Small Cap Value Report (3 Dec) - VNET, CSG, RGD

Tuesday, Dec 03 2013 by
22

Good morning. The most interesting results for me this morning are interim results for the six months to 30 Sep 2013 from Vianet (LON:VNET). This share has been a poor performer in my portfolio, since the group has been dogged by problems in the last year - the main one being a serious threat to its core business by the Government's proposed Statutory Code, which is designed to tackle the unfair treatment of Pub tenants in tied pubs.

The main thrust of the Statutory Code is to ensure that the tenants of Pubs which are tied to the brewery that owns them, are no worse off than if they were able to buy their supplies independently. At the moment breweries charge often much higher prices to tied pubs, in return for financing capex. However the concern in Government is that the breweries also squeeze tenants on higher rents too, leaving many pub tenants with virtually no income.

Vianet's core business is supplying the large breweries with beer flow monitoring equipment, which detects when tenants are using illicit supplies of cheaper beer, by flagging up imbalances in the stock reconciliations (i.e. more pints have been pulled than have been supplied by the brewery, indicating that the tenant is breaking the tie by sourcing their own supplies on the black market).

Therefore the possible threat to the brewery tie arrangements could undermine Vianet's core business, and in the meantime whilst it is in the consultation stage, it creates uncertainty, and makes it virtually impossible for Vianet to upgrade its existing clients to its latest iDraught product. Also, continued Pub closures means that their market (in which Vianet is by far the dominant player) is shrinking. So where they expected their installed base to stabilise at around 17,500 Pubs, it has actually shrunk further to just under 17,000 Pubs, and realstically I would expect that to continue falling slowly as more Pubs are closed - e.g. note the recent deal by Marstons to close 200 Pubs and sell them to Newriver Retail (LON:NRR) who intend turning them into convenience stores.

Therefore these figures from Vianet were never going to be good. Overall they're pretty much what I expected in what has been a very tough year for the company. They remain profitable, and most turnover is…

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Vianet Group plc is a provider of real time monitoring systems, data management services, and actionable insights for the leisure and vending sectors. The Company's segments include Leisure Services, which includes design, product development, sale and rental of fluid monitoring equipment, data management and related services; Vending, which includes design product development, sale and rental of machine monitoring equipment, data management and related services; Technology, which includes the provision of data management and technology related services, and Fuel Solutions, which includes wet stock analysis and related services. Its Leisure division consists of the core beer monitoring business (including the United States), and gaming machine monitoring. Its subsidiaries include Brulines Trustee Company Limited, Vianet Americas Inc and Vianet Limited. more »

LSE Price
107.5p
Change
-0.5%
Mkt Cap (£m)
30.5
P/E (fwd)
11.1
Yield (fwd)
5.3


Real Good Food plc is a food manufacturing and distribution company. The Company is engaged in the sourcing, manufacture and distribution of food to the retail, foodservice and industrial sectors. The Company's segments include Cake Decoration, Food Ingredients and Premium Bakery. The Company’s Cake Decoration segment manufactures, sells and supplies cake decoration products and ingredients for the baking sector in the United Kingdom and abroad. Its Food Ingredients segment manufactures and supplies a range of food ingredients, such as chocolate coatings, sauces, jams, dry powder blends and snack bars to the retail, wholesale and foodservice sectors. Its Premium Bakery segment manufactures, sells and distributes bakery and dessert products to the United Kingdom retailers and foodservice customers. more »

LSE Price
6.5p
Change
 
Mkt Cap (£m)
21.5
P/E (fwd)
n/a
Yield (fwd)
n/a



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


45 Comments on this Article show/hide all

Calalily 3rd Dec '13 26 of 45

Hi PAul

I recall your comments on the trading statement from ACM was fairly positive, worth further research. They have interim results today which to me look decent. With the recent acquisition and a positive outlook reported do you feel they are good value?

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Paul Scott 3rd Dec '13 27 of 45
6

In reply to post #79594

Hi fek47,

I think that's a totally spurious comparison!
A Blog on tax is about an entirely factual, technical subject.

Whereas what shares I happen to own is personal information which I can choose to put out on the internet or not, and can update whenever I feel like it! I'm not under any kind of obligation to cross-reference or reconcile things that I write on the internet.

My views on shares are totally fluid, and will change constantly, on an ongoing basis. Investing isn't just about facts & figures, it's also about sentiment. So I might just suddenly get cold feet about something & wonder if I've made a mistake. In that scenario then it's my money, and I can do what I like with it! So if I want to sell the shares on a whim, I will do, and nobody has any right to be informed at all!

Things are inconsistent because my opinion on 1 October is not the same thing at all as my opinion on 12 October.

I'm sorry if people have lost money today on CSG shares, but that's not my fault. Perhaps people should be turning their irritation towards the company, for putting out arguably misleading trading statements, and poorly presented results, rather than shooting the messenger?

Regards, Paul.

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emmo1210 3rd Dec '13 28 of 45

In reply to post #79601

Paul,

Appreciate the comprehensive reply, and am in no way questioning your honesty. You put a lot of work in here which we seem largely grateful. Also agree that there is little value in your list of holdings as you understandably don't have the time to keep it current. Such a list will, unfortunately, be used in the decision making process of some people in their investments. As this is not your intention the list has little value in my opinion.

Regards
emmo1210

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clissold345 3rd Dec '13 29 of 45
4

Hi Paul, personally I like being able to see your "current holdings" (meaning your holdings at the given date). Id like you to continue to maintain it (updating it every month or two and giving the date is fine by me).

Regards,

Chris.

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fek47 3rd Dec '13 30 of 45

In reply to post #79605

Think we'll have to agree to disagree on this, and put it to bed.

On the subject of Sweett (LON:CSG) itself, I think today's reaction is rather overblown, so I'll be sitting tight. I'd be surprised if the price closes on 31 December at less than 70p (memories are short, and whatever the underlying reality of today's results, the ink will remain green on Sweett (LON:CSG) 's Stock Report!)

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Fangorn 3rd Dec '13 31 of 45
9

In reply to post #79608

I'd suggest you rely on YOUR OWN RESEARCH Fek47 rather than Paulipilot.

Perhaps you'd like to set up your own blog,and your own daily bulletin on stockopedia so we can pick holes in all of your failings - and there will surely be far more than those you highlight who's author you seem to rely on for ideas.

Seriously.

Why do some people even bother nitpicking. Do you realise the effort it takes to skim read and report on numerous companies every single morning. PP isn't a paid up financial advisor, he's an investor in the same vein as we all are.........

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campbellsmith 3rd Dec '13 32 of 45
7

Hi Paul,
Thank you ... for your serious and objective comments on Small Cap value companies, their results and share prices. I always do my own research but it's marvellous to have your views - they are most helpful and sometimes take a different slant to my own. You occasionally mention something in company performance or highlight something in their balance sheet that I had overlooked or had considered not that significant.

Keep up the good work!

Campbell

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fek47 3rd Dec '13 33 of 45

In reply to post #79609

Fanghorn, I don't maintain a blog but I do tweet all (and I do mean all) my buys and sells on twitter. If you'd be interested, see @FrancisKershaw.

More than happy to hear your comments - after all, the point of investing is to make money, not to be right for it's own sake.

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Fangorn 3rd Dec '13 34 of 45

In reply to post #79611

Do you follow any other investor sites? Maintaining a blog, in addition to the time consuming efforts of getting this daily small cap bulletin out in good time, no doubt as well as monitoring Motley Fool(where he has historical links as well as having a life means it's likely things will get missed.

I know from personal experience as I follow and post on three different web sites, as well as Twitter, and often forget to post my trades on all. Sometimes I do them just on twitter, and forget Advfn / Stockopedia. other times I might post on The Fool only.

If you're just posting on one medium it's easy peesy. Perhaps if you set up your blog, scribble a small cap report on Stockopedia with the same time constraints,and continue to tweet you'll appreciate how making sure all mediums are up to date and say the exact same thing is nigh impossible.

"after all, the point of investing is to make money, not to right right for it's own sake".

Agree, which is why I don't get your nitpicking in this regard.

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Fangorn 3rd Dec '13 35 of 45

"but I do tweet all (and I do mean all) my buys and sells on twitter"

With regard to this comment, it's even easier for you as you never seem to say say what price you buy or sell at when you tweet your trades.

Makes it impossible for anyone to gauge whether you're making correct calls. PP specifies buy prices in nearly all cases.Similarly he takes into account sales.

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garbetklb 3rd Dec '13 36 of 45
4

In reply to post #79601

Paul is very open about his portfolio & his views regarding companies; I try to read his reports each morning so i can gain the benefit of his views. Of course his views influence me but, as Paul repeatedly says, it's all about DYOR - and I happen to have taken an opposite view to him this morning with regard to Sweett and bought a few on the price drop.
I hope Paul carries on as before - and people realise that his comments are as he sees things ON THE DATE STATED.
As Paul repeatedly states, he's not providing a tipping service, but a, very well written, reaction to Company announcements.

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Edward Croft 3rd Dec '13 37 of 45
2

In reply to post #79595

Hi Funnymoney, The Value Rank only looks at cheapness relative to what a company owns, earns, sells etc. ABM is one of the cheapest companies in the market at the moment - that's why it's at 99. It may well be that it turns around, maybe not. That's not the point of the indicator. The indicator is pure and simple a measure of cheapness, not of worth. Of course cheapness has always been historically a predictor of future long term stock market returns. People hate cheap things and sell them too low. I'm not saying that's the case for ABM, but a basket of incredibly cheap things tends to outperform. Ben Graham taught us that.

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Paul Scott 3rd Dec '13 38 of 45
5

Hi,

Just as a quick update on Sweett (LON:CSG), I've been through the numbers/issues with one of their advisers, and am happier than I was about the results today. I still think they were presented very badly, but the overall picture is better than I thought earlier. Hence I've written up a new section in the main report, headed "Edit: 13:10"

Regards, Paul.

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Jardine 3rd Dec '13 39 of 45
8

In reply to post #79591

Hi Paul

I would strongly urge you to continue with your blog in the way you have been doing recently. I've found it a great source of ideas for further research. I would ignore all the moaning Minnies and just repeat your watchword of DYOR, you are always quite clear about that so they have no basis for disagreement with you.

Regards, AJ

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emmo1210 3rd Dec '13 40 of 45

Cheers for the update Paul

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Beginner 3rd Dec '13 41 of 45
1

Well said Jardine
I really appreciate your work Paul, which I get for nowt!!! I also think it is fascinating to have an idea of what you hold. Instant updating would be a total imposition by us guppies on you. Please DO carry on as now.

As far as results etc go: I was wrong on Sweett (LON:CSG) before and probably am now, but I think it may disappoint in the long term. There was a whiff of scandal about in Hong Kong a little while back. Will this re-emerge?

I am confused on Debenhams (LON:DEB). On the one hand the quality of their stock seems to me to have declined noticably, BUT her indoors bought some shoes off Amazon the other day, and they were actually from Debenhams (LON:DEB), so good initiative there. Would it be best to wait and see what kind of Christmas they have?

Real Good Food (LON:RGD) just seems to be a serial disappointer. I have some Vianet (LON:VNET) and am hanging on hoping for some success in the States. Apparently there is no competition there, as the firm than ran a similar operation was wound up a year or two back. I hope the existing iDraught in teh UK will wind down in parallel to US growth and expansion of the vending telemetry.

GOOD LUCK ALL

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ericb 3rd Dec '13 42 of 45
2

The obvious thing to do is put on the blog a disclaimer saying that the list is liable to change at any time and is not updated in real time or even monthly. That way people who try to blindly follow other investors will be warned.
I really cant understand why anyone would complain because someone else hadnt told them when they had bought or sold an investment, unless of course they cant think for themselves. Even Robbie Burns can leave huge gaps between his updates, and even then the web lists arent always updated immediately, and he has a mass of followers.

Paul the work you do is fantastic for people who can make their own decisions, but even though you keep on telling everyone that you are not a tipping service and these are your own opinions which are liable to change there will always be blind followers who cant do their own work and make their own decisions and then blame you when they f**k up themselves. Maybe you should have a huge header "DO NOT DO WHAT I DO"

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Paul Scott 3rd Dec '13 43 of 45

In reply to post #79624

Good idea ericb!

I've put up a fairly direct disclaimer, as you suggested, on my Blog.

P.

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Maddox 3rd Dec '13 44 of 45
5

Hi Paul,

Your criticism of the presentation of Sweett's results is a breath of fresh air - at best they appear very poorly presented at worst - dressed up. Your honesty and clarity is a foil to the sloppy and miss leading presentation of what should be facts. If more financial journalists took a similar less tolerant approach we may get rid of a whole lot of bull-shit.

Regards Maddox

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Ned Kelly 4th Dec '13 45 of 45

Hi Paul, have you looked at Pressure Technologies who put out results yesterday
Thanks
Roger

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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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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