Small Cap Value Report (Fri 22 Sep 2017, Part 1) - DX., VLE

Friday, Sep 22 2017 by

Good morning!

DX (Group) (LON:DX.)

  • Share price: 8.45p (+2%)
  • No. of shares: 200.5 million
  • Market cap: £17 million

Financing Update, Property Disposal, Gatemore Loan

I have previously written this logistics player off as uninvestable in its current state, and that remains my view on this RNS.

Indeed, I'm surprised the shares haven't already fallen to a much lower level on today's news:

the Board has identified a near term material funding requirement, over and above the Company's existing resources, to address a working capital shortfall, caused by the Company's recently reduced levels of profitability, and to provide funds for the planned investment into improving the financial performance of the DX business

Elsewhere in the announcement, we learn that the company has sold £4.5 million in properties (sale and leaseback), and has borrowed £2 million from a shareholder, both in order to replace a term loan from its bank.

But the overall debt pile was significantly bigger than that (£19 million last seen) and dilution is on the cards. This could become investable again after the refinancing, but not before then. Why prop up the share price before new shares get issued to institutions?

Volvere (LON:VLE)

  • Share price: 785p (+5% yesterday)
  • No. of shares: 4.1 million
  • Market cap: £32 million

Interim Results

(I currently have a long position in VLE)

I'm struggling to find good companies to write about today, so might as well circle back to yesterday and talk about Volvere.

Volvere is now my largest individual position after recent share price gains, including yesterday's 5% move. It looked like it was going to make a larger gain, but ended up closing on its lows.

This is an investment company which I've written about before. It's run by a very small team and buys into special situations, usually where a business needs financial restructuring.

It's very concentrated and currently only has three investee companies, of which one of them is still tiny. So it's effectively just holding two companies, and a huge pile of liquidity.

I was delighted with these results before the market opened, and clearly I wasn't the only one.

First up, the aggregate numbers:


Volvere also reports NAV, which comes in at 623p per share at June 2017 (up from 617p at December 2016).

The NAV is a sort…

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

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DX (Group) plc is engaged in the provision of parcels, mail and logistics services in the United Kingdom and Ireland. The Company's segments include parcels and freight, mail and packets, and logistics. The parcels and freight segment offers services, such as DX 1-Man, engaged in the delivery of irregular dimension and weight items; DX Courier, which provides next day parcel services, and DX 2-Man, which offers a business to consumer home delivery solution for heavier and bulkier items. The mail and packets segment comprises services DX Exchange, a business to business (B2B) mail service providing its customers with collection and delivery times; DX Secure, which provides security, and DX Mail, a mail service offering downstream access for smaller volume users. The logistics segment includes the provision of customer-liveried vehicles and uniformed personnel, such as fleet management solutions and integration with customer's business operations. more »

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Volvere plc is a holding company. The Company identifies and invests in undervalued and distressed businesses and securities, as well as businesses that are complementary to existing group companies. Its segments include Automotive Consulting, Security Solutions, Investing and Management Services, and Food Manufacturing. Its Automotive Consulting segment consists of the Company's subsidiary, Impetus Automotive Limited, which is engaged in the provision of consulting services to the automotive sector, including vehicle manufacturers, dealerships and national sales companies. Its food manufacturing segment consists of the Company's subsidiary, Shire Foods Limited (Shire), which is engaged in manufacturing frozen pies, pasties and other pastry products for retailers and food service customers. Its security solutions segment consists of the Company's subsidiary, Sira Defence & Security Limited, which is engaged in digital closed-circuit television (CCTV) viewing software business. more »

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  Is DX (Group) fundamentally strong or weak? Find out More »

31 Comments on this Article show/hide all

andrea34l 22nd Sep 12 of 31

In reply to OsullivanB, post #6

I pasted the bones of the main announcements on CAML in an earlier post. My own summary view is as follows:
* Overall production seems quite flat, both actual and projected.
* Copper price is giving the figures a boost, which is feeding an increasing margin.
* I have a worry about the dilutive effect of the placing, as no indicative price seems to be given - I presume the price will be dictated by demand.
* I can't work out how good value the acquisition is... although the company seems to think it's a good fit and immediately beneficial financially.

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OsullivanB 22nd Sep 13 of 31

Thank you to all of you for adding to my understanding of CAML, and to any who may post after this.

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rivaldo 22nd Sep 14 of 31

Great to finally see some coverage of Volvere (VLE), which is undervalued and underappreciated imho. I've been a holder for a number of years and it's now a multibagger for me. It has excellent, conservative management and limited downside with over 500p per share in a £20.5m cash pile and another 60p or so of freehold property against a 795p share price.

In addition, there's anything up to 100% upside on the current share price based on subjective valuations of the 3 investee companies (Impetus Automotive, Shire Foods and Sira Defence), which are in the books for almost nothing since they were acquired for bargain prices.

Simso recently posted elsewhere a nice summation of where VLE are now and the potential upside, which I hope he won't mind me posting:

"A "sum of the parts" valuation as follows:-

1. Shire: My profit assumption for H2 is that it will match last year's H2 of £1.02m. We are now past the anniversary of sterling devaluation, so the negative impact on margins has worked through. The re-pricings they have progressively done through H1, and also the fact that sterling in H2 may actually be better than H2 last year, may make the out-turn better. A full year out-turn PBT of £0.78m, I apply a lowly rating of 5* Post Tax Earnings to derive a value of £3.1m.

2. Impetus: I am hoping for at least £3.7m PBT as already explained. I would value this much more highly, and think a market average P/E of 14 times is prudent given the growth and contractual backing for the earnings. Value £41.4m.

3. Perhaps harshly I give no value to Sira.

4. £2.6m of NTAV given that it is mostly freehold property.

That gives a Gross Value of £47.2m, from which I deduct 20% for Minorities and a further 10% for Bruvva's Bonus for the increase in value net net £31.2m. I would expect year end cash to be at least £22.5m, so my total SOTP valuation of the business is £56.6m (£13.89 a share)."

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RayDC 22nd Sep 15 of 31

I also hold CAML and am just as confused as to the overall benefits to existing shareholders. I suspect that there will be some volatility on Monday morning as the market digests the statements. Like Graham I worry at the geographical distance for managing as well as the dilution but am prepared to wait and see. The share price did start to rise quite substantially before the suspension so there may be more to go - (or not!!!)

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RichardK 22nd Sep 16 of 31

Graham, I mentioned VLE briefly on this site yesterday, and said I was considering buying more. Your review persuaded me to press the buy button. Thank you, but my responsibility if it does not turn out well!


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FREng 22nd Sep 17 of 31


Volvere (LON:VLE) seems to be very illiquid (I can't even get a quote for 1000 this afternoon) so how did you manage to accumulate a large position and do you feel comfortable that you will be able to sell it when you decide to do so?

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Nicowilson 22nd Sep 18 of 31

£.CAML accelerated book build raised £137.4 million at 230p/share:

RNS link

(Declaration: I am long CAML)

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rhomboid1 22nd Sep 19 of 31

In reply to FREng, post #17

By illustration, I too hold a large position in Volvere (LON:VLE),across different accounts, yesterday morning I could sell 5000 shares at around mid price,in one account, by 3 pm I could only get the low bid price for 500. the trick is to be selling when everyone else is buying & vice versa, by contrast the day before I managed to buy only 438 shares below £7.50. I've bulilt my stake by buying whenever stock is around and occasionally by leaving a limit order in place. My investment timeline is akin to the Lander brothers so I'm happy to cash out with them. It's a lobster pot share but thus far a v rewarding one

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davidf 22nd Sep 21 of 31

In reply to Nicowilson, post #18

< 10% discount .

Thoughts anyone?

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FREng 22nd Sep 22 of 31

In reply to rhomboid1, post #19

Thanks, Rhombold.

Despite the market rules that are supposed to protect minority shareholders, I find it hard to have enough confidence in the directors of any company to do as Graham has done, and take a very large position in a lobster-pot share.

That would take greater knowledge of the company, its shareholders, its prospects and its key personnel than I could acquire without being on the Board!

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FREng 22nd Sep 23 of 31

Does anyone here have any insight into current events at Cloudcall (LON:CALL) ?

Paul bought ~150,000 for BMUS on Monday and is currentlly up on the trade, but Miton have been selling large tranches on several recent days.

I have no position in CALL, but I'm intrigued ...

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FoolishBen 22nd Sep 24 of 31

In reply to FREng, post #23

Paul wrote this on Twitter....

Cloudcall (LON:CALL)- @gervais_mam continuing to sell down Miton's holding, from 11% to now 9%. Why? Things are just starting to take off at @CloudCall_

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rhomboid1 22nd Sep 25 of 31

In reply to FREng, post #22

I know what you mean , my position has become oversized relative to what I'd buy afresh today, the counterpoint is that over the years I've developed a degree of trust in mgt that allows me to "run my winner" ..for now. My intent is maybe look to take a slug out when Impetus is sold as the value created here looks to be v substantial relative to other deals they've done, but leave the remainder to run until the Lander brothers cash out, given their history (& strong connections to many shareholders) I think they'll be trustworthy..only time will tell but lobster pots can yield a tasty harvest.

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Graham N 22nd Sep 26 of 31

In reply to FREng, post #22

Hi FREng, I'm not planning to sell unless/until I need to sell shares for non-investment reasons. It wasn't such a big position initially, but it has appreciated by nearly 70% since I bought it in May 2016 (on a purchase price to current bid basis), and that's why it's such a big percentage of my portfolio now. It was originally much smaller than other positions.

A similar thing happened with HAT for me, which at one point reached 25% of my portfolio. My successful investments tend to become very large in my portfolio because I take concentrated initial positions and then I tend to hold on to them.

Thanks for asking!



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Gostevie 22nd Sep 27 of 31

How times change. Interims out this morning from Indigovision (LON:IND) and barely a mention on the bulletin boards.

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RichardK 22nd Sep 28 of 31

Would someone please enlighten me as to what a lobster pot share is. Google couldn't help.

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gus 1065 22nd Sep 29 of 31

In reply to RichardK, post #28

It's a metaphor for a share that seems attractive to buy at face value but which once purchased can prove difficult to sell at a reasonable price when you want to exit the position due to illiquidity etc.. A lobster pot is a trap (for lobsters) which is a typically a round wicker basket with a narrow entrance at the top that is usually baited with a nice piece of dead fish. Once the lobster enters to take the bait it is stuck in the trap and can't get out.


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rhomboid1 23rd Sep 30 of 31

In reply to RichardK, post #28

I see Gus has given you the definitive answer re lobster pots.. another way of expressing it is by visualising the emotion felt by a monkey caught by the barbaric practice of putting food in the bottom of a narrow neck jar. The monkey grips hold of the food but then can't get his paw free without releasing at least some of the food. That's how I feel as an investor in such shares when I try and sell out. I'm only able to escape by leaving some profit behind. So yet another way I resemble that monkey throwing darts randomly at the shares pages of the FT.

My preferred escape plan is to exit when success attracts an institutional investor (did that with £peg) or an opportunistic acquirer (Avesco (LON:AVS) Avesco)

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VegPatch 24th Sep 31 of 31

re Volvere
Illiquidity - makes you feel like a genius on the way up. Shares squeeze higher. Your book profits are amazing. You rival Warren B for stock market acumen....

On the way down, the complete opposite.

Moral = feed the ducks when they are quacking. Let a few go on the way up, you wont call the top, but you wont see your all of paper gains disappear in smoke on a market correction.

See Pauls thoughts re 2008-10 for a validation of this

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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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