Whilst overall there were probably as many fallers as risers my larger positions were generally on the plus side. $GOOGL is moving up largely on advertising rerates. AV. is delivering good newsflow on asset realisations. FXPO keeps on rolling up on general buying. Though being in the Ukraine current Ukranian-Russian tension is delivering daily volatility. GCAP plodded up after last month’s results. GYS had a sort of bid. PPHE seems to be going up on a hope for a new normal in tourism. TET also rose and I have no idea why as the share price seems full. SOM had good H2 results and then I think some good investor / analyst presentations to follow. The big car crash of the month was MPAC which delivered I though decent results and a positive outlook (I write separately on this in my blog), it would seem that the market did not agree with me.
Dipped my toe into KAPE. Recommended to me as a significantly undervalued company, on a GARP basis. But not deep value and no real asset backing. Maybe some IP. On balance it seemed reasonably priced on current delivery, which had recently been given in a TU. But not given any real value for the growth potential. I would like to see the actual accounts as a TU always leads with the promotional information but a small stake seems appropriate. Average in 196p. The following week Kape announced a well received acquisition and the share price hit my target so sold for a 25% gain.
PPHE delivered what were very poor results for the YE December 2020. That being said as a hotel group during the pandemic they were no worse than expected. The share price at £13.90 remains well below the £22.08 EPRA NRV. Though in all fairness I don’t rate EPRA NRV as a measure so it needs to be well below. Going forward the tone was very optimistic and there was a recognition that their OpCo/PropCo model means that many of the issues their competitors may face have been avoided. The management team are experienced and have delivered well in the past. The company seems well in control of its cashflow and the route to recovery, whilst in large part out of the company’s hands seems increasingly solid. I have adjusted my fair value down based on these results as it will take some years to fully recover. Unless of course competitors leave the market entirely. But I continue with PPHE as an over 5% of portfolio holding and I still have not fully sold the shares I bought when it went to circa £9. Though I do not think the company is significantly undervalued at the moment. I do think that it could as it has always done, continue to increase its value by getting back to delivering on growth.
RENX put out its ½ year to Dec results. This is still very much an early stage medical development company. Revenue is minimal and costs are high. This continues to be the case and RENX continues to be a small holding for me that I am not adding too.
Added to my holding in THS. Average in now 133.6p. I think that most of the commodities THS is mining are strongly priced at the moment which feeds into the current P&L. Whilst a lot of people see the current spot price as unsustainable there may well be a lot of future demand. Particularly with US infrastructure plans. These remain only a Biden desire rather than an actual plan at present. My two big concerns are that THS management seem to be spending a lot of time selling the business rather than running the business and the FD is a long term seller. He seems to be the only PDMR seller but refused to explain why in a recent investor call.
Sold AMYT for a 3% loss. It was part of my pharma basket and was at the high growth end of the spectrum. It was coming to the sixth month point where I like to consider whether to increase or exit a holding and the 2020 results came out. However after the high growth at the end of 2019 the company has broadly flatlined and is not predicting much for 2021. Alongside that, the reasonably well remunerated management have cast options upon themselves like confetti at a wedding. So heads they win, tails they win. With quite poor (imho) results for 2020 and not a lot of great news being forecast for 2021 I could not understand the current valuation which seems well ahead of events so I sold.
After a few days of falling prices I added to FXPO. I still think there is a significant MoS in the business and am happy growing this holding in my portfolio. Mid month the company came out with its 2020 full year results. These were, largely as expected, decent results. The business has not avoided Coronavirus effects but has been able to turn towards supplying the Chinese market. This has required the business to accept lower prices and has led to some increased costs, transport. But many of the potential issues have been overcome and my historic concerns on overstocking have been dispelled. At the moment the company can sell everything it can make. Whilst the stronger iron ore and iron ore pellet prices will help the business what I noticed most was the number of small improvements the company is looking to make across the business. There are potentially a lot of small positives being taken forward. On their own immaterial but combined could be a great result.
Alongside this despite being a capital intensive business FXPO is currently in a strong cash generation phase and has moved from being net cash negative to net cash positive. Partly in recognition of this the company declared a 39.6 cent special dividend.
Quite why this number was picked is unclear with me and I do wonder whether the controlling shareholder had a need for a specific sum. On the plus side the dividend will be paid fairly promptly. It’s not like many UK companies that seem to be declaring dividends that will be paid in many months time.
To be fair the significant downside of being a business controlled by an oligarch who is himself out of favour with the authorities continues. Mr Zhevago is not letting go, though his position is clearly weakened and some of his previously dubious actions are being unwound.
As such FXPO is far from being worth a premium but the business even after these results remains undervalued and I added again. Average in now 237.5p.
AV. Came out with what I thought was very good results for the year ending December 2020. It was less the absolute results and more the ongoing delivery of key features in the still relatively new CEO’s strategy. I think Amanda Blanc is about the third CEO at Aviva who started their role saying that the business needed to be simplified. Remarkably she is the first to actually get on and do it. She has realised over £5bn for a business with a market cap of £15.5bn.
Aviva pays a yield of about 5%. And there was always a risk that all this realised cash was only going to end up being invested in the business or sitting on the balance sheet as “security”. Instead of which very clear statements have been made as to the company’s solvency requirements with the determination that excess cash will be returned to shareholders. I think the shares are undervalued so I would be happy to see a significant level of buy backs. Company has a solvency ratio 202% with levels over 180% being seen by management as excessive.
I don’t think AV. Will be the most massive growth share in terms of its operations but I do think that at the moment it is significantly undervalued and that it should be able to close this gap over time.
Average in 306p.
Sold PALM for about a 12% profit. The company kept on hitting my lower alert and after consideration I was increasingly unsure about the management focus. I still think the company could do well, but why invest in a maybe when I can have much greater confidence elsewhere?
Bought some $MELI. This is the Latin American version of Amazon with an overlay of Paypal. I have been invested here twice before and both times made the mistake of selling. As the shares are now down between 28-37% from their highs I have decided to buy back in.
ARTL rearranged its shareholding. One shareholder reduced its holding from circa 30% to circa 11% and a new property focussed shareholder went from a non disclosable position to 24%. I decided to add. My average in is now 155p
SOM came out with pleasing if rather expected full year results. H1 was tough, but H2 much better. The management do seem to me to be good at saying in broad terms what the plans are and then delivering on those plans – pandemic effects excepted.
Most pleasing to me was the ongoing shareholder commitment in paying such a large dividend. The company has a metric on dividends but could easily have skipped claiming one off coronavirus effects, they however went virtually full pay out. It isn’t so much the actual amount so much as showing commitment.
Given the results I think SOM is undervalued on an EPV basis and have bought a little more. It should be noted that management are increasing sales efforts behind new products and into new markets. This has a near term cost, but hopefully a long term benefit. Management flagged this in their cautiously optimistic forecast for next year. I would however note that this will be another year of costs increasing faster than revenue largely under the guise of investing now for future benefit. Whilst at the moment I do think management deserve the benefit of the doubt there is a slight niggle over jam tomorrow becoming too consistent a refrain.
Uninspiring results from LGEN. I still think the business is undervalued but I reduced my target price after these results. Lots of Covid related excuses which did not contrast well with AV. Who despite the issues seem to be getting on with business.
GYS came out with what I saw as quite good results. I recognise some part of the market expected more and there was a level of selling that I bought into. The business is delivering in excess of £200m at the operating level and £100m after financing costs. As such I don’t think the business is highly valued and provided management do nothing stupid this will be a lovely cash machine. And as regular readers will know I do like cash. Average in 1317.1p
GYS has now received an indicative offer from a US operation. The two businesses have a limited overlap and both represent activities the other would like so it seem like a good deal. The offer is circa 1850p At the moment the shares are trading at 2005p so the question for the next few days is whether to take the money or hold a bit longer to see if there is a competing bid. Or indeed if the indicative offer goes firm. As I do not see it as a blockbuster bid, more a fair price for the asset so even now I don’t feel it’s an offer I have to take.
Added some $NEM. Over the last few months the $ has depreciated against Sterling by circa 16%. Making all dollar denominated assets cheaper. In the great decline of the UK this will be only a temporary stop. Within my lifetime we had $4 to £1 and with various short term trend reversals have been sinking ever since. I don’t recommend playing the FX game for trading. But as part of an investment thesis betting against the US and for the UK seems to be a triumph of hope over reality.
NEM seems to me to be amongst the pick of the gold miners. Others are on my watch list and make sense on a low EV/EBITDA basis, a FCF basis and a hedge against inflation. I don’t think inflation is a great threat today but inflation does seem to be the route that all democracies eventually use to clear debts and we have never had a world more indebted than today. So I am not all in on NEM but I am tucking some into the shoebox.
SCS came out with their ½ year report to 23/01/21. It made Ok but not unexpectedly uninspiring reading. But picking through the pieces I keep on coming to the conclusion that it should easily be able to generate profits in excess of £20m. The company has a mkt cap of circa £90m with £80m of cash. (This was £90m in Jan but had fallen to £83m by March). The company is also a cash generator when it sells as it takes part payment before ordering the product and full payment on delivery before paying the supplier. I am unclear how much of the £80m is free cash but looking through everything I am happy to say £40m as a conservative figure. So £90m mkt cap, free cash £40m – to cover from profits £50m with ongoing normalised by 2023 profitability of £20m. I decided to add some more shares and now average in at 219.6p.
REDD hit my price target and I decided to sell. I did wonder about revisiting the target price but didn’t see a big MoS. Circa 46% profit.
CAML came out with OK but uninspiring results. I was concerned that during the Investor call they kept on saying they had saved money on capex only to later say they had simply deferred it. In the same vein I was concerned that they were bringing forward capex plans and when questioned on this gave me the impression that original plans were optimistic. As a miner capex is not a small thing so a change in capex plans without a clearer rationale for the change is not confidence building. I want optimistic management, I don’t want ones that don’t know when they need millions of dollars of drills. I was also concerned that they seem to be looking for additional assets. To my mind when prices are up, as they are now, you maximise profits. When they fall is when you look around for other assets to acquire on the cheap.
To be fair the management do seem to have a very good operational grip. In that they are driving the costs of operations down in many, though not all areas. But they are very much a play on the copper price and to an extent I could buy a copper future to do that. They also mine lead and zinc. But they don’t have the FXPO or RDSB upside of turning that product into a higher value one. (Iron ore to Iron pellets). (Oil to fuel).
As a consequence I have reduced my target price overall. But would consider a possible buy if prices keep falling. Or even if the Biden stimulus bills start going through. I don’t think CAML will gain a specific advantage, but US infrastructure spending should reduce free supply in the market and float all boats.
Following the MPAC results and the fall in the share price I added. Current average now 172p.
Portfolio increase since Inception (31/03/16) 206%