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

Thursday, Jan 18 2018 by
83

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!)

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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Disclaimer:  

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

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The Character Group plc is a toy company. The Company is engaged in the design, development and international distribution of toys, games and gifts. Its geographical segments include other EU, UK and Far East. It designs and manufactures toys based on television, film and digital characters, and distributes these products in the United Kingdom and overseas. It also distributes finished products in the United Kingdom developed by overseas-based toy producers. Its diverse product range includes products for pre-school, boys, activity and girls. The Company's brands include Peppa Pig, Little Live Pets, Teletubbies, Minecraft, Scooby Doo, Mashems, Fireman Sam and Ben & Holly. Its customer list includes the United Kingdom toy retailers, the United Kingdom independent toy stores and a selection of overseas distributors. It operates approximately two distribution warehouses located near Oldham, Greater Manchester. It primarily distributes products sourced from overseas third parties. more »

LSE Price
470p
Change
1.1%
Mkt Cap (£m)
97.7
P/E (fwd)
10.8
Yield (fwd)
4.9

Carpetright plc is engaged in providing floor coverings and beds. The Company operates through two segments: UK and Rest of Europe (comprising Belgium, the Netherlands and Republic of Ireland). The Company trades from approximately 440 stores and concessions in the United Kingdom, as well as over 140 stores across Holland, Belgium and the Republic of Ireland. The Company offers free home estimating services. The Company's product range includes carpets, mattresses, headboards, laminate flooring, engineered wood flooring, rugs, vinyl flooring, luxury vinyl tiles and flooring accessories. Its luxury vinyl tiles are available in a range of designs, including tile, oak, pine and stone. It offers a range of beds and bed products, including divan beds, roll up mattresses, bed frames and others. It offers a range of options from memory foam mattresses to open coil and pocket spring mattresses. Its brands include Kosset, Essential Value, Storeys, Carpetright Clearance and Carpetright. more »

LSE Price
75p
Change
-1.8%
Mkt Cap (£m)
51.9
P/E (fwd)
10.6
Yield (fwd)
n/a

Blancco Technology Group Plc, formerly Regenersis Plc, is a provider of mobile device diagnostics and secure data erasure solutions. The Company's segments include Erasure and Diagnostics. The Erasure segment focuses on development and delivery of solutions, and includes Blancco, which provides erasure software; SafeIT, which is engaged in cloud and networked data erasure business, and Tabernus, which is engaged in providing software erasure products. The Diagnostic segment includes Xcaliber Technologies, a smartphone diagnostics software business. Its secure data erasure solutions include Blancco Management Console, Blancco Cloud, Blancco File, Blancco 5, Blancco Mobile Solutions, Enterprise Erase E800, Enterprise Erase E2400, Enterprise Erase Mobile and Ontrack Eraser Degausser. Its mobile diagnostics solutions include fault diagnostics, repair and program enablement. It serves manufacturers, financial institutions, healthcare providers and government organizations across the world. more »

LSE Price
68p
Change
 
Mkt Cap (£m)
42.9
P/E (fwd)
30.1
Yield (fwd)
n/a



  Is Character fundamentally strong or weak? Find out More »


64 Comments on this Article show/hide all

mammyoko 19th Jan 45 of 64
2

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?

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Zipmanpeter 19th Jan 46 of 64
1

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.......'

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Graham N 19th Jan 47 of 64

In reply to mammyoko, post #45

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

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Trident 19th Jan 48 of 64
12

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

Apologies!

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Graham N 19th Jan 49 of 64

In reply to dahokolomoki, post #43

Thanks for the insight re: £BON!

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Wimbledonsprinter 19th Jan 50 of 64
1

In reply to gus 1065, post #37

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.

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mammyoko 19th Jan 51 of 64

In reply to Graham N, post #47

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.

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runthejoules 19th Jan 52 of 64
4

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.

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JohnEustace 19th Jan 53 of 64
4

In reply to Tanglands, post #38

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.

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clarea 19th Jan 54 of 64

In reply to leoleo73, post #8

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

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peterthegreat 19th Jan 55 of 64
2

In reply to Tanglands, post #38

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.

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Dean Tonna 20th Jan 56 of 64

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

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Edward John Canham 20th Jan 57 of 64

In reply to clarea, post #54

Put a £ sign in front of the ticker.

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

Phil

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rmillaree 20th Jan 58 of 64

Bonmarche Holdings (LON:BON) Its magic Paul

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shauney2 20th Jan 59 of 64

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.


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shauney2 20th Jan 60 of 64

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.

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tripuram 20th Jan 61 of 64

In reply to runthejoules, post #52

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

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clarea 20th Jan 62 of 64

In reply to Edward John Canham, post #57

Many thanks Edward

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eddie koeppl 22nd Jan 63 of 64

In reply to Trident, post #48

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.

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gus 1065 23rd Jan 64 of 64
1

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.

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About Graham N

Graham N

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified and hold an audited, FTSE-beating investment track record.  Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »

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