Small Cap Value Report (Weds 1 Mar 2017) - RBG, EHG, MYSL, VTU, DX.

1st Mar '17 by Paul Scott

18 comments 15521 reads

Good morning!

We did 2 reports yesterday, in case you missed them, as follows;

My report covered Revolution Bars (RBG) interim results, and BooHoo (BOO) trading update. I know BOO is a mid cap now, but as it's so popular with readers, I'm continuing to cover it.

Graham's report covered: Waterman (WTM) interim results, Redde (REDD) interim results, Avanti Communications (AVN) interim results, and Swallowfield (SWL) interim results.

Sorry we didn't get round to mentioning JSG & AVN.

New Stockopedia Charts

The big launch yesterday went well. Have you tried out the new Stockopedia charting package? They're terrific I think - a massive improvement on the old charts.

You can access the new charts for any company just by clicking in the usual place (the "Chart" tab, in between "News" and "Discuss", just below the share price) in that company's StockReport.

Or, another way to access the new charts, is via the "Tools" button on the main black menu. There's a shiny orange star next to it, just to help us find our way.

Here's a comprehensive guide to the new charts, which I will read later. I haven't quite managed to grasp one or two of the features yet.

Revolution Bars (LON:RBG) (at the time of writing, I hold a long position in this share) - just a couple of extra points to add to yesterday's large section on this share.

Interim results presentation - the company, very helpfully, posts the slides which it shows to institutions & analysts onto its website, so that the hoi polloi like us can also see them.

This company's presentation slides are here, then click on "Interim results presentation FY17".

I had a look through these slides last night. This only reinforces my conviction that this share is simply the wrong price, with a good 50%+ upside on it. As always, I may be right or wrong, that's just my personal opinion, not a recommendation - the emphasis is always on people to do your own research, and take responsibility for your own investing decisions. I do my best, but am not infallible by any means - and covering so many stocks, inevitably I do sometimes miss things.

A fund manager friend has kindly booked me in to a results presentation with RBG management today, so I have to finish this report early, in…

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Wol

1st Mar '17

Paul or Graham
I'd be interested in your thoughts on the Empressaria results published today. The market's instant reaction has been to mark the shares up by more than 9%. But while "adjusted" EPS has grown substantially basic diluted EPS is unchanged.
Does the adjusted EPS reflect reality? Or is this another smoke and mirrors trick to boost the share price and the directors bonuses? Your thoughts and analysis would be most welcome.
And again many thanks to both of you. The Small Cap Value Report is essential daily reading. I learn a lot, my investment process improves and my investment returns are improving too.

buyhard

I'd like to see Graham's or Paul's thought on the results from Costain (COST) today if at all possible.

MichaelFBS

Morning

Anybody who reads Pauls reports know what is going on with Purplebricks (LON:PURP), which as far as I can tell is up 25% in a couple of hours (about 15% in the final hours of trading last night and around 8%/9% this morning). I hold and up 105% in 10 weeks and it is now 7.5% of portfolio.

Thanks Paul for your links to £RGG slides which I will study later.

Michael

rouleur1

At the time of writing Purplebricks (LON:PURP) has calmed down a bit, but it's been very lively the last couple of days. Can I add a voice asking Paul or others for some views?

Re: Purplebricks
In response to a couple of questions above.
On 22 February PurpleBricks raised £50m in a placing. It will use the funds to launch in a few key states in the USA. The information provided suggested that the USA is a huge market and because the market is so fragmented and agents charge such high fees it is a huge opportunity for PurpleBricks. The placing was completed successfully at only a 0.6% discount to the market price on the day so no dilution to existing shareholders.
It looks as if the jump in the share price is a positive response to the opportunity.
Hope that helps

This is a useful read.
https://www.research-tree.com/blogs/the-naked-fund-manager/purplebricks-us-expansion-how-big-is-the-opportunity-

Boon

Re Purplebricks (LON:PURP), I'm skeptical if they could crack the US market. Surely, the land of startups and Silicon valley, there are already several established online estate agents? And well funded?

If Purplebricks (LON:PURP) goes in, it will turn out to be a marketing spend war against the existing players, who are likely to be well funded themselves by (private) VCs who don't have to report half yearly earnings and take a longer-term view.

Think how Uber splashes the cash around and runs out huge losses to keep its dominant entrenched position (and thus making life difficult for smaller Lyft and other players) and you can bet that some of the founders of existing online estate agents in the US will be thinking the same tactics to defend their turf and go for winner-takes-all glory.

Tortoise investor

Take a look at rouleur's link. There actually isn't as much competition as you might think and what there is seems to be some sort of company doing payment solutions in different industries rather than something targeted on estate agency. The main issue I am worried about is there isn't a RightMove equivalent in the States, just some smaller equivalents, which might make it harder to drive traffic to Purplebricks (LON:PURP).

On MySale (LON:MYSL) I was expecting slightly higher profitability this morning which is a shame - the move to their own-buy stock is a bit slower than I would like.

They also seem to have less marketing presence in the UK, at least in newspapers and tube posters, compared with BrandAlley. I'd like to better understand the potential market too to estimate potential market cap.

Oddly they seem to have made no mention in any of their RNS's about diversifying into their own products. This has been reported by the press so I don't understand why it has not been referred to. This is the website of their own brand launched last autumn: https://www.londonchic.co.uk/ It seems to have minimal products and the website is not very easy to navigate - so maybe they are giving up already?? It only has 47 likes on Facebook UK and their Oz website has no clothes at all!

Leven

Also Purplebricks (LON:PURP) is very tightly held (Woodford and founders own c. 50% and i doubt they're selling). The placing shares don't settle for a couple of weeks, hence the big spread at times and large swings in price.

GrahamF

I think your comment about a possible problem in there being no equivalent of Rightmove may be spot on.

To sell your house prospective buyers need to know it is on the market. In the UK Rightmove and Zoopla have such a dominant presence that Purplebricks doesn't need to have high visibility itself - just put the property on one of those and the buyers will find it. (Before those listing sites existed the visibility of the high street agents's office and local newspaper advertising were key, because that's where buyers went to find the properties).

So, I just hope that one of the key criteria that Purplebricks are using when choosing the states/locations to go into is the presence of a highly successful on-line site where the majority of local properties are listed.

Chris Brown

Does anyone have a view on the announcement from Low & Bonar (LWB) this morning?
'Low & Bonar announces that it has mutually and amicably agreed with Mike Holt, Chief Financial Officer, that he will step down from the Board and leave the Company once a successor is appointed'

I was close to taking a position in LWB, but this has made me take a step back. It seems a rather sudden and unplanned departure, which can be a warning sign...

doublelutz

A comment from my son who lived in the US for a few years.

"People like their real estate agents in America. They become trusted friends. They find the properties to view and offer support and advice. I'm not sure there is the appetite for change even if savings can be made.

Many in the US (unlike in the UK) are willing to pay for good service. Just think of the tips people happily pay servers in restaurants. Some give 20% or even 25%. I think real estate agents in the US are considered to be worth their money even if to us their charges appear ridiculous".

Samsgrandad

2nd Mar '17

Estate agent and trusted in the same sentence. Not often you see that. Must be different in the US.

rosered

I don't trust TripAdvisor as I find that many comments clash with my own though I do use it as a starting point for research into restaurants and hotels. There is nothing like doing one's own due diligence. Which is why I am sitting in the warm sun in the Tamarind Hotel overlooking the Caribbean. Two comments. I see evidence of constant refurbishment and this hotel is not tired. Secondly the customers seem to be mostly retired and the sort which appears to like their cocktails, fuss and food so perhaps not too price sensitive.

jonno

27th Mar '17

I read a recent article in the FT that American hoteliers were suffering due to a reduction in demand as visitor numbers to the USA had fallen due to the unpopularity of Donald Trump, which is understandable. I wonder whether Elegant Hotels might be a beneficiary?

jonthetourist

4th Apr '17

Re RBG, I spoke to my niece tonight. 25, living and working in Harrogate. Me: Is there a new bar in H'gate called Revolution de Cuba? Her: Yes, apparently it's ace - going to be *the* place to go in town. Me: Do you see yourself spending a lot of money there? Her: Yes, if I had any (she is doing up a house).

Reassuring. I hold.

Jon

Flackwell

5th Apr '17

Jon - do the decent thing mate and send your niece some money for her birthday - on one proviso

;)

Small Cap Value Report (Weds 1 Mar 2017) - RBG, EHG, MYSL, VTU, DX.

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Paul Scott

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