Small Cap Value Report (15 Feb 2016) - BOTB, HRN, PHD, ALLG, PLA, SSTY, NGR, COMS

Monday, Feb 15 2016 by

Good morning!

Last call for Mello Beckenham tonight - with an unusually large company giving a presentation over dinner - Photo-Me International (LON:PHTM) .

A pleasant start to the day for me, with news of a special divi at one of my favourite micro caps:

Best Of Best (LON:BOTB)

Share price: 195p (up 10.8% today)
No. shares: 9.7m
Market cap: £18.9m

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

Special dividend - and quite a decent one too, at 19.5p has been declared today. This company operates the supercar competitions which have been a prominent feature in UK airports for about 15 years - although these days most of their business is now online - making it a much more attractive investment proposition in my view (more scaleable, and without capex).

The Company continues to be both profitable and cash generative and benefits from a strong balance sheet with significant cash reserves. As a result of this, the Company has a cash balance surplus to the operational requirements of its continuing activities and deems it appropriate to declare the Special Interim Dividend.

After the Special Interim Dividend the Company will retain cash balances in excess of £1.0 million, which the Directors consider to be sufficient working capital to fund its activities over the next 12 month period.

This is a good illustration of why I like investing in companies with net cash on the balance sheet. Not only are they much safer investments usually (as cash in the bank means the company cannot usually go bust, and can ride out difficult patches), but also every now and then you get a pleasant surprise - e.g. a special divi, or an earnings-enhancing acquisition. So cash is really latent value, that some investors overlook - people often just look at the PER, and ignore the cash or debt position.

A nice pattern is emerging here, as BOTB also paid a 14.5p special divi in late 2014. I very much like management that distribute surplus cash to shareholders, it's a great discipline, and shows a very good mindset in my view. Management and outside shareholders are well aligned here, with management drawing (in my view) reasonable salaries, and having large personal shareholdings, so we all benefit from the special divi.

Illiquidity -…

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Best of the Best Plc runs car competitions. The Company displays luxury cars as competition prizes in rented retail space within airport terminals, at shopping centers and online. The Company is engaged in selling tickets to passing airport passengers, as well as from online customers through its Website. The Company operates from approximately eight United Kingdom and over two international airport sites, as well as approximately from three shopping centers. The Company operates from various airport sites located at Gatwick North, Gatwick South, Birmingham, Manchester Terminal 1, Edinburgh, Dublin's Terminal 2 and Westfield shopping center located in London's Shepherds Bush. The Company's Indian franchise trades under the BOTB brand from Hyderabad airport. The Company carries out its principal operations in the United Kingdom. The Company's subsidiary is Best of the Best ApS. more »

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Hornby Plc is a holding company. The Company is engaged in developing, designing, sourcing and distribution of hobby and interactive products. The Company distributes its products through a network of specialists through its online activities and various retailers throughout the United Kingdom and overseas. The Company has operations in the United Kingdom, the United States, Spain, Italy and the rest of Europe. The Company offers its products under various brands, such as Hornby, Scalextric, Airfix, Humbrol and Corgi. Its subsidiary, Hornby Hobbies Limited, offers products under various categories, which include Train Sets, Locomotives, Train Packs, Tracks and Extras, Wagons and Coaches, and Spares and Accessories. Its subsidiaries include Hornby Espana S.A., which is engaged in the development, design, sourcing and distribution of models, and Hornby America Inc., Hornby Italia s.r.l, Hornby France S.A.S and Hornby Deutschland GmbH, which are distributors of models. more »

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PROACTIS Holdings PLC is a United Kingdom-based company, which is a Spend control and e-Procurement solution provider. The Company is engaged in the development and sale of business software, installation and related services. It offers a range of solutions, such as PROACTIS Source-to-Contract, PROACTIS Purchase-to-Pay and PROACTIS Supplier Network solutions. It offers managed services, such as procurement-related managed services, such as Sourcing and Content Management; Finance-related managed services, such as Invoice Data Capture and Accelerated Payment Facility, and information technology (IT)-related managed services, such as Application Hosting & Management. Its Solutions for Finance and Procurement include cloud, hosted or on-premise software applications. PROACTIS Spend Analysis offers company-wide data on users' laptop, tablet or mobile. Its PROACTIS Invoice Data Capture turns paper, fax and Portable Document Format (PDF) invoices into system-ready electronic records. more »

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

12 Comments on this Article show/hide all

PJ0077 15th Feb '16 1 of 12


I was surprised to see the Proactis share price plummet on Friday in an Equity market that was strongly going in the other direction, rising 3%.

I notice that the latest options were issued at Fridays close - you don't think the PHD Directors might have engineered the share price lower, do you??

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Ramridge 15th Feb '16 2 of 12

Re. Proactis Holdings (LON:PHD) In one of your recent posts, you gave some rules of thumb which I found sensible and useful. In relation to companies that capitalise software development, I think you said that acceptable levels in your view would be 10-15% of payroll costs and the company to be cash generative.
Applyng these rules to Proactis Holdings (LON:PHD) @ FY2015 results, and using 10% of admin expenses as a rough proxy for 10-15% of payroll costs, the capitalised development costs come to 16% of admin costs. FCF was £1.2m.

So on this basis, this company's software capitalisation seems to be within acceptable bounds.

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Paul Scott 15th Feb '16 3 of 12

In reply to post #121457

Hi PJ,

you don't think the PHD Directors might have engineered the share price lower, do you??

Absolutely not, no. Proactis Holdings (LON:PHD) is just an illiquid share, that moves in lurches, on individual trades of any size. A certain amount of cynicism is helpful when investing, but let's not descend into total paranoia - that's what advfn & LSE bulletin boards are for lol! ;-)

Regards, Paul.

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james1n 15th Feb '16 4 of 12


Its already looking a fairly comprehensive report today, but any thoughts on Amino Technologies (LON:AMO) and the results announced today after the rather mild profit warning that you commented on back in October please?

Regards, James

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Michael Mortphew 15th Feb '16 5 of 12

Thanks for the excellent BOTB interview. He comes across very well. What's useful for me too as a novice investor is that it makes me think about how companies operate, what affects them i.e. understanding the business you choose to invest in.

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fanmail 15th Feb '16 6 of 12

100% agree re Safestay. They were on my watchlist until the capital raise and got chalked off immediately thereafter. Management will do well out of expansion but doubt shareholders will.

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Jardine 15th Feb '16 7 of 12

In recent years NATURE (LON:NGR) have suffered from bad management which has led to the poor performance and decline in share price. Over the last 18 months or so almost all the senior and divisional leadership teams have been changed. It is too early to say if the new team can make a better go of things than their predecessors but there are some positive signs. They are at least making some decisions to better allocate the capital in the business, which is a good start. Today's profit warning is undoubtedly a kitchen sinking exercise by the new FD appointed late last year and might (with luck!) signal the low point in this company's fortunes. One positive sign in today's statement is that turnover will meet market expectations and the loss for last year is more a matter of accruing for reorganisation costs and writing off some old debit balances, so giving the new team at least a clean start.

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andrea34l 16th Feb '16 8 of 12

Is PHD any better than fair-valued at 115p, considering revenue is only rising 3.6%? Maybe the acquisition of Due North will boost numbers going forwards...

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Gostevie 16th Feb '16 9 of 12

Re NATURE (LON:NGR) I can hardly think of a better example of a company where meeting the charismatic CEO can blur one's judgement. I've met the hugely impressive Danish CEO (name escapes me, sorry) of NGR at a couple of investor events and it is hard not to like him although in the case of NGR I never actually invested. I really like these Mello / ShareSoc / Equity Development events but one has to be so careful and keep a clear head.

Thanks, Paul, for another superb SCVR.

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Jardine 17th Feb '16 10 of 12

In reply to post #121526

Gostevie, in response to your comment about the CEO of NATURE (LON:NGR), the man you refer to, Andreas Drenthen, stepped down last year as CEO and has been replaced as part of the wholesale overhaul of senior management in this company. Andreas remains on the board though as a NED as he represents their largest single shareholder which he is a part owner of.

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Pete E 17th Feb '16 11 of 12

"supercar competitions which have been a prominent feature in UK airports for about 15 years"
As a very regular traveller during this time I have yet to notice a competition, maybe its because I 'switch-off' and dive through ASAP?

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Gostevie 17th Feb '16 12 of 12

In reply to post #121592

Hi Jardine,

I stand corrected. thank you for the clarification.


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


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