Small Cap Value Report (24 Feb 2015) - TUNG, MAR, CRAW, VP., DOTD

Tuesday, Feb 24 2015 by

Good morning.

Tungsten (LON:TUNG)

Share price: 161p
No. shares: 103.5m
Market Cap: £166.6m

Bear raid - there is not an RNS, but the link to the left is to Matt Earl's blog, where he published yesterday a second critical article about Tungsten. More importantly, data from the FCA re short selling shows that between 11-19 Feb 2015, a substantial number of new short positions were opened (see table below, source: FCA), totalling 5.56% of the company, plus another existing short position of 1.0%.


With 103.5m shares in issue, that means 5.75m Tungsten shares have been dumped on the market by short sellers in the last couple of weeks. Which explains why the share price has been so weak.

UPDATE: a friend in the City has just phoned me to point out that he believes the shorters named above are mainly quant funds (or at least they are firms which contain some quant funds, which he believes are probably the shorters here - i.e. they opened the short positions mainly because the share price had already fallen a lot. Therefore, this opens up the possibility that what we are seeing today could be a large spike down, with those quant funds becoming large buyers of Tungsten shares at some point to cover their shorts. So, if you like the stock, there is the possibility this could be a buying opportunity, who knows?! Although personally my confidence in the business model has been shaken too much for me to consider going back in just yet.

There are two ways of dealing with short sellers. You can either get angry, and demonise them. Or you can engage your brain, and listen to what they've got to say, think about it, and make a rational choice - whether to sell up and watch from the sidelines, or whether to stand in the way of the short sellers, and accept that you might incur short term losses.

Short sellers don't pick companies at random. They select companies which are over-hyped, and where they believe there is something fundamentally wrong with the company. The short sellers are usually (but not always) right too - because they are generally more experienced & sophisticated investors. Loss-making & low turnover companies are often chosen by shorters, as they are very difficult to value, and the valuation is often based on hype & hope, rather…

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Tungsten Corporation plc is engaged in e-invoicing, purchase order services, analytics and financing business. The Company's segments include Tungsten Network, Tungsten Network Finance, Tungsten Bank and Corporate. Its Tungsten Network segment includes e-invoicing and spend analytics business of Tungsten Network. The Company's Tungsten Network Finance segment includes the supply chain finance business. Tungsten Network connects buyers to their suppliers, enabling tax-compliant electronic invoicing. Its software translates and validates each supplier invoice, and allows suppliers to check invoice status online. All the users ' invoices are digitally signed, encrypted and stored within the Tungsten Network image archive, where the user can access them anytime. Tungsten Bank provides specialist banking products and services. It focuses on providing invoice financing solutions to small and medium enterprises (SMEs) in the United Kingdom, the United States and Europe. more »

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Crawshaw Group Plc is a United Kingdom-based company, which operates a chain of meat-focused retail food stores. The Company has approximately 40 stores, which are located across Yorkshire, Lincolnshire Nottinghamshire, Derbyshire and the North West. The Company's product range is categorized into approximately two distinct areas, such as Traditional raw meat, and Hot and cold cooked food. Under the Traditional raw meat category, it offers various products sold either loose in a serve over counter for the traditional experience or as multi buy packs on supermarket style multi deck counters, which have all been cut and packaged in store. Under the Hot and cold cooked food category, it offers freshly prepared roast chickens, gammon and pork joints, hot roast sandwiches, shop cooked curries and casseroles, chicken and chips, as well as other traditional deli products. Its stores include Arndale Centre in Arndale; The Arcades in Ashton Under Lyne, and Fresh Meat Factory Shop in Astley. more »

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

66 Comments on this Article show/hide all

ACounsell 24th Feb '15 47 of 66


Appreciate any thoughts on £DOTD interims reported today.  Results look pretty reasonable but share price down 6%. Perhaps a consequence of reduced cash inflow due to increased investment in US (and that business not growing fast enough?) and future proposed investment of £3m over next couple of years.  Alternatively may just be failure to meet heightened expectations and good recent performance of shares?



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herbie47 24th Feb '15 48 of 66

In reply to post #92972

Hi Cisk,
Interesting, Im not sure about difference between trader and investor, maybe a trader the shares go up or down quicker? I think we are all looking for companies that go up x10+, the only one I know in the FT100 is Ashtead in the last 5 years and yes I would like to find such companies and hold long term but Im also trying to find smaller companies that can do that in one year like Crawshaw did last. Yes larger companies tend to be less volitile and have more reserves.

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PhilH 24th Feb '15 49 of 66

In reply to post #92936

Hi Herbie,

In the first post I used the data from July last year as that was when I think Paul initially purchased TUNG.
If you look at the data from April 2013 it's much broader.

100 Quintile returned 214 stocks, 77% returned > 10%, 61% returned > 25%, 34% returned > 50%, 7% returned > 100%, 15% returned < 0%, 2% returned < -40%

40 Quintile returned 94 stocks, 39% returned > 10%, 30% returned > 25%, 27% returned > 50%, 9% returned > 100%, 56% returned < 0%, 34% returned < -40%

I don't fancy dipping into a pool of stocks where 56% lose money and 34% lose greater than 40%

With respect to QPP & ASOS ... who cares. I know that I'll miss some stocks but so what?

Also I'm not looking for a conservative approach, I'm looking to sustain/extend my 27% annualised performance ... See

Best of luck

Professional Services: Sunflower Counselling
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ACounsell 24th Feb '15 50 of 66


Sorry just refreshed and seen your posting on £DOTD!


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herbie47 24th Feb '15 51 of 66

In reply to post #92978

DOTD profits only up 17% is probably a bit disappointing?

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imranawan 24th Feb '15 52 of 66

Just had a look at the dotDigital (LON:DOTD) interims and agree that this looks like a great company but the valuation is looking a little stretched for my liking.

Revenues are up 32% which is impressive, Op profit only increased by 17% and NP was up 21%. The increase in admin expenses seems to have absorbed the vast majority of increased revenues.

Secondly, like Paul mentioned on the last SCVR they seem to be capitalising development spend and not fully expensing this through the P & L statement. By my calculations profits are therefore being boosted by £0.5 per annum. I like the company but I think the valuation hinges on whether they can achieve EPS growth for 2016. I think I'll wait and try and buy in on a dip.

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herbie47 24th Feb '15 53 of 66

In reply to post #92984

Hi Phil,
Thanks for that, thats a great return. But I see you did have QPP?

I'm not disagreeing with you but there seems to be many different strategies which work for different investors. Im just debating different techniques.i

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iwright7 24th Feb '15 54 of 66

Paul: VP - Looks priced about right to me.... 

Operational gearing kicks in with VP and it looks as though year end 15 sales will end up +15% with 30+%EPS increase, which is a big EPS lift for a sold 12 PER company. The UK hire sector PER average is 16.5 and Speedyhire is up there at a whooping 21 PER. So maybe more upward movement yet? 

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PhilH 24th Feb '15 55 of 66

Hi Herbie,

Yes I held QPP for less than a month after a big drop (knowing it was potentially toxic). I could only bear to hold onto it for a few weeks.That was quite an unusual play for me and I would never have touched it but for the frequent discussion on these forums.

The reason for my original post is to highlight to all of the readers both experienced and more importantly the inexperienced that chasing big winners is a tricky game to play and that there are perhaps other more profitable and less risky approaches.

Best of luck

Professional Services: Sunflower Counselling
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rick 24th Feb '15 56 of 66

In reply to post #92918

Phil H,

Great comments about the use of StockRanks. Where can I find "The old back test link" please?


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PhilH 24th Feb '15 57 of 66

In reply to post #93014

Thanks Rick,

Hmm I spotted "the old back test link" in a webinar given by Ed last year and when I published it here before Ed was a bit surprised as it wasn't officially released. So I'm a little reticent to post it here. Perhaps Ed will give me permission?

Sorry to be evasive.

Professional Services: Sunflower Counselling
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herbie47 24th Feb '15 58 of 66

In reply to post #93011

Hi PhilH,
I see thanks. So the link is not your holdings? I do have a few of those companies or I have done like Staffline. Yes its good investors posting their strategy. I do tend to agree with your method, I do hold shares generally for a long time but I do quite like the odd short term trade, like Paul does, like OPAY which was a 20% in 1 day trade.

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rhomboid1 24th Feb '15 59 of 66

Re tungsten they've just released this;

Which looks a very weak and non specific response with no detail on current financials IMHO

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PhilH 24th Feb '15 60 of 66

The fantasy portfolio is identical to my personal Investments in terms of holdings but not in terms of size. The returns also match my own returns percentage wise.

Professional Services: Sunflower Counselling
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herbie47 24th Feb '15 61 of 66

In reply to post #93035

OK thanks Phil. But QPP and Staffline are not or were not in the top Stockopedia ratings? Do you sell when shares when they fall below a certain rating or is purely on sp and other information?

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PhilH 24th Feb '15 62 of 66

In reply to post #93038

No QPP was not in the top quintile. As I said that was unusual play.

I bought STAF originally in June 2013 before StockRanks were launched. It would have fallen out of my screens at that time.

I rebought STAF in June 2014 when it had a StockRank of 93 (See

I sell based on price momentum using Ichimoku Charts (see to help me set stop losses based on the clouds. The exception to this approach is when there is a market wide sell off such as the one around early October 2014. In this scenario I sat still and waited for the dust to settle giving the quality stock a chance to recover before deciding which stocks to ditch.

Professional Services: Sunflower Counselling
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herbie47 24th Feb '15 63 of 66

Thanks for the information. Re Staffline it does look a bit high hence value of 48, that is one issue I have with StockRanks the higly ranked ones tend to be a bit expensive, since then I think Staffline have fallen.

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Heisenberg 24th Feb '15 64 of 66

In reply to post #93032

It does look fairly weak but in this situation I am not sure they have much more that they can be specific about. Much of what was in the blog is based on information that was sourced from the Admission Document or in subsequent releases to the market e.g. OB10 acquisition terms (seems very generous) and historic losses (over £50m), terms of the bank acquisition and does the rationale for an in-house bank really stack up etc. However this was all known / disclosed previously. The main thrust of the blog was really about the future take up of invoice discount financing on the platform and the potential net margin that may accrue to Tungsten. At this stage no-one knows how this will develop as it is all yet to be proven - this seems to be where the shorts are really asking the questions.

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Susan Marmor 25th Feb '15 65 of 66

In reply to post #92954

You and I setting trends. How lovely.

To be honest sweetheart I think that too many stocks got ahead of themselves. TUNG and MMX perfect examples.

I quit MMX after meeting the management - a slip by the man at the top (you know my style of interrogation) gave me the impression of the scale they required for the biz to be viable (cash aside). The take-up is publicly recorded so there's no guessing on numbers but we didn't know average price paid. Now we do. Hopeless (imvho). There is plenty of time to come back to it if and when the new domains take off. TUNG in similar situation, only with far less visibility.

FLOW is another one that got ahead.

The moral is to have some fun with these stocks but not to get in over head.

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Paul Scott 25th Feb '15 66 of 66

In reply to post #93124

Well said Sue, I agree with all of that.


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 Are LON:TUNG'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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