Small Cap Value Report (Fri 12 April) - PLUS, GAW, BON

Friday, Apr 12 2019 by

Good morning,

Thanks for all the kind comments to start off the day - much appreciated!

The main things on my mind today are Plus500 (LON:PLUS), Games Workshop (LON:GAW) and Bonmarche Holdings (LON:BON).

Plus500 (LON:PLUS)

  • Share price: 530p (-26%)
  • No. of shares: 113 million
  • Market cap: £601 million ($790 million)

Q1 2019 Trading update

It's going to be difficult for me to avoid a triumphant tone with this one, as I have been very critical of its business model, and how it presents its results.

  • See the Stocko archives for all the SCVR comments by Paul and I over the past year.
  • See my original description of Plus500 as a bucket shop that profits directly from client losses.
  • See my follow-up article discussing various elements of its business practices
  • See my subsequent article after it was finally revealed how much customer P&L it was exposed to.

The bottom line is that it didn't explain properly how much customer P&L it was exposed to.

This customer P&L exposure makes its results inherently volatile. It is incentivised for its clients to lose money, but its clients can enjoy unlimited upside when their bets go the right way.

In 2017, for example, Plus500 lost $103 million to customer profits. Then in 2018, it made $172 million from client losses. This is possible because it doesn't run a comprehensive hedging program like other CFD providers do (its competitors do have some customer P&L exposure, but it is much smaller).

Another key element of this story is that Plus500's marketing efforts target the least knowledgeable beginners, who tend to waste their accounts quickly and then give up.

This is problematic when it comes to the EU's ESMA regulations, which are designed to protect amateur traders from using too much leverage. Last year, Plus500 bullishly claimed that 12% of its European customers "may be eligible" for professional accounts, and that these accounts were responsible for 75% of its revenues.

Today's update

Today we learn that Q1 2019 revenues (to March) have collapsed by 65% quarter-on-quarter, to just $54 million. It would have been $82 million, except for $28 million of client profits eating into the result. 

The quarter-on-quarter…

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All my own views. I am not regulated by the FSA. No advice.

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Plus500 Ltd is an Israel-based company that develops and operates an online trading platform for individual customers to trade contracts for difference (CFDs). Its online trading platform allows its customers to trade CFDs on over more than 2,200 different underlying global financial instruments comprising equities, indices, commodities, options, exchange-traded funds (ETFs), crypto currencies and foreign exchange. The Company enables individual customers to trade CFDs in more than 50 countries. The trading platform is accessible from various operating systems, such as Windows, iOS, Android, and Surface, as well as Web browsers. more »

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Games Workshop Group PLC designs, manufactures and sells fantasy miniatures and related products. The Company's segments include Sales channels, Product and supply, Central costs, Service centre costs and Royalties. The Sales channels segment includes Trade, which sells to independent retailers and includes magazine newsstand business and distributor sales from its publishing business (Black Library); Retail, which includes sales through retail stores, its visitor center and global exhibitions, and Mail order, which includes sales through its Web stores and digital sales. The Product and supply segment designs and manufactures products and incorporates production facility in the United Kingdom. The Central costs segment includes its overheads, head office site costs and costs of running Games Workshop Academy. The Service centre costs segment provides support services and undertakes strategic projects. The Royalties segment includes royalty income earned from third-party licensees. more »

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Bonmarche Holdings plc is a multi-channel retailer of womenswear and accessories. The Company offers clothing and accessories in a range of sizes for women through its own store portfolio, Website, mail order catalogues and through the Ideal World TV shopping channel. The Company's subsidiaries include Bluebird UK Topco, Bluebird UK Holdco and Bonmarch Limited. The Company has approximately 310 stores across the United Kingdom. more »

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

95 Comments on this Article show/hide all

ken mitchell 12th Apr 76 of 95

Eye opening posts from some of those leaving. Amazed to read of so many not prepared to pay £1 or less a day for the invaluable information available on the main Stockopedia page alone for each share, yet are prepared to risk big losses without doing proper research. And even more surprising is to find some who think that invaluable facts and figures provided by Stockopedia are a load of rubbish not even worth looking at! My investment performance improved markedly from the moment I started subscribing.

In fact it's even better than that, as while on a trial subscription there was a share being heavily promoted as a short on a well known and arguably notorious investment site. Yet Stockopedia figures and marks were high, so I bought some. This was lucky I know but just 2 days later that Company was bid for at a 100% premium to pre bid share price. That paid for my subscription for several years!

No wonder so many private investors come unstuck with bulletin board favourites if they are not prepared to look beyond dubious posts from so called "respected posters" on a free bulletin board. On those bbs there are sometimes hundreds of rubbish posts a day. Is taking notice of those really better than using the invaluable information available frrom Stockopedia for very modest cost? No! Generally the more rubbish posts on a share the more rubbish that share is too. 

Also I feel very strongly even with Stocko going subscription only that neither Paul nor Graham should now feel obliged to do a report every day.  Just reading and analysing several results statements must take a good deal of time,  and yet more time typing lengthy reports. Some days it must take hours. So why should anyone insist they do it, when their reports are a brilliant additional tool on top of everything else Stockopedia provides? And on days they don’t report there are several regulars posting their own quality updates.

Stockopedia is brilliant and any further improvement will just make it even better and even more worth paying for. 

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JTG 12th Apr 77 of 95

In reply to post #469011

Just to repeat that SCVR has no need to change, chaps, especially if some seem to think it the only discussion stream worth reading on Stockopedia. And of course Ed's whole thesis in founding the business rested on presenting NUMBERS, not opinion. I used to subscribe to Company REFs years ago, if anyone remembers that, and was delighted to switch to Stockopedia's much more timely offering with nice simple comparison tools.
Look at the StockReport. Decide what you think that tells you. Then test your opinion with the Compare Stocks tool. Then see if the company comes up on the Discuss Tab. In that order. Only then part with your hard-earned cash to buy a stock. This is how to get head to rule heart, and the easiest way is via Stockopedia.
Happy w/e

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newbieinvestor 12th Apr 78 of 95

In reply to post #468851

As Oscar Wilde said, "A cynic is a man who knows the price of everything but the value of nothing."

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JollyBiologist 12th Apr 79 of 95

Like Paul, I am mystified by people who are prepared to invests 100s or 1000s of £££ in shares, but refuse to pay a small subscription to a high quality information service. My best ever investment? Avesco, a company and a situation I would never have noticed, let alone invested in, were it not for Paul writing on Stockopedia. That one idea alone could pay for Stocko subs for the next 50 years or more....

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StudentSteve 12th Apr 80 of 95

I’d like to add my thanks to the above. The SCVR was one of the things that got me interested in investing in the first place. All the best to Paul, Graham and the rest of the team.

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Jonathan C 12th Apr 81 of 95

In reply to post #468806


I love what you do. Stay as you are: we can do without slick professionalism but not without your personality showing through (or your analysis).

Just remember to take a look at Beximco Pharma (especially their cash flow) next time they have results!

Kindest regards


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peterg 12th Apr 82 of 95

In reply to post #468901

SMALL may be the subscription cost, but everyone's affordabilities are different.

That, of course is entirely true, and it's not for any of us to judge either the financial situation, or the need for the other parts that Stocko provides, the data, of anyone else.

But, while I have no knowledge of the details, I think we can be pretty sure that Graham and Paul are paid, they certainly should be. So, since Stocko is a business that has to at least balance its books, they either have to subsidise the comment, in the hope it will attract new subscribers or charge for it. The former model is close to what The Fool did for many years, before deciding they couldn't justify the expense of the boards. I'm not clear why anyone should expect that Stocko would be in a different situation.

For me the big draw, and why I first joined and still subscribe is the data. The discussion boards are useful, and the SCVR particularly so, but the data is the key. In my view anyone who is serious about investing needs access to the sort of data and analysis Stocko provides. I can understand that there are many who are investing on a small scale who can't justify that expense. But from a business case point of view while they may benefit from the SCVR if they are not likely to end up taking out a subscription then what is the benefit to Stocko? Perhaps if those who use these boards and invest on a sufficient scale to justify the subscription and don't currently subscribe did so then the need to make the columns subscription only would not exist?

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davetparkes 12th Apr 83 of 95

In reply to post #468901

i did that with greggs at £15, now bought back in at £18.50

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purpleski 12th Apr 84 of 95

In reply to post #468746


I could not agree more and said similar below. 87p a day is nothing for the SCVR or the screener or the company report pages or the Stockranks or all the other content. But it is not 87p for each of these, it is 87p per day for the lot.

And that does not take into account losses avoided or investment successes made partially as a result of reading Stockopedia content.


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purpleski 12th Apr 85 of 95

In reply to post #468921

Spot on.

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skinner66 13th Apr This post has been moderated
skinner66 13th Apr 87 of 95

In reply to post #468956

dont you realise maybe your comments are helpful as others are,, but you dont really help by getting it all free.. stockopedia does have overheads like all companies,

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PJ0077 13th Apr This post has been moderated
simoan 13th Apr 89 of 95

In reply to post #469111

Your pithy passive aggressive replies will be much missed. I'd guess that you think you're a wit, and you're half right.

You remind me of when I was younger and didn't know as much.

All the best, PJ0077

Oooh. Is that what you call a parting shot, PJ0077? Well, it's a cheap one. Don't flatter yourself, you're nothing like me. I can afford the Stocko subscription for a start, cheapskate!! :-)

Dear Stocko, why are the barbarians still getting through the gates?

All the best, Si

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Boros10 14th Apr 90 of 95

I’ve read most of the comments here on the paywall debate. I appreciate not everyone has the money to spare but if the cost of a UK subscription to Stocko is too much you have to seriously ask yourself what are doing in this game. Investing is a game which is won or lost on the quality of the information you have access to and your ability to make the right judgement calls based on that information. By cutting yourself off from the data, the SCVR and the mature dscussion you find on Stocko you are putting yourself at a huge disadvantage to the other players in this game, professional or otherwise. It’s like playing a round of golf course with only a putter. You are going to lose and it won’t just be your pride which is dented. In the game of investing it will also be your wealth.

I should probably end it there but at the risk of overstating my case and also of sounding like CJ from the Fall and Rise of Reginald Perrin, “I didn’t get where I am today” by entering the investing Coliseum blindfolded, hoping around on one leg, armed only with a kitchen fork in a fight for my life against Etruscan gladiators.

For more on CJ -

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Edward John Canham 14th Apr 91 of 95

Plus500 (LON:PLUS) , IG Group (LON:IGG) , CMC Markets (LON:CMCX)

We now know that Plus500 (LON:PLUS) takes the other side of the transaction much more than the other two, is therefore more risky and deserves a lower rating - whether the current MV disparities are "correct" is anyone's guess.

(It did strike me that in the recent past this has provided a hedge to Plus500 (LON:PLUS) which unravelled in Q1 2019 - when stock markets are rising Plus500 (LON:PLUS) loses on the market gains but gains from more active customers - when it falls they gain on the market but lose from the fall in active customers. Q1 had the anomaly of rising stock markets and less active customers - will this continue?)

As far as I'm concerned the main takeaway from the last three months of CFD providers reporting is to stay well clear of the sector until some green shoots start to reappear. Comparing one against the other is pointless.


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cafcash49 14th Apr 92 of 95

In reply to post #468571

I agree 100% with Camtab with regard to the value of the Stockopedia data (and he was a Stockbroker) We will all miss you guys and gals who are not signing up, your contributions to the conversation will be missed but do you realise Stocko costs less than 70p per day. I know everyone has different needs but the data provided just makes life much simpler when it comes to research for shares to buy. It has to be a quicker and easier method than any other I can think of. It also helps greatly with the selling decision which is never easy. There is a lot more to it than meets the eye. I have 3 different Chart set ups that appear automatically for each share I look at. You have to set them up but once they are there they are there every time you click into a particular share - it's invaluable. Good luck everyone. Charles

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mojomogoz 14th Apr 93 of 95

Everything is transient, particularly opinion.

I'm not sure what the hot air about subs is all about. If its a low value freebie to get SCVR then why do you give a f...

If its valuable then its probable that paying the sub and getting a bit of extra data too is a decent price. At £30k portfolio its a sub 1% cost and if you are actively investing with some experience it seems probable you run much more than £30k.

If you're somewhere in the middle...well then you are not sure what you are doing and should probably buy funds and let someone else do it for you rather than spiv a bit of spare cash after a long shot stock.

Nonplussed by the whole damn fuss. Seems like the usual online hysteria

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Gromley 15th Apr 94 of 95

In reply to post #469186

I don't really see any hysteria on the subject, it has (mostly) been a civil exchange with the non-subscribers saying their gracious farewells and thank-yous.

However, whilst I am sure it was all well meaning, I was a little uncomfortable with the number of subscribers thinking they know what's best for the non-subscribers on thinking they know why other people ('wrongly') make different decisions from their own.

But it's all over now, so those of us remaining can move on and continue to agree on how valuable we find Stockopedia.

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mojomogoz 15th Apr 95 of 95

In reply to post #469201

Isn't the comment section all about Stockopedia-ites providing their opinion and so explaining how what they think is correct? I have read your erudite opinions many times and do not feel you have held back from thinking you know best.

Nevertheless, thank you for correcting my erroneous thoughts and gently alluding to my underlying incivility. I concede the moral high ground to you ;)

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 Are LON:PLUS's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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