Small Cap Value Report (Fri 27 Oct 2017) - SYS1, PHO, ATQT

27th Oct '17 by Paul Scott

22 comments 12460 reads

Good evening! This is the placeholder article for tomorrow morning.

The idea is that we have an article up ready for the 7am RNS, with trading updates & results statements being the focus of the SCVRs, as usual. So readers can post any comments you wish, about the day's small caps RNSs, preferably with as much information & views as possible. We've had some absolutely smashing posts here recently from readers, which are very much welcomed. As I always say, investing is a team sport!

(I don't cover any resource sector stocks, nor blue sky, biotech, financials, property or investment trusts, etc. But I do cover about 600 other UK small caps, which is most of the rest of the small caps universe. Usual market caps we cover here are from £10m up to about £400m. We sometimes break those rules, if something topical & interesting comes up).

See you in the morning.

Good morning, it's Paul here!

Thank you for the reader comments. It's particularly helpful when people post a summary & their own views of results or trading updates. I especially like MrC's daily snapshot, so thanks for that.

There are two sharp fallers today, so I'll start with them.

System1 (LON:SYS1)

Share price: 391.4p (down 24.4% today)
No. shares: 12.5m
Market cap: £48.9m

Interim results - for the 6 months to 30 Sep 2017. The company calls itself;

the pioneering marketing services group

I'm refreshing my memory by going back through our archive. Graham covered the profit warning here on 18 Aug 2017 As you can see from the chart, that hit the share price hard. The company indicated that revenue visibility was poor, and that H1 would be "a little over break-even".

Graham called it absolutely spot-on in August, concluding that the share remained over-priced.

Graham wrote another article about the company's more recent trading update, here on 16 Oct 2017. Again he got it spot-on, concluding that the share looked "Vulnerable to a further de-rating".

Moving on to today's results, H1 produced profit before tax of £0.85m (down from £2.79 in H1 last year). Obviously that's a poor performance, but it's slightly above the £0.8m which was indicated in the last trading update. So the H1 figures don't seem to…

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timarr

27th Oct '17

Also a bit over the normal market cap, given there doesn't seem to much else to comment on, could you take a look at £LRD? They suffered some severe problems a few years ago due, if I remember correctly, to over-investment in the confident expectation that a major customer would continue driving orders (Apple, one assumes) only to find themselves in trouble when the orders were cut. A rights issue and internal re-organisation later they look in much better shape, despite the Stocko computers worrying about bankruptcy risk.

The trading update is here: https://www.stockopedia.com/sh...

tabhair

Any thoughts on the profit warning at ATTRAQT (LON:ATQT) This business looks to have real potential, but to be honest, I am a little worried about the cash position.

rustle2

Morning Paul.
Wondering if you had any comments on the Footasylum IPO. 164p placing values around 170m. JD Sports family Makin will remain majority shareholder.

JohnEustace

Second Footasylum request.
I expect it will get away well given the athleisure trend and the involvement of the JD Sports founders.
But it will only have 37% free float. And is the market getting crowded with Supergroup trialing sports formats and launching their own brand trainers as well?

johnsmith68

Hi Paul. With a market cao of £503.2m, Vitec (LON:VTC) are a little over your normal threshold although they would have qualified for much of this year. Stockopedia computers love it (StockRank = 96) and yet there is virtually no comment about the share by anybody here. They won't be issuing a trading update for a couple more weeks but as it's a quiet day, I'd love to hear your views on it if you've come across it before. Many thanks.

daveinthelakes

A relative works for Computacenter (LON:CCC) and I made a decent little profit, about 12% in a month earlier in the year. I then sold out as it is a sound but somewhat staid company. I think it is okay as a boring medium/long term hold but is unlikely to break any records. It is also okay as a defensive play as two thirds of revenue and the growth part are overseas and it is not at the techy end of tech but services which clients need in all markets.

andrea34

Please can you review SYM? Seem to be making good progress... at last

LRD also seem to have a good Q3 update out... but I guess they are too big for you to look at

DarwenLad

Driver’s sale of Initiate Consulting is a reminder of what Steve Norris, Driver’s chairman and ex-Conservative MP, has brought to the business. He was a major shareholder in Initiate which Driver bought for £5.3m less than three years ago. As part of the deal Norris was made Driver’s non-exec chairman. At the time of the takeover Initiate had revenues of £7.5m and operating profits of £0.48m. According to the latest statement Initiate broke even at an operating level on sales of £3.26m in the financial year ended 30 September 2017. Driver expects to receive something less than £0.2m, resulting in a non-cash write down of goodwill and intangibles of approximately £0.9m.

clouds

I'd be interested in System1 SYS1.

Looks like managements insistence that they have limited visibility of future trading results, has finally showed as being able to surprise on the downside in a big way. To be fair to them, it seems they have often called out the limited visibility, but normally the results haven't surprised like this.

FREng

The Vitec (LON:VTC) broker forecast has been falling recently. That's rarely a good sign, IMHO.

troytea

I always get a little jittery when a company issues an RNS saying we'll give you a trading update in 3 or 4 weeks time. I've not done any analysis on this, do other readers have any experience on this sort of thing?

mrosbiston

would also be interested in Symphony Environmental Technologies (LON:SYM) coverage. guiding higher on revenue and profit in their trading statement today. will be doing further research on the company as biodegradable plastics seem a high potential market - even if this firm have been around for ages, it looks like the technology and product are starting to get there.

Paul Scott

Thanks for the reader requests - you always seem to ask me to look at mid caps which I don't cover!!!! ;-)

For today's schedule, I'll review SysGroup (LON:SYS)1 interims, ATTRAQT (LON:ATQT) trad update, Peel Hotels (LON:PHO) - all small caps.
I should have some spare time after that to look at a coupe of reader requests.

Things are going at a snail's pace today, so I'll be updating this article all through the afternoon.

Regards, Paul.

Regarding ATTRAQT (LON:ATQT) I have roughly modelled what I think it could do over the next 4.5 years. Assuming current gross margins, 10% revenue growth and 5% SG&A growth, it could generate a nice little return for the long-term holder. Picking growth stocks has been a huge blind spot for me in investing, so I'd appreciate if anyone had any thoughts?

Dexx the Dog

Hi Paul,

Just to let you know that you've got the System1 name and ticker (LON:SYS1) mixed up with a similarly named company. Or its the Stockopedia link that's wrong.

Andy

Nick Ray

It's a long-standing bug Stockopedia have got in the regular expression they use to match tickers.

Hi Andy,

Just to let you know that you've got the System1 name and ticker (LON:SYS1) mixed up with a similarly named company. Or its the Stockopedia link that's wrong.

Thanks for flagging this up. I always forget that tickers with a number in them don't seem to work properly. So I've altered it manually, so should be correct now.

Thanks, Paul.

extrader

Hi all,

For an alternative take on Peel Hotels (LON:PHO) outlook, see this from Skyship on advfn...

...the recent refinancing dramatically reduces interest charges whilst also clearing historic director's loans. This move simplifies the Balance sheet & may hopefully hasten the long rumoured liquidation, sale or buy-in of the Company by the two Peel brothers, the 1998 founders who still own 62%.

An alternative future for the Company could involve the Jul’16 appointee to the BoD; see this RNS:– “Haydn Fentum, aged 46, is Co-Owner and Chief Executive of Bespoke Hotels Limited which primarily specialises in Hotel Management and Sales and Marketing Contracts on behalf of Independent Owners. Bespoke have some 120 Contracts Worldwide, the majority of which have been initiated and negotiated by Haydn Fentum.”

IMO a fair price may be something in the region of 145p-150p versus an NAV thought to be in the region of 170p, though valuations are rather historic so that NAV could well prove understated with a true figure nearer 200p. That said, 150p would obviously be a pleasant result; and the potential upside is tempting enough to forgive the current lack of a dividend....

NAI, DYOR etc

ATB

Sniggolb

I see a query about Initiate Consulting where ex MP Norris is non Exec chairman.

As a general rule MPs don't make good businessmen (or women for all I know) as the skills needed for each are wholly different. The only MP who is a great businessman in my experience is Michael Heseltine but he is a one off: I wouldn't touch the rest with a bargepole.

jonesj

I agree with the previous post.
Not only that, we might get a better government if they had the kind of salary structure for MPs that would allow vastly inflated MPs salarieis to be paid to people with exceptional track records of building businesses in the past. Whilst paying the current crop of spineless half wits not a penny more. The chances of them voting for that ? Zero.

Also, Singapore just elected a president just to get on the candidate list, the people have to satisfy one of the criteria for previous high level successful experience. ie The president has to have a top level track record. Compare, for example, with the leaders of all our parties.

Small Cap Value Report (Fri 27 Oct 2017) - SYS1, PHO, ATQT

System1 (LON:SYS1)

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Paul Scott

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