Small Cap Value Report (8 Sep 2015) - SOM, CVR, PUB, CAMB, CCT, MCB

Tuesday, Sep 08 2015 by
39

Good morning!

Absolutely loads of results & trading updates today, so I'll get through as many as I can, focusing on the ones that look the most interesting as potential investments. I tend to skim read nearly all announcements, but most can be ignored as there often seems little reason to get involved. It's smashing when you find something good, and overlooked though.

I shall be glued to CNBC later today, as Warren Buffett is appearing on the show at 15:30 UK time. The only drawback of watching CNBC is that you have to listen to their orchestral jingle about 285 times each day!


Interesting comments from Whitbread (LON:WTB) today, with healthy Q2 LFL sales increases at Premier Inns (up 4.3%) and Costa (up 4.0%). Those are very good businesses in my view, and even though this share is rated at 18 times forward earnings, arguably its consistently strong earnings growth justifies that.

The significant increases in Minimum Wage (now being called Living Wage) are very important for investors to consider. Businesses which currently make little to no profit, but have a large, low paid employee base, are clearly going to be worst affected (e.g. supermarkets, and other marginally profitable retailers, pubs groups, etc). Today Whitbread says;

We are developing plans to adopt the recently announced National Living Wage. We shall mitigate this substantial cost increase over time with a combination of productivity improvements, boosted by investment in systems and training, efficiency savings and some selective price increases. We shall announce more details of our plans with our Interim Results on 20 October 2015.

I think the big rise in wages for the lowest paid (which I very much welcome incidentally) will really sort the wheat from the chaff, and may well weed out some struggling businesses. That's life I'm afraid. If you can't afford to pay your staff enough to live on, then you shouldn't be in that business. Anyway, it's an important topic for investors to consider, as it's bound to be a drag on earnings for some companies.


Somero Enterprises Inc (LON:SOM)

Share price: 140p
No. shares: 56.1m
Market cap: £78.5m

(at the time of writing, I hold a long position in this company)

Interim results to 30 Jun 2015 - this is an American company, listed on AIM since 2006, which makes laser-guided concrete screeding machines,…

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Somero Enterprises, Inc. is a manufacturer of laser-guided equipment. The Company's equipment automates the process of spreading and leveling volumes of concrete for commercial flooring and other horizontal surfaces, such as paved parking lots in North America. The Company's products include S-22E, S-15R, S-15M, STS-11M, S-840, S-485, CopperHead XD 3.0, Mini Screed C, PowerRake 3.0, 3-D Profiler and SiteShape. Its Somero Floor Levelness System monitors Laser Screed performance, operator performance and reports alert percentages of issues. The Somero SiteShape System allows for grade shaping automatically using users' motor grader, dozer or other grading machine. The Somero 3-D Profiler System allows automatic paving of contoured sites using a Somero Laser Screed equipment. The CopperHead XD machine encounters applications, such as chaired rebar, low slump and poor subgrades. The Somero eXtreme Platform (SXP) allows users use their Laser Screed equipment. more »

LSE Price
412.5p
Change
-2.4%
Mkt Cap (£m)
237.8
P/E (fwd)
14.1
Yield (fwd)
4.7

Conviviality Plc is a United Kingdom-based distributor of drinks and impulse products serving consumers through its franchised retail outlets or through hospitality and food service. The Company's activities consist of the wholesale and retail distribution of beers, wines, spirits, tobacco, grocery and confectionery within the United Kingdom to the on-trade and off-trade market. Its Conviviality Direct is an independent wholesaler to the on-trade, serving over 23,000 outlets from hotel chains to food-led pubs. Its Conviviality Direct brand includes Walker & Wodehouse, Catalyst PLB, Peppermint Events and Elastic. Walker & Wodehouse focuses on supplying wine merchants and regional wholesalers with products and producers as part of wine portfolio. Catalyst PLB brand is the agency brand and supply solutions division. Peppermint Events delivers event concepts and bars at outdoor events. Elastic is a brand activation agency that provides support and insight to the Company's supply base. more »

LSE Price
101.2p
Change
 
Mkt Cap (£m)
n/a
P/E (fwd)
n/a
Yield (fwd)
n/a

Punch Taverns Limited, Formerly Punch Taverns plc, is a United Kingdom-based pub company. The Company is engaged in the operation of public houses under the leased and tenanted model, which involves the granting of leases to tenants operating the pub as their own business, paying rent to the Company, and purchasing beer and other drinks from the Company. The Company's segments include Core and Mercury. It has a portfolio of approximately 2,580 pubs in the Core division and over 690 pubs in the Mercury division. The Company also operates public houses under the retail operating model. The Company has approximately 110 pubs trading under retail contracts. The Company's pub categories include Community Pubs, High Street Pubs and Destination Pubs. Its pubs include Arkwrights, Black Horse, Coach and Horses, Bulls Head, Cedar Inn, Cross Keys, Castle Inn, Saracens Head, Stanley Arms, Travellers Inn, Travellers Rest, Bronte and Blacksmiths Arms, among others. more »

LSE Price
180.25p
Change
 
Mkt Cap (£m)
n/a
P/E (fwd)
n/a
Yield (fwd)
n/a



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


33 Comments on this Article show/hide all

Mick Harkins 8th Sep '15 14 of 33

Hi Paul, regarding CCT, I agree that it is very wrong for the company to put out this non-urgent RNS during market hours.

I sold the vast majority of my holding today as being 'in line' with market expectations of EPS of just over 38p, implies H2 must have been pretty poor, as they already did 35p EPS in H1!

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herbie47 8th Sep '15 15 of 33
1

In reply to post #106025

Yes I believe that is true, had the same problem trading with HL.

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roddy10 8th Sep '15 16 of 33
1

Paul - would be interested in your views on Frontier Developments (FDEV LN) that reported today?

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lightningtiger 8th Sep '15 17 of 33

Somero does need a W-BEN form filled out to trade. However I have been watching African Potash (AFPO) streaking up again today with over 90 M trades so far. Can this continue? No difficulty in trading either of these today.

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Stegrego 8th Sep '15 18 of 33

Paul, if you fancy squeezing another one out, have a look at MAI.
Ta.

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jashunter 8th Sep '15 19 of 33

In reply to post #106039

So how did I manage to buy Somero in April electronically through Halifax Share Dealing with no forms, no hassle? It's listed on AIM

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Novice Investor 8th Sep '15 20 of 33
2

You only need a W8-BEN form for trading in the USA market. It ensures there will be no withholding of monies for tax.

NI

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Calalily 8th Sep '15 21 of 33
1

NI is completely correct, no W8-BEN necessary for SOM purchase.

| Link | Share | 1 reply
herbie47 8th Sep '15 22 of 33

In reply to post #106047

Why do most brokers insist upon it then?

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lightningtiger 8th Sep '15 23 of 33

A W-BEN form is required for trading US stocks. To clarify the situation with Somero, the Hargreaves site stipulates that fact.
However Somero is traded on the London market in pence so it is not necessary for the W-BEN form,my mistake, but I do have a form so there would be no problem dealing in US shares.
The global HQ for Somero is in Fort Myers Florida USA. Operations & support office is in Houghton Michagan USA. North East Asia office is in Quingpu District Shaivghai. The European sales office is in Chesterfield UK , so since it has an office in the UK, and is traded in UK currency and not US $ the W- Ben form is not required.
If a company is traded in US $ you would need it to trade. Hope that clarifies the situation.

| Link | Share | 2 replies
garbetklb 9th Sep '15 24 of 33

In reply to post #106053

My understanding was that the W-BEN form was a declaration needed in order for the broker to claim back the witholding tax, rather than anything to do with eligibility to trade.

Of course, some brokers may insist on you filling one out before you trade to ensure they can reclaim your tax and avoid the hassle of chasing / being accused of failing to reclaim your tax.

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iwright7 9th Sep '15 25 of 33
1

In reply to post #106032

Regarding Character (LON:CCT) I do wonder if management are talking down expectations in this trading update having had a really good H1.... "year end result in line with market expectations", so that they can then announce a surprise to the upside at the year end. Ian

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Calalily 9th Sep '15 26 of 33
1

W8-BEN is a form completed by non-US citizens that would be subject to U.S. tax from profit made on US securities. SOM is listed on the LSE so does not apply.

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herbie47 9th Sep '15 27 of 33

In reply to post #106053

No its because you have already completed a form, I just checked again and HL state "To buy US stocks please sign and return a US government 'W-8BEN' form. Until we have received the form unfortunately you will not be able to deal in this stock."


I have sent HL an email about this I will advise what they say.

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herbie47 9th Sep '15 28 of 33

In response to my query about W-8BEN form they have said "Hargreaves Lansdown Stockbrokers have been deemed a qualified intermediary by the SEC in the United States. HL Vantage clients must complete a W8-BEN form before investing in US incorporated securities. Somero Enterprises Inc (LSE:SOM) is incorporated in the United States for tax purposes and traded on the London Stock Exchange. As such, the W8-BEN criteria is required for all purchases on the HL Vantage platform.

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lightningtiger 9th Sep '15 29 of 33

Seems as though I was correct in the first place. It is still a good idea to have one in place and then there is no problem in dealing. I did check the US market as well and it was not available to trade SOM over there, which seems a bit strange to me.

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Robert Smith 9th Sep '15 30 of 33
2

Lease car- can't agree with you, Paul. Quite rightly you are always extolling the virtue of owned property. Spend a minimum of say £10 grand over 3 years leasing a car probably with a derisory mileage limit,acknowledge that you are going to pay mighty highly for the privilege of having it serviced in a car hospital and after 3 years what have you got - memories. Buy a good 5 year old car say 6k, spend thousand servicing it over 3 years and you'll still get £2k for it at the end of 3 years. No-brainer to me. Keep yer money tight and spend nowt ! Really enjoy your articles.

| Link | Share | 2 replies
herbie47 9th Sep '15 31 of 33

In reply to post #106109

I tend to go for newer cars, less than 1 year old, about 40% discount on new price, low mileage, still under 3 year warranty, then sell after about 6 years and start again.

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Paul Scott 9th Sep '15 32 of 33
1

In reply to post #106109

Hi Robert,

Fair points, but you're missing one key element - the opportunity cost of tying up my capital in a depreciating asset! I can earn a much higher return on my money in my trading account, than I can by having the money tied up in a car. So I don't mind borrowing cheaply to fund a new car, and then make a far greater return on the markets using the cash that otherwise would have gone into the car.

But there's no right or wrong answer, it's a case of each to their own! I've "made do" with old cars since 2008, but now things are going a bit better, I fancied treating myself to a new car! So leasing one is ideal for my circumstances, as little cash up-front, and low monthly payments too. A 10k mileage limit is ample for me too.

Regards, Paul.

| Link | Share
Paul Scott 9th Sep '15 33 of 33
1

Somero - I also was told that I had to complete some US tax form when I wanted to buy Somero Enterprises Inc (LON:SOM) for my local Share Club. So we didn't bother. Far easier to just do it on a Spread Bet, no forms, no tax, easier all round.

P.

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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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