Small Cap Value Report (19 Sep 2016) - WTG, SPRP, MTO, SPL, 7DIG, DPP, ADGO, STY, SPSY | Paul Scott

19th Sep '16 by Paul Scott

33 comments 23701 reads

Good morning!

Sorry I didn't get round to reporting on any more companies on Friday, I was too tired. Have decided it's time to focus on health, so spent the weekend charging around on my new bike. It seems to have blown away a few cobwebs!

Mello Beckenham

A lot of regulars read this column, so David Stredder has asked me to mention that there is NO meeting tonight. It has been pushed on to next Monday, 26 Sept.

Fairpoint Webinar

I like webinars, as they save me a trip into London, which isn't really worth it usually just to see one company. Fairpoint management are doing a webinar for investors today at 1:30pm. I've got the date right this time! Here is the registration link.

Watchstone (LON:WTG)

Share price: 181p (down 16% today)
No. shares: 46.0m
Market cap: £83.3m

Correction to H1 2016 results - well this is embarrassing for the company. It looks as if they did their sums wrong in the most recent results, with the EPS figures being incorrect. Today's correction only seems to refer to EPS figures, so that suggests someone used the wrong denominator when calculating EPS, but that the numerator was correct. Sloppy. Mind you, this company has a long history of putting out nonsense figures, so I suppose it's par for the course.

Response to announcement by Slater & Gordon Ltd - of more importance is this second RNS today. Slater + Gordon are of course the muppets from Australia who massively overpaid for the core business of Quindell, when it was on its knees. S+G could have got away with paying a fraction of the ridiculous £637m initial cash consideration (plus further contingent payments). It's been described as one of the 5 worst acquisitions of all time.

This disastrous acquisition of Quindell's core business almost pulled down the whole of S+G. Indeed its share price collapsed from a peak of AUD 8 in early 2015, to just AUD 0.4 today - that's a fall of about 95%. S+G is now reliant on bank financing, and could yet go bust, as another article from the Sydney Morning Herald points out.

Conman Rob Terry, who created the tangled web of Quindell, laughably thinks that S+G "got a bargain". Clearly someone in complete denial, as is often the case with…

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sbotting

19th Sep '16

Hi Paul,

Regards Fairpoint (LON:FRP) they do seem pretty cheap but their legal services firm Simpson Millar has received *terrible* reviews online:

http://www.solicitor.info/solicitors/simpson-millar-llp/1645/1
(poor over various different legal segments especially conveyancing)
and
http://www.mumsnet.com/Talk/property/1576553-Which-ONLINE-conveyancing-solicitors-have-you-used
(look at adda1 's review )
all since the acquisition by Fairpoint Group (in June 2014)

I hold some of them (at a loss now) and was thinking about doubling down, but this makes me wonder how sustainable their business is, it seems that they need to improve their overally service and add some quality control.

Paul what are your thoughts about the relevance of online reviews as a signal for investment decisions?

Any people with legal expertise care to comment?

FREng

Styles and Wood (LON:STY) issued their interim report today, with an in-line forecast for the full year. The shares fell 18% (they have recovered to 8.5% down as I type this).

Here's the outlook statement:

"The trading for the full year remains in line with market forecasts with deferral of work from live frameworks and larger longer term projects strengthening the projected carry through position for 2017. "

Paul Scott

Hi sbotting,

Those are shockingly bad reviews for Simpson Millar.

It's a tricky one, deciding how much weight to give review websites. There are often some phoney or malicious reviews. Also, I think people only tend to leave reviews if something has gone seriously wrong, or if they were absolutely delighted. The broad mass of people in the middle don't tend to write reviews at all - apart from a few eccentrics who just like writing reviews on anything & everything.

Overall though, I've rarely seen such an overwhelmingly bad (terrible actually) set of reviews as the one you linked to. So it's definitely a concern, thank you for flagging. The bad reviews "sound" genuine too - i.e. they're mostly well-written, and give specific & credible reasons as to why they are annoyed, which usually means they're genuine, I find.

Regards, Paul.

Rusty2

Finsbury Food (LON:FIF) results are out today, look quite impressive EPS up 19%, outlook looks good.

Mitie (LON:MTO) profit warning "Revenue and profit in the property management segment has been "significantly" hit by local authority budget pressures and particularly by the statutory social housing rent reductions that came into effect in April, which have reduced the funding available to local authorities and housing associations for repairs, maintenance and project works." Although not a small company could have some read across for other companies in that sector.

Carcosa

Fairpoint (LON:FRP) Only seven bad reviews year to date. I would have regarded that as an indication of how good they are, not how bad.

15 reviews over about 5 years is a very small number to go on, I agree these don't look good. I did check out some solicitors I know and none are even rated, even a large one, so I would not go too much on those, people tend to do reviews when they are upset.

maillotàpoisrouges

Hi Paul,
I didnt like this segment of the results which may account for some of the drop:

· Cash declined by £7.7m since 31 December 2015 principally due to the circa £7.0m payment in H1 2016 for the buffer stock ordered to mitigate against potential supply chain disruption due to the relocation of the factory in China in Q4 2015; this stock remains largely unsold as at 30 June 2016 although the Board is confident it will be sold over the next 12 months

Bw
Hederz

Apologies that was in ref to SPRP

BlueFrew

"Conman Rob Terry .... doing the decent thing and owning up to their mistakes."

Whatever Rob Terry got up to at Quindell, I don't think any of it was a mistake on his part. It was I would wager, almost entirely deliberate.

We need to find a way to lock up people like this up far quicker than happens at the moment, in the unlikely event that they get locked up at all.

james8

For FCCN followers

https://www.theguardian.com/fashion/2016/sep/18/french-connection-stephen-marks-refuses-discuss-turnaround-plan-fashion-retail

Re Sprue Aegis (LON:SPRP) , Paul wrote: "Smoke alarms seem an obvious product to connect to the internet, and combine with other sensors perhaps, so I can see the potential here."

I can see a reason to have smoke alarms send a text message to a phone or alarm centre if they detect smoke, but what's the benefit of an internet connection? Who sits at their desk checking that the smoke alarms are OK? Or checks emails often enough to stop their house burning down?

I suppose you could set up a system to poll the sensors every few seconds, but if everyone does that, we are going to need more bandwidth, and there will be a lot of false alarms.

Thanks hedley05,

Useful point, I have included it in the main report. Together with a hat tip in your direction!!

Many thanks, Paul.

bobo

stock to be sold in the next 12 months (1 stock turn) "you're havin' a laugh mate" barge pole

Quindell remnant, another.

Small Cap Value Report (19 Sep 2016) - WTG, SPRP, MTO, SPL, 7DIG, DPP, ADGO, STY, SPSY

Mello Beckenham

Fairpoint Webinar

Watchstone (LON:WTG)

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Paul Scott

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