Small Cap Value Report (Fri 26 Oct 2018) - CRAW, PDG, VTU

Friday, Oct 26 2018 by

Good morning! It's Paul here - sorry, I forgot to put up a placeholder last night.

It's Budget day today. EDIT: No it's not, apologies, it's on Monday! I misread something.

Let's hope Philip Hammond doesn't try to steal any of our money! There's an interesting article on the BBC's website, entitled "What do young people want the government to spend more on?". Isn't that revealing? The assumption being that government spending should always go up, with total disregard for where the money is actually going to come from!

It doesn't seem to occur to the BBC or young people, that perhaps the government should spend existing resources more efficiently, and borrow less, so that we don't have to spend a fortune on debt interest in future.

Crawshaw (LON:CRAW)

Share price: 1.88p (down 22% today)
No. shares: 113.0m
Market cap: £2.1m

Statement re media speculation

This chain of butchers/fast food, today says;

The Board of Crawshaw Group plc notes the recent media speculation regarding a potential financial restructuring and equity fundraising.

As announced in the Company's interim results on 26 September 2018, the Board have completed their review of the business and is implementing its change programme to restore growth and profitability, which includes reviewing its structure and investment in traditional high street locations.

The Board confirms that it is considering a number of remedial actions to address the key issues it has identified, which may include raising additional funding through an equity capital raising.

No decision has yet been made by the Board on these matters and the Company will update the market in due course.

I'm fuming about this, as it's a good example of how appalling the system here is, at raising money via placings. When a company is doing a fundraising, the shares should be suspended. I understand that is a requirement in some places abroad. Otherwise it's a false market. People are buying the shares in the market, oblivious to the reality that the company is trying to raise fresh equity, at a discount to the prevailing share price. In distressed situations like this, the discount can often be very large. Therefore, private shareholders are lambs to the slaughter, and are buying shares at an artificial price. This is scandalous!

We really should all write to…

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Crawshaw Group Plc is a United Kingdom-based company, which operates a chain of meat-focused retail food stores. The Company has approximately 40 stores, which are located across Yorkshire, Lincolnshire Nottinghamshire, Derbyshire and the North West. The Company's product range is categorized into approximately two distinct areas, such as Traditional raw meat, and Hot and cold cooked food. Under the Traditional raw meat category, it offers various products sold either loose in a serve over counter for the traditional experience or as multi buy packs on supermarket style multi deck counters, which have all been cut and packaged in store. Under the Hot and cold cooked food category, it offers freshly prepared roast chickens, gammon and pork joints, hot roast sandwiches, shop cooked curries and casseroles, chicken and chips, as well as other traditional deli products. Its stores include Arndale Centre in Arndale; The Arcades in Ashton Under Lyne, and Fresh Meat Factory Shop in Astley. more »

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Pendragon PLC is an automotive online retailer. The Company's principal market activities are the retailing of used and new vehicles and the service and repair of vehicles (aftersales). Its segments are Stratstone, which consists of its vehicles, truck and commercial vans brand, including the sale of new and used motor cars, motorbikes, trucks and vans, together with associated aftersales activities; Evans Halshaw, which consists of its volume brand, including the sale of new and used motor vehicles and commercial vans; US Motor Group, which consists of its retail operations in California in the United States, including the sale of new and used motor cars; Pinewood, which consists of its activities as a dealer management systems provider; Leasing, which consists of its contract hire and leasing activities; Quickco, which consists of its wholesale parts distribution businesses, and Central, which represents its head office function and includes all central activities. more »

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Vertu Motors plc is an automotive retailer in the United Kingdom. The principal activity of the Company is the sale of new cars, motorcycles, and commercial vehicles and used vehicles, together with related aftersales services. The Company is engaged in the provision of management services to all subsidiary statutory entities. The Company operates a chain of franchised motor dealerships offering sale, servicing, parts and bodyshop facilities for new and used car and commercial vehicles. The Company also operates various franchise dealerships, such as Volvo, Volkswagen, Land Rover, Audi, Mercedes-Benz and Jaguar, and operates Honda dealerships in the United Kingdom. The Company operates approximately 125 franchised and over three non-franchised operations across England and Scotland. The Company's subsidiaries include Bristol Street First Investments Limited, Bristol Street Fourth Investments Limited, Vertu Motors (VMC) Limited and Grantham Motor Company Limited. more »

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  Is LON:CRAW fundamentally strong or weak? Find out More »

42 Comments on this Article show/hide all

dscollard 26th Oct '18 23 of 42

In reply to post #412529

it was in a broader context of liquidity and price: some shares trade on wafer thin volumes. Selling even a small volume at market may result in a very poor price if there are few buyers: better to place a sell at a limit or use a broker to place the trade for you.
It is both the blessing and the curse of small caps as big positions are difficult to both build and unwind without causing large price dislocations where you may have to chase price in either direction to get a fill.

Holding big positions of low liquidity stocks can be very uncomfortable in times of high volatility since the lack of liquidity amplifies any volatility.
This is also the main reason why low liquidity stocks behave very badly technically as they just don't have the right physics in terms of price action (and why so many would-be technical analysts make a hash of trying)
It does also open opportunities if you don't mind the above hazards: setting buy orders at cheeky levels can result in a fill if you are on the other side of a trade like the above "idiot" selling

as Friday afternoon interesting factoid: of the 2346 shares in the total LSE universe, 899 have daily volumes of less than 10,000 shares and 706 trade on daily volumes of less than 2000 shares

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mojomogoz 26th Oct '18 24 of 42

In reply to post #412524

If it’s a growing company that has a potentially positive reasons to invest then placing at a higher price is relatively good thing (more capital at less dilution).

IMO we’ve somewhat forgotten in recent times that one of the key reasons to list is to be able to access equity finance on ongoing basis.

Obviously got to choose your cases well and if there is going to be a lot of equity raised over time then top line growth better be very good too

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davetparkes 26th Oct '18 25 of 42

In reply to post #412494

greggs and crawshaw are poles apart in all respects.

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clouds 26th Oct '18 26 of 42

In reply to post #412569

I don't think so. Depending on the situation I think share buybacks can be a better route than dividends e.g. if shares are priced low enough, or if adverse tax on dividends.

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Edward John Canham 26th Oct '18 27 of 42

Crawshaw are in nowhere land.

Like many people, I suspect, the supermarkets provide most of my normal requirements.

When I want something special I go to farm shops with specialist butchers, that includes pork pies etc - some of these artisan suppliers produce sheer manna.

Equally, if I'm in a town center and fancy a pasty, sausage roll ........ I have to admit to seeking out a Greggs.

That, for me, leaves Crawshaw (LON:CRAW) with no obvious place to go.


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purpleski 26th Oct '18 28 of 42

“Isn't that revealing? The assumption being that government spending should always go up, with total disregard for where the money is actually going to come from!”

I couldn’t agree more Paul but then

- the BBC is a socialist organisation to its core
- it is paid full for by the people and the BBC does everything it can to curry favour with them.

It is an outrage but there we are.

Sorry for the minor rant.

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InvestorJohn 26th Oct '18 29 of 42

In reply to post #412524

I agree with that... placing is usually at a discount so it leaves existing shareholders with a bad taste in their mouth and they usually leave in droves after that... look at Pci Pal LON:PCIP if you want an example of this...

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Zipmanpeter 26th Oct '18 30 of 42

In reply to post #412579

Forgive the Forgive the Friday afternoon dumb question but why does everyone refer to share VOLUMES when actually, it is share VALUE traded that seems to me to be the more important - compare 100 share of £NEXT at say +/- £50.00 = .£5000 trade whereas 100 Sosandar (LON:SOS) is only +/- 0.30 = £30 trade?

(I understand ultimately I am paid my dividend on a per share basis! ...but from an understanding of trading volumes, value exchanged is key)

Or at least why is Value not typically provided at the same time. Modern systems must sure be able to add this up easily per period

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WhaleHQ 26th Oct '18 31 of 42

In reply to post #412664

If one person buys your lemonade at £100.00 for one cup but 100 people buy it at £1 a cup how much is your next cup worth?

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runthejoules 26th Oct '18 32 of 42

'It doesn't seem to occur to the BBC or young people, that perhaps the government should spend existing resources more efficiently, and borrow less, so that we don't have to spend a fortune on debt interest in future.'

glad to see you come out against pfi and as pro-nationalisation there Paul! ;-p

But seriously, the easy answer has to be 'tax amazon'. There's a much bigger, juicier billy goat about to cross the bridge and his name is Jeff Bezos.

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jonesj 26th Oct '18 33 of 42

In reply to post #412639

Agreed Purpleski. I try to limit my BBC listening to Radio 4 in the morning, but there are a number of policy areas where they regularly give air time to slightly left of centre views, but never a centre or right of center alternative.

Anyway, never mind the politics. It's nice to see Paul on top form yet again today.   

Never one to sit on the fence, calling  a spade a spade & combining entertainment and education so well.    Along with stories of lunches that lasted until 2:00 am.

Incidentally, I can think of some examples of businesses which were highly rated, with no obvious reason for it:

1  DEVRO.   I understand they made sausage skins, but could not understand why this was high margin & the PE ratio was comfortably in double figures when most other food makers were making no money.    Share price is down about 50% from it's peak.

2  Patisserie Valerie. 
 Every time I walked past the local store, it was at least 2/3rds empty.  Not only that, but there were queues at Costa.   Both seem to do coffee & cakes.  

Of course, I have succeeded in avoiding these two dogs, plus Crawfords, but have failed by not investing in the likes of Whitbread or Starbucks at least 10 years ago.

What's needed is a process to identify some of these "long runway" companies and filter out the dogs.

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dscollard 26th Oct '18 34 of 42

In reply to post #412664

price is discovered via auction which is a function of supply/demand. Price moves towards the dominant side of the bid/offer based on relative volumes until a transaction occurs for that volume at that price. Big orders will fill over multiple prices by combining volumes at different prices: for that reason it is sometimes a good idea to get a broker to "fill" an order as he/she will often get you a price improvement over the electronic auction by negotiating. In very liquid share with hundreds of  thousands or millions of shares being traded, there is little benefit in that as the auction is very efficient and is a shifting dynamic equilibrium: price moves in small increments (unless there is a major event) as supply/demand shifts. Typically the best time to execute a trade is after the open or before the close at periods of maximum liquidity.
Order books do offer volume based pricing called market depth or VWAP. These are available to anyone who pays for Level 2 data.
For low liquidity shares with low volumes (and therefore fewer buyers and sellers) when you offer shares for sale  you are hoping there are bidders around at that price you want to sell at: if there are not, and you have not set a limit on the price you will accept, then price discovery may find you a buyer at a much lower price. So volume can greatly affect value depending on supply/demand and time. 

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jonthetourist 26th Oct '18 35 of 42

In reply to post #412649

"I agree with that... placing is usually at a discount so it leaves existing shareholders with a bad taste in their mouth and they usually leave in droves after that... look at Pci Pal LON:PCIP if you want an example of this..."

Off-topic, but I thought PCIP's placing was sensible. The share price had been run up on thin volumes and they cashed in as they needed funds. Which they had previously flagged in a trading statement, so it was hardly a surprise. And you could currently buy the shares for a lot less than the institutions paid at the placing . . .


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Edinburgh Investor 27th Oct '18 36 of 42

I think many young people would consider and be frustrated by the inefficiency in spending our hard earned (taxed) earnings. Rather than just taxing us more.

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hayashi22 27th Oct '18 37 of 42

Yes the BBC worships at the foot of the Corbyn magic money tree; ie there is an endless supply of money to throw at the Guardian readers' favourite projects. No matter if this stows up a bucket full of problems for future generations.
I know folk who work at the BBC-you will never get a job there unless you have the correct 'right on' views. Britain to remain in EU/pro immigration etc etc

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jonesj 27th Oct '18 38 of 42

In reply to post #412824

In this era of multiple TV stations, streaming & all the rest of it, it is high time the government abolished the TV license, so we are not compelled to pay for all their propaganda.

If we are compelled to pay for it, then the BBC needs to embrace some diversity and actually employ a few right wing people to balance up what they have at present.

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JollyBiologist 27th Oct '18 39 of 42

Funny thing is, all the left wing people I know think the BBC is heavily right wing biased, suggesting the organisation is actually fair and balanced! Propaganda is a bit strong - Fox News is propaganda, the BBC is hardly in that league. And I don't see anything wrong in asking young people how they think government money should be spent - isn't that what everyone is basically asked at election time?

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peterg 28th Oct '18 40 of 42

I think you must be watching a different BBC than me, jones. No shortage of right wing people on the channels I listen to/watch.

I'm wholly in favour of a licence and good publically funded tv/radio. Of course people will always complain when it doesn't only reflect their views. But a world in which we choose from privately run channels that only reflect a narrow range of views leads to a dramatically polarised society - as we increasingly see in the US. If you want the splits of Brexit to start looking like a sideshow then doing away with channels like the BBC is the way to go.

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Housemartin2 28th Oct '18 41 of 42

In reply to post #412854

Hi JB. The crucial words were 'spend more on' not 'spend on'

Missing out that word nullifies the point of Paul's comment IMV

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Fangorn 28th Oct '18 This post is under review

In reply to post #412504

"Your Child Tax Credit will also depend on your income"

"Child Benefit is payable to families with children on the basis of the number of eligible children in the household. It is £20.70 per week for the oldest child and £13.70 per week for subsequent children."

ie There are TWO benefits! I presume Child tax credit is more substantial than Child benefit!
Far too many sponging parasites pumping out kids to rape the taxpayer imo.

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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