Small Cap Value Report (23 Mar 2016) - ALY, TRCS, CLL, QXT, BAR, SWP, CNKS

Wednesday, Mar 23 2016 by

Good morning!

What a busy day yesterday! I added loads more companies to yesterday's report, but there were so many companies reporting, in the end I had to do brief comments on the last 8 companies added to yesterday's report. So you might like to recap on that report here.

My CEO interviews seem to be popular, so I've got more in the pipeline. Yesterday afternoon I had a long chat with the CEO of accesso Technology (LON:ACSO) (at the time of writing, I hold a long position in this share) - very illuminating too, he's so bullish about the business, and its seemingly unique opportunities for growth.

Accesso seems to have a huge moat around it once clients are signed up - the company already has c.60% visibility of its revenues for 2022! The interview is just over an hour long, which I know some people baulk at - I can't understand why, because if I'm risking thousands of pounds on a company's shares, an hour of my time to listen to the CEO is time very well spent. The link for the audio is here.

Laura Ashley Holdings (LON:ALY)

Share price: 24p (down 0.7% today)
No. shares: 727.8m
Market cap: £ 174.7m

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

Results 52 wks ended 30 Jan 2016 - the company is in the process of changing its year end from 31 Jan to 30 Jun, so this will be an extended, 17-month year. Hence today's results are called "second interim results", but are 52 week figures, so I'll treat as a normal year's figures.

The share price has already come down a lot from last summer's peak of 35p per share. So clearly the market has been anticipating lacklustre performance. That's why the price has barely budged today, on publication of lacklustre figures.

The core UK retail business performed pretty well in 2015/16, as you can see from the table below:


The highlighted items are what I regard as the underlying performance of the retail business. As you can see, "contribution" (i.e. the profits from the UK shops, before central overheads such as warehouse, Head Office costs, etc) rose 8.7% to £ 31.3m. That's a…

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Laura Ashley Holdings plc is engaged in designing and manufacturing products for home and fashion. The Company's segments include Retail and Non-Retail. The Retail segment includes sales through Laura Ashley's Managed Stores, Mail Order, e-Commerce and Hotel. The Non-Retail segment includes licensing, franchising and manufacturing. The Company's property portfolio in the United Kingdom includes approximately 190 stores. The Company's United Kingdom business includes the Home Accessories, Furniture, Decorating and Fashion categories. The Furniture product category includes upholstered and cabinet furniture, beds and mirrors. The Home Accessories product category includes lighting, gifts, bed linen, rugs, throws, cushions and children's accessories. The Decorating category includes fabric, curtains, wallpaper, paint and decorative accessories. The Fashion category includes adult fashion, fashion accessories and perfumery. The Company also holds interests in the Laura Ashley hotel. more »

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Tracsis plc is a holding company. The Company is engaged in the business of software development and consultancy for the rail industry. Its segments include Rail Technology and Services, and Traffic & Data Services. The Rail Technology and Services segment includes its Software, Consultancy and Remote Condition Monitoring Technology, and also includes Ontrac Limited and Ontrac Technology Limited (together being Ontrac). The Traffic & Data Services segment includes data capture, analysis and interpretation of traffic and pedestrian data to aid with the planning, investment and ultimate operations of a transport environment and it also includes SEP Limited (SEP). It provides software products, consultancy services and delivers customized projects to solve a range of problems within the transport and traffic sector. It specializes in solving a range of data capture, reporting and resource optimization problems along with the provision of a range of associated professional services. more »

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Cello Health plc, formerly Cello Group plc, is a United Kingdom-based healthcare and consumer strategic marketing company. The Company is engaged in providing market research, consulting and direct marketing services. The Company provides a range of biotech, diagnostics, devices and other non-healthcare clients. The Company operates through two segments: Cello Health and Cello Signal. The Cello Health Division provides market research, consulting and communications services principally to the Company's pharmaceutical and healthcare clients. The Cello Signal Division provides market research and direct communications services to the Company's consumer facing clients. The Company delivers its services from office networks in the United Kingdom, the United States and Singapore. more »

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

33 Comments on this Article show/hide all

dscollard 23rd Mar '16 14 of 33

very bullish price action with ALY... complete reversal on the day with higher than average volume. Guess the results when digested were more palatable.

From a technical POV this may well break-out towards 28p

I am a  holder for the divi and thought about adding this am on weakness...didnt expect such a  quick bounce!

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aiminvesting 23rd Mar '16 15 of 33

Hi Paul,
Any thoughts about Cenkos Securities (LON:CNKS) ? FY results are out today, and I can't really understand why the shares are down 10%, since everybody knew 2015 would not be as good as 2014. Revenues for the FY are down 14% vs 20% in H1, so I think they are doing pretty well, and the yield is over 10%. Would really like to read your interpretation of those results, or anything strange yoy may have spotted.
Thanks as always for the reports!
By the way, I think yesterday's acalarations were not needed, you have every right not to publish reports when you don't want to!!

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2020vision 23rd Mar '16 16 of 33

Paul, I noticed you didn't comment on SEE yesterday in the end. What's your view on their premium placing with VSI, looks like VSI will manufacture their new 'reduced cost' fleet product, VSI are Malaysian based and have a link with Dyson.

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Paul Scott 23rd Mar '16 17 of 33

In reply to post #125119

I didn't get round to commenting on Seeing Machines (LON:SEE) yesterday. However I did look at their deal, with a Placing (at a premium) from a technology company. Looks very promising I think. Certainly it's an important validation of their technology & its potential I think. Not one I currently hold.


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apad 23rd Mar '16 18 of 33

Friday 8th January, John McArthur, Chief Executive, disposed of 120,000 ordinary shares of 0.4p each ("Ordinary Shares") in the Company, at an average price of 515.9p per Ordinary Share.
Worth including in your opinion piece.

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purpleski 23rd Mar '16 19 of 33

Sorry Paul was meant to be a thumbs up but my hand was shaking. Thanks for the write up on ALY.

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Ramridge 23rd Mar '16 20 of 33

Re. Tracsis (LON:TRCS). I like this company a lot and I am looking for a reason to invest.

For the full year the company expects to make eps of 21p. Today's HY report shows a normalised eps of 4.04p. So for the results to be in line, TRCS has to make some 17p in 2nd half year.

Yes, the 2 acquisitions SEP and Ontrac are expected to fire on all cylinders in the 2nd half. But my back of fag packet calculations say it will be a tall order to make 17p in the next 6 months, from base business plus the 2 acquisitions.

However far be it for me to bet against John McArthur, who I rate to be one of the best CEO in the business. So I am going to take the coward's way out, and sit this one out.

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Edward Croft 23rd Mar '16 21 of 33

We're just testing some new tickerize fixes.

 888 Holdings (LON:888)  BP (LON:BP.)   Vodafone (LON:VOD)   £10m   £174

We've changed the £XYZ to work for characters or digits and only for UK stocks.  We'll figure something out for international stocks later. 

@Paul give it a go and see if it works better.  My test seems ok

Actually - it's not released yet.  Please wait a mo.

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gus 1065 23rd Mar '16 22 of 33

In reply to post #125140

Hi Ed. could you have a look at Sports Direct while you are at it please? There are three SPD's at the moment, two of them in the UK. Only one of them ever seems to be talked about ...



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seadoc 23rd Mar '16 23 of 33

Hi Paul,

Thanks for chat with Tom Burnet at accesso Technology (LON:ACSO). The introduction of ticketing solutions to Asia sounds very positive.

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janebolacha 23rd Mar '16 24 of 33

In reply to post #125101

Carcosa, this article refers to the reasons for the collapse of the licensed Laura Ashley business in Australia:

The chance of recovering the debt would seem slim.

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Paul Scott 23rd Mar '16 25 of 33

In reply to post #125158

Re Laura Ashley Holdings (LON:ALY) and the £1.3m debt from its Australian franchise partner going bust. I haven't looked into the detail, but normally in these situations, unsecured creditors get nothing. Occasionally there might be a small payment (a few pence in the pound), but that's the exception rather than the rule.

The business will usually resume trading, but under a new limited company, which does not inherit the debts of the old company, it's a clean sheet.

So I would work on the basis that the £1.3m exceptional charge is an unrecoverable bad debt. It's not material anyway, so forget about it.

In many ways this is a much cleaner way of doing things for ALY than it operating the stores itself. When the franchisee goes bust, it kills all the lease liabilities for the shops, which is a good thing. Therefore although ALY has been stung with a bad debt, imagine how much greater the losses might have been, if it had operated the shops itself, and been liable for years of rental payments on loss-making shops (look at the mess French Connection (LON:FCCN) has got into on that front).

So I like the franchising model that ALY uses.

Regards, Paul.

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grym02 24th Mar '16 26 of 33

If you can update on Lamprell when you get a chance, it would be much appreciated.

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Paul Scott 24th Mar '16 27 of 33

In reply to post #125179

Hi grym02,

I'm reporting on absolutely loads of companies at the moment, as we're in the busy season.
So once the article's signed off for the day, that's it, I'm done!

There are only so many companies one person can cope with. I do about 500, which is hard work.

Perhaps you could take up a bit of the slack, and tell us why you think Lamprell is good or bad? Just a couple of sentences is good. It's a team effort here So it's much more useful when people say something about the stock they are interested in, rather than just asking me to do the work for you, which is a bit annoying to be honest, when I'm busting a gut to cover as many companies as I can already - so asking me to do more, after already having spent all day & all evening writing the above, is a bit annoying. I'm not a machine FFS!

Regards, Paul.

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grym02 24th Mar '16 28 of 33

In reply to post #125185

LAM LN: Leading shipyard in the Middle East, where the NOCs are ramping production low oil prices. 2016 will be slow year, but can still generate EPS of 0.10 GBP per share, or 10% yield on a trough-ish earnings number. And tax advantaged status means zero tax rate so EBIT = NOPAT. In addition, company has net cash of 201m USD or almost 40% of the market cap. This will only grow due to the NWC unwinding as part of PoC accounting (they have done a lot of upfront work). so even if a chunk of that cash is needed to run the business, LAM trades for less than 8x EV/NOPAT. 2016 revenue are 90% covered by current projects. 2017 is a mystery, but doubtful that they stop drilling in the Middle East no matter what happens to oil.

Curious if you or others see it differently?

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gus 1065 24th Mar '16 29 of 33

I'm not especially familiar with the company, but it looks as though they may suffer from the view that their new business flow is lumpy and unpredictable. Yes, the producers will keep drilling in the shallow water ME but pressure on Capex might lead them to sweat their rig assets for longer delaying new orders etc., for Lamprell (LON:LAM) . Presumably they themselves have pretty high overheads so if running at less than full capacity there is likely to be significant cash burn. This said, this already seems built in to the share price so I agree there seems a good risk:reward profile, especially if you think there is an oil price recovery on the way.


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bobo 24th Mar '16 30 of 33

middle east shipyards, dealt with a few, dodgy to say the least, i'd avoid

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herbie47 25th Mar '16 31 of 33

Paul, many thanks for the link to your interview with accesso Technology (LON:ACSO) CEO, does sound very promising, I'm now a long holder. Also thank you for the Tracsis (LON:TRCS) review.

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tiswas 8th Apr '16 32 of 33

I am surprised that there is no comment on the ALY RNS yesterday where over 100m shares are pledged as collateral for a loan.

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rhomboid1 8th Apr '16 33 of 33

In reply to post #126944

Hi tiswas

I'm assuming in a sense it's old news as everyone knew his divorce was going to be painful so this looks like just his chosen way to maintain exposure to Laura Ashley Holdings (LON:ALY) upside whilst providing an alimony pot?

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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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