% to 25,000 a year. I continue to hold.

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Q3 2021: Linking Revenue Per Employee To Investment Success

30 September 2021
By Maynard Paton

Happy Thursday! I trust your shares are flourishing and that you still find my blog useful.

A summary of my portfolio’s third quarter:

  • Q3 change: +5:1%*
  • Q3 trades: none
  • YTD change: 19.0%*
  • YTD winners/losers: 9 winners vs 2 losers

(*Performance calculated using quoted bid prices and includes all account fees, dealing costs, withholding taxes and paid dividends)

I am pleased the portfolio gains recorded during the first half of the year were extended during Q3.

Newsflow from my shares has been generally encouraging, and I hope boardrooms will remain optimistic as the pandemic subsides.

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[SharePad] Screening For My Next Long-Term Winner: CURTIS BANKS

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22 September 2021
By Maynard Paton

Shares offering ‘Quality At a Reasonable Price’ have been hard to find during the last few years.

But specialist SIPP provider Curtis Banks could meet some QARP-type criteria.

At present this small-cap offers:

  • Predictable income, with approximately 60% of revenue said to be recurring through annual fees;
  • Respectable financials, including 20%-plus margins and an ambition to reach 30%;
  • A history of growth, although future prospects have admittedly moderated, and;
  • A reasonable P/E of 14-17 depending on which projections you believe.

Let’s take a closer look.

Read my full Curtis Banks article for SharePad.

Maynard Paton

MINCON: Mixed H1 Suffers Pandemic Disruption And Extends ‘Moat’ Questions As Management Expects A Better H2 After Creating A ‘Platform For Future Growth’

22 September 2021
By Maynard Paton

Results summary for Mincon (MCON):

  • A very mixed H1 performance, as record €67m six-month revenue contrasted with profit down as much as 13% due to general pandemic disruption.
  • European construction revenue encouragingly climbed 50% supported by numerous smaller projects and innovative sector products.
  • Customer testing of the “disruptive” Greenhammer system remains on hold, although other developments are now “poised to deliver“.
  • The move to selling a wider range of equipment direct to customers continues to limit margins/returns on equity/cash flow and raise doubts about an indisputable competitive ‘moat’.
  • While a P/E of 20 is not a clear bargain, the long-time family management expects a stronger H2 and claims to have established a “platform for future growth“. I continue to hold.

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