Weekend Rebel Review Oct 5th 2024

It's quiet.....oh so quiet.....

This is just some thoughts, it isn't investment advice or incitement to buy in any way, just my views - please do your own thorough research. I’m not an analyst, I’m just a private investor looking after my own money. Nothing I do or say is meant as advice or should be taken as such. Here I publish my ideas and research that I have done and discuss the way I invest.  Anything written here needs to be verified for its accuracy. Assume any stock I write about I likely own, so my views are biased. Inevitably I will get things wrong, everyone is responsible for their own decision making and what they buy and sell. Subscribing and reading this article means you accept the above and you take full responsibility for your own actions and decisions. Small Cap stocks can be illiquid and very hard to sell at times when demand is weak so caution is required.

It has been a lot quieter week so I thought I would kick off today with a chart and a few comparisons.

Three indexes here as you can see. Pink is the FTSE250, Lavendar is the FTSE Small Cap Index, Green is Aim, over 3 years.

Aim has greatly under-performed.  This has been a feature since Covid, I can’t explain why other than the heavy selling then was it part a lot of people finally getting out of some ‘Aim dreadfuls’ and they just haven’t returned?  I don’t know because there is no difference between the whole Aim market and the Ain 100 so it’s a puzzle.  It may mean the real value is in Aim here of course.

Whatever the reason, the FTSE250 and the FTSE Small Cap Index have been a far better place to be.  That may change, Aim may have a lot of catch up to do but it may be that investors are far more risk averse after the pain of Covid and they are giving the less reliable, loss making shares in Aim a wider birth or possibly investors are looking for stocks with assets and divi paying more and they are fewer on Aim.

I posted the bounce in the Chinese market this week – I know they are some way from the middle east but rising nearly 30% in a spike like this is impressive in the face of a middle east war which will affect everywhere imo The bounce in China has been huge.

You have got to watch these foreign indexes when they move like this because it is rarely for no good reason. Burberry has firmed off the bounce and there has been a bout of brokers firming up their targets and far less positive, HSBC being the first to actually raise their price target.

The real issue for markets is the middle east kicking off. Did anyone expect it not to tho?  I posted a couple of months ago that this was my biggest issue and I had sold down heavily.  I’ve been buying back bits gradually as these issues get priced in but we still are not fully there.  We then have the US election to deal with now too. I’m struggling to see what difference Trump or Harris will have on the market, they both seem loopy in their own ways. A lot is priced into a lot of shares now and I expect there is a lot of surprises to come over the next few months, good and bad.  The interesting thing I see is that the FTSE Small Cap Index is the best performer lately, nearing an attempt at a 3 year high and a big bowl.  There is still the budget to come but I suspect some will buy ahead of that if they feel the bad news is priced in. Can they afford to upset business?

FTSE Small Cap index – still set up to break out at the end of the month if not before.

Below are the FTSE250 and Aim indexes

Meanwhile the US still looks strong, all the indexes near the recent highs. And so to sharers:

Tuesday saw news from MPAC regarding another acquisition.

The consideration payable to the Sellers for CSi Palletising is an enterprise value of €56 million which is to be satisfied as follows:

Cash Consideration of €41.5 million on Completion;

€5 million through the issue of 1,039,500 Consideration Shares at the Issue Price of 400 pence per share (subject to a two-year lock-up);

€6 million through the Vendor Loans; and

€3.5 million by two deferred consideration payments of €1.75 million each which become payable on 1 January 2026 and 1 January 2027.

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It looks an interesting acquisition and easy to see the rationale.  It never said earnings enhancing though and Panmure and Shore never raised forecasts for this year but I suspect it’s going to help upgrade earnings as it gets bedded in.

I am not holding a large amount – will see where it goes short term. I think I can find faster growth in the market and while Freyer is in there for free, the take up of EV’s looks to be stalling which comes as no surprise to me, they just don’t live up to the hype and especially in the UK this dumb government has just driven electricity prices to the highest in the world!  If it kicks off in the middle east, Iran and other nations may need to fund their weaponry and pump more oil to pay for it, which would bring oil prices down in comparison That’s a  side issue for MAC tho who likely benefit from low oil prices too. But Freyer has nothing priced into forecasts anyway.  Adam Holland, CEO had frequently said he’s looking for 10% sales growth and 10% margin growth and if they achieve that they are cheap in my view.

I highlighted these last weekend after buying into them on the basis that the results were imminent and the chart was showing a bowl.  You can read more there:

https://cockneyrebel.substack.com/p/weekend-rebel-review-sept-27th-2024?r=29huk7&utm_campaign=post&utm_medium=web&triedRedirect=true

The bowl n the chart suggested something good going on.  On Tuesday the company said this:

That looked interesting to me but the initial reaction by punters was to sell.  If I had been at the screen I’d have been buying the dip.  That evening, Mark Kleinman on Sky News posted this:

https://news.sky.com/story/saga-in-talks-with-belgiums-ageas-about-insurance-arm-deal-13226065

It would appear SAGA are in talks with Agean regarding a deal to reduce SAGA’s debt which sounds like a sale of part or all, or some form of partnership with the Insurance business which has been a struggle for SAGA.

The shares duly rallied 14% the next day on 10 times normal volume.

On Wednesday SAGA added this:

“Saga plc (Saga or the Group) notes recent media coverage. The Group is in discussions with Ageas with regard to a potential partnership arrangement for its Insurance business.

There can be no certainty that any partnership agreement will occur. A further announcement will be made in due course, as appropriate.”

SAGA are striving to create a new ‘capital lite’ business model.

I’m looking forward to seeing where this goes and the forthcoming results. This reminds me a lot of Thomas Cook and how it had huge debt (far worse than SAGA compared to mkt cap) who saw Harriet Green take over as CEO and in 6 months they had 8 bagged. They were being written off on the debt, trading on a PE below 2 and were not making headway. SAGA’s debt is high but nothing like Thomas Cook had. SAGA’s leverage ratio fell from 7.5x to 5.4 times  at the last results and with Cruises seemingly doing well they can hopefully make inroads into the debt (they repaid in full the £150.0m 3.375% senior secured bond in May from existing cash resources.)  They are looking to achieve a capital lite business model for both insurance and cruises. None of that is a prediction. I’m just mentioning the broad parallels I see.  This is definitely high risk and not for those that like asset backed investment or strong balance sheet so do a lot of research. 

I’m cool with taking higher risk when the stars look more aligned and the potential reward looks worthy of the risk.

And that was mainly a very quiet week for me.  I did buy GAMA after mentioning it last weekend and that fab bowl and it was good to see a director buy nearly £100k worth on Thursday – director buys in this market have been few and far between everywhere. I also added more FTC – 20% off the recent high and SpaceX demand and margins going forward look just too good not to imo.

WOSG announced the acquisition of Hodinkee – a website which talks watches and affiliates to watch sellers. WOSG will be the affiliate now so it should provided a decent sales boost.  No numbers were given but I suspect it was pretty cheap as WOSG are bringing back the founder owner to run it so it looks like they think he can run it better – interesting. After trading my WOSG last weekend for near 25%, I bought them back on Friday on the dip.

I watched CARD CEO, Darcy Wilson Rymer on Edison on Friday.  It looked okay to me, but he was definitely less fluent than in the past. Edison’s interviewer sidestepped the H1 numbers.  The jury is out, I wouldn’t want to guess either way where they will meet forecasts.  I think I can find racier movers till they issue an update so closed the last few I had for now and maybe return later.

Enjoy the weekend and I hope next week is a bit more busy and exciting. 

CMCX trading update due on Thursday.

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