Small Cap Value Report (14 July 2017) - DX., CCT, RFX, HAS

14th Jul '17 by Graham Neary

46 comments 15262 reads

Hi everyone,

There's not much in terms of results today but there are some trading updates on some familiar stocks, so that's what I'll be covering.

Cheers

Graham

DX (Group) (LON:DX.)

Share price: 9.5p (suspended)
No. of shares: 200 million
Market cap: £19 million

Trading Update

These shares remain suspended due to ongoing procedures related to a potential reverse takeover by Menzies Distribution.

That doesn't stop the news flow and today we learn that the CEO and CFO are both stepping down from the company.

Perhaps given the destruction of the share price, there are few platitudes given in the statement with respect to these changes.

We further learn that the company's bank remains supportive in relation to net debt at end-June of £19 million.

If the bank wasn't supportive, the consequences would likely be dire for equity value, so this is certainly not a positive - just the absence for now of a serious negative.

But perhaps the outcome isn't going to be so bad for shareholders after all, if the Menzies deal goes through. The Group is being reorganised into two divisions, Express and Freight, whose managers will report to the Board. Is that in preparation for the Menzies deal going through, I wonder?

Adjusted PBT is set to be in line with market forecasts. Overall, combined with the personnel changes and the restructuring, I'd see this as a soothing update for long-suffering shareholders.

Character (LON:CCT)

Share price: 490p (+1.6%)
No. of shares: 21.1 million
Market cap: £103 million

Character renews license for Teletubbies

Again, I see this as less of a positive than the absence of a negative!

Character, through its subsidiary Character Options, designs and distributes a wide range of toys under some of the most well-known brands.

The relationships with the licensors are critical, and Character has done a really good job over the years of impressing IP-holders with what it can do.

Today's statement confirms that Character is still impressing DHX, the owner of the Teletubbies brand. Another happy customer:

"As we continue to grow the overall licensing programme for Teletubbies, it is imperative that we build on strong sales and marketing in core categories. Character Options has done a sterling job with the toy lines and we are excited about the…

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Flackwell

17th Jul '17

In your own article

Last Friday, the Swiss parliament adopted a bill that gives priority to Swiss-based job seekers - Swiss nationals and foreigners registered in Swiss job agencies - but which avoids quotas on EU citizens

Rusty2

Yes but it was over turning quotas which would restrict EU workers going to Switzerland. Quotas on EU citizens means they were restricted.

"The EU approved a new Swiss law on Thursday (22 December) that will allow EU citizens to work in Switzerland, opening the way to solve a two-year crisis."

timarr

In the event that there is no deal then we default to the WTO tariff system - so the level of tariffs between the UK and the EU (and every other country) is then determined under WTO rules. However WTO tariffs only apply to goods - so the EU will be able to continue to trade with the UK on well understood terms, and the UK will not be allowed to levy punitive levels of tariffs - which would be stupid anyway, as most of the stuff we import we can't make here anyway.

However, services are not covered under WTO rules and are subject to negotiations between individual trading areas. Within in the single market or under the auspices of a trade deal such as the ones with Korea and Canada access to the EU market for services is done under controlled terms. Without such a trade deal individual EU countries are allowed to introduce whatever local rules they want to limit access to their market for services - so the French could require banks to set up branches in every small town, the Danes to ensure all UK financial services customer support people speak Danish, etc.

So if there's no deal then the EU gets to trade its £96 billion surplus of goods with us under WTO rules and we get to trade our £24 billion surplus on services under any restrictive rule the individual 27 countries of the EU decide - and under WTO rules we're not allowed to retaliate by imposing penalties on goods. And we have to agree to trade under WTO rules otherwise the whole world won't trade with us.

We have to do a deal, the EU doesn't. What kind of negotiating position is that?

timarr

peterg

We are a NET IMPORTER - think that one through and then perhaps you will see who has the better bargaining position

This fantasy argument keeps getting thrown out. We may be net importers - but do we matter that much as a market? UK represents about 8% of exports from the rest of the EU. They account for nearly 50% of ours.

One of the cases always quoted is German car manufacturers - we import a lot, so they will pressure their govt for a good trade deal. But a few days ago they were clear that, entirely unsurprisingly, they see the continued success of the EU as far more important to their future profits than any potential losses of a relatively small part of their total exports if the UK ends up with import tariffs.

A small secondary point - I've always been careful not to stoop to being rude and calling Leavers Europhobes. It's a shame many Leave supporters feel it's entirely acceptable to address people who happen to disagree with them and argue for their view by the ludicrous epithet of Remoaner. If you want a discussion be serious about it - otherwise please keep your rants to yourself.

Peter

Mancman

It certainly looks as if opinion is moving in the direction of the "remoaners".
http://uk.businessinsider.com/opinium-poll-support-for-a-second-brexit-referendum-is-surging-eu-opinion-tony-blair-2017-7

TangoDoc

Norway has filthy amounts of oil revenue and a tiny population but also accepts free movement and pays into the EU club, Turkey does not manage which is why they'd like to be in the EU but will never fit the rules, Switzerland exists by tourism, cheap hydro-electric energy and money laundering and China copes by being vast and having been held back for decades, not caring about pollution and global warming one scrap, cynically exploiting its peasants who, if they kick up, get run over by tanks.
We, on the other hand, are a tiny landmass jam-packed with bolshie citizens, many of whom insist on human rights, a clean environment, health and safety and freedom of speech, even for state registered cretins, have reduced our manufacturing base to laughable, rely on money laundering to earn 14% of our GDP, have stubbornly refused to grasp any forward-looking energy policy and are arrogant enough to believe that, despite giving up our Empire, we matter to the rest of the world. You couldn't make it up for a sitcom.

18th Jul '17

You wonder why you're labelled as a remoaner

A campaign fought on lies - armageddon would ensue etc etc and then your idea of a "positive" argument with ridiculous comments such as;

but do we matter that much as a market?

and your views of the car market - when the UK has announced a number of material motor investments in the last two years and record output for the last decade from UK car manufacturers (approx 1.6m vehicles)

But all you want to do is talk Britain down. Shame on you

Fangorn

"Norway are in the single market, and said they thought the UK were mad to want to leave the EU"

Funny then that they have consistently voted against joining EU themselves!

"Why Norway voted NO to the EU - and why it’s NEVER looked back, writes MIMMI KVISVIK"

"Norwegians voted ‘no’ to the EU in a heated referendum in 1994 – and we are not regretting it.
Quite the opposite.
There has been a rock solid majority against EU membership for more than 10 years."
According to the most recent poll, 72 per cent are opposed to Norwegian membership of the EU, with only 18.1 per cent supporting it and 9.9 per cent undecided.

http://www.express.co.uk/comment/expresscomment/673775/Norway-EU-referendum-positive-brexit-UK-vote-MImmi-Kvisvik

In fact, in a poll conducted by Sentio in September 2014, the opposition was stronger than ever: 70.5% were against membership.

https://www.norwegianamerican.com/opinion/should-norway-join-the-eu/

Still a majority against at 48% vs 41%.
Funny that.
Remain's plan is pretty obvious - drag feet, sow negative sentiment , talk Britain down such that a vicious circle ensues..Get the EU to offer us as bad a deal as possible in hope we eventually return to EU fold, tail between our legs.

Well news for you lot - we won't be returning on same terms we left if that outcome occurs.
Rebate will be gone! Another £5bn will go EU tribute, and UK will be the laughing stock for succumbing just as all the other nations who were told to vote again.

We should listen to Varofakis - EU wont negotive but will obfuscate and drag things out as long as possible. We should just LEAVE and get on with it.

I thought the most interesting thing about the article was that 34% strongly believe we should stay in the EU, and 33% strongly believe we should get out. Clearly the country is very divided. It was a great mistake to make such an important decision on a simple majority - and the leave campaign would certainly not have taken a 51-48 defeat as the final word.

Incidentally I think the UK has already become the laughing stock for much of the world for the way this whole thing has been and is being handled.

The most interesting thing in all this is that UK wouldn't have joined if Ted Heath had done his bloody job properly and not lied to British people!

"It was a great mistake to make such an important decision on a simple majority"

Funny as I seem to recall Remain were perfectly happen to have such - as was every member of Parliament when they voted to give the people the final say!! (Expecting Remain to win!)

"and the leave campaign would certainly not have taken a 51-48 defeat as the final word"

I don't think LEAVE would be doing Britain down as Remoaners clearly are on a daily basis!

"Incidentally I think the UK has already become the laughing stock for much of the world for the way this whole thing has been and is being handled."

Yes blatant attempts by MP's to overturn the result, to disingenuously claim they respect the result whilst trying their utmost to con us into believing staying in Single Mkt/CU is an outcome that would represent us leaving the EU!

Yes I can see how this is looked upon with the scorn it deserves.

I see Labour still failed to Win the GE despite having a multitude of students vote TWICE, in addition to a blatant lie about tuition fees swiftly pulled post Election result!! This tuition fees promise saw 2/3's at least of the young vote plump for Labour!

Yes I can see how UK is a laughing stick when so many so called "Democracy" supporters are doing their utmost to sink a democratic vote!

Yes I can see how UK is a laughing stick when so many so called "Democracy" supporters are doing their utmost to sink a democratic vote!

That didn't worry Farage, or you, at a time when UKIP were struggling to get 10% of the national vote. Did you say - oh they are all right, we're wrong and we'll stop arguing and campaigning? Of course you didn't, and nor should you have done if you believed what you said. Democracy isn't about people who disagree with you shutting up - or being told to. If a lot of people think Brexit is a disaster for the country, as they do, it would hardly be either democratic, or patriotic, if they just shut up and did nothing to argue for leaving in the least damaging way possible, or even for people to have a chance to think again.

One of the most worrying aspects of the Brexit campaign, and the post referendum situation, is the way in which those on the Leave side have continually tried to put their point of view, not on the basis of analysis or argument, but by suggesting anyone who disagrees with them should now shut up, and with ridiculous suggestions that it's unpatriotic to talk about what they see as real dangers for the country.

Suhailr

19th Jul '17

what utter drivel - brexit rubbish to the core. The reality is that Switerland has to take all EU citizens - the requirement for Swiss person first is a figleaf. Likewise, Norway is one of the richest countries on the planet because of its oil wealth.

Already, jobs are moving to the EU. And not one trade deal signed

Peter,

"That didn't worry Farage, or you, at a time when UKIP were struggling to get 10% of the national vote. Did you say - oh they are all right, we're wrong and we'll stop arguing and campaigning? "

Don;t recall UKIPPers not accepting any of the GE results, nor the European election results,nor in fact trying to overturn the outcome post event.Similar for the Referendum party. Votes were cast, result was called. All accepted such. No wailing, no dishonest claims noone knew what they voted for!

If LEAVE had lost the EU referendum then I would've accepted it, just as my parents were accepting of the 1975 EU referendum despite being lied to by Ted heath.

Each General election I accept the result, get on with it, and await the next GE to once again voice my opinions. I wouldn't seek to overturn a GE vote, by whatever means, If I had lost at the ballot box.

This is,incidentally, exactly what the Democrats are trying to do with Trump in US.

Nor do I mind those Remaoners who wish to continue to voice their opinion that Brexit is bad for Britain.

Where I do draw the line is blatant attempts to subvert the will of a democratic vote.

Gina Miller, "it's all about due process" when clearly it wasn't,as,despite due process being followed, she is still campaigning to overturn the result! As we all knew - she was determined to not accept the result outcome and engage in all avenues to thwart it.

Ditto the multitude of other whining remoaners with their patronising "We didn't know what we voted for", "We should aim for a Soft Brexit not a Hard Brexit drivel", "We must stay in Single Market" knowing full well this goes against what Brexit actually is.

The dishonesty, the constant undermining of the democratic process purely because they didn't get the result they wanted is unacceptable. As is the constant negativity, the doing Britain down, the cheering of EU efforts to punish the UK with unjustifiable eye gouging exit fee demands...

"One of the most worrying aspects of the Brexit campaign, and the post referendum situation, is the way in which those on the Leave side have continually tried to put their point of view, not on the basis of analysis or argument, but by suggesting anyone who disagrees with them should now shut up, and with ridiculous suggestions that it's unpatriotic to talk about what they see as real dangers for the country."

Not half as worrying as having no faith in your own people, wanting Britain to fail, and pushing endless negativity to hit sentiment in an effort to undermine and ensure Brexit fails..

Thanks a bunch.

"Already, jobs are moving to the EU. And not one trade deal signed"

You know we cant "sign" a trade deal till we've left the EU right? So your claim is a tad economical with the truth

Oh please - when we leave in March 2019, the brexiters were telling us that the documents would be ready to be signed when we leave. We have heard nothing from them at all. Why? Because no one else cares. Signing a trade deal with the UK is not a prority for the india, china, Or the US - despite what Trump says. To sign a trade deal with India would required 100k perhaps 200k visias. all to replace the EU workers. All that time and expense to get to back where we were. Meanwhile enjoy the Brexit induced inflation. I want a hard brexit - it will be the wake up call the Brexiters need to realise how an integrated global economy works. Unfortunately a lot of normal hardworking people will see their living standards drop. Take a look at sterling!

"Oh please - when we leave in March 2019 the brexiters were telling us that the documents would be ready to be signed when we leave. We have heard nothing from them at all"

That's not the same as your claim "Not one trade deal signed" now is it!!

Talk about dishonesty.

Why not wait till 2019 and see IF/WHEN trade deals are done. At the moment we cant sign any.

"Signing a trade deal with the UK is not a priority for the india, china, Or the US"

We shall see at the time wont we.You;re being extremely disingenuous.

"To sign a trade deal with India would required 100k perhaps 200k visias. all to replace the EU workers"

Evidence for this or just you spouting?

"I want a hard brexit "

No such thing as hard Brexit - there's only Brexit, or Remain you'll find.

Hard or soft Brexit is NONSENSE, we are leaving the EU’ Jacob Rees–Mogg declares
Even Donald Tusk agrees there is no hard or soft Brexit.
http://www.express.co.uk/news/uk/825788/jacob-rees-mogg-question-time-brexit-donald-tusk-hard-soft-democracy-leave-remain

"It will be the wake up call the Brexiters need to realise how an integrated global economy works"

We don't need to be governed by EU to trade with EU.

We don't need to give ECJ supremacy over our laws, nor the EU over our borders, waters,to engage in global trade

Global trade occurs DESPITE government,not because of it.

"Unfortunately a lot of normal hardworking people will see their living standards drop. Take a look at sterling!"

Sterling is a floating currency for a reason! Living standards rise and fall.

They will recover. Goldman's said it was overvalued at $1.50/£ - it was.

I recall Sterling at $2/£ in 2006 odd. Even more overvalued.

See your ridiculous "look at Sterling" jibe and raise you "Take a look at Unemployment!"

We are living beyond our means. Whether we were in EU or not, that is a prime worry which will come back to haunt us.

But don't let that worry..you seem focused only on what's best for you!!

Wait?! of course, that's why people are selling £ post Brexit - they are taking their money out of the country. As for evidence for an indian trade deal - go ask the Indians? Its not hard to find out what they want.As for being selfish - under a hard brexit, people will lose their jobs - not that Rees Mogg cares. We don't need to be part of the EU to trade with them - but we will be poorer outside the EU, Remember inflation is high now because of Brexit. As ever with Brexiters, happy to that other peoples livelihoods go downhill so they can feel good about themselves. Remember people are selling £ post Brexit. We go for a hard brexit, even more people will take their money out of the UK.

JollyBiologist

Trying to avoid the shouting and name calling, here's an interesting link, for people who still consider experts are worth listening to, on how trade deals are conducted: https://www.youtube.com/watch?v=RHFp3-qE_T8

20th Jul '17

Freedom of speech is part of our democratic rights - and just because the majority has expressed a different opinion doesn't give them the right to silence dissenting voices. And, in passing, I note that Nigel Farage was very clear before the referendum that if Leave lost he would carry on campaigning.

More practically the UK in a Changing Europe think tank has published a paper looking at the effect of what they term a "Chaotic Brexit": the UK leaving the EU with no deal in place. They make it clear that this isn't a prediction and they outline a range of other options, but they're trying to quantify the impact of no deal.

Whether you're inclined to accept their forecasts or not the paper does at least set out the vast set of issues that need to resolved. For instance, it hadn't occurred to me that, post-Brexit, legal decisions made in the UK against EU companies or residents won't be automatically enforceable without going through the legal system of the EU country in question. I still think some form of transitional deal is the most likely option, but given the fragile and febrile state of UK politics an exit without a deal must remain a distinct possibility.

Anyway, the paper is here, and it's worth reading if, like me, you're trying to think about how to position yourself for a post-Brexit world rather than simply accepting the soundbite reassurances or doom-laden prognostications of ideologically biased pundits and politicians:

http://ukandeu.ac.uk/cost-of-no-brexit-deal-will-be-widespread-damaging-and-pervasive-leading-academics-find/

timarr

Small Cap Value Report (14 July 2017) - DX., CCT, RFX, HAS

DX (Group) (LON:DX.)

Character (LON:CCT)

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Graham Neary

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