Small Cap Report (8 May) - FCCN, GVC, QPP, RGO

8th May '13 by Paul Scott

8 comments 20375 reads

Pre 8 a.m. comments

French Connection (LON:FCCN) have appointed Adam Castleton as their new Finance Director. Coming so quickly after the unexpected departure of the old FD, this suggests that it was probably being arranged before the previous FD left. I stumbled across this article about the old FD's departure, which suggests that trading is still poor at FCCN. They've got time to turn it around, due to the big cash pile, but I'm not as confident as I was about the odds of a turnaround being successful, so I've trimmed back on my personal holding in the company, which is now only small. I've usually found that an FD leaving any company can be a sign of trouble, but we'll have to see what their next trading update says.

GVC Holdings (LON:GVC) has issued an AGM trading update, saying they are in line with market expectations, and are busy integrating the Sportingbet brand, which they acquired in March. GVC shares have doubled in the last year, but at 289p they still look good value against broker forecasts.

I can't find any forecasts on Stockopedia, but on Morningstar they show EPS of 37.4p for 2013 and 54.6p for 2014, which is a PER of 7.8 and 5.3 respectively. Although I would need to double-check that those forecasts have been converted from Euros (the company's reporting currency) into sterling.

The company has historically paid generous dividends, and the forecast yield is 7.6%, rising to 10.2%, again those figures would need to be checked, as they look unusually high, so as always please do your own research. But if those PER and yield figures are correct, then it certainly seems good value.

I think we might have one or two GVC shareholders amongst members who read these reports, if so please feel free to comment in the comments below.

Post 8 a.m. comments

Going back to GVC Holdings (LON:GVC), I've had a couple of chats & emails with friends who have kindly provided me with useful information on the company.

Broker forecasts for calendar 2013 and 2014 are for E44.1c and E64.3c respectively. Converting those into sterling…

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intuitive6191

8th May '13

Investors Chronicle have quite a good write up on Quindell
http://www.investorschronicle.co.uk/2013/01/21/comment/chronic-investor-blog/the-curious-case-of-quindell-Aj4mTqM3hNsBQRIXdTkAXL/article.html

cig

9th May '13

You say poker is about people, but what about robots? There are independent poker bots operators, and a site could also have in house bots to avoid looking too empty.

Paul Scott

Fair point cig. Although a lot of users also like the chat banter, so it's immediately obvious if the other player doesn't respond to trash talk, that they are a bot. I don't think bots can be used at higher levels either, as good players will quickly work out their programming by testing their responses, and then take them to the cleaners. Unless the whole site is completely rigged (i.e. the cards are NOT random), which has crossed my mind a few times when using some sites, and the most unfeasible card combinations just keep happening so often that you think to yourself that this is a rigged site, and you stop using it.

mpat89

13th May '13

I'm stuck in FCCN having bought at 40-45p thinking I was making a 'value' investment. I immediately lost the dividend yield and 30-40% of my investment. In hindsight, I would stick to companies with a solid track record that are already performing well. My position in FCCN is now essentially a gamble on the financial results improving before the company runs out of £££.

PhilHofGrowYourDough

Poker sites pay some players to sit at tables and play in order to keep tables open and to create games. These players have a reduced rake and the majority of sites operate this strategy.

Also the repeated moans of rigged cards are frequent at online sites. Let's face it, it's not in the poker sites interests to run a bent game. On online sites you play many more hands than you'd ever play at a live table and you're more likely to remember 'nightmare' hands rather than hands which play out as per the odds. Bear in mind I've seen AA beat AA with only 3 players remaining on the final table of a live tournament, plus I've been on the wrong end of a straight flush against another nut flush. It happens!

With respect to not responding to trash talk ... Many serious per players will play many tables at once, e.g. I used to play 4+ single table tournaments together. When playing like that I'm not interested in chat but it doesnt mean I'm a bot.

iwright7

10th Jul '13

GVC Holdings (LON:GVC) have issued a July update which has encouraged me to take a small holding. The Chairman has updated the Sportingbet acquisition position... "By the end of 2013, the Sportingbet cost base should have reduced by close to 40%" Astonishing in spite of this Sportingbet sales are up year on year so this combination should have a very +ve effect on profitability. On a PER of just 6.7 GVC Holdings (LON:GVC) looks like great value and worthy of further investigation.

Maddox

23rd Aug '13

The GVC update revealed a fantastic performance by the management team - they'd taken on an ambitious task in integrating SBT non-Oz divisions and delivered it spectacularly well. Typically when a business undergoes this scale of transformation the trading results suffer, but not in this case. Rapid transformation and improved trading results. This is a clear endorsement of their vision, strategy and ability to deliver.

Really looking forward to the next set of figures.

Maddox (long GVC)

jjis

25th Nov '13

Coming a bit late to this one - it has come up recently on a few screens I run because of cheap valuation 6.5x P/E , 9% yield (!?) upgrades, what's not to like - oh yes its involved in the on line gambling market. Any way looks like it had a pretty poor trajectory of performance from 2007 - 2011 but seems to have been transformed by Sportingbet acquisition in the last year - the integration of which seems to be going remarkably well and they are flagging possible benefits from World Cup next year.

Also Non Exec Chair has just bought 10,000 shares & I see the US is looking to expand on line gambling:
http://www.bbc.co.uk/news/technology-25051312

& I like the Companies commitment to paying dividends as indicated by this from the r3ecent announcement:
GVC is financially focused on generating cash and returning a high proportion of this to shareholders by way of dividends. From 2007, GVC has declared over €85 million or £2.00 per share via dividends to its shareholders.

Just thinking this may be worth a punt given it has gone sideways after the big jump since the result in the summer. But seem to remember Sportingbet was pretty controversial - so does any one else have any more views on it now?

Small Cap Report (8 May) - FCCN, GVC, QPP, RGO

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Paul Scott

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