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2020's Bargain Share growth potential still on offer

Simon Thompson reveals how his 2020 Bargain Share Portfolio beat the market, and updates all 10 companies
2020's Bargain Share growth potential still on offer

The 2020 Bargain Shares Portfolio has handed back some of its gains following some profit-taking in recent weeks, but has still delivered a healthy 30.2 per cent total return, a decent outcome considering last year’s stock market crash came just 11 trading days after the portfolio’s launch. The total return is more than three times higher than the 7.7 per cent return on the FTSE Small-Cap index, and also outperformed the FTSE Aim All-Share by six percentage points and its benchmark FTSE All-Share index by a healthy 38 percentage points.

As always there have been some big winners, but more comforting is that the two laggards – beauty brands company Brand Architekts and specialist bank PCF – both have strong recovery potential to recoup paper losses. The fact that I consider all 10 shares buys at current levels tells a story, and one that should reward loyal followers in due course.


Simon Thompson's 2020 Bargain Shares Portfolio Performance
Company nameTIDMMarketActivityOpening offer price 7.02.20 Bid price 02.02.21 DividendsPercentage change (%)
XaarXARMain Industrial inject technology company42p135p0.0p221.4%
Metal Tiger (see note two)MTRAimInvestor in natural resources11.8p20p0.0p69.5%
CreightonsCRLMainComputer hardware44p65p0.0p47.7%
Cenkos SecuritiesCNKSAimCorporate broker56p61p0.0p8.9%
Anglo Eastern PlantationsAEPMainCrude palm oil producer570p598p0.4p5.0%
NorthamberNARAimComputer hardware54.9p60p0.3p9.8%
Chenavari Capital Solutions (see note one)CCSLMainClosed-end investment company61.4p35p0.0p-1.0%
CIP Merchant CapitalCIPAimClosed-end investment company57p55p0.0p-3.5%
Brand ArchitektsBARAim Beauty products 160p120p0.0p-25.0%
PCFPCFAimChallenger bank33.3p22.5p0.4p-31.2%
Average       30.2%
FTSE All-Share Total Return index 7,7967,124 -8.6%
FTSE Small-Cap Total Return index 9,2749,989 7.7%
FTSE Aim All-Share Total Return index 1,0991,357 23.5%
Note 1. Chenavari Capital Solutions made a compulsory capital redemption of 34.73 per cent of the share capital at 85.72p a share in March 2020, and subsequent compulsory capital redemption of 21.9 per cent of the share capital at 72.93p a share in July 2020. The total return takes into account the capital redemptions. The company delisted its shares from Aim on 30 September at a closing bid-price of 35p. Approximately 17.9 percent of each holding was then redeemed on 9 November 2020 at 65.26p a share. The board plans to make further compulsory capital redemptions in due course.
Note 2. Metal Tiger shares consolidated on the basis of one share for every 10 shares previously held on 1 July 2020.
Source: London Stock Exchange. Latest prices taken at 1.30pm on 02.02.21. 


Click here for Simon's 2021 Bargain Shares selection. 


Xaar (XAR)

Main: Share price: 135.5p

Bid-offer spread: 135-136p

Market value: £105m


  • Losses slashed and forecast to report a small pre-tax profit in 2022.
  • Multiple OEM contracts signed at eye-catching 75 per cent conversion rate.

Cambridge-based Xaar (XAR), a world leader in the development of inkjet technology and a manufacturer of piezoelectric drop-on-demand industrial inkjet printheads, was a classic Ben Graham recovery play 12 months ago. Net cash backed up 90 per cent of its market capitalisation at the time, the shares traded 65 per cent below book value and there was even hidden value in Xaar’s balance sheet.

That’s because the company holds a valuable 55 per cent stake in Xaar 3D, its cutting-edge 3D printing business, having formed a partnership with Stratasys (US:SSYS) to develop 3D printing solutions based on its high-speed sintering technologies. Stratasys is one of the world’s leading 3D printing companies and has a call option to buy the balance of Xaar’s stake for $33m (£24.3m) at the end of 2022.

In the past year, Xaar’s new management team has been working its magic, improving the working capital position and landing multiple new contracts with original equipment manufacturers (OEMs). Operating losses have fallen sharply, so much so that broker Panmure Gordon expects Xaar to report a pre-tax profit of £1m in 2022.

The share price may have more than doubled, but Xaar is still only valued on a 62 per cent premium to net asset value (NAV) of £65m even though the trading outlook is positive, Xaar retains £20.2m of net cash and looks set to realise a £24.3m windfall from its 55 per cent stake in Xaar 3D. Panmure’s upgraded 176p target price seems reasonable to me. Buy.


Metal Tiger (MTR)

Aim: Share price: 20.5p

Bid-offer spread: 20-21p

Market value: £32.2m


  • Dual listing planned on the Australian Stock Exchange
  • Investee company gives green light to develop the copper project in Botswana.

Metal Tiger (MTR), an Aim-traded investment company focused on natural resource opportunities, has had a prosperous 12 months.

Firstly, Sandfire Resources (ASX:SFR), the A$1bn (£0.56bn) market capitalisation Australian Stock Exchange-listed mining and exploration group, has given the green light to develop the T3 Copper-Silver project in the Kalahari Copper Belt, Botswana. Metal Tiger has a capped US$2m Net Smelter Royalty (NSR) on the T3 Motheo Project and an uncapped 2 per cent NSR over 8,000km of Sandfire’s adjacent licence holdings. Metal Tiger also holds shares in Sandfire worth £18.2m (12p a share).

Secondly, Metal Tiger has a 49 per cent interest in the Kalahari Metals Project (carrying value A$4m, or £2.2m) in the Kalahari Copper Belt, Botswana, the balance being owned by Australian Stock Exchange-listed Cobre Pty (Aus:CBEXX), a company in which Metal Tiger holds a stake worth A$4.7m (£2.7m). The nearby Sandfire T3 and A4 deposits are located close to the Kalahari Metals Kitlanya East Project, highlighting the development potential here. That’s not priced in.

Thirdly, Metal Tiger’s investment in Trident Resources (TRR), an Aim-traded company that is establishing a diversified mining royalty stream, has almost doubled in value since the company invested £570,000 in last summer’s IPO. It’s not the only investment that has done well.

Metal Tiger’s annual results should reveal a decent uplift in the company’s last reported NAV of 15.1p a share, while an imminent dual listing on the Australian Stock Exchange should spark further investor interest. Buy.


Creightons (CRL)

Main: Share price: 65.5p

Bid-offer spread: 65-66p

Market value: £43.1m


  • Record half-year revenue and profits.
  • Branded sales growing strongly.

Creightons (CRL), a Peterborough-based manufacturer of beauty and healthcare products, delivered record half-year results at the tail end of 2020, buoyed by sales of hygiene products, sanitising gels and hand washes, primarily through its reinvigorated 'Pure Touch' brand. These products are sold to major UK retailers and to the NHS as part of its PPE procurement plan.

Revenue through the company’s branded division, excluding hygiene-related products, is growing strongly, too, helped by 180 per cent growth in internet sales, a six-month contribution from Balance Active, the brand acquired in June 2019, and launch of its Body Bliss brand. These factors all contributed to the 36 per cent hike in first-half revenue to £32.3m, which propelled pre-tax profits up by two-thirds to £2.9m.

Cash-flow generation is mightily impressive, too, enabling the company to invest heavily in working capital to fulfil its bumper orders. Net debt is negligible and Creightons should return to a healthy net cash position by its 31 March financial year-end as previous investment in inventories and receivables unwinds. On a 12-month trailing price/earnings (PE) ratio below 10, and price-to-book value of two times, I maintain the view that Creightons’ ability to consistently generate a 20 per cent-plus post-tax return on equity is underrated. Creightons rejected bid approach to smaller rival Innovaderma (IDP) highlights the potential for corporate activity too. Buy.


Cenkos Securities (CNKS)

Aim: Share price: 62.5p

Bid-offer spread: 61-64p

Market value: £35.5m


  • Bumper deal flow in second half of 2020.
  • Strong cash position.
  • Able replacement for retiring chief executive.

Corporate broker Cenkos Securities (CNKS) delivered underlying operating profit of £2m in the first half of 2020, reversing a small loss in the same period of 2019. A relatively low fixed cost base, and a remuneration structure highly geared to performance, means profit rises sharply in a positive operating cash cycle.

Revenue increased by more than a fifth to £12.9m in the six-month period, buoyed by 48 per cent higher corporate finance fees of £9.2m, despite slightly lower income from nominated advisor, broking and research work. Cenkos' strategic focus on growth companies is clearly paying off as clients raise funds for acquisitions and expansion to take advantage of new opportunities.

In the first half of 2020, Cenkos raised £340m of equity finance from 11 transactions including the largest IPO on Aim in 2020, debt advisory and financial restructuring group FRP Advisory (FRP). That run rate accelerated in the second half when the broker raised £575m across 17 transactions, including US$328m (£241m) for Round Hill Music Royalty Fund (RHM).

Cenkos’ balance sheet remains robust. Net cash of £22.4m (40p a share) backs up two-thirds of its market capitalisation and the company has a £15.8m capital resources surplus above the Pillar 1 regulatory requirement. Adjust for cash on the balance sheet, and Cenkos’ highly profitable businesses are in the price for £12m. There is even a 12-month rolling dividend of 2p a share.

Chief executive Jim Durkin retires in March and his replacement, Julian Morse, current head of the Growth Companies Team, is an able replacement. Buy.


Anglo Eastern Plantations (AEP)

Main: Share price: 606p

Bid-offer spread: 598-610p

Market value: £239m


  • Crude palm oil price doubles since May 2020.
  • Pre-tax profits could double in 2020.

Anglo-Eastern Plantations (AEP) primary activities are crop production and processing of crude palm oil (CPO) and some rubber from 16 plantations across Indonesia and Malaysia. CPO, together with its related product, palm kernel oil, is derived from the fruit of the palm oil and is one of the four major vegetable oils. Non-food applications include use in bio-diesel and oleochemicals.

In recent years, oversupply and competitive pricing of other vegetable oils placed significant pressure on the CPO price (ex-Rotterdam). However, I anticipated a sharp rebound in 2020 driven by lower supply coming onto the market (due to a reduction of fertiliser applications by planters); lower industry production growth; and Malaysia and Indonesia pushing through increases in their biofuel mandates.

The CPO price has certainly moved in the right direction, rebounding by 26 per cent to average US$665 per metric tonne (mt) in the first nine months of 2020 and then surging from US$710 to US$1,045 per mt in the final quarter.

So, with Anglo’s production of fresh fruit bunches up around 6 per cent and total CPO production holding steady, I would not be surprised to see full-year pre-tax profit double to US$38m. Strip out net cash of US$90.2m (174p a share) and the shares are rated on a cash adjusted PE ratio of eight. They also trade 38 per cent below book value.

Importantly, as long as CPO price (ex-Rotterdam) stays above US$1,000 per mt, producers will capture the majority of further price rises under the new Indonesian export tax regime. Buy.


Northamber (NAR)

Aim: Share price: 62p

Bid-offer spread: 60-64p

Market value: £16.8m


  • Net cash equates to half market capitalisation.
  • Platform set for IT distributor to perform well as UK economy recovers.

Northamber (NAR), one of the largest UK-owned trade-only distributors within the IT equipment industry, managed to report modest organic sales growth in the financial year to 30 June 2020, and significant margin growth year on year as it picked up opportunities from major rivals. The £2.1m acquisition of audio-visual distributor Audio Visual Materials (AVM) is also helping drive growth for IT and audio visual resellers in areas such as professional displays and video conferencing. 

Non-recurring costs associated with the acquisition of AVM and Northamber’s warehouse move – the company acquired a 51,000 square foot freehold warehouse in Swindon for £3.2m, having sold its Weybridge facility for £10.4m – mean that the operational progress made will not be reflected in forthcoming annual results. However, the platform is set for the well-funded company to do well as the UK economy recovers. Finances are in good shape, too, as Northamber’s robust balance sheet includes net cash of £8.4m, a sum that backs up half the company’s market capitalisation. The shares also trade a third below NAV, a discount that should narrow as underlying sales and margins drive the company into profit. Buy.


Chenavari Capital Solutions (CCSL)

Main: Share price: 35p (bid price when delisted)

Market value: £4.9m


  • Compulsory redemptions return 75 per cent of initial outlay in past year.
  • Break-even 44 per cent below Chenavari’s last reported NAV.

I suggested buying the shares in Guernsey-registered closed-end investment company Chenavari Capital Solutions (CCSL) to profit from the divestment of its portfolio of financial assets (SME loans, corporate loans, mortgages and asset-backed securities). In the past 12 months, the company has made three capital returns totalling £15.6m to shareholders.

Chenavari made a compulsory capital redemption of 34.73 per cent of the share capital at 85.72p a share in March 2020, 21.9 per cent of the share capital at 72.93p a share in July 2020, and 17.9 per cent at 65.26p per share in November 2020. Chenavari then delisted its shares at a closing bid-price of 35p to save costs as it enters the final stage of the divestment process. This means that you will have recouped 75 per cent of your initial outlay and still hold 42 per cent of your initial holding, which has a break-even price of 36.5p, or 44 per cent below Chenavari’s last reported NAV. I still expect a profitable outcome. Hold.


CIP Merchant Capital (CIP)

Aim: Share price: 57p

Bid-offer spread: 55-59p

Market value: £31.3m


  • Portfolio in the price for only 72 per cent of book value.
  • Cash backs up 60 per cent of market capitalisation.
  • Bid approach.

CIP Merchant Capital (CIP), a Guernsey-based closed investment company that takes a private equity style approach to investing, is valued 28 per cent below its NAV of £42.9m (78p a share) even though CIP’s investment managers have been making some decent calls lately.

A few months ago they invested a further £2m in CareTech (CTH:508p), a heavily asset-backed provider of social care services and a favourite of mine. CareTech’s share price has since rallied 12 per cent, which means that CIP’s 1.23 per cent stake is currently worth £7.05m (13p a share). It has also made a 40 per cent paper gain on a £1.1m initial investment in EKF Diagnostics (EKF:77.5p), a point-of-care business that is manufacturing novel Covid-19 testing equipment. Moreover, shares in Orthofix Medical (US:OFIX), a Nasdaq-quoted medical devices company, have recovered strongly after last year’s stock market crash, justifying the manager’s decision to hold on. CIP’s holding in Orthofix is worth £3.6m.

This means that CIP’s estimated £18m cash pile (33p a share) and holdings in Caretech, EKF and Orthofix almost fully cover all its £31.3m market capitalisation, so you have a free ride on £11.6m (21p a share) of other investments. These clearly have some value as they include listed stakes in automotive services firm Redde Northgate (REDD), Milan-based digital marketing company Alkemy S.p.A(IT:ALK) and Aim-traded global procurement software provider Proactis (PHD).

There is even the possibility of a takeover as CIP has rejected a 50p a share indicative bid approach from 15.9 per cent shareholder Corporation Financière Européenne. The valuation anomaly is worth exploiting. Buy.


Brand Architekts (BAR)

Aim: Share price: 125p

Bid-offer spread: 120-130p

Market value: £21.5m


  • New management team outline strategy for turnaround.
  • Company well focused and funded to grow sales in key market segments.

The new management team at Brand Architekts (BAR), an Aim-traded beauty brands business, has had a baptism of fire, having taken the reins during a global pandemic. However, backed by a solid balance sheet boasting net cash of £18m (105p a share) following the disposal of its manufacturing business, and a well laid out strategic plan, they are well placed to turn around the company’s fortunes.

The plan is to focus investment on key market segments – facial skin care, bath and body care, and hair care – launch new products to reinvigorate the company’s 20 brands, and increase their online presence by scaling up digital marketing and e-commerce teams. Improving direct to consumer sales channels will help enhance gross margin, too. Super Facialist has been singled out as a key brand and one that chief executive Quentin Higham plans to grow into a brand generating £10m a year of net sales by 2025. Mr Quentin has form as former managing director of Yardley of London Consumer Care. So too does finance director Tom Carter, who joined last summer, having previously held roles at Alliance Boots and Procter & Gamble.

The point is that with Brand Architekts’ gross margin stable at 35 per cent, and operating costs and central costs relatively fixed at £5.7m, then once annual revenue hits £16m we can expect operating profit to rise sharply given the operational gearing of the business. Priced in line with book value and with net cash equating to 84 per cent of Brand Architekts’ market capitalisation, investors are underestimating the turnaround potential here. Recovery buy.



Aim: Share price: 23.25p

Bid-offer spread: 22.5-24p

Market value: £58m


  • Minuscule impairment charge in PCF’s consumer loan book.
  • Forbearance requests from SME borrowers fall markedly since May.

Aim-traded specialist bank PCF (PCF) is the laggard in the 2020 portfolio, perhaps unsurprising in light of forbearance requests from customers and the risk of bad debts. Investors have massively overreacted.

Annual results revealed a minuscule 2.3 per cent impairment charge in PCF’s £168m consumer loan book, where 93 per cent of lending volume is in prime grades and the average loan size is £18,000 for its 12,700 customers. Demand for used-car finance (as people opt for private travel during Covid-19) and leisure finance (horseboxes, motorhomes and classic cars) continues to buoy demand.

The reason PCF’s annual underlying pre-tax profits halved to £3.9m on £26.6m of net interest income reflects £7.8m of impairment charges, the majority of which reflect IFRS9 provisioning on PCF’s £206m small- and medium-sized enterprise (SMEs) loan portfolio, where £18.7m of loans (accounting for 800 of the 5,800 business customers) are in forbearance. However, as trading for PCF’s SME borrowers returns to some form of normality in 2021, then forbearance requests should decline. The directors expect “significantly reduced impairments this year”. I agree and so do analysts at Equity Development, who are pencilling in 2021 pre-tax profit of £6.8m, an outcome that is not priced into PCF’s market capitalisation of £61m, nor a modest price-to-book value of one times. Recovery buy.


Click here for Simon's 2021 Bargain Shares selection. 


■ Simon Thompson's latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at, or by telephoning YPDBooks on 01904 431 213 to place an order. The books are being sold through no other source and are priced at £16.95 each plus postage and packaging of £3.25 [UK].

Promotion: Subject to stock availability, both books can be purchased for the promotional price of £25 with free postage and packaging.

They include case studies of Simon Thompson’s market beating Bargain Share Portfolio companies outlining the investment characteristics that made them successful investments. Simon also highlights many other investment approaches and stock screens he uses to identify small-cap companies with investment potential. Details of the content can be viewed on

Simon Thompson was named 2019 Small Cap Journalist of the year at the 2019 Small Cap Awards.