Small Cap Value Report (Fri 15 June 2018) - REC, NXR, BPM, GYM, BWNG

Friday, Jun 15 2018 by


Yesterday was a fun day out at Mello South, as expected. I was too busy to attend the morning sessions, as I was preparing notes on Revolution Bars (LON:RBG) for my own presentation. But I was pleased to attend the afternoon sessions from Titon Holdings (LON:TON) and Non-Standard Finance (LON:NSF), and in particular very happy to hear the presentation by actuary, investor and author Guy Thomas.

Guy's book Free Capital was inspirational to many of us in the investor community. It had a big impact on me, too. It showed that a determined individual, if they put their mind to it, could succeed in the stock market. Furthermore, it showed that there was no single path to success. While successful investors may have certain traits in common, their "edge" tends to be unique to them.

Guy gave a strong presentation on a new topic: fund manager selection. This is more commonly discussed among professionals in wealth management than among the typical private investor who is interested in picking their own stocks. But in the field of finance it is a key issue, and one which has been relevant to my own career. So it was terrific to hear the considered thoughts of Guy Thomas on the matter.

Many other strong presentations were given - too many to mention them all here. Equally as important, however, was the chance to network and to put faces to names. Well done to all concerned.

Right, time for some stock analysis.

Due to the business of the week, I've not covered quite as many I hoped by now.

For today, I'd like to cover:

  • Record (LON:REC) - final results (I hold this one)

Stocks with news this week I haven't covered yet:

Quick personal note on my own portfolio: I've been nibbling up some more shares in Ranger Direct Lending Fund (LON:RDL). I've realised…

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

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Record plc (Record) is a United Kingdom-based company, which is engaged in the provision of currency management services. The Company's suite of products is divided in two categories: Currency Hedging and Currency for Return products. It also offers solutions to individual client requirements. Its Currency Hedging mandates are primarily risk reducing in nature. Its suite of Hedging products includes Passive Hedging and Dynamic Hedging. Its Currency for Return mandates are return seeking in nature. The range includes five Currency for Return strategies being Active Forward Rate Bias (FRB), FRB Index, Emerging Market, Momentum and Value, and these strategies can be offered in either a segregated or pooled fund structure. The Company's clients are institutions, including pension funds, charities, foundations, endowments, and family offices, as well as other fund managers and corporate clients. It operates in the United Kingdom, North America and Continental Europe, including Switzerland. more »

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Norcros Plc is a holding company for the Norcros Group. The Company's principal activities include development, manufacture and marketing of home consumer products in the United Kingdom and South Africa. The Company's segments include UK and South Africa. The Company has six United Kingdom businesses, including Triton Showers, Vado, Croydex, Abode, Johnson Tiles and Norcros Adhesives, and three businesses in South Africa, including Johnson Tiles South Africa, TAL and Tile Africa. The Company is focused on showers, taps, bathroom accessories, tiles and adhesives. In the United Kingdom, the Company offers a range of bathroom and kitchen products both for domestic and commercial applications. The Company offers mixer showers and accessories; tile and stone adhesives; taps, bathroom accessories and valves; bathroom furnishings; ceramic wall and floor tiles; kitchen sinks; tile adhesives, pourable floor coverings and tiling tools through its United Kingdom and South Africa business. more »

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B.P. Marsh & Partners PLC is a United Kingdom-based specialist investor in early stage financial services intermediary businesses. The Company invests in various business, including insurance intermediaries, financial advisors, wealth and fund managers and specialist advisory and consultancy firms. It invests amounts of up to £5m in the first round. Its investment stage ranges from start up to more developed. It considers investment opportunities based in the United Kingdom, Europe, North America and Internationally. Its portfolio includes Asia Reinsurance Brokers Pte Limited, ATC Insurance Solutions PTY Limited, Bastion Reinsurance Brokerage (PTY) Limited, The Fiducia MGA Company Limited, CBC UK Limited, LEBC Holdings Limited and Summa Insurance Brokerage, S. L. GAM London Limited and Rathbone Investment Management Limited are the Company's investment managers. more »

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

42 Comments on this Article show/hide all

FREng 15th Jun '18 24 of 42

TU today from SThree (LON:STHR) looks good, driven by continental Europe. (no position but considering).

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danielbird193 15th Jun '18 25 of 42

In reply to post #374584

Just read through the Prospectus for the placing and open offer on the B.P. Marsh & Partners (LON:BPM) website. Seems like a sensible transaction which gives the Company some 'dry powder' for new investments in partnership with a like-minded investor with international experience. It also has the benefit of allowing Mr Marsh to reduce his holding and perhaps increase liquidity for the shares (although I think the liquidity benefits will be marginal - presumably PSC Group intend to hold on to the placing shares and the shares transferred from Brian Marsh, so the free float will remain roughly the same).

Reading through the risk factors, I was a little spooked by the one titled "No guarantee that the ordinary shares will continue to be traded on AIM". The way I see it, after the placing roughly 44% of the shares will continue to be held by Mr Marsh and roughly 20% will be held by the new (Aussie-listed) investor. Do you think there's a risk that these two dominant shareholders will consider their AIM listing as an avoidable cost and hassle, and take the company private? That would be pretty disastrous for minority shareholders. Unlikely I know, but it did make me stop and think before pushing the "BUY" button.

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GreyInvestor 15th Jun '18 26 of 42

In reply to post #374524

I'm a sizeable holder in BPM, and am taking up the placing in full, plus a bit more.

I am mildly concerned about the age of Brian Marsh, but this is a great fund with good prospects of future growth It has developed a nice niche.

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GreyInvestor 15th Jun '18 27 of 42

In reply to post #374774

Could just be a warning that they might move to a full listing...

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Gostevie 15th Jun '18 28 of 42

I too look forward to Graham's wise words on B.P. Marsh & Partners (LON:BPM) . I don't currently hold but have been fascinated by this company since meeting the very formidable Bryan Marsh a few times some years ago in my professional career.

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Graham Neary 15th Jun '18 29 of 42

In reply to post #374439

Hi reacher, I will be covering B.P. Marsh & Partners (LON:BPM) shortly. Thanks for the suggestion. G

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Graham Neary 15th Jun '18 30 of 42

In reply to post #374549

Good call, EI. I will be covering GYM (LON:GYM) today. G

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bobo 15th Jun '18 31 of 42

REC, spread >5% wow....

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rwalford 15th Jun '18 32 of 42

In reply to post #374814

I have held B.P. Marsh & Partners (LON:BPM) since buying in at about 90p in 2012. Brian Marsh is a very decent honourable man and I am sure he would say if he was planning to retire. Also, he is keeping a 44 per cent stake: if he wanted out, surely he would have sold more, and/or placed some of his own shares rather than giving existing shareholders the chance to buy in at the same price as the Aussie investor.
Simon Thompson at the Investors Chronicle continues to be very enthusiastic - - and so am I!

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seadoc 15th Jun '18 33 of 42

Norcros (LON:NXR) interview with Nick Kelsall, CEO:



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kenobi 15th Jun '18 34 of 42

re nxr I notice stockopedia is penciling in a near 50% increase in eps for 2019,
if that comes to pass surely that in itself on the same lowly pe of 7 or so will see the shareprice from
200p to 300 p, pretty good return over a couple of years

mind you eps was 24,7p on 2016 and the share price wasn't above where we are now, perhaps pension deficits are receeding as an issue though ?


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Graham Neary 15th Jun '18 35 of 42

In reply to post #374844

re: B.P. Marsh & Partners (LON:BPM)

Hi, just wondering about the Brian Marsh stake, isn't it 56.7%? Thanks - G


Brian Marsh, the Executive Chairman of the Group, who (along with certain of his connected persons, being B.P. Marsh Management Limited and the Marsh Christian Trust, as further referred to below) currently holds in excess 60.7 per cent. of the Ordinary Shares, wishes to diversify his personal holdings by transferring beneficial interests representing approximately 4.0 per cent. of the Existing Issued Share Capital (held through B.P. Marsh Management Limited, a company wholly owned by Brian Marsh) to a suitable, supportive third party investor.

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Graham Neary 15th Jun '18 36 of 42

In reply to post #375014

I can answer my own question - after the dilution with up to 6.7 million new shares in issue, his percentage stake will reduce.

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rwalford 15th Jun '18 37 of 42

In reply to post #375014

Dear Graham,
According to their website:

Released : 01 Mar 2018 15:19
RNS Number : 4439G
B.P. Marsh & Partners PLC
01 March 2018

Date: 1 March 2018
On behalf of: B.P. Marsh & Partners Plc
Immediate release

B.P. Marsh & Partners Plc
("B.P. Marsh" or "the Company")
PDMR and Director Dealings

B.P. Marsh (AIM: BPM), the niche development capital provider to early stage financial services businesses, announces that it has been notified that B.P. Marsh Management Limited, ("BPMM"), a company wholly owned by Mr. Brian Marsh, the Executive Chairman of the Company, on 1 March 2018 sold 39,000 ordinary shares of 10 pence each in the Company ("Ordinary Shares") at a price of 271p pence per Ordinary Share.

As a result of the transaction, Mr. Brian Marsh has a total interest in 17,729,581 Ordinary Shares (including 998,000 Ordinary Shares held by the Marsh Christian Trust and 1,166,310 Ordinary Shares held by BPMM), representing approximately 60.71% of the total voting rights of the Company.

Please note, for the avoidance of doubt, that in the Company's announcement dated 9 February 2018, references to Brian Marsh Management Limited should be read as B.P. Marsh Management Limited.

Hope this helps!

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rwalford 15th Jun '18 38 of 42

In reply to post #375034

You beat me to it. Sorry

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Zipmanpeter 15th Jun '18 39 of 42


Thanks for promising to circle back to N Brown (LON:BWNG) I wrote to the company this morning more or less as per below.

Since your professional coverage might stimulate some considered responses, here were my thoughts as well. Despite my complaints I actually think there is good value here and once it presents itself as a modern, wholly online fashion company for specialist, under served markets, it will re-rate. Meantime I am optimistic the stationary but very big divi can be maintained, although I expect and want no more than symbolic growth in divis until the debt stops climbing.

Few brief comments on the 14th June 2018 trading statement from a very weary, long term private investor on strategy/progress

1. Decision in principle to close stores
Hurrah.!! At last !!! As a shareholder, I have always felt stores were not part of the company's DNA and complicate an otherwise simple, sexy story - online fashion specialist (with some profitable legacy paper.....until this gets small enough to stop as well). I am frustrated at the waste and another exceptional cost but at least it will then be (finally) done.

2. JDWilliams
This is the critical opportunity. Operating at scale, with still few direct competitors concentrating on the older/middle aged wome - Midsters in your new jargon. (This compares to Simply Be which I feel is doing well but in a now no longer under-served curvy young women segment). I worry on JDWilliams as Creative Agency being changed just 12months after relaunch with a lack of transparency on numbers. Customer numbers are always "up double digits" but net growth is is low due to "drag from Fifty Plus conversion" . Unless FityPlus is doing dreadfully AND still quite big I don't see how it can drag JDWilliams back so much. At the end of the day, net "JDWilliams" revenue is -2% and profit growth seems low. I expect 10% growth pa as online generally grows fast especially I think with middle age women who are now embracing it. Note I fully support the age agnostic, lifestore concept (providing it focuses on fabric fashion not garden furniture!)

3. Secondary / Traditional brands
Similar view to stores. As an outsider they complicate the story and I presume complicate life/dilute mgt focus internally.
i) What long term advantage do you have in garden furniture or electronics vs Amazon if "where fashion fits" is the corporate tagline. Bite the bullet: exit these categories
ii) Figleaves - where is communication of the turnover strategy and results. It should be big enough to warrant separate reporting like a Power brand. If NBrown can't leverage it as a standalone, sell it and focus on the Power brands
iii) House of Bath - missed chance to sell out of group instead of moving its independent headquarters to Manchester to raise cash/simplify(see comment on fashion focus above). If retained, need to focus on fashion related items in the Famous Five - bedding, furnishings etc, not garden tables!!

Cumulatively these secondary/traditional brands are a large chunk of turnover but get glossed over in reporting. No specific figures for turnover by brand. No sense of direction. Now the business is so much clearer after the great brand consolidation work of the last few years, perhaps this can be addressed in the Full Year results presentation. I also commend the work done to improve the Financial Services side but this only fires if the fashion side gets customers.

4. International - USA
i) USA - Perennially disappointing with a real focused effort always 6 months away. Capital markets day 2014 spoke of $100Mn by 2020. Look at the speed with which others are moving here. The opportunity gap for (British) online curvy fashionis closing fast.

Overall, I have liked the direction of the company these last few years: focus & simplification(fewer brands), greater agility (digital) etc. Just still more to do and do it faster, please !

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danielbird193 18th Jun '18 3 of 42

In reply to post #375034

I did some "back of a fag packet" calculations. After the B.P. Marsh & Partners (LON:BPM) placing, there will be 37.48 million shares in issue. BM's reduced holding will be 16.56 million (44.2%) and PSC Group will hold 7.34 million (19.6%).

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Fangorn 18th Jun '18 40 of 42

Hi Graham,

Received this in my inbox about 10mins ago...

"Ranger Direct chairman resigns in boardroom exodus"
The chairman and two directors of Ranger Direct Lending (RDL) are to resign as rebel shareholders tighten their grip on the troubled investment company which last week announced it would wind up and return money to investors.

"Old news? I don't follow RDL but you mentioned it above so thought I'd link you the story"

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Graham Neary 19th Jun '18 41 of 42

In reply to post #375744

re Ranger Direct Lending Fund (LON:RDL)

Yes, thanks. I spotted that. Didn't want to mention the stock too many times in the SCVR but I viewed that as positive news re: the liquidation.

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allery 20th Jun '18 42 of 42

the NSF note never got posted on thsi site Graham ? rob collinson

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 Are LON:REC'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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