Weekender #6

A weekly recap on European micro-caps

Good morning and welcome to your weekly source of European micro-caps news. This week we published our first deep dive note “Deep Dive #1 - Cake Box Holdings PLC (#CBOX)”. This is the first stock that made it into our micro-cap portfolio. We will keep you posted on CBOX by covering earnings/press releases via Twitter. We intend to do this for all deep dive stocks. I hope you enjoyed the note. If you are short on time just read the investment thesis below (1 min read). Also, if you have any questions re CBOX, ping me an email, I’m always happy to discuss!

Let’s dive in


Have you ordered your cake yet?

This is all you need to know about CBOX:

CBOX is an asset light franchise business model with >40% ROCE and no direct national competitors. The company has grown revenues at a 5yr CAGR of >30% and we expect growth to remain strong due to 1) new kiosk format in shopping centres and supermarkets (Asda); 2) new delivery service; and; 3) product innovation (vegan, gluten-free). The business has proven to be pandemic resistant, with revenue +17% and adj. EBITDA +26% FY21A (March year end). CBOX boasts gross/EBITDA margins of 50%/25% and we expect these margins to expand as 1) sponge sales become a larger slice of the pie (70% gross margin); 2) CBOX benefits from bulk buying; and; 3) online sales increase. CBOX also benefits from a robust balance sheet which is net cash. This is a founder-led company with the management team owning 49% of the company and with LTIP awards well aligned with shareholders’ interests. The company has a strong institutional shareholder base with the likes of Fidelity, AXA, and Ennismore on the list and it has a limited broker coverage (2 + paid marketing). CBOX trades on a reasonable valuation of 22.6x EBITDA FY21A (rapidly falling thereafter). As per all the high quality cash compounders, we expect most of the returns to come from the growth and compounding of earnings and not from the re-rating of the stock. This is the first micro-cap that makes the cut and we are long term holders of the stock. Stay tuned for our next deep dive due in September.

Feedback so far (apart from great report and love the cake!) is the stock looks a tad overvalued. My response is the multiples will look more attractive once the company delivers on store openings. I find that with compounders, the best thing to do is to buy the stock and forget about it. These are stocks that tend to grind higher and where finding the perfect entry point usually leads to never investing in the stock.


  • Karolinska Development Ab (#KDEV) +85% (mkt cap: £70m): A Sweden-based investment company that provides capital to biotech firms, as well as develops and commercialises biotech products. Have a look at the chart. The company reported on Thursday and the stock finished up 61% on the day. However on Wednesday, a day when there was no news (last news on Monday with no price reaction) the stock ended up 18%. There’s clearly something fishy going on here and if I was the regulator I would take a closer look at who was buying on Wednesday. 2Q21 results were strong with net profit SEK216.4m (2.1m). Lots of KDEV portfolio companies listing/announcing intentions to list reflecting increased maturity level of companies.

  • Codere Sa (#CDR) +47% (mkt cap: £73m): A Spain-based company engaged in the operation of arcade and slot machines, sports betting houses, bingo halls, casinos and racetracks in Latin America, Spain, and Italy. This stock must have been flying below peoples’ radars because the stock move this week which was driven by Codere Online filing a registration statement with US SEC regarding a proposed business combination with DD3, was just paperwork for the deal announced on 22 June. It’s an interesting deal. Codere Online is a leading online gaming and sports betting operator in Latin America and DD3 Acquisition Corp II is a SPAC. The deal values Codere Online at an EV of $350m (mkt cap $500m). Codere Online will be listed on Nasdaq and Codere Group will maintain a stake of between 54-73%. The deal is expected to be completed in 4Q21.

  • Novacyt (#ALNOV): +40% (mkt cap: £276m): An Anglo-French biotech company focused on clinical diagnostics. On Wednesday the company reported a 1H21 update. Revenue +50% YoY and a new contract with the Department of Health and Social Care under Public Health England agreement. “The Company expects continued strong growth in private testing as markets and travel re-open and, as the Northern Hemisphere heads into winter, the potential for higher infection rates will increase the need for COVID-19 testing.” ALNOV reiterates revenue guidance of £100m for FY21.


  • Clemondo Ab (#CLEM) -32% (mkt cap: £22m): A Sweden-based company manufactures washing and cleaning products for home and industrial use including automotive, food, workshop and hygiene. The company reported 2Q21 results on Thursday with numbers looking significantly weaker YoY, Sales SEK75.4m (95.9m), EBITDA SEK7.5m (20.5m). The company saw strong growth in sustainable cleaning products but also lower demand for pandemic-related hygiene products. Interestingly, paring the rapid volume change has been a challenge. The company expects to achieve a more optimal staffing/resource allocation in 3Q (thank you Google Translate, what would I do without you!)

  • Cyan Ag (#CYR) -31% (mkt cap: £25m): A Germany-based company engaged in the field of IT security and providing white labelled security solutions tailored to the business partners. Profit warning FY21 - the company can no longer maintain the revenue/profit forecast given at beginning of the year and now expects revenue EUR10-14m (EUR19-23m) and EBITDA will be clearly negative (breakeven). 2020 was characterised by many one-off revenues. The company is now focusing on recurring revenues but revenues are coming in more slowly than expected. Management is planning extensive restructuring measures such as cost reductions, the sale of business units and a cash capital increase to finance the repositioning.

  • Powerhouse Energy Group PLC (#PHE) -22% (mkt cap: £144m): A UK-based company that has created a sustainable technology to transform plastic/waste into clean energy. Shares have been weak all week. On Friday the company announced that Executive Chairman, Tim Yeo, will be stepping down with immediate effect due to personal reasons. He was only appointed in July last year. He will remain as a consultant for 12 months. James Greenstreet, who has been a non-executive director at PHE since 2011, will be replacing him as Chairman. The recruitment for a new CEO is ongoing.

Directors’ Deals

  • Minds + Machines Group Ltd (#MMX): Operates in the domain name industry and provides end-to-end domain services (mkt cap: £74m). Buyer: Non-Executive Chairman (Guy Elliott), 2.6m shares at 8.5p (£221k). Owns 2.7%.

  • Trident Royalties PLC (#TRR): A UK-based diversified mining royalty and streaming company (mkt cap: £61m). This is not the first time we mention them. On 6 August NED Albert Gourley bought £185k worth (owns 3.5%). This week the Non-Executive Chairman Paul Smith bought 775k shares at 34p (£264k) and NED Peter Bacchus bought 175k shares at 34p (£60k). The Chairman joined on the 21 June and Peter Bacchus at the end of July. They are probably building up their positions. PS owns 1.84% and PB owns 0.10%.

  • Quartix Technologies PLC (#QTX): A UK-based supplier of vehicle tracking systems and services. At the beginning of the month the CTO (Laura Seffino) sold £50k worth of shares at 457p. This week, a Director of Quartix Ltd, Peter Brown, sold £83k worth of shares at 488p. QTX is trading near an all-time high.

Notification of Major Holdings

  • Best Of The Best (#BOTB): “Win your dream car!" (mkt cap: £66m). We wrote about the profit warning in the previous Weekender. Post the profit warning, MI Chelverton UK Equity Growth Fund initiated a new 5.1% position. The art of catching a falling knife. Best case scenario for the entry price is 800p, worse case is 1148p. Now its trading at 730p. Only time will tell.

  • Napster Group (#NAPS): (Formerly Melodyvr Group PLC) A UK-based company that owns and operates the MelodyVR and Napster music platforms (mkt cap £39m). Buyer: Nice & Green S.A., a Swiss company based in Nyon that specialises in alternative equity financing, has increased its position from 6.4% to 12.3%

  • Tribal Group PLC (#TRB): A UK-based company that provides software and services for Education management (mkt cap: £220m). Buyer: New 4.9% position from Harwood Capital Management Ltd. Last time they popped up on my spreadsheet was for a new 19.4% position in NAHL Group PLC (mkt cap: £27m). The asset manager has £1.9bn AUM and was established in 2011 by Christopher Mills (co-founded JO Hambro Capital Management).

Movers & Shakers

  • NAHL Group PLC (#NAH): A UK-based consumer marketing business focused on legal services market (mkt cap: £27m). James Saralis, who was until now CFO but who was covering also for the CEO who departed in September 2020, is now CEO. Taking his place as CFO is Chris Higham who was working under James Saralis as Group FD. The Non-Exec Chair changed in October 2020 so there’s been quite a bit of change at the top, but now that all vacancies have been filled, the company can refocus on executing the strategy.

  • SenzaGen Ab (#SENZA): A Sweden-based company that sells state-of-the-art non-animal tests for assessing a substance’s allergenicity (mkt cap: £30m). The CEO, Axel Sjobald, is leaving to another company. More money? better opportunity? who knows, however, he’s been replaced by Peter Nahlstedt who was appointed to the board in 2018. His last operational role was as CEO of Probi AB. He is expected to lead the company into a new phase with a focus on a growth strategy that now also includes acquisitions of profitable and growing companies. 

  • Vita 34 Ag (#V3V): A Germany-based company that operates as an umbilical cord blood bank (mkt cap: £54m). The CFO, Falk Neukirch resigned this week to take on a new challenge and will be replaced by Andreas Schafhirt who has 20yrs experience as CFO and most recently worked as CFO of Biella-Neher AG.

Tweets of the week

  • Seriously cool!

Enjoy the weekend all!

Dark Horse Research