Small Cap Value Report (Fri 11 Dec 2020) - FOXT

11th Dec '20 by Paul Scott

79 comments 10558 reads

Good morning, it's Paul here with the SCVR for Friday.

Foxtons (LON:FOXT)

Share price: 44.14p (+0.32%)

(Jack writing - I hold)

Trading update from this London-based estate agency today. With its reasonably resilient lettings-based revenue, I’ve bought a few shares here on the basis that fears of a widespread migration out of London might have been overplayed.

We’ll see in the coming year or so if that thesis plays out, but in the meantime Foxtons (LON:FOXT) strikes me as a sensibly-run outfit that, post placing, has a good opportunity to consolidate and grab share in the London market. Directors have made a series of substantial buys at these lower levels.

In fact it doesn’t stop there - the company today announces a share buyback programme, so clearly the management team is signalling that it thinks the shares are cheap. Whether or not you will share that view of course is another question.

Performance improvement continues

Group revenue in October and November was £14.8m, up 2% year-on-year.
Splitting this out, sales revenue increased by 11% to £5.4m as momentum increased;
Lettings revenue was down 1% to £8.0m with strong volume increases being offset by a decline in average rents and; and
Mortgage broking revenue was down 14% to £1.3m.

This means that revenues for the eleven months to the end of November 2020 were £83.6m, down 15%. But, ‘as a result of the improving revenue trend and the continued tight control of costs’ the board now anticipates adjusted operating profit of £1.0-1.5m for the full year compared to a £0.7m adjusted operating loss in FY19.

Foxtons has a healthy cash balance expected to be in excess of £30m by the year end.

The company's trading performance has been better than expected, enabling it to spend £4.6m spent acquiring three lettings books this year. Trading so far suggests to Foxtons that this is the correct strategy in today’s market. There’s a good pipeline here and the group expects to make further investments in the next 12 months.

Not only that but the board says the combination of stronger trading and shored up cash balances means ‘it is now appropriate to start to return this to shareholders’. Foxtons is therefore buying back shares in the market from today, up to a maximum consideration of £3.0m, with a further update on capital allocation to be provided around the 2nd…

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Dojosan

11th Dec '20

Creightons (LON:CRL) I am sure Pippa enjoys rubbing it on for us men - for the two most recent presentations she has highlighted that during lockdown, men have literally stopped buying bathing / washing products or to that extent. Makes me chuckle everytime she emphasises this point! Yes, indeed, we can be rather uncooth neanderthals!

Have we got so used to Brexit talk that despite many stocks tanking, I noticed today there was not one comment on Brexit! Certainly affected my portfolio!

Momoko Miyamoto

I'm a London landlord and have by-passed using overpriced lettings agents like Foxtons (LON:FOXT) for many years. Very easy to do these days with cheap and excellent platforms like Openrent. If Foxtons (LON:FOXT) had falling sales commission during the recent period of stamp duty exempt turbocharged housing liquidity then the company is doomed.

the market was relatively calm given the potentially calamitous circumstances. Either in denial or thinks Bojo is bluffing. He may not actually be joking this time, it's hard to tell.

Boon

Om French Connection (LON:FCCN) I had a thought. With the founder owning 41% and Frasers owning 26%, wouldn't it be easy for them to take it private on the cheap? Isn't that a key worry about investing in French Connection?

gari en desti

12th Dec '20

Momoko. Your comments are interesting but the figures really don’t appear to support them.

Foxtons (I hold) as a whole appears to be doing well. Sales are actually up 11% (compared to 2019) during Oct & Nov, which is the period one would hope to start seeing sales income increase after the SDT holiday was announced in Sept.

Their lettings revenue was only down 1%, which surprised me, as during the past 9 months, we found our London residential properties being let at 10-20% discount to the previous rent. However, these properties are in the City and Central London where there are few people looking to let. Interesting, most of our new tenants previously lived in zone 2, 3 or 4 and are taking the opportunity to move in to the central area while rental prices are depressed.

I also like that the management team at Foxtons are buying some very smart mid to up market local agents for their lettings book. This is the market where few landlords have the time or inclination to do the viewings and haggle with prospective tenants by using an online letting platform such as Openrent.

XTR

Hi Paul,

How did you plot the FTSE All Share over the Foxtons (LON:FOXT) chart in your report? Also, I see you've used a Heiken-Ashi chart, is this your preferred chart option?

Best regards,

Ian

Mark Penney

thanks Paul for a wonderful hour with Lauren - most enjoyable. My wife logged in as Sarah.

Best wishes to you both and a Merry Christmas

Mark

Funderstruck

Paul, Thanks for that Wonderful 'Harpy' Christmas. Thoroughly enjoyable & loved by all our bubble.

abtan

13th Dec '20

Best Of The Best (LON:BOTB)

To add to the discussion, it's probably also worth noting that every person is limited to 100 ticket purchases per competition per week. That's about £500 max per week for the most expensive tickets in the Dream Car competition, and £15 for the cheapest tickets (eg an iPhone).

Given that one of the biggest changes anticipated from the upcoming gambling review relates to stake sizes, BOTB would therefore probably only be affected if:

It was re-classified as gambling
companies were forced to make stake sizes lower than £5.

As long as any new stake limit (if that is indeed what is recommended) is £5 or over, then there should be no impact on BOTB given that this is the maximum ticket price customers currently pay.

As an aside, I see that the Dream Car competition is offering £50k again with each ticket sold. The company must be doing well to be able to offer this so frequently.

Well, I hope so anyway as I hold.

Foxtons (I hold) sales haven’t fallen during the present stamp duty holiday as you suggest, they are actually up 11% (compared to 2019) during Oct & Nov, which is the period one would hope to start seeing sales income increase after the SDT holiday was announced in Sept.

Their lettings revenue was only down 1%, which surprised me, as during the past 9 months, prime central London residential properties have been let at 10-20% discount to the previous period.

I also like that the management team at Foxtons are buying some very smart mid to up market local agents for those agents lettings book. This is the part of the market where few landlords have the time or inclination to carry out the viewings themselves by using an online letting platform such as Openrent.

UK_Investor_8888

Its not particularly moral to be exporting, promoting and marketing old legacy technology that ultimately kills people.

India is infamous for its pollution and anarchic traffic.

How would investors find this profitable and conscious able?

Re., 3.5 tonnes

There will be driveways (and drains etc) that will collapse with that on top of it.

Also, some minor road country bridges unable to take that weight.

And traffic parking regulations make it not so easy to park a 3.5 tonne commercial vehicle in a residential street.

Wired tends to be a remainer-editorial publication.

There are no lithium or cobalt mines in Britain (ASFAIK). I don't see that as much different from Tesla and Panasonic's US plants?

The magic materials presumably come by ship and rail.

We are pretty good at shipping, ports and rail infrastructure.

And a UK surplus of tattooists, nail technicians and influencers.

Wilbraham

No. The Cornish pixies claim to have found 'globally significant' promise of lithium.

https://www.bbc.co.uk/news/uk-... and https://www.cornishlithium.com...

Nit A

Hi Ian,

Just type FTSE:ASX in adjacent to LON:FOXT in the long text box that you see above the chart and select it from the dropdown.

Thanks,

Nitesh

That is very good news.

And good news that its not in the independent national socialists republic of Scutland.

Just imagine if Krankie suddenly found she controlled The British Isles leading source of the future key commodity.

timarr

As the proud scion of a Cornish fishing family I can confirm we've found lithium down the pasty mines. And the engineering loss figures are consistent with the various Engineering UK reports (https://www.engineeringuk.com/...). The Faraday report suggests we need about 50,000 Phd level engineers to run the industry needed to meet the 2030 targets (https://faraday.ac.uk/wp-conte...).

I don't think the materials for battery production are particularly difficult to get hold of - it's more the process to get the factories up and running which will need inward investment and the expertise needed to build and run them. Everybody is trying to do this so you've a global crunch on skills and investment.

The UK is late to this game, it needs more than some start-up to move to critical mass - LG, Samsung and Amperex have already committed to plants in the EU, for instance, while Total / Opal will have an initial site up and running next year. Northvolt's plant will also come online next year, along with Tesla's.

The UK also has a structural problem with car manufacturing as well because we only have a small handful of volume producers - we need a big enough home grown industry to support the battery production. Of those the Toyota factories must be at risk because even with a Brexit deal they won't meet the country of origin rules and will be hit by WTO tariffs. And the UK-Japan trade deal means they can import from Japan at zero cost. The Vauxhall plant is also at risk, as it's Peugeot owned. So that leaves Nissan, Jaguar Land Rover and BMW.

As you might suspect I'm looking hard at this to figure out how and where to invest, but the UK government needs to start backing rhetoric with action if it's to be worthwhile investing in companies in the UK.

Thanks for the tip Nitesh, much appreciated.

Small Cap Value Report (Fri 11 Dec 2020) - FOXT

Foxtons (LON:FOXT)

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Paul Scott

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