Small Cap Value Report (Fri 3 August 2018) - RDL, TSLA

Friday, Aug 03 2018 by

Good morning!

Let's see what the RNS feed has in store for us this morning:

  • Minds Machines (LON:MMX) - trading update. Gross margin below expectations for FY 2018.
  • Animalcare (LON:ANCR) - change of CEO to "big pharma" executive and H1 trading update. Delays to some new product launches.
  • Warpaint London buys its USA distributor for between $2 million and $3 million
  • The private equity backer of Luceco (LON:LUCE) has spent £2 million to buy back some of Luceco's depressed shares.
  • Initial admission of Argo Blockchain (ARGO), a company created in December 2017 "to develop a global datacentre management business facilitating cryptocurrency Mining as a Service (MaaS)". £25 million was raised. If extreme leverage to the price of Bitcoin Gold, Ethereum, Ethereum Classic and Zcash is what you're looking for, look no further.
  • S&U (LON:SUS) - trading update for the period from 18 May to 31 July. Sounds reassuring but the company does not refer to performance vs. expectations.
  • Keywords Studios (LON:KWS) - H1 trading update. All in line with expectations despite a severe currency headwind. A good achievement.
  • Pets at Home (LON:PETS) - Q1 trading update. Good like-for-like revenue growth. Addressing the challenge of a shortage of vets. This is the most heavily shorted stock on the LSE right now.

Ranger Direct Lending Fund (LON:RDL)

(Please note that I currently hold RDL shares)

Princeton and Portfolio Update - some promising news from this lending fund which is currently in wind-down. One of its major investments, which has caused it so much of a headache, is making progress through the bankruptcy courts.

There has been a preliminary award for a net amount of almost $31 million in favour of Ranger and another fund managed by the same investment manager.

Will it pay, and how much will Ranger get? I don't know. Ranger says:

The Company is unable at this time to determine whether Princeton's assets are sufficient to pay the entire judgment.

I have managed to find a court document and this shows (to the best of my…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way


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

Do you like this Post?
64 thumbs up
2 thumbs down
Share this post with friends

RDL Realisation PLC, formerly Ranger Direct Lending Fund Plc, is a United Kingdom-based company focused on realization strategy and a managed wind-down. The Company’s investment objective is to seek to effect a managed wind-down with a view to realize all of its investment. It seeks to sell its investments either to co-investors in the relevant investment or to third parties. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

Tesla, Inc., formerly Tesla Motors, Inc., designs, develops, manufactures and sells fully electric vehicles, and energy storage systems, as well as installs, operates and maintains solar and energy storage products. The Company operates through two segments: Automotive, and Energy generation and storage. The Automotive segment includes the design, development, manufacturing, and sales of electric vehicles. The Energy generation and storage segment includes the design, manufacture, installation, and sale or lease of stationary energy storage products and solar energy systems to residential and commercial customers, or sale of electricity generated by its solar energy systems to customers. The Company produces and distributes two fully electric vehicles, the Model S sedan and the Model X sport utility vehicle (SUV). It also offers Model 3, a sedan designed for the mass market. It develops energy storage products for use in homes, commercial facilities and utility sites. more »

NSQ Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

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

27 Comments on this Article show/hide all

Kevlar 3rd Aug '18 8 of 27

Morning. May II second Keywords Studios (LON:KWS) please Graham!

| Link | Share
MarkOR 3rd Aug '18 9 of 27

Thanks for the update on Ranger Direct Lending Fund (LON:RDL), Graham. For the core asset underpinning the value of the current share price, it looks like the capital downside is reasonably limited given the strong exposure to USD assets (where economic growth is strong!)

| Link | Share
bobo 3rd Aug '18 10 of 27

I'm not sure big pharma is the right approach for vet drugs, they've had that sort of ceo before and it didn't really work, still if she keeps the development pipe line full it will do well

| Link | Share
Mark Carter 3rd Aug '18 11 of 27

Re: Minds Machines (LON:MMX) My own view is that domain names were a good idea at the time, but that time has passed. It's basically just a cash grab now. Companies now have to register multiple times: .com,, .dot.whatever. Now it's all a bit of a con.

This is not a criticism of Minds Machines (LON:MMX) per se, but of the whole internet infrastructure.

The alternative? Well, why not have the whole thing under one roof, or just letters of the alphabet? Or maybe scrap domain names entirely, and just go by numbers, like in the telephone book. We have search engines like Google, anyway, that solve the problem.

| Link | Share | 1 reply
barnetpeter 3rd Aug '18 12 of 27

Tern....having been the biggest winner in the stock market this year, the share price is now crashing. Small cap stocks are dangerous! The secret is to jump off just in time I guess. This was up 25 fold at one stage....amazing what hype can achieve.

| Link | Share
paraic84 3rd Aug '18 13 of 27

The Amazon tax story in the news this morning is interesting. I don't know for sure whether they have done anything unethical as I haven't gone through their books, but there is growing pressure on the Government to charge predominately online businesses some form of additional tax. The Government is searching around for ways to increase taxes to pay for more NHS funding (e.g. see here) and I wonder whether they might bow to pressure and apply some kind of tax to online sales or profits? I think this is a real risk - and possibly a good move to balance out online advantages. It's worth keeping in mind as a risk when buying highly-rated shares in retailers like Boohoo (LON:BOO) . Or maybe the government will focus on shared-based payments (which seems to be a way Amazon avoided paying more tax).

| Link | Share
Graham Neary 3rd Aug '18 14 of 27

In reply to post #387859

Hey Gus, apologies for not covering Pets at Home (LON:PETS) today. Maybe when there are results! G

| Link | Share
rmillaree 3rd Aug '18 15 of 27

Ref Tesla - i am long having picked some up a while back when they were trading in in the low 270's.(missed my quick profit chance with this one when they hit 370 shortly after my purchase) The main logic being that the company was soon (July if they can squeeze out profit qe Sep) to be profitable. Note they are still to some extent heavily investing for the future so a breakeven figure qe Sep hides the fact that they are investing in things like their servicing network ($120 mill loss the last 3 months) which will take time to reach full efficiency.

One thing with Tesla is that they are very popular with the punters who use their cars and that's what matters - very akin to Apple in this respect IMHO.

Ok i would be happier with 5 Bill cash on the balance sheet and no debt but things like the Giga factory show that the debt has been used for reasonably sound investment that is starting to bear fruits now. It's a shame they are as cash stretched as they are as they need to get as many other products to market asap while they have the lead in this area - hey ho we can't have everything we want.

One just has to look at the pickup truck market in the US to see how many new product options they have that could literally destroy the opposition in a tick if they can get product to market.

Anyway owt i say isn't going to convince the doubters here so we will have to wait and see

| Link | Share
Chrisfarrell21 3rd Aug '18 16 of 27

Hi Graham,

I really enjoyed that US:TSLA deconstruction, good stuff. I don't have, and don't intend to have, any position in US:TSLA but it's pretty clear that all those principles, including the risks of shorting, are applicable to all companies.

I wholeheartedly agree that you (and Paul) should write what interests you, as it's a hell of a commitment you two take on.

Thank you again, and have a blinding weekend!


| Link | Share
doublelutz 3rd Aug '18 17 of 27

In reply to post #387949

Mark - best of luck to anyone in trying to persuade existing businesses to give up their web address in favour of something akin to a telephone number.

I have no idea what you do but lets say you are an architect. If the gtld "architect" were available you could have the web address markcarter.architect. This is memorable and when someone in the pub recommends me to look you up on that address I may remember and you will not be relying on my doing a search for what is not an unusual name and then hoping that Google presents it at the top of their listings behind everyone who has paid for their placings.

| Link | Share
browndogwork 3rd Aug '18 18 of 27

No doubt this has been said before but how about changing the name of the blog? I for one would love to hear more of your thoughts on the bigger companies and the likes of Tesla are neither small cap or value! There's plenty to learn from you and Paul writing about large caps and growth companies.

| Link | Share | 1 reply
Aislabie 3rd Aug '18 19 of 27

In reply to post #388004

Pleas don't change the name or focus of this forum.
I too am delighted to hear views on some big caps that are of interest to the writer and many thanks to Paul and Graham for their insights in these stocks. But these stocks are comprehensively covered in many other sites around the net - in fact Tesla is not just covered, but smothered.
But small caps in the UK - and pretty much everywhere else-(Australia I am looking at you), are underresearched and following the shambolic MIFID 2 the situation is getting worse. SCVR is a key resource and we would hurt by having it weakened or redirected.

| Link | Share
DaviStoVest 3rd Aug '18 20 of 27

I'm with browndogwork on this question. I hold quite a few small caps and I'm really interested in commentary on them. But I also hold more traditional larger companies ... a small handfull of 'turnaround' cases for example ... £BT.A, Rolls-Royce Holdings (LON:RR.), Tesco (LON:TSCO), Marks and Spencer (LON:MKS), Barclays (LON:BARC). As a group, they are doing very well for me at the moment, are interesting/enjoyable shares to hold, but obviously risky. They amount in total to a good slug of my portfolio.

I would have greatly appreciated some examination of Rolls-Royce Holdings (LON:RR.)'s half-year report just a couple of days ago, for example. Mostly, the press seemed to be quite negative (the BBC quite astonishingly so) ... but the market has been very positive. The kind of commentary and analysis that Graham and Paul provide on the smaller stocks would have been really helpful to me here.

Sure, these larger stocks are (mostly not very incisively) discussed and analysed in many other places. But I am a subscriber here. I pay my annual dues. And I would like more focus and discussion on larger companies, if at all possible with a similar quality, interest and flair (thank you Graham and Paul) as offered on the small caps.

To be fair ... I'm not really saying rename or reposition the small cap discussion. I am saying that I think we are deserving of something equally incisive, interesting and informative at the other end of the size spectrum.

| Link | Share | 1 reply
peterthegreat 3rd Aug '18 21 of 27

Glad you are interested in Tesla Graham.

| Link | Share
rmillaree 4th Aug '18 22 of 27

In reply to post #388034

It's almost the rule that if a company is laying off staff that will be bad news in press and good news for the shareprice :)
I held RR shares until the middle of June - they have been on a downward spiral news wise pretty much since i bought back in the summer of 15. I thought i was quite lucky to walk away with a 20% profit bearing in mind the fact they seemed to be doing everything wrong (reported numbers wise now and near future). I note the price is up another 10% since i sold (typical of my timing).
It is all about the future though and i guess mr market believes that the current actions being taken are of the right type. Looking at current forecasts though even 2019 will still only be half the normalised EPS back when i bought in 2015. Although with major restructuring of this type one has to believe this is a more a 5 years plan than one of 18 months.

ref the general more small caps or large caps argument - i am all for more relevant large cap items as long as that doesn't detract from the quality of the small cap discussion. To me the small caps discussion is a fantastic resource now we have a few years of back articles. Sometime a past article will sum of pretty much where we are still are with a company so that being the case quick comment and something new and enlightening elsewhere (large cap wise) would be most appreciated. A good case in point was Superdy - i had never looked at the financials of this company comment here tweeked my interest.

| Link | Share | 1 reply
anothersaxman58 4th Aug '18 23 of 27

I am immensley grateful to Paul and Graham for all of their wit and wisdom. I am also very much aware that SCVR is very much a labour of love. There is quite a high risk that it will become a chore unless you guys continue to be able to choose what to write about. Sure I sometimes wish that you would dissect some piece of large cap news but then I think back on all the small cap gold you have dug that is not available elsewhere. So I say keep running the site exactly as you want to!

| Link | Share
Nick Ray 4th Aug '18 24 of 27

For a $60B company, TSLA really does feel like a small cap sometimes. It's got a charismatic CEO and it perpetually makes a loss while promising riches tomorrow. So maybe it earns an honorary place in the SCVR as undisputed king of the "story" stocks.

| Link | Share
Zipmanpeter 5th Aug '18 25 of 27

As I understand it, Stockopedia is doing well in terms of subscriptions income......perhaps Ed and co. need to re-invest and give us a NEW and and EXTRA column - BigCap.. This could focus on big caps but follow a similar editorial style (columnist writes about what they like but in a forensic way that complements DYOR /Private investors and encourages use of Stokopedia !!).

| Link | Share
runthejoules 6th Aug '18 26 of 27

Zipmanpeter I second the request for a Bigcapvaluereport! I do appreciate Graham & Paul's comments on the likes of Tesla and Next but agree that focus should concentrate on small caps here, primarily. Incidentally, when is Paul back? Graham is doing a wonderful job but I don't want him to burn out, and Paul's more adventurous style compliments Graham's ultra-cautious one. DYOR etc!

| Link | Share
oscar247 6th Aug '18 27 of 27

In reply to post #388149

Re: Rolls-Royce Holdings (LON:RR.)
I'm quite amazed by the continuing strength in the companies share price, given its current difficulties over the Trent 1000 engines which power the Boeing 787 Dreamliner. Initially only thought to be an durability issue confined to Package C engines its since been discovered that Package B engines also face similar durability problems. A total of nearly 500 engines are effected.

With associated costs currently expected to be in excess of £1.5 billion and with no guarantees that similar defects may exist in the later more powerful engine variants, this sum could considerably rise. This Trent 1000 fiasco could thus prove to be a long running and massively more costly affair, in monies and reputational damage. I'd be avoiding investing.

| Link | Share

Please subscribe to submit a comment

 Are LON:RDL's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

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, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »


Stock Picking Tutorial Centre

Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis