Small Cap Value Report (3 Jun 2016) - GOAL, SVS, SEA

Friday, Jun 03 2016 by

Good morning!

It's a very unusual day today - there are no results or trading updates at all, in my universe of stocks. That's rather handy actually, as I'm off on a jolly today - I'm visiting English wine producer, Chapel Down. Their shares are listed on ISDX - I reviewed recent results here on 22 Apr 2016. Pity I didn't buy some shares, as they're up 41% since then - a big rise in just 7 weeks.

There are decent shareholder discounts (about 33%, from memory), if you own 2,000 shares or more in CDGP (about £930-worth at current share price of 46.5p). Mind you, on trying their white wines previously, which retail for about £10, personally I wouldn't seek them out. Perfectly pleasant, but nothing special, in my view. I reserve the right to change that stance, after today's slap-up lunch, and wine-tasting at their premises. So there's the distinct possibility of some rambling Tweets later today.

A few other things have caught my eye today, so here goes.

Placings (again)

Some readers may recall that, a couple of years ago, I set up a (now defunct) website called PlacingWatch. I reviewed every Placing that occurred, and rated it on some key criteria;

  • Whether there had been suspicious share price movements in the month before the Placing was announced (which there often were).
  • Also I looked at the level of discount to the prevailing share price for each Placing (the smaller, the better).
  • Dilution should not be excessive (where the price discount is large)
  • Finally, I urged companies to include an Open Offer for existing shareholders to participate - especially where the price discount was significant.

I had expected to find considerable problems. However, in most cases, the deals done actually looked perfectly reasonable. If you buy shares in a small company, with a weak balance sheet, then you should accept that at some point you're likely to be diluted a bit by a Placing.

Institutions usually demand a discount of say 5-10%, to compensate them for the lack of liquidity - i.e. if something goes wrong, then they can't exit quickly, unlike small shareholders. That's not unreasonable.

You only really need an Open Offer for existing shareholders if a deeply discounted Placing is being done. If there is a deep discount, then chances are the company is crap anyway. So shareholders can't really blame anyone other than themselves if you get caught up in…

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Goals Soccer Centres plc is a United Kingdom-based company engaged in the operation of outdoor soccer centers. The Company operates in the United Kingdom and United States, and operates in the operation of soccer centers segment. The Company offers 5-a-side soccer centers across approximately 50 centers in the United Kingdom and one in Los Angeles, the United States. The Company's centers are in locations, including Aberdeen, Beckenham North, Beckenham South, Chingford , Coventry, Sheffield, Norwich, Sunderland, Teeside, Bexleyheath, Birmingham (Perry Barr), Birmingham (Star City), Black Country (Wolverhampton), Kingston (Tolworth), Bradford, Bristol North, Bristol South, Glasgow South, Wimbledon, Plymouth and Heathrow, among others. The Company's subsidiary includes Goals Soccer Centres Inc, which is engaged in the trading business. more »

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Chapel Down Group Plc is engaged in producing and selling sparkling and still wine. The Company also produces a range of beers and cider. The Company offers a range of sparkling wine, including Vintage Reserve Brut, Blanc De Noirs 2009, Three Graces 2010, Blanc De Blancs 2011, Century Extra Dry, Sparkling English Rose and Rose Brut. The Company offers a range of still wine, including English Rose 2014, Union Red 2014, Wickham Estate Red 2011, Pinot Blanc 2014, Chardonnay 2012, Kit's Coty Estate Chardonnay 2013, Bacchus Reserve 2014, Bacchus 2014 and Flint Dry 2015. Its beer and cider range includes 12 Bottle Curious Tasting Case, 24 Bottle Curious Tasting Case, Curious Brew 33CL Can, Curious Brew, Curious IPA, Curious Apple, Curious Porter, and Mixed Case of Curious Brew and Curious Apple. The stores also stocks a range of products, such as local cheeses, artisan biscuits, teas, handmade chocolates, local chutneys as well as a selection of tableware, gifts and hampers. more »

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Savills plc is a United Kingdom-based real estate services provider that offers specialist advisory, management and transactional services. The Company's segments include Transactional Advisory, Consultancy, Property and Facilities Management, and Investment Management. The Transaction Advisory segment consists of commercial, residential, leisure and agricultural leasing, tenant representation and investment advice on purchases and sales. The Consultancy segment is engaged in provision of providing a range of property services, including valuation, building and housing consultancy, environmental consultancy, landlord and tenant, rating, development, planning, strategic projects, corporate services and research. The Property and Facilities Management segment provides management of commercial, residential, leisure and agricultural property. The Investment Management segment consists of commercial and residential property portfolios for institutional, corporate or private investors. more »

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

23 Comments on this Article show/hide all

brryhayward 3rd Jun '16 4 of 23

You're quite right to question why estate agents' commission should be related to value.
So why should so called professionals such as fund managers, tax accountants, anyone in financial services also expect to be paid in the same way?
I thought a professional person was paid to do a job. Anyone expect to pay a dentist dependent on the pain relieved? Or a teacher for succeeding with a difficult child?
We live in a very greedy world.

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Aislabie 3rd Jun '16 5 of 23

While defending estate agents will not make me popular here it is only fair to acknowledge that when I sold a higher price house three years ago the agent made a huge difference. He set the price at a level a fair bit above what people expected to pay (or what I would have accepted). But low enough to still have five serious enquirers. He then managed the buyers offers and counter offers until eventually one paid the asking price. His 1.5% commission got me a price over 10% higher than I would have probably accepted.

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Santawani 3rd Jun '16 6 of 23

Thanks Paul for your Placings overview.
Your musings on such subjects are always very helpful to allow one to take a balanced view on events. For example you point out that Institutions should be allowed a certain discount as their size makes a quick exit more difficult. It is so helpful to understand the logic behind these facts.
Equally, while I’m in a mood for commenting on the workings of this website, there was a very good exchange of views prompted by your Glassdoor reference on 1 June. Julianh questioned that employees of ACSO, on the Glassdoor website, felt that technical decisions by non-tech management were slow to adopt new developments. Apad came back with a view that this was common feedback, particularly on software companies because the techies had to be moderated or aims became unrealistic.
So useful to get these interpretations and thank you for the constructive atmosphere you have created on this website.

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Noodle Hat 3rd Jun '16 7 of 23

In reply to post #134018

I think its fair to say that an estate agent does, or should, do pretty much the same work selling a high or low priced home. ie: visits, brochure, office costs. Whereas a financial adviser, tax accountant has more work to do if planning higher net worth ie: different accounts, multiple complex tax returns etc etc.

Fund managers and other services however are a different matter.....I think you can argue percentage fees for some services, where the amount of work involved does rise/ become more complex and others where it doesnt.

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woodlandantics 3rd Jun '16 8 of 23

Thank you for mentioning SEA and R2S I knew I had read about them before. Not so good if you were a shareholder in SEA of course but not a bad result for R2S especially if you are a long term holder of Fisher ( James Fisher and Sons (LON:FSJ) ) as am I !

The announcement from FSJ this morning states that many of R2S clients are existing FSJ customers. Fisher has an excellent track record of managing its acquisitions spectacularly well, letting the existing management do their work and providing the support. In the current difficult environment for oil and gas I doubt that R2S could have found a better home?

Fisher shares rarely appear cheap and right at the moment with the setback in the oil and gas sector the shares look well expensive at a forecast P/E of around 21 ! But Fisher has a stable of highly performing specialist technical businesses in the oil&gas, defence, nuclear & renewables sectors and acquisitions they are making now will perform strongly in a couple of years time. I predict some sizeable upgrades in the next couple of years and am holding. Should the share price fall to under £12 I'll consider adding more (it's my largest holding already).



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ds1980 3rd Jun '16 9 of 23

I don't think the estate agent got you an extra 10%, however the market did. All the EA did was showcase your house. Don't believe for one minute they're worth what most people pay them. They're basically glorified auctioneers. A good auctioneer can certainly help but if two people want something they decide the price.

I sold about 10 houses through online estate agency half a percent and house network over the last decade. Half a percent were the first that I can remember who did this sort of thing but have since folded I believe which probably says it all however anything to shake up the ridiculous EA market has to be a good thing.

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cyberbub 3rd Jun '16 10 of 23

Paul I have often found that buying at around the price of a (good or middling) placing has been very lucrative. Have you any plans on reviving your placingwatch website? Or any other way to automatically identify placings on a daily basis from RNSes? Cheers.

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cyberbub 3rd Jun '16 11 of 23

I noticed that convenientional estate agents around where I live are now charging as little as 0.65% for sales. I think that's the only way they can compete - the days of fat 1.5% and 2% commissions are gone forever.

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Flackwell 3rd Jun '16 12 of 23

In reply to post #134021

But Aislabie - going back to the core argument

That's his job

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Dennism 3rd Jun '16 13 of 23

With regards to Goals Soccer Centres (LON:GOAL) its interesting that, on the day they announce the placing, they also sneak out an RNS about a grant of 1 million shares under their new LTIP scheme at a nominal exercise price of 0.25p. At this point, you're probably assuming this is for their recently appointed CEO but you'd be mistaken. This is for their CHAIRMAN, yes, their CHAIRMAN. That's nearly 2% of the pre-placing shares in issue in one year's grant. Makes you wonder if that's best practice and also what are they likely to grant to their new CEO. I don't think this meets the new ShareSoc guidelines on such matters - see section 2.3 here and one wonders how much more is to come for the exec team.

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JamesrWilson1989 3rd Jun '16 14 of 23

In reply to post #134051

Hi Dennism,

This was mentioned in their annual report, on the 5th April, which first mentioned the LTIP:

If approved by shareholders, the first grant under the LTIP will be made shortly following the

Annual General Meeting to Mr Nick Basing, the Group’s Executive Chairman, who joined the

Company in November 2015. As explained in the Appendix, Mr Basing’s award (the “NB Award”)

will be granted over a total of 1,000,000 ordinary shares in the Company (“Shares”) and its vesting

will be dependent on the satisfaction of certain stringent performance conditions relating to the growth in the Company’s share price (as measured against an assumed starting price of 100p perShare).

The ' NB Award' is "in the case of the NB Award, it has been decided that its vesting will be subject to a share price growth condition measured over the period up to the third anniversary of its date of grant (the "NB Performance Period")".

The award is then split into two segments which need to be realised before the shares are then awarded to the chairman:

In relation to 400,000 of the Shares over which the NB Award is granted (“Part A”):

Part A - under 50% - 0

50% - 80,000

100% - 400,000

Between 50% and 100% Between 80,000 and 400,000, calculated on a straight-line basis

In relation to 600,000 of the Shares over which the NB Award is granted (“Part B”): 

Less than 101% 0

101% 120,000

200% or more 600,000

Between 101% and 200% Between 120,000 and 600,000, calculated on a straight-line basis

Hope that clarifys things. 

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Graham Fraser 3rd Jun '16 15 of 23

In Portugal and Spain estate agency fees are much higher 4 or 5% plus VAT and they try and take their fee out of the deposit,rather than when the full price has been paid,also agency fees are much higher in the US.
I eventually managed to sell my flat in Lisbon through a newspaper ad. baulking at the ludicrous fees agents wanted.
No idea how they can get away with it. But they do.

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herbie47 3rd Jun '16 16 of 23

In reply to post #134057

Is that because prices are much lower in Spain?

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Graham Fraser 3rd Jun '16 17 of 23

No,don't think so.

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Dennism 3rd Jun '16 18 of 23

In reply to post #134054

Hi JamesrWilson, thanks for the information which helps to clarify the background on the Goals Soccer Centres (LON:GOAL) LTIP scheme. I'm relieved to see that they have a cap of 10% on the total shares in the scheme which is in line with ShareSoc guidance but the overall concept of the LTIP and nil cost approach is still questionable and not in line with ShareSoc guidance. Its also not obvious to me why the chairman should receive such a large chunk in one go but i accept it was only recently approved by key shareholders - presumably a few chosen institutions. I note that their new scheme is claimed to be "in line with best and market practice". But LTIP's are coming under increasing criticism and rightly so.

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doug2500 3rd Jun '16 19 of 23

I'm not a wine drinker, but I think that Chapel Down's Curious Brew Lager is excellent. It's just a little more 'beery' than normal lager, but still lager. Smashing stuff.

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Lion Tamer 3rd Jun '16 20 of 23

In reply to post #134021

Hi Aislabie

I don't think the percentage fees are normally much of a motivator for the average estate agent to get a better price for you when selling your home. If you think about it from the point of view of the agent, he or she will make more turning over more properties that they will investing more effort to get an extra, say 10%, on the sale price.

Worked example:

Sale price £100K @ 1.5% = £1.5K but sells the same day.
Sale price £110K @ 1.5% = £1.65K but takes a week to sell.

So would you rather make £1500 in a day, or £1650 in a week?
Is it worth risking a sure-bet £1500 for a risky £150 premium in commission?

I'm sure they'd let the market bid up the price when there are multiple buyers & it's a sellers' market, I'm just saying I don't think they're motivated to work too hard to get that extra few £K on the sale price, the difference in commission is just not worth the hassle.

Cheers, LT

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Golspie 3rd Jun '16 21 of 23

In Scotland Home Reports are mandatory --and in my view a good idea -- and solicitors, particularly in the provinces, do a lot of estate agency. I was one and we tried a deal whereby clients paid us a marketing fee of AMUNDI SP 500 ETF (LON:500)-750+VAT max [depending on size], but we got paid 10% of the excess on prices greater than 5% over the Home Report value, but it didn't really take off and went back to 1%+VAT.

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mpat89 4th Jun '16 22 of 23

In reply to post #134039

Having recently dealt with agents after viewing many houses in LB Kingston/Sutton I think estate agents are worth their commission as they know current market values, where as people selling with online portals don't.

I saw two common themes with houses listed on online portals: severely underpriced hence being sold immediately for far less than an agent would have got OR severely overpriced hence not selling at all.

People selling online think they know the market value but they don't. You can't get that info online, only the agents truly know the current market.

Nevertheless good to have competition to reduce EA's fees but overall I think I would still use one when it comes to selling. Also if you're in a chain EA's suffer from massive self interest which works in your favour on the buying side when they want commissions from selling your existing place.

If there's anything EA's need in general it's to behave more professionally and adhere to an ethical code. Currently EA's just pretend to be professionals but there's nothing professional about them.

Professional Services: Web hosting
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ds1980 6th Jun '16 23 of 23

In reply to post #134165

That's nonsense. Firstly you don't need to know the market price as other estate agents come and value the house also. I get 5 in as well as the independent. So that's 6 valuations. I like to waste EA's time ;-). I already have my valuation also. It doesn't take a rocket scientist to value a house. What most people don't understand is that EA's will value property per sq foot/m. They don't just make it up! London is a different beast to pretty much everywhere else though so prices can shift depending how much someone wants the place!

Properties abroad are all priced this way and its how pretty much all other countries buy and sell property. I don't really understand why we don't realise that's what we do here but we just don't advertise the fact. You only need to know the price per sq f/m in your area to know what the value is. A 2 minute search on rightmove tells you all that info so I've no idea where you are looking.

The same people are coming to look at your house as everyone looks on rightmove and zoopla etc. Don't kid yourself thinking an estate agents adds value to your gaff. He don't. Same as people thinking an investment manager adds value to their portfolio. He don't either.

The market decides the price but nobody likes change do they.

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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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