Small Cap Value Report (Fri 19 Jan 2018) - CCT, CPR, BLTG, BON, REC, DTY, RM2

18th Jan '18 by Graham Neary

64 comments 22231 reads

Morning folks!

Busy morning for updates today. Thanks for your suggestions in the comments, I'm looking at the following (list is subject to change!)

Character (LON:CCT)
Carpetright (LON:CPR) (plus United Carpets (LON:UCG), which I hold)
Blancco Technology (LON:BLTG)
Bonmarche Holdings (LON:BON)
Record (LON:REC)
Dignity (LON:DTY)
RM2

Cheers,

Graham

Character (LON:CCT)

Share price: 452.5p (-0.3%)
No. of shares: 21 million
Market cap: £95 million

Trading Update

This is an AGM trading update, for the meeting at 11am.

Trading for the first four months of the financial year, i.e. from September to December, was in line with expectations.

As anticipated, the Toys R Us debacle had a negative impact on international trading. But domestic sales "continued to perform well".

If the company has performed fine on the domestic front during the period, that's encouraging, and better than I expected. November was supposed to have been a disastrous month for the industry here, so well done to Character if they managed to pull through it.

Indeed, the statement says that management "speedily and skilfully (sic)" addressed the changing conditions in the marketplace, so that there are "virtually no excess stocks to deal with in-house", and the major retailers "experienced a clean sell-through" of product.

From that wording, it does sound like there may have been build-up of excess inventory at some of the smaller retailers. But hopefully nothing too catastrophic.

I've noticed that some investors are a bit unhappy with executive compensation at Character. Today's statement could also be interpreted as presenting management's argument that their ability to control inventory is something that is worth paying for, in advance of the AGM.

The statement also reiterates the company's belief that while H1 this year will be tough, H2 will see the company return to its previous growth pattern, with the help of the new Pokemon range.

My opinion

I'd probably have marked the shares a little higher on today's news (which unfortunately was not released until just before the market opened).

The big fear was that H1 was going to be a catastrophe, and…

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mammyoko

19th Jan '18

Thanks for looking at Record (LON:REC) Graham. Could you compare it with Alpha FX (LON:AFX) which trades on a much higher multiple? It seems to be a bit of a one-man show like Miton (LON:MGR). But, like Miton (LON:MGR), the main man is impressive. He recently gave a talk at my daughter's school to which he had donated a seven figure sum for a new building which brought Record (LON:REC) onto my radar. The company seems to be struggling to stand still but it does have a niche and a 'moat'. t thought today's results were going to be better as the dollar has dropped which makes their life easier. Although they have added one client in the quarter their AUME remains rather static. I wonder if this is a lifestyle company for its founder, although, TBF, they do pay out reasonable dividends. I think the question all holders would have is what, if anything, is likely to ignite the share price?

Zipmanpeter

Bonmarche Holdings (LON:BON) results highlight how dependent they are (still) on foot traffic from a very aged customer base that can be genuinely deterred by bad weather. Also much more vibrant online propositions now for older folks eg Lifestore from online specialist JD Williams (part of N Brown (LON:BWNG) group). Difficult to see a positive future for Bonmarche Holdings (LON:BON) medium term with such a low margin as safety - a feature since emerged from Peacock ruins - and store centric business.

Following today's Dignity inspired, cycle of life theme,will Bonmarche Holdings (LON:BON) be "from administration to administration.......'

Graham Neary

Hi, nice comment there re: Record (LON:REC) and thanks for the anecdote with respect to "the main man"!

Maybe there is no catalyst for the share price but I like what I see, so I bought a few of them.

Cheers,

Graham

Trident

Little smile about hearing that a profit warning from Dignity (LON:DTY) arose because of stiff competition.

Apologies!

Thanks for the insight re: £BON!

Wimbledonsprinter

Online sales at Bonmarche Holdings (LON:BON), face tougher comparables going forward so I would expect reported growth rates to come down in future quarters. FY17: Q1-2.7%, Q2 c+2.5%,Q3 -3.8%,Q4 +15.2%. FY18:Q1 +37.9%, Q2 +39.4%, Q3: +28.5%.

I hold the share - although to be honest I was looking to sell after reading the trading update, until I realised how much the stock had been marked down.

The up-side to a 'lifestyle' business dominated by a visionary is that they care about how the business's share price performance reflects on them. Neil Record has an impressive cv, deep pockets and owns 31% of the business. I think there is limited downside and given that he is 64 he may be looking for an exit at some point. On the negative side, the share seems very much off the radar, poorly understood and the pedestrian performance isn't improving its profile.

runthejoules

GAME Digital (LON:GMD) is down loads to about 46.5p to buy - I didn't think their update was that bad but obviously the market did. Sincerely regretting not seling at 60p+ now - let that be a lesson to always sell a SCSW recommendation spike! Oh dear me.

JohnEustace

I completely agree.
Also a lot of old people buy insurance products, expecting the proceeds to cover funeral costs, that only pay out if the premiums are paid every month without fail up to death. Miss a payment and all the money is lost, which is a very easy pitfall to fall into at the end of life with illness, care home fees, Alzheimer’s etc.taking their toll on finances and the ability to stay on top of things.

The Phoenix

Hi how do you get the blue highlighter to work on Stocko for company names ?

peterthegreat

Re: Tangland comments on Dignity.
Yes Tanglands, I share your concerns about Dignity. I held Dignity until a couple of years ago when I had time to to some more diligence on the company and having worked out their liabilities which arise from pre-paid funeral plans I was sufficiently alarmed to sell the shares immediately. I could not work out how they could get a sufficient return on all the money they have received from pre-paid plans over the past 20 years or more to actually pay for the funerals when they become needed. Dignity is not, of course, free to invest this money as it wishes, it goes into funds such as The Funeral Trust which have relatively low exposure to equities (about 20% in 2015) and the rest mainly into "safe" investments such as bonds and cash. Costs (as opposed to prices) of funerals have continued to increase for a variety of reasons, including environmental regulations, and I really wonder whether the investment performance of The Funeral Trust and other similar funds have kept pace with funeral cost inflation. I hope it has, otherwise Dignity is going to be hit with falling profits from both on-demand funerals and pre-arranged funerals. My view is that, despite the regularity of death, there are huge uncertainties in its business model and it should have kept a large sum of money to deal with contingencies. Instead it made generous payouts to its shareholders and, according to Stockopedia, now has debt of around £500M. I fear that will be the undoing of the company.

Breakout

20th Jan '18

Bonmarché is a dog ..dropped 24% yesterday and I was stopped out ...never buying women’s retail again !

Albertos

Put a £ sign in front of the ticker.

Therefore (£BON) without the brackets becomes Bonmarche Holdings (LON:BON).

Phil

rmillaree

Bonmarche Holdings (LON:BON) Its magic Paul

shauney2

A test for the pound sign tip Fairfx (LON:FFX)

Just catching up on a wet Saturday morning.Cheers Paul and Graham for all your hard work.Some
brilliant insight.The body of work since the new year has been brilliant.

A test for the pound sign tip Fairfx (LON:FFX)

Just catching up on a wet Saturday morning.Cheers Paul and Graham for all your hard work.Some
brilliant insight.The body of work since the new year has been brilliant.

tripuram

I too share the pain on GAME Digital (LON:GMD). Wish I had exited @60 :-) and dont feel like selling now

Many thanks Edward

eddie koeppl

22nd Jan '18

There is no mention of Dignities crematoriums which I would think are free from competition from local undertakers and I believe they would get most of the business withiin their area.

gus 1065

23rd Jan '18

RNS out that Monaco based Private Investor John Jakes (of Acorn Stairlifts fame) has taken a 4% stake in Dignity (LON:DTY) . Has a decent track record of spotting “grey” value opportunities (presumably why he’s able to be Monaco based).

https://www.stockopedia.com/share-prices/dignity-LON:DTY/news/dignity-plc-notification-of-major-holdings-urn:newsml:reuters.com:20180123:nRSW6555Ca/

Shares are up about 6.5% at the moment.

Life after death?

Gus.

Small Cap Value Report (Fri 19 Jan 2018) - CCT, CPR, BLTG, BON, REC, DTY, RM2

Character (LON:CCT)

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Graham Neary

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