Jump to content

UK Small Companies' valuations seem highly attractive for long term investors


Recommended Posts

The valuations in the UK seem to be really cheap at the moment:

 

image.thumb.png.d3bdea3ed6acaa07d555e34cb9ee8ca4.png

bild.thumb.png.b13a2815eeef4858cd3f5dee01b9356e.png

 

From:

 

Anyone here been investing in the UK lately?

 

I have bought quite a few stocks, but they always seem to get cheaper except for BATS.L. ADM.L (the "poor man's Geico" of the UK) is a stock I bought recently.

Link to comment
Share on other sites

I own Cranswick, Ashtead, Relx.  Spirax Sarco, Diageo and Fever tree are getting close to me pulling the trigger.  I used to own BATS, sold it and switched to PM.

Link to comment
Share on other sites

Off the top of my head, you might want to look at Experian, which is like the Equifax of the UK.  Can't remember the valuation, but like most things UK, it is basically pretty much as good as Equifax but significantly cheaper.

 

And Rightmove is pretty great, is the significant leader in the online real estate oligopoly.

Link to comment
Share on other sites

Posted (edited)

TheWorks.Ln - value retailer - trades at <2x EBITDA, no debt and net cash, think dividend reinstitution should be a catalyst in July. Playtech, igaming plug-in software, hard to build and very valuable, probably gets acquired soon at a >20% premium; even without it, business is cheap annualizing their latest quarter.

 

JD Sports looks interesting as well, not mentioned anywhere - corp governance overhang but tremendous value creation over the last decade, youngies love shopping for athleisure there, trades at what 4x EBITDA?

Edited by n.r98
Link to comment
Share on other sites

15 hours ago, thowed said:

Off the top of my head, you might want to look at Experian, which is like the Equifax of the UK.  Can't remember the valuation, but like most things UK, it is basically pretty much as good as Equifax but significantly cheaper.

 

Thanks. I added Experian to my watchlist.

 

15 hours ago, thowed said:

And Rightmove is pretty great, is the significant leader in the online real estate oligopoly.

 

I bought a starter position in RMV recently. There's also Hemnet in Sweden which is similar, AFAIK.

 

15 hours ago, n.r98 said:

TheWorks.Ln - value retailer - trades at <2x EBITDA, no debt and net cash, think dividend reinstitution should be a catalyst in July. Playtech, igaming plug-in software, hard to build and very valuable, probably gets acquired soon at a >20% premium; even without it, business is cheap annualizing their latest quarter.

 

JD Sports looks interesting as well, not mentioned anywhere - corp governance overhang but tremendous value creation over the last decade, youngies love shopping for athleisure there, trades at what 4x EBITDA?

 

B&M European Value Retail S.A. (BME.L) seems interesting, but is not really a small cap. I'm not familiar with JD, but have owned BOO.L and ASC.L in the past.

 

Link to comment
Share on other sites

On 6/9/2022 at 2:51 PM, formthirteen said:

Anyone here been investing in the UK lately?

 

Yep Hostelworld (HSW) small cap on LSE is IMO still disgustingly cheap (despite being up 40% YTD) relative to the numbers they are going to print in August

Edited by changegonnacome
Link to comment
Share on other sites

41 minutes ago, skanjete said:

One of the most insane valuations is Anglo Eastern Plantations :

Marketcap : 410m US$

Net cash : >252m US$

EBITDA : +/- 150m US$

You never see the cash.  Look at it from 2000 onwards, and look at how much shareholders have received.

Link to comment
Share on other sites

Also, you need profits for "biological profits" which swing wildly.  On average over the cycle numbers it does not look as undervalued, albeit still cheap.  But you never see the cash.

Link to comment
Share on other sites

@Dinar : did you ever see some cash from Berkshire?

AEP shareholders got something else : the stock price end of 2000 was 0,43£ (with net debt), now 8,5£ (with net cash).

The two are not to be compared, but AEP had a way better return than Berkshire over these years. 

 

About the cash : AEP is steadily investing the cash that comes in.

If you take into account the minorities, they had net debt in 12 of the 21 years. 

 

That being said, management could indeed do some more effort to get a correct valuation from the market. 

Link to comment
Share on other sites

There is a difference.  Berkshire knows how to allocate capital, AEP LN does not.   Look at return on marginal capital for AEP LN.  As for calculations, stock price = 63 pence in 1993 and as you said 8.5 today.  9.4% annual return in pounds and 8.5% in USD.  

Link to comment
Share on other sites

You've got to take the dividends over the period into account, and the payout ratio used to be more important than now. 

In any case, it's clear that AEP has a very respectable track record, although quite volatile.

 

But what are you actually trying to prove here?

Link to comment
Share on other sites

I am trying to prove two things.  a) Profits here are very cyclical, so one should use average over the cycle profits, and not profits from a boom year for purposes of valuation; b) capital allocation matters, and when your stock trades at a fraction of liquidation value, why invest in more plantations rather than to buy back stock or pay dividends?  In my opinion, your returns here will not be very good unless the company is sold to a third party, and not the controlling family

Link to comment
Share on other sites

  • 2 weeks later...

Delayed but JD reported p good profits over fy 21. They are guiding to flat profits despite the last 4-5 months generating +5% over previous comps. Company is in a net cash posn even after netting for the minority put options. With retailers trading at low multiples across the globe, huge opp for JD to continue acq spree with its cash position. Company also made the right decision to raise equity at stock peak. Governance overhang remains. Can't wrap my head though on why theyre so confident in their outlook vs ASOS for e.g. - athleisure has stronger customer base? World Cup tailwinds? Moreover, was in the store just last week pre Myk and still had to queue p long.

 

Also Punch Card Mgmt just took a posn in Countryside Partnerships - apparently transitioning to an asset light model. 

 

Maybe the board has some opinions on said names..

Edited by n.r98
Link to comment
Share on other sites

On 6/14/2022 at 1:18 PM, Dinar said:

Also, you need profits for "biological profits" which swing wildly.  On average over the cycle numbers it does not look as undervalued, albeit still cheap.  But you never see the cash.

Biological profits are non cash. You never see these profits.

 

CAM.L was one of those sucker plays I participated with years ago to no avail. Growing tea and other products who know where. Unless they are paying you significant amount of cash, why bother?

Edited by Spekulatius
Link to comment
Share on other sites

1 hour ago, n.r98 said:

Countryside Partnerships

 

Spent a good chunk of time on this name earlier this year.....the partnerships model they are pivoting to is interesting........but it depends almost completely on the whims of the UK government (which I consider currently as dysnfuntional & unpredictable as the US political system) and how much budget it allocates to social housing/ housing association & Homes England department......the other issue is that in an inflationary environment where Countryside tenders for these partnership projects inflation can wreck havoc on your proposal and your relying on the various local councils to "work with you" in the future to rebase the costs in the tender to allow you to get out with a margin. 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...