Downing Strategic Micro-... Share Discussion Threads

[spectoacc] 08/10/2020 13:53

Judging by the sell quotes, the buyback is finally having an effect. Wonder how close to NAV they'll push it..

[red ninja] 01/10/2020 11:29

DSM splashes some cash :-

"(Alliance News) - Digitalbox PLC on Thursday said it has acquired Tab Media Ltd for GBP750,000 in cash and announced a GBP1.2 million subscription in conjunction with the buy.

The Bath-based digital media company, which owns Entertainment Daily and The Daily Mash, said the proposed subscription by Downing Strategic Micro-Cap Investment Trust PLC was priced at 4.9 pence per share for 24.5 million shares. This represents a 2.0% discount to its Wednesday closing price of 5.0p.

Shares in Digitalbox were up 10% on Thursday morning at 5.50p.

The subscription shares represent 27% of Digitalbox's existing share capital and will represent 21% of share capital once subscription shares are issued. It is conditional on shareholder approval, with proceeds to "be used to accelerate the company's growth strategy through further acquisitions".

As part of this, Downing Strategic Micro-Cap and Digitalbox have entered a relationship agreement that will remain in place while Downing Strategic Micro-Cap holds at least a 10% stake. Under the terms of this agreement, Digitalbox has granted Downing Strategic Micro-Cap the right to appoint an observer to any board meetings.

Digitalbox Chair Robin Miller has said he is willing to resign, pursuant to the subscription agreement, and step down from the board. He will remain in his role until a successor is appointed.

Tab Media runs online news website The Tab, which covers youth and student culture for university students in the UK. It operates a national website plus 32 sub-sites for specific UK universities.

The Tab Media acquisition is expected to be marginally accretive to Digitalbox's earnings per share, as enlarged by the subscription, in the first full year and significantly accretive in the second full year after the buy.

In 2019, Tab Media's revenue was around GBP1.2 million. It made a gross profit of GBP900,000 and a pretax loss of GBP400,000, while its gross assets on December 31 came to GBP600,000.

Digitalbox Chief Executive James Carter said: "The Tab is the UK's leading youth culture platform fuelled by students and a pro team of journalists who love being first with the most relevant stories. The Tab provides a really exciting addition to our portfolio. As well as providing insights into youth and student culture, it is an important training ground for journalists.

"As achieved with The Daily Mash, our technology platform can help drive traffic and advertising revenue to support the site. Since we acquired The Daily Mash in 2019, we have grown traffic and revenue whilst allowing the editorial team to get on with what they do best, and we aim to do the same with the Tab. We very much look forward to working with Editor-in-Chief Grace Vielma and her team as we look to grow and enhance The Tab."

By Anna Farley; [e-mail]

[red ninja] 30/9/2020 12:04

The results for Real Good Food, Fireangel and Synectics have all been a bit disappoint ing due to Covid19 effects.

Adept Tech update today although encouraging is still like likely to be impaired when the results come out IMO

Still yesterdays NAV was still above 67p, presumably due to Volex share price rises.

[red ninja] 22/9/2020 15:39

Notice of AGM

Real Good Food Plc (AIM:RGD) announces that its Annual General Meeting will be held at J F Renshaw Limited, Crown Street, Liverpool, L8 7RF, on Wednesday 23rd September 2020, at 11.00am.

[spectoacc] 16/9/2020 10:04

9p spread. DUKE reasonable t/s this morning.

[red ninja] 11/9/2020 10:37

Totally agree it does not deserve a premium and should not even trade at a par until there is more proof of a turnaround.

[spectoacc] 10/9/2020 16:07

You'd struggle to say it deserves its premium again tho - or even to trade at par.

Over 3 years from £1 issue price and no more than a quarter of the fall is Covid IMO.

[red ninja] 10/9/2020 16:00

To be fair they did pick Volex, but the rest have not shone at best and at worst like Redhall have been a disaster.

If RGD divisions are sold there should be a good payout on the loan notes.

She is right if there is a market crash DSM should be in a good position to buy quality at good prices.

[spectoacc] 10/9/2020 15:42

If only she could pick stocks like she can market the trust:

[red ninja] 08/9/2020 11:21

Downing selling some Pennant International. However, this is now at a low level in DSM so not really too significant.

[hugepants] 01/9/2020 13:24

Market down 1.5%. Volex up 8%!

The other portfolio holdings are flat. Good performance.

[spectoacc] 01/9/2020 11:49

Yes, always stock available in DSM, wouldn't pay Offer.

Also enjoyed:

"Bar a recession, we are hopeful that the company will grow earnings this year.."

Have they missed the c.20% drop in GDP? :)

[red ninja] 01/9/2020 11:29

The launch date for the trust was not opportune.

I like the bit in the reports where they say they are targeting an annual return of 15% although not in the current investors letter. Maybe they are learning.

They are investing in two new holdings ie Toehold 1 + 2, but they appear to be waiting to buy at the correct price. Hopefully they have not picked turkeys.

Hopefully the trust has better days ahead, but there is still a recession to get through.

Some buys at 52.4 and above. Personally I'd wait a bit as price always seems volatile with DSM.

Then again Volex is pushing higher maybe I am too negative.

[spectoacc] 01/9/2020 10:42

Lol yes, always talk a great game.

"A further 20% is comprised
of businesses which we think aren’t trading much higher than what we consider to be a minimum valuation given the quality of earnings and balance sheet strengths underlying."

Um, how about buying them at those prices in the first place?

(The cash/loan notes point is a good one, albeit most of the loan notes are Real Good Food. Buybacks would be highly accretive if a fifth is in cash, & think I'm relieved they've not been punting it instead).

[red ninja] 01/9/2020 10:32

Septembers Investors letter making the case for DSM as normal :-

"Despite our caution, there are reasons to be cheerful with this portfolio from both a downside protection and an upside perspective. Firstly, almost 21% of the portfolio is in cash and another 20% is in loan notes where their value is not influenced by volatile stock markets. That makes over 40% of the portfolio which is entirely unaffected by volatility. Volex comprises just under 16%, and is trading robustly through this period. Bar a recession, we are hopeful that the company will grow earnings this year and should continue to re‐rate. A further 20% is comprised
of businesses which we think aren’t trading much higher than what we consider to be a minimum valuation given the quality of earnings and balance sheet strengths underlying. From an upside perspective, the opportunity is significant. Not only is there over 100% of upside potential to intrinsic value in the portfolio, but investors today can access that upside at a 27% discount to current NAV. That points to a 64% ‘double discount’. The discount has historically
traded significantly narrower than the current gap and we expect that discount to narrow as value creation catalysts are delivered, and the wider market begins to appreciate the quality of some UK smaller companies."

[hugepants] 14/8/2020 10:55

The Volex share price is performing well

[red ninja] 07/8/2020 09:38

Well the challenge to Gamma should come from the groups they mention, but also DSM.

I mean with RGD they were very much the activist investor.

RGD does seem to me in turnaround with DSM approved managers, but it has been dealt another challenge with Covid-19. If the debt burden ever becomes too much for RGD I believe the loan note holders might be forced to do a loan for equity swap. However, I don't believe that is the case at the moment and hopefully will never come to that.

[spectoacc] 07/8/2020 09:28

Thanks @RN - agree re Gama, tho the "..Disappointed..no challenge.." is a little disingenuous - the challenge should be coming from DSM IMO.

As long as RGD keeps going, those loan notes will turn out fine (tho is a reminder of another duff pick by Ms MacKenzie & co).

[red ninja] 07/8/2020 09:26

July news letter out :-

hxxps://assets-us-01.kc-usercontent.com/8c961317-6aee-00a7-e4b6-ae38cd847d2d/6be6c983-a6ec-4109-91cd-2b5f8d2f1621/PE3040_Downing%20Strategic%20Micro-Cap%20Investment%20Trust_Factsheet_August%20(Jul)%202020.pdf

They have sold off Gama Aviation which is a good move as it has been a weak holding :-

"In the month, we exited our remaining position in Gama Aviation in full, prior to
it announcing results. This is an incredibly disappointing outcome, but one which
has been driven by an increasing lack of confidence in the management team
and Board, following restatements of its accounts, and what we perceive to be
misleading accounting practice which flattened cash flow, including by failing to
recognise the receipt of overpayments totalling c$5 million in 2017 and c$5.75
million in 2018. We are equally disappointed that Gama’s directors, brokers and
auditors at the time, have not faced any challenge to their professional conduct
before, during or after the placing in February 2018 in view of the subsequently
discovered accounting inaccuracies."

This should povide cash for new investments hopefully of much better quality.

Real Good Food most loan notes, but small amount equity is largest holding at 20 %.

[hugepants] 06/8/2020 10:29

Agree performance has been rank the last few years but maybe this is the year it all turns around. Actually like the portfolio with the possible exception of RGD. Even then I imagine cakes are a growth sector at the moment.
They are also cashed up so in a good position to bag some bargains.

[picaroon] 06/8/2020 09:31

Haven't looked at this for some time. I see that Judith MacKenzie is maintaining her stellar performance as fund manager (figures to 30 June 2020):

1 Year: Bottom place
3 Years: Bottom place
5 Years: Bottom place

Citywire ratings

Still not been fired!

[spectoacc] 06/8/2020 08:27

Considering one of Duke's big royalty deals was to a European ferry co, I think they're doing pretty well. They ought to emerge well out the other side (whenever that may be).