[SharePad] Small-Cap Spotlight Report: TRUSTPILOT

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18 November 2022
By Maynard Paton

Read a set of company results, and chances are you will spot a reference to Trustpilot. Examples of quoted businesses mentioning the popular review website include:

  • AJ Bell: “Our operational performance indicators have shown excellent levels of customer service as demonstrated by our high 4.5-star Trustpilot score.“
  • AO World: “Over 350,000 Trustpilot ratings, averaging an “Excellent” 4.6/5 stars.“
  • Big Yellow: “We have over 3,200 reviews from the independent review site TrustPilot. These reviews average a 4.7 out of 5-star rating, labelled as “Excellent” on the TrustPilot ratings scale.”
  • Procook: “We are pleased to have retained our excellent-rated Trustpilot score of 4.8.“
  • Redde Northgate: “Customer satisfaction is the cornerstone of our business success and the ‘excellent’ satisfaction scores achieved across our businesses from Trustpilot.“
  • Redrow: “We continue to be rated as ‘excellent’ on Trustpilot.“
  • ScS Group: “Improved Trustpilot rating to the maximum 5 stars, maintaining our ‘Excellent’ rating with over 370,000 reviews.”
  • Travis Perkins: “The experience with Toolstation remains best-in-class with the business achieving a 4.6-star rating on Trustpilot.“

With so many quoted companies trumpeting their Trustpilot reviews, is Trustpilot itself worthy of a 5-star investment rating?

Let’s take a closer look.

Read my full Trustpilot article for SharePad.

Maynard Paton

M WINKWORTH: Yield Approaches 7% Despite Acceptable H1 2022, Quarterly Dividends Lifted 23% And Confidence Towards £2m Profit Forecast 

04 November 2022
By Maynard Paton

Results summary for M Winkworth (WINK):

  • An acceptable H1 performance that would always struggle against the comparable (and exceptional) H1 but encouragingly matched the preceding H2.
  • The subsequent Q3 update provided reassuring ‘mini-budget’ commentary, reiterated an earlier £2.1m profit forecast and announced a further 23% quarterly dividend lift.
  • Claims of a leading SSTC market share may contradict statistics from Foxtons, with fresh leadership at the London rival set to create stiffer competition. 
  • A robust 25% margin plus £4m net cash left the accounts in good order, although cash conversion was impacted by rising intangible expenditure and more franchisee loans.
  • The gloomy outlook for the economy and housing market looks responsible for the possible 10-13x P/E and yield that approaches 7%. I continue to hold.

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CITY OF LONDON INVESTMENT: H2 2022 Profit Drops 20% And FuM Slides To $8.5b Although Yield Now Tops 8% And Run Of Net Inflows Extends To 4 Quarters

21 October 2022
By Maynard Paton

Results summary for City of London Investment (CLIG):

  • Rough market conditions causing funds under management (FuM) to fall 17% to $9.2b led to H2 net fee income dropping 5% and H2 profit diving 20%.
  • A post-year update showed FuM sliding a further 8% to $8.5b, but also the fourth consecutive quarter of net FuM inflows that may signal clients re-appraising CLIG’s ‘value’ approach.
  • Buying SPACs at discounts to cash helped merger partner KIM outperform the original CLIM division with 6% five-year annualised returns versus 3-4%.
  • Revenue “100%” denominated in the stronger USD, handy cash conversion plus net funds and investments of £30m counterbalanced an H2 margin squeezed to ‘only’ 42%.
  • Near-term earnings could now be running at 36p per share, which should still support the 33p per share dividend and 8%-plus yield at 400p. I continue to hold.

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

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20 October 2022
By Maynard Paton

Difficult market conditions have led to depressed ratings for many asset-flush shares.

Hence a new screen to pinpoint companies offering cash-rich balance sheets and market caps below their book value. I have attempted to avoid ‘value traps’ by demanding the shares pay a dividend and offer a history of trading above book value.

The exact filter criteria I employed for this search were:

  • A price to net tangible assets of no more than 1;
  • A dividend being paid during the most recent year;
  • A 10-year average price to net tangible assets of at least 1;
  • Net borrowings less total leases of no more than 0 (i.e. a net cash position excluding IFRS 16 lease obligations), and;
  • A share price denominated in pounds sterling.

I applied the screen the other day and SharePad returned 22 matches:

(Source: SharePad)

I selected Redrow from the five house builders at the top of the list because the group’s recent results included very clear guidance:

Redrow’s own projections put its 400p shares on a P/E of approximately 4 and a yield of at least 8%

Combined with a net asset value of 554p per share that gives a price to book of 0.72, the FTSE 250 constituent is very much trading at the ‘deep value’ end of the market spectrum.

Let’s take a closer look.

Read my full Redrow article for SharePad.

Maynard Paton

Q3 2022: Portfolio Winners As GBP Slides Towards USD Parity

02 October 2022
By Maynard Paton

Happy Sunday! I trust your shares continue to perform better than mine during 2022.

A summary of my portfolio’s progress:

  • Q3 return: -9.2%*.
  • Q3 trades: None.
  • YTD return: -23.4%* (FTSE 100: -3.9%).
  • YTD winners/losers: 2 winners vs 9 losers.

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

I am heading for my worst annual performance for at least two decades after my portfolio fell 9.2% during Q3 to leave my shares down 23.4% for the year so far.

Yet despite another miserable quarter of negative returns, the Q3 newsflow did not seem particularly awful. 

Special dividends were in fact declared by Andrews Sykes and Tristel, which takes one-off payments for me this year to six and cements 2022 as my best-ever year for extra income. The quarter also witnessed higher payouts from M Winkworth and S & U.

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SYSTEM1: £100m Revenue Ambition Disappears Following Disappointing H2 Loss As Tender Offer Cancelled And Agitated Shareholder Initiates Strategic Review

24 September 2022
By Maynard Paton

Results summary for System1 (SYS1):

  • A disappointing FY 2022 performance, with a Q4 sales warning alongside greater costs leading to a small H2 loss.
  • SYS1’s ‘Reasons to Believe’ have been diluted, and hint at reduced long-term expectations following the disappearance of a £100m revenue ambition.
  • The transition to new data and consultancy services continues, with such income representing 51% of total revenue for FY 2022 and possibly 70% for Q1 2023.
  • A fresh non-exec reveals the agitated shareholder who has initiated a strategic review, which in turn led to the sensible cancellation of a tender offer.
  • Net cash represents 31% of the market cap, with long-term multi-bagger potential presently obscured by weak legacy services and costs running ahead of new-product revenue. I continue to hold. 

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[SharePad] Small-Cap Spotlight Report: SHOE ZONE

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23 September 2022
By Maynard Paton

Top of the shops among this year’s market carnage has been Shoe Zone.

The discount shoe retailer has enjoyed an amazing 46% share-price gain so far this year in a sector blighted by rising costs and recessionary fears:

(Source: SharePad)

A trio of upbeat trading statements caught the market’s attention this summer.

The first occurred during June and referred to “strong margin improvements“:

“29 June: Shoe Zone is pleased to announce that since the publication of its interim results in May, the business has been trading well and has also seen strong margin improvements and cost savings, in particular as a result of rent reductions and good supply chain management, which are expected to continue into Q4 of the Company’s financial year for the 52 weeks to 2 October 2022″.

The second update followed in July, and revealed “stronger than expected” trading:

“26 July: Shoe Zone is pleased to announce that since the publication of its trading update on 29 June 2022, trading has been stronger than expected due to higher than expected demand for summer products, particularly in the last two weeks. The Company has also continued to experience margin improvements as a result of good supply chain and cost management.”

And the third update occurred last month, and confirmed trading had “continued to exceed expectations“:

“31 August: Shoe Zone is pleased to announce that since the publication of its trading update on 26 July 2022, trading has continued to exceed expectations due to continued strong demand for summer and back-to-school products throughout August. The Company also continues to benefit from the margin improvements as outlined in recent trading updates.”

The remarkable run of RNSs also revealed the group lifting its current-year profit expectations from “not less than £8.5 million” to “not less than £10.5 million“.

The profit upgrades and share-price surge will of course be welcomed by shareholders, although the company’s longer-term performance could mean the positive summer may not be a persistent phenomenon.

The shares joined AIM at 160p during 2014 and, eight years later, the price stands at… 160p:

(Source: SharePad)

Let’s take a closer look.

Read my full Shoe Zone article for SharePad.

Maynard Paton

MOUNTVIEW ESTATES: Estimated NAV At £210 Per Share After H2 2022 Shows Average Sale Reaching £379k To Realise 66% Premium Over Allsop Valuation

02 September 2022
By Maynard Paton

Results summary for Mountview Estates (MTVW):

  • A steady FY 2022 performance, buoyed by an H2 that saw property sales achieve a record £379k average and realise a 66% premium to their 2014 Allsop valuation. 
  • The final dividend was lifted 11% while expenditure on new properties fell to a 13-year low after management expressed a desire to “not chase purchases at any price“.
  • Net debt remains very modest at just 5% of the property estate and reflects management’s concerns of forthcoming “difficult economic circumstances“.
  • Friction between major shareholders continues, with revised director-pay arrangements perhaps encouraging significant protest votes at the latest AGM.  
  • Net asset value remains at £101 per share, although the balance sheet could be worth £210 per share assuming all owned properties enjoy immediate ‘reversionary’ gains and are then sold at fair-market value. I continue to hold.

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BIOVENTIX: H1 2022 Reveals Dividend Up 21% And ‘Exciting’ Tau Biomarker Although Cash At 6-Year Low Now Reduces Special-Payout Prospects

26 August 2022
By Maynard Paton

Results summary for Bioventix (BVXP):

  • An unspectacular H1 performance, albeit accompanied by a 21% dividend lift, after further pandemic disruption left revenue down 8% and adjusted profit down 9%.
  • Muted progress from vitamin D and other established antibodies continues to leave near-term growth dependent on the fast-selling troponin product. 
  • The “exciting” potential of a Tau biomarker alongside the BVXP website selling pyrene test kits suggest positive developments within the research pipeline.
  • Net cash at £5m is the lowest for six years, and combined with standstill earnings seems likely to reduce the size of any FY 2022 special payout.
  • Troponin’s finite income and a resultant sum-of-the-parts valuation do not indicate an obviously compelling £33 share price. I continue to hold.

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

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25 August 2022
By Maynard Paton

Another month and another round of ‘back to basics’ filtering.

Introduced earlier this year to identify James Halstead, this screen shortlists companies that offer cash-flush balance sheets, robust margins and dependable dividends. SharePad returned 19 matches:

(Source: SharePad)

I selected Cerillion because the shares were among the few on the shortlist to have moved higher this year. I passed on EMIS and Cardiff Property because the former was subject to a bid and the latter was too small.

Cerillion’s shares have actually five-bagged since the pandemic lows of March 2020 and remain very close to their £11 all-time high:

(Source: SharePad)

Let’s take a closer look.

Read my full Cerillion article for SharePad.

Maynard Paton

ANDREWS SYKES: FY 2021 Discloses UK Hire Revenue Rebounding 17% To Deliver 34% Margin While Dividend Yield Remains Near 5% Despite Potential FY 2022 Heatwave Bonanza

18 August 2022
By Maynard Paton

Results summary for Andrews Sykes (ASY):

  • An encouraging performance, with profit recovering 35% following the pandemic to almost match the record set during FY 2018.
  • Additional reporting disclosures revealed ASY’s main UK Hire division enjoyed sales rebounding 17% and a wonderful 34% margin.
  • European operations expanded to 27% of group revenue following very strong progress, although Middle Eastern woes included an extra £1m provision. 
  • The books remain in good shape, with useful cash generation lifting net funds to £29m and perhaps increasing the possibility of another special dividend. 
  • An estimated 13-14x P/E and near-5% yield hardly seem expensive given the appealing financials, potential for an FY 2022 heatwave bonanza and scope for further European expansion. I continue to hold.

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TASTY: £8m Market Cap Could Still Be Remarkably Cheap After FY 2021 Reiterated 5-6 New Restaurants Despite ‘Prevailing Economic Uncertainties’

04 August 2022
By Maynard Paton

Results summary for Tasty (TAST):

  • The absence of pandemic restrictions ensured a bumper H2 performance that TAST acknowledged may not be repeatable during the current year.
  • Higher wages, rising utility costs, “prevailing economic uncertainties” plus a June update that did not refer to H1 trading could be other signs of FY 2022 not being that profitable.
  • Rent reductions of 27% now appear to be temporary, and explain why total lease obligations remain in excess of £50m.
  • Repaying an emergency loan, appointing a new executive alongside plans to open 5-6 new restaurants confirm management’s mindset has moved from ‘survival’ to ‘recovery’.
  • Although the £8m market cap could be remarkably cheap if TAST ever sustains a modest margin on decent sales, other shares could offer more dependable returns. I continue to hold.

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