Small Cap Value Report (10 Jun 2016) - BON, GTC, FLYB, AVS, BDI

Friday, Jun 10 2016 by

Good morning!

Bonmarche Holdings (LON:BON)

Share price: 126p (down 1.2% today)
No. shares: 50.0m
Market cap: £63.0m

(At the time of writing, I hold a long position in this share)

Results, 52 wks ended 26 Mar 2016 - here are the highlights:


Given how bombed out the share price has been of late, these figures don't look too bad at all. Note that LFL sales growth of only 0.7% isn't enough to maintain profits - because I suppose their costs are increasing faster than that.

The PER is only 6.9 times, based on the underlying EPS of 18.3p. This seems to have come in above forecast EPS of 16.9p.

Dividend yield is 5.7%

Outlook - the company today says:

The market niche in which we compete continues to represent an opportunity to gain market share from less focused competitors. I believe in our strategy to deliver successfully our five pillars of growth (described further in the CEO report), and in the ability of our colleagues to execute it. The beginning of FY17 has continued to be tough due to poor weather, however our full year expectation is unchanged provided trading conditions normalise.

The way I read that, it's almost a profit warning, but not quite. So there has to be a heightened risk that there could be another profit warning, given that the new year has started badly. For this reason, I would take say 10% off current year forecasts, to be on the safe side.

Broker consensus is currently for 20.0p EPS this new year. So if we reduce that to 18p to be prudent, then the current year PER is 7.

I've just found some more outlook comments, which say:

Looking ahead, there will continue to be external factors that affect consumer confidence and the cost of doing business - the EU referendum, rising costs driven by the Living Wage, forex rates, and business rates are all unhelpful macro headwinds. Consumers are also spending a greater proportion of their disposable income on technology and leisure - however we are focused on continuing to provide customers with a compelling reason to shop at Bonmarché. We firmly believe that as a niche retailer, focused on catering for the mature female demographic, Bonmarché is well positioned to continue to grow.

The brand development work we are conducting through the early summer will serve to focus…

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Bonmarche Holdings plc is a multi-channel retailer of womenswear and accessories. The Company offers clothing and accessories in a range of sizes for women through its own store portfolio, Website, mail order catalogues and through the Ideal World TV shopping channel. The Company's subsidiaries include Bluebird UK Topco, Bluebird UK Holdco and Bonmarch Limited. The Company has approximately 310 stores across the United Kingdom. more »

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Getech Group Plc is a United Kingdom-based company, which provides geological services, reports and data to the petroleum and mining industries to assist in their exploration activities. The Company's segments include Multiclient products and services, Consultancy projects and All other segments. Its Multiclient products and services segment includes Globe, which is its live Geographic Information Systems (GIS) Earth platform; Gravity and magnetics, which offers global databases; Multiclient regional reports, which include reports on various exploration areas, and Multi-Satellite Altimeter Gravity Programme, which is a three-year study covering gravity data for the continental margins of the world. Its Consultancy projects include Consultancy and licensing rounds, under which the Company provides technical support and advice to the Mozambique government, and GIS software and services, under which, the Company, through Exprodat Consulting Limited, offers Exploration Analyst Online. more »

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Flybe Group PLC is a United Kingdom-based company. The Company is a shell company.

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

34 Comments on this Article show/hide all

herbie47 10th Jun '16 15 of 34

In reply to post #135017

Yes it was very small on my ipad, had to enlarge a few times.

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dfs12 10th Jun '16 16 of 34

In reply to post #135011

Hi, With regards the decline in the Bonmarche margin, this was due to getting lumbered with lots of winter clothes that were supposed to be sold during the cold weather that never materialised. They had to discount these to shift them (hence the reduction in margin). The good news is they ended the year with a lower stock holding position than they did the year before (so they haven't still got them to deal with). So one could argue the decline in margin is temporary (assuming we are going to get a winter next year).

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Carcosa 10th Jun '16 17 of 34

An (unusually?) informative note regarding Avesco (LON:AVS)

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rhomboid1 10th Jun '16 18 of 34

Re Avesco (LON:AVS) , there was a thread yesterday where I reached a similar conclusion ;

"Thanks for the post , I'd say the market is majorly undervaluing this business. I'd agree that the other divisions can be largely ignored, let's assume they just offset the remaining 3.2m debt and HQ costs which is a ludicrously crude and mean spirited assumption . But makes the sums easy!

So CT itself is the value, so looking just at that portion of the RNS :

"A combination of underlying revenue growth and the timing of events coupled with some favourable foreign exchange movements on the US Dollar meant that our main trading division, CT, saw revenues grow by 20% to £61.9m (six months ended 31 March 2015: £51.6m). Trading profit grew by £0.4m to £5.9m (six months ended 31 March 2015: £5.5m) with CTUS again providing the bulk of CT's profits, although CT London contributed significantly improved results and CT Asia Pacific was able to continue its progress as it works towards achieving profitability in the region. Our CT business in Qatar suffered however, with the effects of the current low oil price seeing a marked reduction in the number and size of events in the region although in contrast the Dubai office produced a much stronger performance. Despite pricing pressures, an increase in the worldwide demand for the use of LED products in shows and events has resulted in us looking to invest more in equipment than we had planned at the beginning of the year, thus enabling us to reduce sub hires and improve margins where we can."

So a c.£120m turnover business with profits of £12m in a growth sector and growing at 20% a year, obviously this at the pre tax level and tax in US is 35% so say £8m post tax, I'd put a PE of high teens on that and still be being slightly unkind, so that suggests a market cap of 100m plus rather than 40m today.! Stonking value here imho, and a c. 4.5 % + divi whilst we wait for the value to be recognised!

Done in haste with no envelope to hand so pls feel free to correct any errors!


So I think this looks one of the cheapest shares in my portfolio !

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imranawan 10th Jun '16 19 of 34

In reply to post #135020

I was looking at the text on a 15 inch laptop and then also looked at it on a 21 inch screen later in the day and experienced the same problem.

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mammyoko 10th Jun '16 20 of 34

Thanks for the write-up on Avesco, Paul. Like you I am long.

It is interesting to do a Stockopedia comparison with Vitec (LON:VTC) (same market but supplier rather than hirer) which is on a similar forward P/E and yield and has better quality ratios. Does that make them both good value or just that players in this market aren't highly valued?

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tomps3 10th Jun '16 21 of 34

Paul, many thanks as always.

Any thoughts on Accrol £ACRL an IPO listing today. Floated at 100, giving a £93m market cap, although since first thing it's been pretty impossible to get under 110. 3.5% spread annoying.

A loo roll maker, based in Blackburn, selling to Tesco, Aldi and Wilkinson. The placing is to virtually eliminate the existing £66m debt. Until now it was family owned by the Hussain family, who only founded it in 1993, and NorthEdge Capital who got involved a couple of years ago.

It's revenue and profit growth seems impressive - t/o doubling in the last 3 years, from the top three customers. Simon Thompson (article 6.6.16) says cash profits increased almost 14% in period to 12.2 (yr end April 15). Brokers Zeus Capital and Mike Allen forecast revenues of £120m for the year just ended, and £138m for year to April 2017 and cash profit of £15m and £16.4 in yr just ended and 2017 respectively.

They don't have paper mills, but outsource supply - which makes them more flexible and competitive.

Prospective 6% yield.

Equity Development also did a piece on them today.

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ridavies 10th Jun '16 22 of 34

Hi Paul dont often disagree with you but have to do so on Flybe (LON:FLYB). WE have been talking about the 74% seat take up as an opportunity for so long that it is a joke. 24% is an abject failure when Easyjet, Ryanair and even Wizzair are up in or near the 90s. There is also the 58% satisfaction rate if I read it correctly. I live in the Isle of Man and Flybe is still a major player, but was much bigger for us, before selling their LGW slots to Easyjet. Thank goodness they did. Easyjet is such a please versus Flybe or Flymaybe as we used to call them. Their claims on time keeping used to be a joke too because they excluded the frequent cancellations form the figures. Their operational reasons or technical issues for cancellation were as laughable as they were frequent when we all knew that the main reason for the cancellations was consolidation - i.e. where the seat take up was so low on a flight that they consolidated it into the next one.
When you say there is a need for a short distance airline, we already have lots of them dont we?
Their model at one time was that on short distance flights, their turbo prop planes were-much more fuel efficient that jets. Sadly as an environmentalist, that has become less of an issue with the collapse in oil prices, and also I believe that more and more passengers want to fly in a jet - more space and feeling of space than the smaller aircraft. All IMHO of course. I cant see where they are going to steal share, and profitable share, although they have a lot of cash to back them up whilst they are getting their. Their strategy so far IMHO has been to get out of major problems, rather than how to take the airline forward profitably. When there is nowhere else to hide, all the legacy issues gone away, I believe they will be found out. I dont think they will even be worth a takeover, unless it is for the cash. Your response as always will be welcomed, and I hope for all the shareholders that you have a positive one! Best regards

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Paul Scott 10th Jun '16 23 of 34

In reply to post #135047

Hi ridavies,

Many thanks for your contrary view on Flybe (LON:FLYB) - you make some excellent points.

Regards, Paul.

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Aislabie 10th Jun '16 24 of 34

Bonmarche seems to be a company that you give more credit to than I would have thought it merits. Retail is your thing and not mine, but the update appears to say, after all excuses are factored in, that "we did not do very well last year, we are not doing well now and in the future we might do well depending on the result of brand development and recently recruited talent " (i.e. a miracle)
There must be better stocks out there than those that depend on customers self identifying as "mature adults",without a mention of "style", "sophistication", "elegance" etc

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rhomboid1 10th Jun '16 25 of 34

In reply to post #135041

Hi tomps3

With Accrol I have one major concern , this is that the vendors are taking a load of money off the table, repay all of their loan notes , sell down of equity to 15% and bowing out themselves having put in place a new mgt team. How strong are the indemnity and warranties given to stop them after a decent period of time has elapsed starting a newco with all their knowledge,capital and contacts? I also asked on Advfn "Does anyone know the story behind Nisaic Ltd , set up last month by the Hussain's at the same registered office with the activity TBA ?"

Which looks to be the start of a successor business that isn't keen to declare its field of activity

Without knowing the answers I'd not be comfortable investing.

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BlueFrew 10th Jun '16 26 of 34

Despite being close to a bus route that would take me to an airport Flybe (LON:FLYB) go from, I've actively avoided them since 2009. My son went down with chickenpox 2 days before a family holiday. I got all of the money back I'd paid out thanks to my travel insurance except the taxes and charges, which had to be claimed back from the airline. A £ 150 administration charge to refund £ 153.90 worth of taxes and charges was, in my opinion, completely out of order.

At the time it wasn't in the T&Cs or on the website, though I see they now have a note on the website about this charge. Any business which is dependent on repeat business should really try to avoid screwing over their customers. Unfortunately just about all of the airlines have some kind of charge for these refunds, but Flybe (LON:FLYB) are in a league of their own when it comes to rapaciousness.

As for Avesco (LON:AVS), I am long too. It's always worth hearing a bear case, just in case you've missed something, but it seems just about impossible to find a bear on this company. It does seem like a real bargain.

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FREng 10th Jun '16 27 of 34

In reply to post #135071


That's an excellent find - how did you spot it?

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rhomboid1 10th Jun '16 28 of 34

In reply to post #135083

I always look at companies house for Directors other interests, it's also useful to breakdown to operating subs and look at the picture in detail. In this case it may all be fine but the facts need an explanation imho

For instance the fact that a newco existed pre IPO might sidestep the warranties? Who knows but I'm sure the company would be able to put any interested investors concerns to bed if requested.


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Beginner 11th Jun '16 29 of 34

In reply to post #135038

Vitec (LON:VTC) has some considerable debt, left over from some unwise acquisitions a few years ago. However I agree that it is a potentially good buy at the current price. With the Rio Olympics coming up, as well as Euro 2016, profits should be up again this year. Broker forecasts have been lowered recently though. I formerly held Vitec (LON:VTC) and will again at some point hopefully. Interims are due on 4 August, and the interim dividend record date is usually a month after that.

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Cato 11th Jun '16 30 of 34

In reply to post #135071

p105 of the £ACRL admission document says that Nisaic is a consultancy firm which Accrol has an agreement with to enable the family to do consulting with them .

Seems ok. Have not found any red flags yet, still to do number crunching.


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rhomboid1 11th Jun '16 31 of 34

In reply to post #135212

Thx Cato , makes sense and my paranoia is allayed !


(Enjoyed Bale's free kick..)

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Browndog24 12th Jun '16 32 of 34

In reply to post #135047

I'm from Guernsey ridavies and we had the same problem with Flybe cancelling flights on two routes out of the island where they faced competition from Aurigny and Blue Islands. This was a number of years ago however and something which happened a lot under the watch of the previous management, who, from what I have read, left this company on the brink of bankruptcy. Saad Hammed has to be commended for what he has done as without him they wouldn’t be around today. Almost all legacy issues have been resolved and this year in particular we are going to see the unwinding of expensive fuel hedges which as Paul says will be a significant tailwind for the coming year.

Flybe’s reliability stats are now one of the best in Europe and I believe Flybe are the 17th most punctual airline in the world, which is quite a feat when you consider the fleet size and the high frequency of flights they have. This is the advantage that Flybe has over other airlines; they can run the smaller routes to regional airports on a high frequency basis and run them at a profit. For example, EasyJet wouldn't be able to operate a high frequency Gatwick service from Guernsey because they have too many seats to fill to break-even and Guernsey folk want multiple flights to Gatwick every day. EasyJet could only make that route work with two flights a day (this is what they applied for when they tried to get in to Guernsey a few years back). An aircraft like the Dash 8 with 78 seats or so allows Flybe to offer multiple round trips potentially with full loads. It's not a question of stealing market share from other airlines, as something like 85% of Flybe’s routes face zero competition.

Granted Flybe aren’t the cheapest airline to fly with and the passenger generally pays a premium, but its a price worth paying if you live in say Newquay or Exeter and you want to fly to the other end of the country without connecting through the London airports, or spending a horrendous amount of time on a train (not to mention the cost of rail travel is extortionate). I flew with them last month from Guernsey to Exeter and back and the service was flawless. Flights arrived 15 minutes early on both occasions, the flight out was about 75% full and the flight back had a couple of empty seats. Tickets were about £130 return booking 6 months in advance.

They need to work on their loadings as 74% is not much in comparison with the other LCCs which you quite rightly point out, but, if they get the figures they say they will for the forthcoming year, they will be profitable on ok load factors with the potential to fill those remaining seats through good marketing, which they have plenty of cash to splurge on. They need to work on their PR a bit more as they still have a horrendous reputation. 58% customer satisfaction is not great, but then no-one really enjoys travelling on planes and going through the rigmarole of airport security etc so it doesn’t attract the rave reviews that a hotel guest might give, or an owner of a new gadget. Check out TripAdvisor - Flybe, Ryanair and Easyjet all have the same ratings.

I don’t think the market really understands Flybe. Either that or the City is still a little nervous given the terrible performance since the company floated. Assuming they continue on their current trajectory, the fuel bill comes down and the benefits of Project Blackbird are reaped, I can’t see how this will not be a winner over the long term.

Thanks for the analysis by the way Paul - a good read and I agree with many of your points.

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gus 1065 27th Jan '17 33 of 34

Just wondered if there are any followers of Getech (LON:GTC) out there that can shed any light on today's c.20% jump in the share price on roughly ten times the normal daily volume? Can't find any news online and there have been no material announcements for a while. Only a small company (market cap c.£15m), so perhaps there's something stirring in the background. Now at about 44p compared to the 25p when Paul posted last summer.



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herbie47 27th Jan '17 34 of 34

In reply to post #169093

Seems to be a share tip, only time I go on BBs. Some complaints about large buys just before it was published.

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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 on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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