Small Cap Value Report (Fri 17 Sep 2021) - STCM, PPS, AXS, ELTA

17th Sep '21 by Paul Scott

55 comments 8570 reads

Good morning, it's Paul & Jack here with Friday's SCVR. Today's report is now finished.

Agenda -

Paul's section:

Proton Motor Power Systems (LON:PPS) - a bizarre share, with a crazy balance sheet. Jam tomorrow - i.e. awful historic (and interim) results, but the big valuation seems to rest on hopes for credible-looking orders received more recently. A complete punt, so wouldn't interest me at all. In a sector that's been in a speculative mania of late (clean energy).

Accsys Technologies (LON:AXS) - a good trading update. This looks an interesting growth company, but I find it difficult to value, and don't see enough upside on the current market cap to make it look compelling to buy. I could be wrong though, as am only using broad brush assumptions.

Electra Private Equity (LON:ELTA) (I hold) - I cover updates on both portfolio companies, Hostmore (which owns TGI Fridays), and Hotter Shoes (to be renamed Unbound). I've just come off a call with management, with things seemingly going OK, as confirmed in recent trading update. Do check out the link to Unbound's recent CMD recording.

Jack's section:

Steppe Cement (LON:STCM) - Good results with revenue up 17% and profit after tax up 52%. This company has had a high StockRank for a few years now but is thinly traded and, having doubled in recent months, is no longer in deep value territory.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to cover trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty.

We stick to companies that have issued news on the day, with market caps up to about £700m. We avoid the smallest, and most speculative companies, and also avoid a few specialist sectors (e.g. natural resources, pharma/biotech).

A key assumption is that readers DYOR (do your own research), and make your own investment decisions. Reader comments are welcomed - please be civil, rational, and include the company name/ticker, otherwise people won't necessarily know what company you are referring to.

Paul's…

Unlock with Email

Unlock with Google

Already have an account?
Login here

GN100

17th Sep '21

Electra Private Equity (LON:ELTA) I agree with Paul here and think that holding ELTA has potential but may be a wild ride when the breakup happens. However I resonate heavily with his comment, having watched the video, I found it dripping with management-speak. I sometimes question if there is a clone school that produces these people with an inbuilt dictionary of semi meaningless phrases. I hope that they continue under the brand name 'Hotter', it's not particularly attractive, assuming a better replacement could be found but is hardly as meaningless as 'Unbound'. I also watched some time ago the presentation from Fridays. Again an awful lot of management-speak from a similar clone school and another meaningless name change proposed to 'Hostmore'. I think and hope that they will continue to badge themselves under the Fridays name as everyone knows who they are and what they do. As for the spin-off at Fridays, something to do with some numbers representing street names in the US, words fail me!

I conclude I am getting too old for this game, rather like Victor Meldrew.

Richard - where is the reference to the John Authers column - I can't see it. A link would be helpful.

Helvellyn

I agree with most of the above but i actually like the 63rd and 1st name , although i wasn't really taken with their website and the menu is different for Chobham and Glasgow , (does that work ?) , but trying to book a table gives the impression that they are pretty busy so that hopefully bodes well.

I think there could be a lot of upside at Hotter/Unbound , why does Womens make up 55% of sales and Mens 10% ? Surely if anything Men over 55 would be more likely to forsake fashion for a comfortable pair of shoes than Ladies of the same age ??

Thank God It’s Friday at 63rd Street and 1st Ave – Secrets of Manhattan (wordpress.com)

Maybe this explains the name.

Richard

I have read somewhere today that "retail sales" are made up largely of Supermarket sales and these have dropped because people are eating out now instead of buying ALL their food at a supermarket . That is the main reason for the drop. Lies, Damn Lies etc.

Rusty2

Who makes up the other 35% of sales, if men are 10% and women 55%?

I always thought Hotter shoes were for women.

JimMcLad

You can sign up for his free weekday newsletter here.

https://www.bloomberg.com/account/newsletters/points-of-return

I find it very useful.

Zipmanpeter

The consumer facing names will be Fridays and Hotter. The non-names Hostmore and Unbound are the holding companies the PE guys set up (for tax, admin & other reasons) including hoping to instill the belief that more standalone brands/companies can be added.

For instance Hotter is focused on shoes 55+ women. If they launched a new company focused on clothes for 55+ women, cross selling using the same email base but wanting a different name, they could.

Re Electra Private Equity (LON:ELTA) and Hotter specifically, I really like this part of the business (the old are rich and still underserved but getting into digital very fast). It claims to have contact details for 3.7Mn or 29% of women over 55 and email addresses for 8%. This is great.

However, in the presentation Paul references above, it includes this at 21.00 mins in

This worries me as it seems to fly completely against privacy concerns and I thought laws! Can anyone explain this? If I browse a site without registering, can they email me legally?

timarr

No. I think what "stimulating on-site email capture" means is that they're finding ways of persuading you to provide them with your email address.

The other part of the statement is also legal at the moment - "Technology to identify anonymous site vistors" probably means using a third-party that can triangulate your data (e.g. ip address) to a profile and then let Electra Private Equity (LON:ELTA) know what you're likely to be attracted to without telling them who you are.

You'll see this already when you browse Google for the mistresses' birthday present and then adverts for skimpy lingerie suddenly start popping up in other places when the wife starts looking for gardening implements. It can be very awkward.

The whole area of these digital marketing companies tracking online behaviour is bit murky, frankly. The government intends to reform GDPR which may make this more or less intrusive. If I were guessing I'd say more, but there are lots of caveats to that.

This kind of online tracking isn't so much common as endemic. It's not exactly a USP, just normal online merchant behaviour.

timarr

FREng

Re Electra Private Equity (LON:ELTA) (which I hold). My wife is part of Hotter's target demographic and she has bought Hotter shoes previously. She is inundated with email catalogues, mostly for sports shoes that she never buys. She has unsubscribed.

Paul Scott

Hi GN100,

I think we need to distinguish between the trading names (e.g. Fridays, and Hotter Shoes) and the holding company names on the stock market. They're two different things.

For example, I suppose the Hostmore name was chosen because it sounds like something to do with hospitality, and the group company already owns 2 distinct brands, "Fridays" (they're dropping the TGI bit), and 63rd+1st (cocktail led bar/restaurants, new format, referencing a New York street address).

They're also considering small acquisitions, e.g. of small chains of bar/restaurants that don't have the capital to expand, and/or where owners want to retire, etc. So Hostmore could end up with multiple brands, all being rolled out. This is the perfect time to do it, with so many good, well fitted out sites available from landlords desperate to find a well-financed tenant.

Re the management-speak, I did flag this up to the company, in my feedback on the CMD. I said that a lot of private investors really don't like a lot of trendy buzzwords. I noted down a few from the Unbound CMD, for your pleasure & exasperation -

The Hotter Shoes stores are now being seen as "technology centres". not shops!

"We're re-branding comfort - to an enabling version of comfort"

"Changing gears in the presentation...."

Regards, Paul.

Hi Zipmanpeter,

Sorry I only just saw your post, I duplicated it above before I'd seen it! Apologies.

Paul.

Thanks KevinS1,

I am not sure if I have missed it, but is there any view on what the mkt cap might be for Hostmore?

Edison have published some estimates of valuation in their previous notes, but I'm not alone in thinking they might be too cautious.

Revised numbers are due out from Edison next week I think, so I suggest taking a look at their update note at the time.

Personally when I crunched the figures, I think ELTA could be worth 1000-1200p given some time for the 2 individual shares to settle down. But that depends on what appetite for the individual company shares there is, which is completely unknown at the current time. We'll just have to wait and see what Mr Market thinks in due course!

MichaelFBS

Looking at the page I link to above they breakdown by:

Food
Non Food
Fuel
Internet retailing

Regards

Michael

Paul - yes, I cringed at the 'technology centres' bit. That name describes more the McLaren version near Woking. However, I see the logic of different holding Companies. The acid test for us is if they make money and the SP's increase. Fingers crossed, I hold and could consider picking up some more if there are wild swings on the demerging

RayStraw, Yes the mens sales they need to work on. My wife has bought Hotter shoes at some time and I actually thought they were all Womens styles. I long ago abandoned looks for comfort so I guess I might become a customer.

Kevin Holloway

18th Sep '21

this is just what every up to date ecommerce site does. In English it means they try to show you more of what they think you like in order to get you to sign up for offers or news

I think there is a fair size market, I find most of the chinese or asian made shoes are too narrow for my feet, so I tend to buy shoes now that you can get in wider fittings, such as Clarks and NB. Not bothered about looks.

The problem is, if I have to put my email in I rarely proceed any further, so they are losing potential sales. I give them my email only if I have to. Some are difficult to unsubscribe from, I got a load I think from some american site. They are wasting their time with me anyway.

cojode

21st Sep '21

Morning all,

Electra ( LON:ELTA )
This article is in today's Retail Bulletin and demonstrates Hotter further embracing the "on line department store" concept.

"Comfort footwear brand, Hotter Shoes, will next month (October) begin to sell its products via John Lewis online as part of its strategy to reach even more consumers within its core demographic of 55+.

Hotter, which sells 1.3 million pairs of shoes worldwide, has struck up its latest partnership as it expands and responds to changing consumer trends. The brand, which currently reaches 29% of the female population 55+, has heavily focused on digital transformation in the last 18 months and is seeking to underpin further growth by securing strategic partnerships with well-known complementary brands.

A curated selection of women’s and men’s Hotter shoes will be available on John Lewis online as both brands seek to offer wider product sets to customers. Hotter’s product strategy is driven by its unique proposition of customised comfort, precision fit and stability.

The prestigious partnership with retailer John Lewis is the third collaboration for Hotter in the last three months. In July, the business re-launched a selected product range on Debenhams.com, after the retailer was acquired by Boohoo earlier in the year. This month (September), Hotter has launched a partnership with online marketplace Zalando, one of the largest global online marketplaces, focused on European and UK markets."

Small Cap Value Report (Fri 17 Sep 2021) - STCM, PPS, AXS, ELTA

Paul's…

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

55 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...