Small Cap Value Report (24 May 2017) - SAL, TRAK, KWS, LRM, HRG, ACT, BOWL, HSS

Wednesday, May 24 2017 by

Note: Paul updated Tuesday's report to include Topps Tiles (LON:TPT), Epwin (LON:EPWN) and eg Solutions (LON:EGS) (in addition to accesso Technology (LON:ACSO), Indigovision (LON:IND) and £CALL). You can read it here.

First section - by Paul Scott.

Thanks to Graham for taking the strain today. I should be getting the keys to my new flat today, then the removal men are shifting all my stuff on Friday. Therefore I’m being considerably distracted from the markets this week.

It’s a fairly modest place on the south coast. These days I like to keep living costs low, as experience has taught me that relying on the markets for income is too precarious. It’s best to build up some other forms of income, to cover all household outgoings. That takes the pressure off, allowing an investor to even sit on the sidelines in cash, if a bear market starts.

I tend to look at portfolio gains as being a bonus. Obviously the last 2 years have been remarkably good, but it won’t be like that forever. So it’s always best to plan for a downturn.

Anyway, on to today’s news. Here are a few very brief comments;


Spaceandpeople (LON:SAL) – contract win announced. I see that, as usual, the share price moved the day before the announcement. So our insider dealer at SAL is alive & well. Whilst I had a historic attachment to this business, I now think it lacks the potential to really scale up. Therefore the upside is probably quite limited. As the CEO always points out, contract wins are a matter of “snakes & ladders”. So the company tends to RNS contract wins, but is less keen to announce contract losses! That’s true of many companies. It’s got momentum for now, so that might provide some liquidity for long-suffering shareholders to exit, if they wish to.


Trakm8 Holdings (LON:TRAK) (in which I hold a long position) – has also announced a contract win, which sounds potentially significant. “Additional visibility for our expectations…

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All my own views. I am not regulated by the FSA. No advice.

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SpaceandPeople plc is a United Kingdom-based media specialist company. The Company is engaged in marketing and selling of promotional and retail licensing space on behalf of shopping centers and other venues throughout the United Kingdom, Germany, France and India. The Company's segments include Promotional Sales, Retail, Head Office and Other. The Company markets, sells and administers promotional space in a range of footfall venues across the United Kingdom, including shopping centers, theme parks, garden centers, retail parks and airports. The Company offers a service covering from consultancy services to the provision and management of retail merchandising units in shopping centers. It enables venues to market, administer, promote and sell their promotional space. Its subsidiaries include MacPherson & Valentine Limited, SpaceandPeople GmbH, Retail Profile Holdings Limited, POP Retail Limited, Retail Profile GmbH, SpaceandPeople India Pvt Limited and S&P+ Limited. more »

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Trakm8 Holdings PLC is a Big Data company. The Company, through its subsidiaries, manufactures, distributes and sells telematics devices and services. The Company focusses on owning the intellectual property that it uses in its products and solutions. It supplies its customers in the fleet management and insurance sectors across the United Kingdom. In addition, the Company provides hardware devices that can be integrated into third party telematics or Internet of Things (loT) solutions. It offers Configuration Manager, Product Datasheets, Radio Frequency Identification, Telematics Devices, Vehicle Connectivity and Accessories, among others. Its portfolio of solutions includes Trakm8 ecoN, Trakm8 Tacho, Trakm8 Secure, Trakm8 Logistics and Trakm8 Insure. Its portfolio offers telematics solutions, including dashboard cameras that enable customers to record driving incidents and mitigate the risk from crash to cash accidents. It provides bespoke solutions and engineering support services. more »

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Keywords Studios Plc supplies localization and localization testing services. The Company's segments include Localization Services, which relate to translation and cultural adaptation of in-game text and audio scripts across multiple game platforms and genres; Localization Testing, which involves in testing the linguistic correctness and cultural acceptability of computer games; Audio/Voiceover Services, which relate to the audio production process for computer games and includes script translation, actor selection and talent management through pre-production, recording and post-production; Functional Testing, which relates to quality assurance services provided to game producers to ensure games functions as required; Art Creation Services, which relate to the production of graphical art assets for inclusion in the video game, and Customer Support, which relates to the live operations support services, such as community management, player support and associated services. more »

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

33 Comments on this Article show/hide all

clarea 24th May '17 14 of 33

In reply to post #188244

No worries Graham I second everyone on here thanks for the input you and Paul put in and the knowledge you are both willing to share .

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steviej 24th May '17 15 of 33

In reply to post #188294

Its a takeover situation. You usually see this with the big investment banks when a large cap is involved.

I wouldnt worry about it. When I take a position in my momentum portfolio one of the things I look for when doing my quick sanity check is any RNS' with the same headings, as that tells me M&A is involved.

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rhomboid1 24th May '17 16 of 33

In reply to post #188294

P120 is the one, it is a technical reporting requirement when a takeover is in play , no great significance

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Ramridge 24th May '17 17 of 33

In reply to post #188299


My understanding is that the positive trend in mortality improvement is still true, except that the improvement rate is not as high as that assumed in previous CMI studies.

Happy to be corrected. I also believe that this trend of slowing down improvement in mortality is apparent in the US.

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Howard Adams 24th May '17 18 of 33

In reply to post #188314

Hi steviej

Many thanks for the rapid response and the information.


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Howard Adams 24th May '17 19 of 33

In reply to post #188324

Hi rhomboid1

Wow that's some document. Many thanks for your clarification.


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DGW 24th May '17 20 of 33

Thanks for the coverage on BOWL Graham following my request, very much appreciated

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browndogwork 24th May '17 21 of 33

In reply to post #188269

Thanks Herbie - missed this!

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bestace 24th May '17 22 of 33

In reply to post #188344

That's what the CMI press release implies, but the FT article quotes the actual numbers:

The latest figures, released in March, show that life expectancy for men at age 65 dropped six months from 22.8 years in 2014 to 22.2 years in 2016. For women, the reduction was eight months from 24.9 years to 24.1

It may be a blip in a longer term trend, but that's now two years in a row and even if it is a blip, there will be a lot of Finance Directors who will be happy to take advantage in the short term given the impact on pension deficits.

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JohnEustace 24th May '17 23 of 33

In reply to post #188254

IKEA sell their mattresses rolled up. The Morgedal is a Which best buy at £165 for a UK double.

I'm not sure I would pay more for the EVE "disruptor" product or that their customers are the ones seeing the benefit of their lower online costs.

It typically takes 72 hours for rolled-up mattresses to unroll fully.

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Ramridge 24th May '17 24 of 33

In reply to post #188399

Triennial reviews are carried out by actuaries and they set the assumptions. So the key question is will the actuaries reflect this apparent slowdown in improvement, or will they be ultra caution and wait a bit more?

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JohnEustace 24th May '17 25 of 33

In reply to post #188344

My memory of the FT article is that people on final salary pensions are still benefiting from improving lifespans and that the negative change is concentrated on those not lucky enough to have that benefit.
Which clearly raises questions about applying the new figures to calculating the liabilities of final salary schemes.

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bestace 24th May '17 26 of 33

In reply to post #188409

Hogg Robinson (LON:HRG) took advantage of the change for their IAS19 valuation, with the triennial valuation to follow:

The next triennial valuation, based on actuarial values at 31 March 2017, is currently underway... It is expected that the funding valuation performed by the UK Scheme's actuary will factor in the latest demographic assumptions.

For the IAS19 valuation, it's ultimately up to the company management to decide on the assumptions and I'm not sure an actuary/auditor would be able to object if the management pushes to use the updated longevity tables.

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Ramridge 24th May '17 27 of 33

Thanks bestace

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Graham Ford 24th May '17 28 of 33

Hi Graham, All

Mortgage Advice Bureau Holdings gave an update at their AGM today basically saying that the outlook is in-line with expectations.  However, the market appears to have been anticipating an exceed expectations statement as the stock is down 4.9% today.

Given this and the massive sell off in Revolution Bars (LON:RBG), is this an indicator that everyone is starting to get very twitchy?

I sold out of RBG but still hold MAB1 and continue to do so as it looks like a very solid business,

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clarea 24th May '17 29 of 33

In reply to post #188434

Ditto with Softcat today Graham I'm struggling to find any value and most of my 4-5 faves all seem to have topped out and off 5-10% even the lovely Somero seems to have stalled.

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gsbmba99 24th May '17 30 of 33

In reply to post #188434

I think the movement in MAB is more likely related to the HMRC figures released yesterday ( "For April 2017 the number of non-adjusted residential transactions was about 22.5% lower compared with March 2017. The number of non-adjusted residential transactions was 12.8% higher than in April 2016." How unusual for newspapers to be focusing on the first sentence and not the second. For comparison, the sequential decline in housing transactions in 2016 from Mar to Apr was 57%.

Jan-Apr 2016 was 420.3k transactions and Jan-Apr 2017 was 354.3k or -15.7% (page 6). If you look at Jan, Feb and Apr (ie exclude Mar) then it was 248.9k transactions in 2016 and 247.2k in 2017. Not sure where that leaves us. Lots of volatility around Mar in both years.

CML mortgage lending figures should be out tomorrow which will provide another data point. I expect very little progress for MAB in 1H.

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herbie47 24th May '17 31 of 33

In reply to post #188459

Re Softcat (LON:SCT) I was surprised how much it went up so I think just some profit taking, in line is not good enough for some investors. You won't find much value as the market has gone up so much since Brexit. But does value matter, value investing does not seem to have worked so well for 2 years or so compared to momentum.
Yes there does seem to have been a lull recently but some of mine are still going up such as Zytronic (LON:ZYT), Burford Capital (LON:BUR), Fevertree Drinks (LON:FEVR), Patisserie Holdings (LON:CAKE), G4M. I do hold Somero Enterprises Inc (LON:SOM) as well, down to 50MA think this is due the concerns in the US re Trump.

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Paul Scott 24th May '17 32 of 33

In reply to post #188269

I've bought several memory foam mattresses online in recent years. They arrive rolled up tight in a bale, with a strong plastic bag around it. So they're fairly easy to lug around indoors, or to put in your car.

So I don't really understand what eve Sleep (LON:EVE) is doing that's unique?

Also, I paid about £600 for a memory foam mattress online, about 4 years ago.
I bought another, similar, but slightly thinner one online about 6 months ago for just £150.
So price deflation is another issue - maybe that's why they're floating on the stock market now?


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herbie47 24th May '17 33 of 33

In reply to post #188504

Hi Paul,

I can't see anything unique and looking online there seems to quite a few other companies that are doing similar mattresses, just seen Bruno, Emma and HydeandSleep as well as Simba and Casper I already knew about. Also it seems you can order direct from the manufacturer. In reviews Eve rarely seem to come out on top. Here is an article:

I'm amazed how many mattresses there are, seems a crowded market. If Eve had something unique I think it maybe be a good investment but I'm struggling to see the potential. Anyway I'm sticking with my Warren Evans for a few years yet, it's very comfortable.

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 Are LON:SAL's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »


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