Small Cap Value Report (14 Mar 2014) - FUTR, SOG, TAN, CAP

14th Mar '14 by Paul Scott

6 comments 12704 reads

Good morning! Slightly late today, so I pressed "snooze" a few times.

I have to mention today's IPO of BooHoo.com. The ticker is BOO, and that also describes the impact the shares had when they burst onto the market today! The valuation looked eye-watering at 50p per share, which valued this online fashion retailer at £560m. Of the £300m raised in the Placing organised by Zeus Capital, £240m is being withdrawn by the existing owners, and £50m ie being retained by the company to buy the freehold of its warehouse, and finance further expansion.

The shares are currently 75p, just over one hour into their life on the market, so that now takes the market cap to £840m, which is nearly as much as the value of Debenhams (£966m mkt cap at 77p per share)! Looking through the AIM Admission Document on their website, 2013 results shown are for 10 months to 31 Dec 2013, and show turnover of £92m and operating profit of £9m. So it's a proper business, and showing strong growth, with international expansion planned. But £840m market cap already?!! That's paying up-front for many years' expansion that has't yet been done.

I suppose investors are looking at this as the next ASOS, so are throwing valuation out of the window. All very reminiscent of the 1999 tech shares boom, although at least the companies now achieving sky-high valuations are mostly profitable. In my view, by far the cheapest way to buy successful online retailers, is to buy shares like Tesco or Debenhams, which have online operations that dwarf many of the fashionable dot.com shares.

Future (LON:FUTR)

Last time I reported on this publisher of magazines, was when they warned on profit on 18 Jul 2013.

They've done it again today, with another profit warning today. The shares are down 23% to 10p at the time of writing. With about 333.6m shares in issue, that makes the market cap currently £33.4m.

The key part of today's profit warning says;

Following our update to the market on 3 February, the downturn in trading we saw in the latter part of the first quarter has continued in January and February. This has led the Board to conclude that the EBITDAE out-turn for the full year is anticipated…

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SevenPillars

14th Mar '14

According to the urban dictionary the definition of BooHoo is;

The term is imitation of the sound of someone crying or sobbing. It is often seen written, like in cartoon speech balloons. Less often, a person may say it aloud in an affected way to convey sadness or disappointment. Can be used sarcastically.

I imagine some investors may well get to feel this way eventually when reality hits the valuation the market has put on it and similar companies, IPO or otherwise.

And you are right re Tesco and Debenhams, has the market forgot they do online and do it very well?

Ramridge

Hi Paul -
Re, BOO. At a market Cap of £840m and scaling up revenue and net profits given in the admission document, gives a PE = 100 and MV/ Sales = 7.7. That makes it more pricey than ASOS: PE = 85, and MV/ Sales = 7.
I think they should rename it different_planet.com

mikelevie

Hi Paul - did you hold your planned meeting with Indigovision yet? Notice their share price has held up well following their Interims last week. KR, Mike.

kevanp

Clean Air Power (LON:CAP) prelims: revenue up 25%, gross profit up 24%, cash up 25%. Loss per share down to 0.85p from 1.53p. "In line with market expectations". Today's price up 2.8% at 9p bid — one of the few blue rows in my portfolio! (Together with a rebounding £SBRY)

Best, Kevan

I know there are some Zanaga Iron Ore investors here and I've been following it for a while. Is this story today a positive that things are finally moving forward?

South Africa-based engineering and project management company DRA on Friday announced that it had been awarded the study of the process plant for the next phase of the Zanaga iron-ore project in the Republic of Congo (RoC).

The award was made by MPD Congo, which is owned jointly by the London-, Hong Kong- and now also Johannnesburg-listed GlencoreXstrata and the Zanaga Iron Ore Company.

DRA reported that previous studies had focused on the viability of a large-scale 30-million-ton-a-year mine.

However, Glencore’s review of these earlier studies identified the potential for developing the Zanaga project in stages, with the first stage involving a smaller 12-million-ton-a-year operation as well as a yearly one-to-two-million-ton direct shipping facility using existing infrastructure.

DRA said Glencore expected the revised approach to potentially more than halve the project's previous initial capital-cost estimates.

DRA’s study into the staged development of the project, which is due to be completed by the end of this month, will form part of the basis of a mining exploitation licence application.

DRA CEO Paul Thomson said the Zanaga project had the potential to become a large-scale producer within RoC’s burgeoning iron-ore province.

http://www.miningweekly.com/article/glencore-zanaga-award-congo-iron-ore-project-study-2014-03-14

Jon1958

15th Mar '14

Thanks Paul again for an excellent column
I hold CAP and will continue to do so.
The worry that I have had about this company for a while is how they are ever going to generate substantial profits by retrofitting trucks at 25k a time.
Encouraged by the fact that this seems to be recognised in the business review and the strategy is to partner with OEMs to develop volume.
At a market cap of 21m and turnover of just under 10m it might be a take over target as well?

Small Cap Value Report (14 Mar 2014) - FUTR, SOG, TAN, CAP

Future (LON:FUTR)

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Paul Scott

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