More UPGSide?

10th Feb '19 by mojomogoz

8 comments 1955 reads

Hello

I attended UP Global Sourcing Holdings (LON:UPGS) site visit 7 Feb. There will be trading update on Monday 11 Feb.

I wrote this note when share price collapsed sub 40p:

https://www.stockopedia.com/content/oops-upgs-ide-your-head-327743/

I was buyer down into the 30s as despite the post-IPO blues and disappointments I felt that their woes were understandable and non-critical. So far so good in that trading seemed to have recovered despite the tough background.

If you are interested MD Andrew Gossage gave a useful presentation at Equity Development event which can be watched here:

https://youtu.be/dPrIEbgRoXw

Anyway, what follows is my update following the site visit. In conclusion I believe this stock has the potential to travel a long way from current 57p. How far depends on some factors that need to be proved out that I detail below. if the proving is good then I can envisage holding this for many years as it continues to surprise to the upside, grow earnings and push up its valuation rating.

Information and views on UPGS

The origin of UPGS was Simon Showman in the 'close out' business 20 years ago. That is buying product from known brand at below cost (c.40% of cost) as the seller needs to shift product out of the way for some reason. UPGS still do some of this (I can't remember if 5 or 10% of revenue) and for example have bought stock from Alessi to punt at discount.

Senior team have been together for a long time and have shown the ability to be both opportunistic and strategic. On site met with founder Simon Showman (I get the impression he's not really keen on doing the external stuff like this as he wants to get on with business...he's going to have to show more of himself over time to take UPGS up in investor eyes and help the stock into a teen multiple). He's your real deal entrepreneur left school at 15 to make money.

My sense from meeting is well balanced team with Showman the guy that pushes boundaries and key relationships and the others around him keeping the show on the road and preventing overreach and missteps. There seems to be mutual respect and trust. These are things that can never…

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rhomboid1

10th Feb '19

Great summary..I held but sold out when mgt refused to answer some basic questions...but they now appear to understand that being a public company involves connecting with shareholders

I think you’re correct in your assessment that they’re likely to do well..

mojomogoz

11th Feb '19

Well Rhom, fingers crossed...maybe one day you may see them as having a quality, repeatable, scalable and defensible business model and you will do your Tweet magic ;)

:) I must admit I’m kinda kicking myself for selling as I knew the international bit was going better than planned as they were recruiting for country managers for countries they hadn’t formally stated they were active in!

Did you attend the investor day last week?

I did and it was useful. Met the publicity shy so somewhat paradoxically names Mr Showman CEO. I like him. He’s a genuine ground up entrepreneur. I have done many entrepreneurial things and been round entrepreneurs. I realise that whilst entrepreneurial I am not an entrepreneur...I don’t have that little bit magic that takes me through any and all brick walls and always believe I can do it. Showman is that. He’s nicely balanced out by MD Andrew Gossage who is the details and organiser guy. They’ve worked together for a long time and it seems to go well. Other seniors been there a while too. Seems to be genuine loyalty to task and company. My instinct is that they have a shot at doing something decently bigger than today. Really strong sense that they know who they are and how they are going to do it.

I don’t expect fireworks as it’s a northern business that doesn’t sell premium stuff in John Lewis. So, a bit like say SCS (LON:SCS), hard for affluent investors to appreciate. That said, there’s potential for Europe to move with surprising pace. Not a forecast by me but they are obviously excited by it and seeing a lot of opportunity.

Great background....many thanks...co-incidentally I also held SCS (LON:SCS) for a while..again took profits far too early after doing a couple of mystery shops which made me feel that it wasn’t my kind of investment...I keep both on my watchlist to remind of what I’m missing

Land and expand is what they say...so that means grind it out...they are focused on grinding it out when a door of opportunity opens. I referenced SCS as know you know it so it was a parallel for you. UPGS have upside opportunity more driven by top line growth. SCS top line growth a bit tougher but they are super cash generative and I do expect high earnings growth derived from cash (eg, they have 30 stores to open in tightly targeted locals when the right opportunity arises in right out of town park, or they could buyback perhaps once the retail uncertainty calms down). SCS cash generation should remain above earnings for foreseeable future as some old and expensive leases from over aggressive early Noughties expansion roll off.

ISAallowance

10th Jun '19

Popped into Sainsburys yesterday and noticed a very prominent Salter cookware display taking the entire end of a prime position aisle in among the food. The pots and pans all had UPGS as the distributer, the scales were a different company, I'm guessing their Salter licence is similar to Russell Hobbs where they only have the non-electricals.

Anyway, prominent in Sainsburys can only be a good thing IMHO. I hold.

jonthetourist

That is true of the Salter license - everything but scales. I congratulated Andrew Gossage on bringing a non-stick pan, with packaging, to Mello. It made the story clearer. He offered it to me to take home, to save him the carry, but I didn't fancy carrying it either. Another Mello visitor stepped in to save the day.

Impressive presentation. I went in too early in the 90s, then chased the falling knife in the 30s. Currently a happy holder.

Jon

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Mojomogoz

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