Small Cap Value Report (16 Nov 2016) - SDY, KOOV, ABDP, HMLH, FLOW

Wednesday, Nov 16 2016 by
55

Good morning!


Profit warning webinar

Last call for Ed's free webinar, starting at 12:30 today. The sign up link is here.

I forgot to say yesterday, that the data used in this webinar is specifically small caps-based. So this project was originally something I started - by looking through my reports for last year, and using that as a source of profit warnings - since I usually cover the day's profit warnings in these reports.

Then the details on each company's profit warning went onto a spreadsheet, and I started looking at things like: when the share price bottomed out, what % gain (if any) could be had by buying after a profit warning, which companies/sectors were more likely to have profit warnings, etc.

Unfortunately it soon dawned on me that this was a herculean task which would take months of hard work, so reluctantly I had to drop it, after barely having started. Imagine my delight when Ed picked up on it, and put a team of analysts together to properly execute this project. It's taken months, but it's now finished. The results should be fascinating!


EDIT: I hope everyone enjoyed the webinar. I found it absolutely fascinating, and a big wake-up call for me to stop catching falling knives!

Here is the recorded video of the webinar, in case you missed it.


eBook on profit warnings

Here is the link to download Stockopedia's eBook which Ed referred to in the webinar. Essential reading I would say.



Somewhat belatedly, I'll now get stuck into looking at some individual company results & trading updates.


Speedy Hire (LON:SDY)

Share price: 42.25p (up 15.0% today)
No. shares: 523.5m
Market cap: £221.2m

Interim results, 6 months to 30 Sep 2016 - these figures have been well-received by the market, with a 15% share price rise today. Speedy Hire is an equipment hire company, focused mainly on the UK & Ireland.

There was a positive trading update recently, which I covered here in my report of 3 Oct 2016. So we already knew that the turnaround strategy was beginning to work. The highlights table below, taken from today's interim results, makes very positive reading, with all key metrics moving strongly in the right direction;



582ca8bf9a901SDY_table.PNG



Valuation - good figures today have driven forecast upgrades by at…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Speedy Hire Plc is a tools, equipment and plant hire services company. The Company's segments include UK & Ireland Asset Services and International Asset Services. UK & Ireland Asset Services delivers asset management and focuses on relationship management. International Asset Services delivers overseas projects and facilities management contracts by providing a managed site support service. Its geographical segments include UK, Ireland and Other countries. It operates across the construction, infrastructure and industrial markets. Its hire fleet comprises a range of small tools, specialist equipment, and large plant vehicles and machinery. It also retails a range of tools and equipment, as well as safety personal protective equipment (PPE) and site supplies. It also offers various services, such as on-site operative training, test and repair, fuel supply and management, industrial shutdown project management, on-site depots and hire desks. It also offers partnered services. more »

LSE Price
56.5p
Change
-1.3%
Mkt Cap (£m)
295.9
P/E (fwd)
13.1
Yield (fwd)
2.9

Koovs plc is a supplier of branded fashion garments and accessories for sale by a third party through Koovs.com Website principally in Republic of India. The Company offers dresses, tops, jumpsuits and playsuits, skirts, trousers and leggings, cardigans and pullovers, lingerie and sleepwear, and swim and beachwear, among others, for women. It offers shirts, t-shirts and polo shirts, vests, jeans, jog pants, shorts, hoodies and sweatshirts, coats and jackets, and innerwear and socks, among others, for men. In addition, the Company offers bags and wallets, accessories, sunglasses, jewelry and watches. The Company offers its products of various brands, including Knockaround, KOOVS, Kultprit, Pataaka, Pepe Jeans, Shuffle, Sole Threads, Vans, Voi Jeans, Modello Domani and Mr Button, among others. The Company's subsidiary is Koovs Marketing Consulting Private Ltd. more »

LSE Price
25.88p
Change
4.6%
Mkt Cap (£m)
45.4
P/E (fwd)
n/a
Yield (fwd)
n/a

AB Dynamics plc is a holding company, which is engaged in the provision of testing systems to the global motor industry. The Company is a designer, manufacturer and provider of testing and measurement products for vehicle suspension, brakes and steering to the global automotive research and development sector. Its geographical segments include the United Kingdom, Rest of the European Union, North America and Rest of the World. It designs and manufactures specialized testing systems to produce equipment for its customers to develop suspension, brake, chassis and steering systems; evaluate vehicle dynamics and safety systems on the track; employ driver in loop simulation for prototyping; develop and evaluate the next generation of safety systems in vehicles; test and evaluate the technology for use in future driverless cars/autonomous vehicles, and carry out end-of-line noise/vibration (NVH) testing of power train assemblies. more »

LSE Price
870p
Change
-0.3%
Mkt Cap (£m)
167
P/E (fwd)
23.6
Yield (fwd)
0.4



  Is Speedy Hire fundamentally strong or weak? Find out More »


26 Comments on this Article show/hide all

IGC WHITE 16th Nov '16 7 of 26

Downloaded-an excellent and thought provoking seminar-many thanks all!

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mikelevie 16th Nov '16 8 of 26
3

Excellent webinar, some strong principles to live your investing life by. Only wish it had been scheduled before the sodding Flybe (LON:FLYB) warning 22 month ago!

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medlar 16th Nov '16 9 of 26
2

Excellent webinar and e-book - has all the hallmarks of becoming a seminal piece of work and vital for every investor..
Congratulations to all involved. No doubt the financial PRs are now looking for new and ever more tortuous phrases to circumvent phrases such as "below market expectations". Perhaps the FCA/LSE should be asked to ban all such circumventions.

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Mike Rawson 16th Nov '16 10 of 26
2

I can't seem to download the book from the seminar since I don't have a subscription - the sign-up by email seems to be stuck in a loop.

Blog: 7 Circles
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cic 16th Nov '16 11 of 26
8

In response to JamesrWilson1989. If you look at the company Cons Balance Sheet, Equity section, you will see:
Share Capital 18,988
Share Premium 89,520
Retained Losses (27,589) ...all figures '000 USD
There are 110,053,073 shares in issue of nominal value 10p. The share capital is the no of shares x nominal value (10p) = £11,005,307, which is the share capital above when converted to USD at the rate applicable when the share capital was created. The share premium represents what was actually paid into the company when the shares were created, in addition to the share capital. Retained losses are the accumulated losses since inception of the company. Normally, a company is not allowed to pay out to shareholders the Share Capital or Premium other than on winding up the company, so it has to generate a lot of profits to clear the accumulated losses before any dividends can be paid. However, if shareholders agree, the Premium can be paid back to shareholders with agreement of the Court. For practical purposes it makes no difference how this is classified, except that after the Court order it is available for distribution. The question is why would the company want to distribute it? I note that the company has been profitable in the latest year (Dec 2015), and is sitting on quite a lot of cash (12.6m USD, although debt (approx 17m) is higher than the cash pile - but not excessive!), so if it cannot use the cash to repay debt it would be a reason to reclassify and distribute it. How much could it be? Well, if the company has had another good year in 2016 (and the fact that it has applied to the Court now, and Stocko reported earnings forecast for 2016 is positive, suggest it will have a good year), I suggest that most of that cash pile could be distributed, which could be a dividend of around 9p which would equate to about 22% at a share price of 40p. That would likely only be a one off though. Just my thoughts and I hope this is helpful - apologies if my explanation of share capital above is teaching grandma to suck eggs.

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ericb 16th Nov '16 12 of 26
1

In reply to Mike Rawson, post #10

Me too - it takes your email then spits it out again

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Gostevie 16th Nov '16 13 of 26

In reply to Mike Rawson, post #10

Same here.

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JamesrWilson1989 16th Nov '16 14 of 26

In reply to Richard Goodwin, post #4

Thanks Richard.

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JamesrWilson1989 16th Nov '16 15 of 26

In reply to cic, post #11

Hi Cic,

No you have explained it greatly - many thanks.

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Howard Adams 16th Nov '16 16 of 26
1

In reply to cic, post #11

Cic

Thanks for taking the time to write that explanation, very useful.

Regards
Howard

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Howard Adams 16th Nov '16 17 of 26
3

Paul

Thanks for inspiring the Stockopedia team to do the Profit-warning research study. Your long list of profit warnings in the ebook is really useful as a sanity check against my own past experiences. I have used it to track back on my activities and gained some enlightenment, but not without a grimace or two. But great learning for me, so thanks.

Regards
Howard

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Funderstruck 16th Nov '16 18 of 26
5

Thank You Stockopedia for the latest piece of excellent work, particularly Paul who kicked it off. It is extremely useful as it supports the position I reached recently after a lot of time working on the Ratings Ranges but my conclusions were a bit tighter. It's no wonder that Stocko' won the Best Investment Software award recently. Also Paul I have learnt so much from reading your daily analysis of S/caps since day one; it's not the stuff one picks up on accountancy courses.

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B1ggles 16th Nov '16 19 of 26

It took my email OK but I never received the e-book; when it said, 'will be sent after the webinar', I wasn't sure how long after!

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Edward Croft 16th Nov '16 20 of 26
17

In reply to B1ggles, post #19

The ebook is here - www.stockopedia.com/books/profit-warnings/

Thanks for the amazing comments about the webinar... we really did work hard on it... from Paul's daily updates to the data gathering, cleaning, organising, spreadsheets, python scripts, writing, slide crafting, editorial and publishing work.  Really glad it's appreciated !

Blog: Follow @edcroft on Twitter
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dawnpatrol 16th Nov '16 21 of 26

Just caught up and watched the webinar on you tube. Thanks Ed for getting the video up so promptly. Always irritating to miss stuff and great to be able to catch up and know what has been going on.

All very interesting and thought provoking, particularly seeing the relevance of the quality and momentum indicators as well. Well done!

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spaceinvader2 16th Nov '16 22 of 26
3

In reply to ericb, post #12

I think you have do the free two week trial to download the books.

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gus 1065 16th Nov '16 23 of 26
1

In reply to cic, post #11

Hi cic,

Thanks for the clear explanation of the Trans-Siberian Gold (LON:TSG) share capital reorganisation. Worth bearing in mind that UFG Fund Management hold about 80% of the shares and company management about another 5% so it wouldn't surprise me to see a significant special dividend (possibly even funded by an additional leveraged recap) being paid out in the near future as a means of realising value from their holding while retaining control. As a shareholder I would prefer a dividend to all rather than some sweetheart deal cut between management and the principal shareholder.

Best,

Gus.

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andrea34l 17th Nov '16 24 of 26
1

I have a couple of comments on the stocks reviewed:

SDY - revenue has gone up 13.4% (which is pretty good) but cost of sales have gone up 29.3%!?!? As a result the gross profit is only up 1.3%... which doesn't seem that great to me; admittedly they've managed to lower admin costs to give a good improvement in pre-adjusted operating profit... but how long can they continue doing that? Agree with Paul, much prefer LVD, staggeringly low valuation by comparison.

ABDP - the numbers all look great... but what worries me is the comment "With current orders taking us into our third quarter...." - this doesn't appear to give a long visibility of future earnings

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benjamin176 17th Nov '16 25 of 26

Paul

Are you supporting the Peoples Trust? Or have you got something similar planned - you've talked about it in the past!

Keep up the good work

https://thepeoplestrust.co.uk/

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dulciemo 19th Nov '16 26 of 26

Really enjoy reading your insights. Thanks

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

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