Small Cap Value Report (Fri 2 July 2021) - CMOStores, POLR, GYM, FCAP, CBOX

2nd Jul '21 by Paul Scott

57 comments 9651 reads

Good morning, it's Paul & Jack here with the last SCVR for this week.

Timing - I'm going to type up my notes on the Cake Box Holdings (LON:CBOX) webinar today, which was good. Should be finished by c.1:30 pm.. Today's report is now finished (14:06)

Disclaimer -

A friendly reminder that we don’t recommend any stocks. We aim to cover notable trading updates & results of the day and offer our opinions on them as possible candidates for further research if they pique your interest. We tend to stick to companies that have news out on the day, and market caps up to about £700m. We avoid the smallest, blue sky type companies, and a few specialist sectors (e.g. resources, pharma/biotech).

A central assumption is that readers then DYOR (do your own research) and discuss in the comments below. The comments, incidentally, sometimes add just as much value as the articles. We welcome all rational views, whether bull or bear!

It's helpful if you include the company name or ticker within reader comments, otherwise some readers may not be aware of what company you are commenting on.

Agenda -

Paul's Section:

CMOStores - It's a quiet news day, so I take an initial look at a forthcoming (next week) new float. This is an online only building materials company, with a drop-shipping model. I like the concept, but generally avoid new floats.

Gym (LON:GYM) - a £31m equity placing, to accelerate new site rollouts and (I suspect!) calm the bank down. Good business model, and this seems a great time to be opening new sites, due to favourable property market opportunities. My main issue is the market cap - it looks far too expensive to me.

Cake Box Holdings (LON:CBOX) - my notes from today's interim results webinar. Very positive - management are exactly what I look for - hands on entrepreneurs, with tons of skin in the game.

Jack's Section:

Polar Capital Holdings (LON:POLR) - results from yesterday for this active fund manager. A record year for inflows, with scope for organic and acquisitive growth, plus a dividend yield of close to 5%. Tech continues to dominate assets under management and inflows remain sensitive to market conditions.

Finncap (LON:FCAP) - a year to remember for this growing broker and financial advisory business. FY22 pipeline…

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ridavies

2nd Jul '21

Re Finncap (LON:FCAP), thank you Paul - and / or Jack!

Bullion

re: cmo stores

I've had some experience with their roofing company in the past and found that they were cheaper than the usual merchants for several velux balcony windows I was seeking. So I simply returned to our usual merchant and he matched the price. Roofing superstore couldn't go any lower. Yes this experience is limited but I question their competitive advantage if they couldn't bring their price down beyond that of a typical merchant. It is something I'll certainly keep an eye on.

davidjhill

I really like Bidstack (LON:BIDS) model. I think they could potentially be phenomenally successful and whilst I've held previously have remained on the sidelines up until now as I felt they needed to do another raise.

I'd say they have been somewhat naive since being on the market. Investors got very carried away with the opportunity a couple of years back and the price got up to around 30p at one point. Why they didn't raise £15-20m there with a market cap in the range of £150m at the time I will never know. They could probably have got a big raise away with minimal dilution, fully/over funded the business and removed a lot of stress/management time from subsequent raises. They did eventually raise cash but clearly not enough and at much lower prices and only when they had no choice. Then they allowed the same to happen again, this time with the share price dribbling down consistently from 5.5p as investors worked out their lack of runway before they got it away at 2p today! Given they listed at 6p it's a pretty sorry tale and whilst I actually think they may well now go on to exceed that listing price from here a lot of this pain could have been avoided. Perhaps an experienced city hand on the board rather than media types might have helped avoid this. I'm sure they genuinely believed they could commercialise the business with the money they had but just goes to show how over optimistic directors can be about the timing of revenues and cashflow breakeven. Sosandar (LON:SOS) have been a bit guilty of the same thing in the past and I think they have a great business too, but these funding mistakes are fundamental and end up costing existing shareholders badly.

Anyway that said I will now look to pick some up as I reckon they are finally well enough funded and once revenues reach inflection point the change in cashflow generation should be pretty dramatic.

MichaelFBS

Love the write up on CMOStores.com Ltd.

Sounds like a barge pole job to me.

Regards

Michael

Best Of The Best (LON:BOTB) Probably not much consolation to his son! (Or me I hold 6.1% of portfolio and small top up yesterday)

Paul Scott

Hi Michael,

Why do you say that? I quite like the concept of drop-shipping building products using the internet. The promotional RNSs were quite persuasive, so I think this might be a popular stock. Maybe that didn't come across in the main report, but I always try to look for potential negatives, so all bases are covered!

Regards, Paul.

JohnDoe2378

Hi all,

Thanks for sharing notes from Cake Box Holdings (LON:CBOX) webinar Paul.

Impressive company and management. However, like you, missed the boat on this one, for now. Refuse to chase it up at 25 x forward earnings!!

GBC

Thanks a lot for your thoughts on GYM, very much appreciated! Have a great weekend...

FuzzyHaha

As a customer of CMO, I think this sort of model will take huge market share from the lightside trade of the Builder's merchants. Many trades are becoming much more business savvy, and the CMO model gives a much wider choice of products at a lower end cost. Many of the equivalent high value products are to order anyway through the larger BMs.

I was about to post that the only disadvantage to the small builder is the lack of monthly credit terms, but have just checked and see that they do trade accounts too.

My guys will be fitting the 3 rooflights that arrived from Roofingsuperstore this morning, next week!

Breakout Trader

I'd tend to agree, I think the management and shareholder communication from Bidstack have been abysmal. They even have comments disabled when they post on twitter, presumably because they'd be bombarded by disgruntled shareholders - and rightfully so.

I have tiny holding, as the concept makes perfect sense, but as always execution is a completely different story. There has been no evidence thus far that the concept translates to a viable business.

There are some huge red flags, but if they can get their act together and get some traction, they could do very well.

joshwood976

So breakout if you dont mind me asking will you to be topping up on Bids at ~2p? i cant see a single sign they are improving things or an a viable path to profitability personally

Thanks FuzzyHaha,

There's nothing as good as genuine customer feedback, so I'm really interested to hear your thoughts on CMO.

Quick question though - surely existing builders merchants also have online offerings for people who want to buy via the internet? So why would you go to CMO's websites instead?

David Dias

Amazing input on Cake Box Holdings (LON:CBOX), I bought it at £205,25 (I Hold), Is part of my SIPP portfolio which I consider my Coffee can approach (after reading 100baggers and 100 to 1 on stock market), its something I will not have access for the next 30yrs.

I bought it after watching a webinar about 6 months ago, I loved the management and the numbers.

3rd Jul '21

Hi Paul

On CMOStores the bits of your write up that made me write what I did were:

"Looks like a private equity part disposal, with Key Capital Partners retaining 26.8%, founders 10.4%, and senior management 6.4% on admission. So I expect a lot of the cash raised will be used to pay down private equity debt, so in effect nearly all the money raised in the float is going to selling shareholders"

"As I would expect for a float, the historical losses have transmogrified into EBITDA profits for 2020!"

Additionally on a sample of one I bought my house in 2017 and had it refurbished in the summers of 2018 and 2019 by a builder/electrician/plumber friend of mine who waxed lyrical about Screwfix and he would ring Monday and it was ready for pickup or delivery Tuesday. See https://www.screwfix.com/ and I feel that Screwfix have huge brand recognition amongst the trade and general public whereas I have never heard of any of the specialist web sites mentioned.

The other high profile supplier Wickes offers delivery or Click and Collect.

So I am struggling to see the edge/moat/USP that CMOStores have but that could just be me.

And I am just wary of private equity/owners selling and even more so having got caught by BOTB shortly after a large owner sale.

But I accept only the above, not through any deep analysis of the business model or the company.

Cleeve

thanks Paul understand your reasons

ok lots there but I think mr Von Rosen of lotto land involved and nick Candy of Candy and Candy- I think the reason to float in the USA is because they value tech companies more highly and in the uk Tom Winnifrith keeps attacking and they are probably not in a position to reveal everything as lots of moving parts. They have raised 135 million from memory at 80 p a share - Sentiance is an AI company there are very few AI plays around and AQUUA allows you to control who holds your data hence the responsible face book line.

If you look at the larger share holders they do not seem to be selling and those that ramp usually start to get out and I do not get that feeling here - also AQUAA have been taking staff from the other big tech companies so with the fundraising they do not need any more money and whilst personally I would prefer it not to delist as it means it gets thrown out of my ISA which will be painful (not sure if it will get thrown out of my SIPP, I hope so as that will prevent future overfunding taxation) but if it lists in the USA then I guess there is no need for uk listing.

I can understand you being sceptical and I am all for that, always good to hear all views and I do think in the coming weeks that more information will be forthcoming which hopefully will answer more of your questions

4th Jul '21

Hi Paul, they're slow on the uptake. I think the traditional BM's like to price according to the customer. I've had 15 years as a small scale developer in Andover doing new builds and office conversions to flats. I tart myself around the large BMs for bricks blocks etc, because Hermes can't deliver them,. Different BMS seem to have different rebates each month from different suppliers, so pricing is fluid. but there's a whole range of lightside merchants. We have a number in Andover who can supply stuff that can only be delivered on a van. They're pricing seems to be bespoke to the customer, but online still seems to be cheaper. I guess this is down the CMO dropship model. Capital light etc etc. Of course CMO-like merchants will lack personal touch, but maybe in time that's something they'll develop with relationship managers for customers worth keeping

GrahamScott

Hi Fuzzy, I’m in Andover too - beer sometime? You’re right about the local BMs prices vary so much and it’s really down to who serves you as to what price you get. I’ve a friend of friend who’s the manager at one of the big merchants in town. If he’s on duty then my prices are 20% less than normal. Whatever I need to buy I do research on the internet and show them the price that I can get there so they can hit the deal button. No objection to paying 5-10% more in order to shop local and keep jobs in the town.

njoydev12

Thanks for your thoughts on Cakebox. They concur with mine and I did buy in. I did think the management were quite active. I think it is steady company.

8th Jul '21

- posted in wrong place

Small Cap Value Report (Fri 2 July 2021) - CMOStores, POLR, GYM, FCAP, CBOX

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Paul Scott

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