Small Cap Value Report (11 May 2016) - JDG, WTM, ASY, VTU

11th May '16 by Paul Scott

65 comments 26231 reads

Good morning!

They're testing the fire alarms here at the Yas Viceroy Hotel in Abu Dhabi, so that's forced me to do today's report a bit earlier. I still haven't visited Ferrari World yet, so that's on the agenda for this afternoon. I'm looking forward to going on the 150mph roller-coaster ride!

Judges Scientific (LON:JDG)

There's a new video of a recent investor presentation at Mello, by David Cicurel of Judges - here is the link to PIWorld.co.uk. This website is terrific - set up by an investor friend, to provide video presentations for companies of interest. So it's well worth visiting, and joining their email list, to be notified of new videos posted.

Waterman (LON:WTM)

Share price: 87p
No. shares: 30.8m
Market cap: £26.8m

(at the time of writing, I hold a long position in this share)

Interim Management Statement (trading update) - today's update covers the bulk of H2. This company has a 30 Jun year end. It reads well:

The Group's trading performance has remained in line with the Board's expectations with revenue during the first nine months of the year to the end of March 2016 10% above the prior year period.

As a result, the Group remains on target to exceed its previously declared financial objectives to triple adjusted annual profits before tax to £3.3m over the three year period to 30 June 2016.

All good stuff. The company has been saying for a while that trading conditions are good, with several more years of strong performance expected. So it shouldn't be a big shock to anyone that the company again confirms today that everything is fine.

On operating profit margins, the company says:

As previously announced, the Board's future aspiration is to increase the Group's adjusted operating profit margin towards 6% by 30 June 2019 compared to the 3.3% delivered in the last financial year ending 30 June 2015. The Board continues to anticipate that the results for the current financial year will show a significant increase in adjusted operating margin, consistent with delivery of this new aspirational target.

Without wishing to pour cold water on this, I should point out that Waterman has one significantly loss-making division. Therefore simply eradicating the losses there would automatically achieve most of the target margin improvement for the group overall.

So to a certain…

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Beginner

16th May '16

A pretty good deal, but not unless you like the product! Leasing does have the disadvantage of tying you in.

I currently have a 2002 VW Lupo diesel.
Cost £800 two years ago.
Now worth £800.
Tax = £30
50mpg
Total repair costs to date £300.

Horrible wee car, but cheap motoring and no internet to go wrong (and it is amazing the exercise you get winding the windows up and down!)

Rusty2

I think the main advantage of leasing is you have a new car without tying up a large amount of money and you are not suffering the high depreciation. In fact if you good with investing you could even cover the lease with the investment return. Say £15k car, lease £170 pm, invest £15k you would need a return of 13.6% to cover that.

Yes I wish some cars had the option of non electric windows as thats the most problem I've had on mine, seems to be a VAG problem, talking to various people and garages.

Timing belts can be expensive, should be changed about every 5 years, cost about £300. But some engines have a chain which does not need replacing.

WarrantStar

Vertu Motors (LON:VTU) Paul Scott's opinion (above) is that the recent results are excellent. The stockreport shows that the normalised EPS is down 24% compared to the forecast, which was for a 28% increase. The figures for normalised EPS do not match the results announcement from Vertu. I have questioned Stockopedia about this and have been told it is the result of Thompson Reuters usual process for calculating normalised EPS.
Anyway I have sold my holding, because I can no longer have any faith in the forecasts for Vertu. Also very large differences between reported and normalised EPS are an indication of poor earnings quality.

dfs12

17th May '16

I've taken a look through the results and it appears that Vertu have shown the earnings from recent acquisitions separately (there is a separate profit entry for £9,872,000 from acquisitions). Because of this Thomson have considered these as exceptional items and non core. But that seems wrong - just because it's a acquisition that's making you money it doesn't mean it should be excluded. So in my opinion definitely not a reason to consider the earnings as poor quality. I'm not an accountant - so I may well have all this completely wrong - so I have raised a support call to query the data too. I have queried data in the past and more than once its the data from Thomson that is wrong. Even if they say it is correct I can't see that it makes much difference in reality.

DFS12 Thanks very much for your reply. To me the data that Stockopedia uses to calculate its stockranks, and numerous ratios, is of the utmost importance.
Good luck with your support request from Stockopedia, and please let us all know the outcome.
Generally Stockopedia is really first class. But I find that they are unwilling to question Thompson Reuters about the data. Surely Stockopedia's responsibility is to its subscription paying customers? Stockopedia has selected Thompson Reuters as a supplier. But I am not sure that they have selected the best data supplier. I have no idea who the competition might be for data suppliers.
But if we can't rely on this data, and all calculations for Stockranks & important ratios, then what are we to do?
It seems fairly likely that I, & probably others, have sold Vertu on the basis of unreliable information. So I am less than happy because there is a really major difference between the data for normalised EPS provided by Thompson Reuters, and thus by Stockopedia, and that provided in the company report by Vertu.

I don't know who supplies the share price information but its often incorrect, I looked at my folio of shares on here last afternoon about 4.40pm and it had Berkeley Group (LON:BKG) at over 3300 and another share I can't remember which now was about 10% too high, I've given up raising these issues. Another thing I find very annoying is the prices shown on the folios is the latest trade, not the mid price, so if you have share with a wide spread its going up and down all the time, depending if the last trade was a buy or sell. Stockpedia or Thompson Reuters are not that reliable, take St. Modwen Properties (LON:SMP) EPS forecast for 2015 was -59%, actual was +80%, that is a hell of a difference, the TTM was +108%. If there is a TTM why is the EPS not updated?

Thanks Herbie47
I agree that these issues need sorting out.

xcity

There's usually a period some time after the market closes when some of the prices are way off. Outside any trading range. Caught me out a few times before I realised. Tends to revert to being OK some time after 5.

I always double and triple check numbers before I rely on them. I agree that errors mean that some screens are misleading.

gus 1065

18th May '16

Herbie.

Re. Your issue with the price data in the portfolios screen, you can customise the page to show bid/mid or offer. If you select the portfolio you want then click on the "Holdings" sub-screen on the right hand side and then select the pencil icon you can then drag in or out the variables you want to see in the selection screen I mark my portfolios to the bid side so I can see what their sale value is at any point in time.

Hope this helps.

Gus.

I'm a very big fan of stockopedia too. But i am wondering about the number of additional countries being added at the moment. Each country adds to the amount of base data to keep a lid on. The backroom infrastructure in terms of people and processes to sanitise/check the data needs to get pretty slick - otherwise more issues will start cropping up. It is not unusual for products to have data issues. I use sharescope and they occasionally have problems too. Loads of these companies use the same data suppliers and i don't think any of them are perfect. But when you are running your portfolio off the back of the info it is pretty important. Personally I'd love it if stockopedia went all out to become known as the product with the highest quality uk data set rather than the company with the greatest number of countries covered - but they'll want to grow the business and there's going to be a better business case for launching extra countries than concentrating on the data for the uk. I hope they don't bite off too much at a time though.

Thanks Gus but I do have my holdings set to bid, generally the bid price does not change but still the daily gain is going up and down, for example Amino Technologies (LON:AMO) is bid 107p but it is showing gain is -1.25%, Price change 1.14%, funny AMO is nearly always showing a loss even though the bid price never changes. So going over to the right hand columns these movements are showing in these columns, gain gain % and Today £, even though the mid price has not changed. Now Air Partner (LON:AIR) is showing up 24p, change % 5.99 but the bid price is still 400p, I check with my broker and price is unchanged today.

Yes I agree its happens more around close time, however 4.40 is before close as Stockopedia have at least a 15 minute delay, sometimes hours. But its not only at this time, I have reported incorrect prices around mid day. Its is annoying when you see a share has gone up 3% only to find it has not moved at all. I really think we should have accurate information. Share prices are not complicated. Yes well after the close around 5pm everything is back to normal.

Hi, I have received a response from Stockopedia about the Vertu normalised EPS issue. It wasn't clear in their reply that they had talked to Thomson about this particular case - so I have asked them to clarify.

cig

In so far as Stocko mainly passes through upstream vendor data the cost of adding an extra country is marginal. Other than reporting errors they find upstream, it's probably not realistic to expect a service like Stocko to add their own proprietary data curating level. It's like you don't expect a pizzeria to grow their own tomatoes in the back garden. At some point you have to decide what business you're in.

In any case you'll always have some data errors, and they can be mitigated with diversification: the more stocks you buy, the more you can afford a few them to be in your portfolio for the the wrong reason.

Point taken on diversification, and I think you're right that in the grand scheme of things the number of data errors is probably not significant to the end result. But I'm not asking them to grow tomatoes... I'm just asking them to wash the dirt off before putting them on top of my pizza.

Okay I need to adjust my metaphor: they're buying clean tomatoes. Cleaning the tomatoes is extremely labour intensive in this business (been there done that), generally you either want to buy from a vendor or become a data vendor yourself. Another problem with custom curating is that it introduces a new class of errors that wouldn't otherwise exist: local errors in the curating layer...

Just got a reply from Stockopedia who have now been pressing Thomson to investigate. Thomson have admitted the error and are going to correct it. So we can expect Vertu to look a little better in a couple of days time (seems to take that long for this sort of thing to work through the system). I wonder if this opens up a potential opportunity as everyone who relies on Thomson (inc Stockopedia subscribers) will have been more inclined to sell over the last few days. Interestingly the Vertu share price has been heading south ever since the results - which seems quite counter intuitive as the results were great. The other car dealers reporting recently have had great results too and their share prices have jumped upwards nicely! The error in the analysis might end up making you money! For your info here is Stockopedia reply:
---------------------------------------
Just to let you know, Reuters have got back to me and have indeed admitted an error on that one. They have updated the figure in their database and so we will be showing the corrected data tomorrow morning once we have pulled in all the new data overnight.

You were exactly right that the error was in their treatment of acquisition costs.

My apologies again for the inconvenience and thank you very much for taking the time to report the issue in the first place.
-------------------------------------
So it seems we might need to keep our eyes out for the odd error and then make sure we report it.

Will be interesting to see if this correction will have any effect on the share price. If I did not have Cambria Automobiles (LON:CAMB) I would be tempted to pick a few up.

dfs12
Well done! And thanks very much for pressing the point with Stockopedia.
And thank you to Stockopedia for sorting it out.

I have just bought back in at a lower price than I sold at.
It will be interesting to see what happens to the share price over the next few days!

Flackwell

20th Jul '16

From today's RNS

The UK represents the second biggest market for new vehicles in the current EU and thousands of continental European jobs are reliant on a continuation of this trade with the UK. Consequently, the Board believes that Manufacturer partners are likely to be keen to support UK retailers through any period of uncertainty. The majority of the Group's new vehicle sales are imported to the UK from the EU. Our Manufacturer partners clearly have a vital interest in ensuring continued free trade access to the key UK market and the Board will be monitoring the negotiations of the trade relations between the EU and UK. The GBP:EUR exchange rate is important to Manufacturer profitability on the UK sales and is a factor in determining the level of supply push of vehicles into the UK market. Whilst sterling has declined against the Euro following the referendum result, it remains at levels above the lows seen in 2008/9, and more recently throughout much of 2013, and at levels which the Board believes remain attractive for European Manufacturers to export vehicles to the UK. This should help to underpin the UK new car market which is currently at record levels.

Small Cap Value Report (11 May 2016) - JDG, WTM, ASY, VTU

Judges Scientific (LON:JDG)

Waterman (LON:WTM)

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Paul Scott

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