**NEW VERSION** - Small Cap Value Report (10 Jun 2015) - DIA, OPM, SHOE, BOO

Wednesday, Jun 10 2015 by

Apologies, the original report got corrupted, so I'm recreating it from a backup.

I've got loads of companies to report on today, so quite a full report today.

Dialight (LON:DIA)

Share price: 477p (down 36% today)
No. shares: 32.5m
Market Cap: £155.0m

Profit warning - and it's quite a nasty one too, the key parts saying:


The warning signs were very evident in the last trading update in April, indeed I predicted that another profit warning could be on the way, in my report of 15 Apr 2015.

It's interesting how the fall-out from the lower oil price is triggering profit warnings in other sectors. So any company with material sales to the oil & gas sector is likely to be suffering to some extent.

Today's update also says that the new CEO is conducting a strategic review, which usually means closure of factories & offices, redundancies - all of which are usually costly.

My opinion - the sheen has very much come off this share, and it's almost impossible to value at this stage. I shall await broker updates. It sounds to me, from today's and April's updates, that this company is a can of worms, with possibly more bad news to come out.

The new CEO is likely to kitchen-sink things at some point, so I'd rather sit on the sidelines until everything has come out in the wash.

On the positive side, the balance sheet looks fine to me, so I don't see any solvency concerns, and it sounds as if the company will remain profitable, albeit at a lower level. This share is unlikely to regain a high PER any time soon though, it looks permanently damaged now, after being a previous stock market darling.

Note that Matt Earl, a talented analyst & short seller, wrote a piece on his blog in Dec 2014 predicting further problems for Dialight. People may not like it when short sellers flag up problems (or potential problems) in shares they hold, but to ignore such concerns is folly, and very often a costly mistake. In my view, Matt is one of the best shorters in the UK, because he publishes detailed financial analysis to back up his view, rather than just trying to spread fear…

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Dialight plc is a holding company. The Company manufactures and sells lighting products in the industrial market. It operates through two segments: Lighting, and Signals and Components. Its Lighting segment develops, manufactures and supplies light emitting diode (LED) lighting solutions for hazardous and industrial applications, and includes anti-collision obstruction lighting. Its Signals and Components segment develops, manufactures and supplies status indication components for electronics original equipment manufacturers, together with industrial and automotive electronic components and LED signaling solutions for the traffic and signals markets. Its LED lighting solutions include Vigilant Industrial Solutions, DuroSite Industrial Solutions and StreetSense Infrastructure Solutions. Its LED signaling solutions include transportation signals, obstruction signals and SafeSite hazardous area signals. Its indication solutions include Circuit Board Indicators and Panel Mount Indicators. more »

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Shoe Zone plc is a footwear retailer in the United Kingdom and the Republic of Ireland. The Company offers women's shoes, men's shoes, boy's shoes and girl's shoes. The Company's online offering combined with its store network enables customers to shop through multiple channels. The Company operates from a portfolio of approximately 550 stores. Its customers purchase all of the products available in stores, as well as an additional approximately 400 product styles. The Company sells over 20 million pairs of shoes per annum. The Company has operations in various countries, including Germany, Italy, Spain and France. The Company's distribution center is located in Leicester, England. The Company's subsidiaries include Castle Acres Development Limited, Shoe Zone Retail Limited, Zone Property Limited, Zone Group Limited, Shoe Zone (Ireland) Limited, Shoe Zone Pension Trustees Limited, Stead & Simpson Limited, Zone Footwear Limited, Zone Retail and Walkright Limited. more »

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Boohoo Group PLC, formerly boohoo.com plc, is an online fashion retail group. The Company is based in the United Kingdom and has a presence in the United Kingdom, the United States, Europe and Australia, selling products to almost every country in the world. The Company owns the boohoo, boohooMAN, PrettyLittleThing, Nasty Gal, MissPap and Karen Millen and Coast brands. These brands design, source, market and sell clothing, shoes, accessories and beauty products targeted at 16-30 year old consumers in the United Kingdom and internationally. more »

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  Is LON:DIA fundamentally strong or weak? Find out More »

21 Comments on this Article show/hide all

VegPatch 10th Jun '15 2 of 21

Thanks Paul, v comprehensive round up

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WatsonNimrod 10th Jun '15 3 of 21

Paul, good commentary today, many thanks.

After our 'joust' on Shoe Zone a few weeks back I decided to buy a pair online, and I have to say I have been pleasantly surprised. Like you I'm on the bike a lot, mostly for short hops to meetings around town and I can never be bothered with trainers etc. The shoes have performed remarkably well, and although tempted I didn't dip my toe in the water with the share, which now I'm probably thinking a I should have!

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Fegger 10th Jun '15 4 of 21

I have invested in Boo a while ago. I was interested in buying dresses and sports clothes and investigated their ranges. I liked a lot of the dress designs but when I investigated them further every dress was made of cheapy polyester - I could never wear that unbreathable fabric in the summer. And the sports clothes werent very inspiring. So only the view of one customer but they may be doing well but they could do better ! :)

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Paul Scott 10th Jun '15 5 of 21

In reply to post #100920

Hi Fegger,

I agree with you - BooHoo's biggest issue is that their product is not always good enough quality. But having said that, it's basically Primark online. So you get what you pay for - cheap & cheerful.

I raised this issue in person with Carol Kane, the Joint CEO who is directly responsible for product, and annoyingly she batted away my question, denying that there was a problem with product quality, and saying that only a few customer reviews are negative. But in the next breath, she said they were increasing their quality control dept from 2 people to 25 people! So clearly she knows there is a problem, or they wouldn't be employing so many more QC people.

When I asked my niece & her friends (aged 18) about BooHoo they all said the same thing - that it's good, but product quality is not always up to scratch, but they shrugged and said "you get what you pay for".

So I agree with you, product quality is the biggest issue that I have found when researching BooHoo.

Back in the day when I worked in a young fashion chain, which bought a lot of the product from the predecessor company of BooHoo, run by the same people, called Pinstripe, product quality was not considered very important. The customers just wanted cheap fashion to wear out a few times, and then throw away. So it's very much at the disposable fashion end of the market - again Primark online.

The biggest threat to BooHoo would be if Primark decided to sell online. At the moment they take the view that it would just cannibalise sales from their shops, so Primark doesn't sell online. That has created a gap in the market which BooHoo has done a very good job in filling.

Regards, Paul.

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shanklin100 11th Jun '15 6 of 21

Hi Paul

You obviously put a great deal of effort into producing each day's SCVR, producing a high quality report on a consistent basis. I do not normally watch/listen to your follow-on Youtube broadcast but did so today because of my interest and holding in ESR.

Whilst I do not disagree with anything you said about ESR, I did get the impression that you were commenting on ESR without being up to speed with yesterday's RNS let alone with other recent RNS'd events there. No damage done to ESR I am sure, but in terms of maintaining your high quality brand, I don't think this was very helpful to you.

Please accept this as constructive comment. It must be incredibly difficult on busy days to comment on every SC RNS, but perhaps if you run out of time it would be better not to comment at all.

Best wishes, Martin

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Paul Scott 11th Jun '15 7 of 21

In reply to post #100927

Hi Martin,

I was reasonably up to speed on Ensor Holdings (LON:ESR) - had read the RNS, and I know the stock quite well, as myself and some friends jointly researched it a while back.

As I was whizzing through the video, I couldn't find the section of text which I wanted to talk about, and then got momentarily confused by another bit of text on the sale of a subsidiary (as opposed to the mooted sale of the whole group).

The trouble is, the software I use means the videos have to be done in one take, all off the cuff, with no editing. If you could get it 100% right under those conditions every day, then please feel free to give it a go.

As it is, my key points on ESR were perfectly valid. I described how the company reported excellent figures, that it was up for sale, that it had freehold property upside, but my only reservation was that the big jump in profits might not be sustainable because the company referred to one-off orders from water companies that were coming to an end.

I think your comment is very unfair actually. I was up to speed with the company, but just stumbled for a few moments on what I was saying.


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shanklin100 12th Jun '15 8 of 21

Hi Paul

Its unfortunate you have to do the videos in one take. This seems most unfortunate.

In terms of the property upside on ESR, much of this has already been achieved in terms of concrete sales, as RNS'd in 02-Jun-15, and is already reflected in the share price, so I don't believe it has property upside other than in properties that are required to operate the business.

We will have to agree to differ on whether my comments are unfair or unhelpful. I only wrote my first post because I think your brand is worth protecting!!

Regards, Martin

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Paul Scott 12th Jun '15 9 of 21

In reply to post #101005


I think you've completely misunderstood the purpose of the videos. It's just brief comments on things that I would otherwise not have time to include in my report at all.

I flagged all the main issues on ESR, including property. I'm not going into all the ins & outs of the property transactions in a short video, I just flagged that property has been a bull point for this stock, which it has. The onus is then on listeners to do the detailed research, I'm just flagging key issues.

Property WAS an important issue from the day's RNS, as shown by this excerpt, so I was totally correct to flag this as an issue:


Anyway, if you think my videos are not good enough - don't watch them.


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shanklin100 12th Jun '15 10 of 21


Blimey, this reminds me why its normally best to walk by on the other side and not try to be helpful.

I won't be making the same mistake again.

Cheers, Martin

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Paul Scott 12th Jun '15 11 of 21

In reply to post #101013

Well you haven't been helpful! You've just demotivated me, and made me wonder why I bother doing so much work to put out free content. Also, it's stressful enough doing these videos, as it's easy to get tongue-tied, without additional pressure being loaded on from expectations being unrealistically high.

As you know, if there are factual errors, which inevitably there will be occasionally, then I'm happy to correct them. I don't accept there were any factual errors with my comments on ESR. If I got tongue-tied, and muddled about the text on the screen, then my apologies, but these things happen. It's not meant to be perfect. I haven't got time to write a script, practice it, etc. It's just off the cuff.


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shanklin100 12th Jun '15 12 of 21

Hi Paul

I did start by pointing out in the most positive terms the high quality of your daily reports, something I stand by. This has resulted in a Paul Scott brand that is worth you doing everything possible to build further and not dilute in any way.

Please feel free to have all these posts deleted as I am sure we both have far better things to do than continue being at cross purposes.

Best wishes, Martin

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kenobi 12th Jun '15 13 of 21

In reply to post #101014

Paul, I must say I love the videos, sometimes a bit chaotic, but I love seeing how you look things up on stockopedia, and the thought process. It's also really nice to see it form so to speak, obviously you've thought about it before, but I love comments like "I can see the bearish views on this one too", gives a much better feeling of how much of a "conviction it is too.

Obviously it's not the same as the scvr, but I really enjoy watching it. Maybe it's just different strokes for different folks ! don't get discouraged, and please keep it going.

All the best,

long time follower, kenobi (back from the days you were reviewing new look ! and the dolly the sheep company !)

just to add a PS,   I prefer that you don't reherse it and its all slick !  I like it as it is,

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Beginner 12th Jun '15 14 of 21

In reply to post #101014

Hi Paul
This is just to say a massive 'thank you' on behalf of myself and all the others who read your work, and now listen to it, daily. I have learned a great deal from you, and continue to do so.

DO NOT BE DEMOTIVATED. For every one person who ticks up your work several hundred read it. You are genuinely giving back to the investing community here, and making a real and valuable contribution to our knowledge and understanding.

Thank you again.

(Martin was being critical without really being constructive, but I am sure he means no harm or ill will).
Joke to cheer you up:

Horse walks into bar.
Barman says "Why the long face?"
Horse leaves.
Celine Dion walks into same bar.
Barman says "Weren't you just in here?"
Horse leaves again.

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Mark Carter 12th Jun '15 15 of 21

In reply to post #101014

Paul, I too would like to extend a massive "thank you" for all the hard work that you put in. There are many people out there who may not acknowledge it publicly, who owe you a huge debt of gratitude. I know I do!

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ericb 12th Jun '15 16 of 21

IS Paul Scott a brand now !! Can I order a T Shirt ... what nonsense

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herbie47 12th Jun '15 17 of 21

I would like to thank Paul for all his work and invaluable information that he provides which does not seem to be available elsewhere and its free. Insight into the balanace sheets of smaller companies for very useful when making investment decisions, my only regret is I did not know about him sooner.

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shanklin100 12th Jun '15 18 of 21

Brand reputation is a massive issue, which many individuals and organisations fail to take properly into account. It takes years to create and moments to destroy.

Examples like Blair and BP show the extent of the damage that can be caused. Merlin with Alton Towers so far seem to be doing a far better job of dealing with a very serious negative situation.

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awhawh 13th Jun '15 19 of 21

Hi Paul,

Another great report. Keep up the good work.

Regarding BooHoo - I agree with you positive sentiments on this company.

Great business with strong leadership - At its heart is Mahmud Kamani, a self confessed workaholic with a large stake in the company. I like the company's strategy of marketing cheaper clothing specifically at those customers with less spending power.

Excellant ROCE, cash flow, liquidity. Marketing is working (I've seen BooHoo posters at train stations); positive reviews on YouTube; Saw a few items in the fashion section of the Metro; Items now appearing on the ASOS website; Increasing customer base (3 million) and the new mobile app.

My only concern about the company's strategy is that it is aiming at a transient customer base. 18-24 is not very wide and it may reach a point that for every new customer you gain you loose one whose tastes change and no longer finds BooHoo appealing. I also suspect that the aggressive marketing will need to be a regular feature of the business to attract new customers and to encourage existing customers to spend more with discounts which would eat into profits.

Overall, in the medium term this is a company with excellant growth prospects. I believe market confidence will return by early 2016 and I expect the share price to rise to 50+

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shanklin100 14th Jun '15 20 of 21


FWLIW, I would remove all my posts in this thread were this possible, as I was not seeking to be unhelpful, and it is best not to post when angry.

Despite being content with my level of diversification, I think events at and surrounding PLUS are affecting me on an ongoing basis more than I had previously realised.

Regards, Martin

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tony akram 22nd May '16 21 of 21

Paul, You do a great job and even better because it is honest and unscripted -keep it up



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 Are LON:DIA's fundamentals sound as an investment? Find out More »

About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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