Small Cap Value Report (24 Nov 2016) - BLV, LTHM, MTC

Thursday, Nov 24 2016 by

Good morning!

Apologies for there being no report yesterday, I was under the weather so had a sick day. I know the service from me is a little unreliable, but it's still pretty good coverage considering it's just one person working all year round.

Plus I don't think anyone is complaining, considering the series of big winners we've had here (e.g. BOO, AVS, LVD), in what is turning out to be a blockbuster year. My broker even quipped that if I find any more takeovers, the FCA will probably come knocking. Still, when you have a portfolio of 40 value/GARP shares, there do tend to be plenty of takeover bids.

There's a very clear trend now of overseas (esp. American) companies buying up cheap UK companies, since sterling weakened. Let's hope there are lots more!

Letting agents

The Autumn Statement earlier this week has put the cat amongst the pigeons for letting agents, as the Government is proposing to ban fees to tenants. Although it should be noted that proposals like this are often watered-down, or dropped altogether, during the consultation period. No doubt lobbyists will be paid handsomely to nobble the proposals.

I've been sounding out opinion on Twitter, and it seems mixed. Some people think that landlords will just jack up rents to recoup their additional costs. My view is that, even if that is the case, it's still a much better idea to have the landlord paying the letting agent, since the agent works for them. Also, there's greater transparency with no fees for tenants - the rent is transparent, but often the fees are not.

I rent a flat in Hove, and was recently appalled at being charged £70+VAT just for a one year renewal document. This would have take all of 5 minutes for the agent to prepare. I texted my landlady and suggested we draw up the document ourselves next time. She agreed, as she had also had to pay £70. So that's £140 the agent earned from a few minutes work, and hitting a few buttons on her keyboard. As I quipped to my landlady, "we're in the wrong game!". She laughed, and said that she's just been saying the same thing to her mother-in-law.

Belvoir Lettings (LON:BLV) has issued an interesting RNS on this matter today, saying;

At this stage, Belvoir cannot fully predict the likely financial impact on…

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Belvoir Lettings plc is a United Kingdom-based company engaged in selling, supporting and training residential lettings franchises. The Company operates a nationwide property franchise group with four brands that offers a range of services in property rental, property management, residential lettings, buy to let and property sales. Its property franchise group manages approximately 58,000 properties in Grantham, Lincolnshire. more »

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James Latham plc is a timber and panel products distributor. The Company is engaged in timber importing and distribution, carried out in approximately 10 locations. The Company offers a range of wood-based panel products, natural acrylic stone, hardwoods, high grade softwoods, flooring, cladding, decking and plastics. The Company also supplies commodity and specialist products to timber and builders' merchants. The Company offers a range of product categories, such as panels, solid surface, door blanks, hardwoods, softwoods, engineered timber, flooring, decking, cladding, modified timber and panels, fire retardant panels and technical panels. The Company caters to door and kitchen manufacturers, shop fitters and other market sectors. The Company's subsidiaries include Lathams Limited and James Latham Trustee Limited. Lathams Limited is engaged in importing and distribution of timber and panel products. James Latham Trustee Limited is a corporate trustee company. more »

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Mothercare plc is a retailer for parents and young children. The principal activity of the Company is to operate as a specialist omni-channel retailer, franchisor and wholesaler of products for mothers-to-be, babies and children under the Mothercare and Early Learning Centre brands. The Company's operating segments include the UK business and the International business. The UK business segment includes the United Kingdom store and wholesale operations, catalogue and Web sales. The International business segment includes the Company's franchise and wholesale revenues outside the United Kingdom. Its clothing and footwear product includes ranges for babies, children and maternity wear; home and travel includes pushchairs, car seats, furniture, bedding, feeding and bathing equipment, and toys are mainly for babies. It operates in the United Kingdom through its stores and direct business, and across the world in over 60 countries through its international network. more »

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55 Comments on this Article show/hide all

Beginner 24th Nov '16 36 of 55

In reply to post #159575

Ho Gorgeous
I used to have a crappy job, just like you. I resolved not to whinge about it, or gripe about how much better other people had it. Instead i packed it in and learned to live a cheaper life. If I had been LovelyLovelyGorgeous I would have tried to marry money instead, but unfortunately I am UglyUglyChubster. We can't have it all!

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steviej 24th Nov '16 37 of 55

No strong opinion on the letting fees as I don't really know enough about the sector/area but if these fees are beyond reasonable (seems they are), then what about:

Airlines charging £30-100 for a customer to type their new name into a webpage following marriage?

Home Office charging £70 for forms that are printed and sent through the post with virtually zero input from the Home Office

Building Companies allowed to sell houses leasehold with annual ground rent increases that would shame Wonga

I'm sure there are many other examples.

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ISAallowance 24th Nov '16 38 of 55

Creightons (LON:CRL) (I hold) put out what looks to me like very good half year results yesterday, but appears to have generated no comment. Underlying eps (there was a major disposal last year) appears to have more than doubled, with a mixture of both organic and result-of-acquisition profit increase.

Has anyone got any bear points on this stock before I'm tempted to top up a bit? I guess lack of dividend is one - I like to see at least a nominal dividend even from growth stocks as an indication that management realise that ultimately their purpose is to return cash to shareholders and not just themselves.

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steviej 24th Nov '16 39 of 55

In reply to post #159665

Too small / illiquid for me, but apart from that ticks all of my boxes

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Monty9 24th Nov '16 40 of 55

In reply to post #159665

I also have a small holding in Creighton, in the hope any measurable success in its export markets would transform the company. It has roughly doubled over the last year so probably the result is in the price. It's very small so I doubt the results will generate a rapid response on the back of analysts upping target price and institutional buying. I was a bit sceptical when I bought but I am now a fan, it could easily double and double again.

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rhomboid1 24th Nov '16 41 of 55

In reply to post #159665

I hold Creightons (LON:CRL) in reasonable size , I think they'd have been on course to pay a dividend if they hadn't done a very cute deal to buy a competitor's assets & customers out of administration. That deal has paid off in style but it meant that working capital went up substantially and they conservatively put in place a £600k term loan to deal with that.

Overall I can see very few more compelling growth stories at such a low valuation.


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simoan 24th Nov '16 42 of 55

In reply to post #159665

Has anyone got any bear points on this stock before I'm tempted to top up a bit?

Well, releasing a RNS results announcement at 10 to 3 on a Wednesday afternoon is a pretty big black mark IMHO. Why can't they arrange this at 7am like everyone else? Is there any good reason for management doing this other than not giving a stuff about other shareholders?

All the best, Si

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herbie47 24th Nov '16 43 of 55

In reply to post #159665

problems for me, first is MCap is below £10, second the spread is very wide. I used to invest in a few small companies but after nearly getting trapped I decided to avoid them in the future. Ones I nearly came unstuck with were Elektron Technology (LON:EKT), Universe (LON:UNG) and Aukett Swanke (LON:AUK), problem is with a small fall in share price these types of shares can be like value traps.

Apart from that I can't see any obvious red flags. I will add to my watchlist.

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rhomboid1 24th Nov '16 44 of 55

In reply to post #159689

Good Point Si
In fairness they'd pre announced the T/O increase a few weeks ago to enable those of us with a calculator to add to our holding and await the good news re profit which duly arrived.!

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Reubencash207 24th Nov '16 45 of 55

Looking at the VCP H1 report, it looked very positive, with profit doubling, debt reducing and a promising outlook for the rest of the finacial year. I could see any major negatives, yet the share price didnt move at all following the release of the report...? Anyone know why?

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Tanglands 24th Nov '16 46 of 55

Paul, the fact that when I log in and don't find a report from you I feel lost, disappointed, for me says it all. Lovely Lovely thingy above is so off, someone at Stockopedia should note him and refuse his subscription renewal !! :) I have benefited considerably from Boohoo, Avesco and Lavendon, and I am pretty certain I wouldn't have if not for you. Like you I am an FCA so can "critically" I think, appreciate your observation and commentary. So apart from the above I have used your comments insights and observations together with other research and the stock rank system to guide my general investments. I took a trip down memory lane yesterday and my SIPP is up 78.7 % since October 2013. Now I am going to take a little credit for that BUT your observations and commentary has provided me with parameters and guidance, almost rules to use and add to my own intellectual research. That sort of gain in three years at my age is literally life changing. To be direct I will now be able, if I chose, to retire earlier and certainly far more comfortably then perhaps I would have. So to end, you bloody well have a busy or duvet day when ever you want :)

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Wimbledonsprinter 24th Nov '16 47 of 55


Keep up the good work. Thanks for higlighting the Countrywide trading statement, the decline in conveyancing (not just in London) was surpring to me. Many home improvement related companies could be affected by this - I need to look at my portfolio again to check my exposure. There seems to be a marked difference between the New Build market for homes (still robust) and the secondary market.

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jonesj 24th Nov '16 48 of 55

Paul, the standard of your analysis is excellent. I've made money on Boohoo & Avesco, although selling out of the latter too early.
I would much rather read high quality analysis, which you only write when you are fit & there is something you see to be worth writing.
That beats subscribing to some magazine or newspaper where there is more volume and less quality, since the journalists have to fill so much paper every day.

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Christopher Smith 24th Nov '16 49 of 55

Regarding my AXS Accsys Technologies comment earlier, here's the link to the Interim Results and webcast:


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Paul Scott 25th Nov '16 50 of 55

In reply to post #159644

Naturally you do change your opinion from time to time, sometimes without explanation. Re £STAFF I can remember when you were extremely critical of the model, and I followed you and sold, I think immediately before the election which the Conservatives won against the odds. Then surprise, surprise they suiddenly became a long for you, without further comment on low pay etc.

If the facts change, then I change my mind.

The key fact that changed with Staffline (LON:STAF) is that the share price halved from 1600p to 800p! So combined with strong results & a good outlook, it moved from being something I was nervous about (when it was expensive) to something I was prepared to back at a very much lower valuation.

Also I went to an analyst meeting, which I mentioned here, inviting other people to attend too, where management gave a very good account of what they were doing with the business.

I think you have a misconception that mine (or anyone else's) view on a share should somehow be set in stone. Nothing could be further from the truth. One weighs up the constantly changing facts & valuation, and based on assimilating all that information my view on shares will often change - based on my interpretation of the facts & figures. It sounds like you take a more emotional approach to markets, which is not a good thing.

Hope that clarifies.


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Paul Scott 25th Nov '16 51 of 55

In reply to post #159704

Hi Tanglands,

Many thanks for your kind comment!

Just to correct one point though. As I've mentioned in the past whenever this question has been raised, I'm not an FCA qualified accountant, because I flunked my finals exams in 1993.
Although having subsequently run a finance department for 8 years, peaking at 25 people, am regarded as QBE (qualified by experience).

Anyway, I've never done anything the conventional way, so the lack of a specific bit of paper hasn't ever held me back on anything! In fact I think it's been an advantage, because you have to always excel on your own merits if you don't have a formal qualification to fall back on.

I've seen far too many mediocre but studious people pass accounting qualifications, but be totally useless in the real, entrepreneurial world of commerce.

Regards, Paul.

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Paul Scott 25th Nov '16 52 of 55

In reply to post #159701

Hi Reubencash207,

I recently had a meeting with Geoff Wilding of Victoria (LON:VCP) and we covered a lot of ground in a 1 hour Q&A.
I came away tremendously impressed. He seems to have worked miracles with a disciplined & effective buy & build there. Am pretty sure I did a write-up of our meeting here. Let me have a rummage. Yes, found it - here is the link.

I should also disclose that more recently, I've picked up a bit of stock in VCP personally.

Interim results are due out soon, so I'll comment on those figures, and reserve the right to pick up more stock if I like the numbers.

Regards, Paul.

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iwright7 25th Nov '16 53 of 55

In reply to post #159725


Victoria (LON:VCP) Interim's out last Friday. Would be interested in your comments if a slow news day today.

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Ramridge 25th Nov '16 54 of 55

In reply to post #159665

Hi ISAllowance     Re Creightons (LON:CRL) Yes I think the management is shooting itself in the foot by releasing such sparkling results late afternoon. I certainly missed it until you pointed out the RNS.

Having analysed it last night, there is little to fault and a lot to like. The only comment I would make is that the cash flow at this interim stage is negative. But this is a flea bite when you consider all the other positive factors. In summary, double digit growth in sales and eps, PE below 8 , EV/ EBITDA around 6 and P/S 0.35 with no debt.

I bought this morning.

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ccraig 25th Nov '16 55 of 55

MTC I emailed them 3 years ago and said they should put chairs in the shops. They did not. When my partner was heavily pregnent and we went to mothercare the was no where to sit so we left before buying all we wanted to. Obvious to put chairs in and what pregnent women drinks coffee?

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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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