Small Cap Value Report (Fri 3 May 2019) - DPP, MYSL

3rd May by Paul Scott

14 comments 5272 reads

Good morning, it's Paul here.

Apologies again that this week's reports have been so useless. I've had the worst flu for about 20 years, and it still hasn't properly cleared up. Obviously if I'd known it was going to be this bad, then I'd have made alternative arrangements.

DP Poland (LON:DPP)

Issues a Q1 trading update with no figures. All it says is;

Trading in line with management expectations

More stores are opened, despite the existing ones never having collectively made a profit.

It refinanced recently, with a 6p placing.

Based on performance to date (it's been listed, and burning cash for 9 years now), I don't see any value in this share.

MySale (LON:MYSL)

Is disposing of its UK operations, called Cocosa, for £1m, to focus on ANZ operations.

Looks a bit desperate. I've lost faith in management here, so won't be revisiting it.

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MrContrarian

3rd May

My morning smallcap tweet:

MySale (LON:MYSL)

MySale (MYSL) sells its UK business for £1.5m. It lost A$0.4m last year. Step to focus on home ANZ markets.

Carcosa

MySale (LON:MYSL) Oh my, I thought I had been disposed of ;-) Close call.. :-)

andrea34l

This week's reports have not been useless, Paul - they may not all have had the in-depth analysis some are used to, but you have made an effort to comment on an assortment of announcements this week.

Not for the first time, I have noticed Friday seems to be often reserved for basket-case companies to sneak out there announcements in the hope that investors have gone on a long weekend. Symphony Environmental Technologies (LON:SYM) are another case in point, in addition to the ones you've already mentioned.

I drink hot whisky and Ribena for the flu, it helps me sweat it out under the duvet - give it a try, and take it easy.

ken mitchell

SFOR Capital (LON:SFOR)

Sorry to read that you are still so unwell Paul so you probably won't feel up to covering SFOR today.

I've held SFOR almost from the start and after another positive trading update today looks well worth checking out.

SFOR is the new digital advertising and marketing services company started by the legendary and very wealthy Sir Martin Sorrell, the founder of WPP, which became the World's largest advertising group under his watch.

The SFOR trading update today reports very strong growth and with the Company on target to deliver their 3 year plan to double in size organically.

Revenues £40.9 million and gross profit up 37% to £32.8 million.

Key acquisition was Media Monks, a digital content business.Cash flow strong and Geographically all areas strong too.

Though now 74, Martin Sorrell seems totally committed to this new venture and to show he still has what it takes! Share price has been ticking up recently and is up again today.

The positives, including those covered in the trading update today, seem clear cut, The negatives (other than Sir Martin Sorrell so crucial and he is 74) less obvious. SFOR seems surprisingly under the radar.

Views?

Glorenfeld

Trans-Siberian Gold (LON:TSG)

As a miner, I know that it likely won't be well followed here, but in case there's anyone else out there looking at this, does anyone have any thoughts on today's RNS proposing to buy ~23% of the shares in issue from the largest shareholder?

As I see it, the positive (?) side is that:

- the sale is at a significant discount to yesterday's closing price (~42%);

- the directors are buying more shares in a secondary transaction;

What's concerning me is that they're going to be ~doubling net debt, and the new debt is going to carry an interest rate of 10% PA, which seems high (although I'd very much appreciate any other thoughts as to the appropriateness of this rate).

EDIT: Looking at the last set of interims, I see that the existing debt, from the same bank, is at 6.2% PA which is significantly less. So, has the interest rate environment in Russia changed that much, or is that the bank thinks that the co. is now (or will be once more indebted) significantly more risky?

I hold.

gus 1065

Wondered if any holders in Trans-Siberian Gold (LON:TSG) have a view on today’s proposed buy back of shares from the principal owners (UFG fund) at a huge 42% discount to the prevailing share price.

https://www.stockopedia.com/share-prices/trans-siberian-gold-LON:TSG/news/trans-siberian-gold-proposed-share-buyback-urn:newsml:reuters.com:20190503:nRSC9608Xa/

At face value the purpose seems rational (a leveraged re-cap to create liquidity to buy out shares from a long term investor looking to monetise their position in a generally very illiquid share that would otherwise crater the share price), but why such a huge discount? Company has recommitted to maintaining its generous dividend pay outs (I’ve taken out about half my original investment in dividends in the last 3 years) and with a Stock Rank of 91 and the rest of the key metrics being pretty good it hardly seems necessary to dump shares as a fire sale. The deal represents about 20% of the company shares with a further 10% being sold to other “insiders” within the company. Thinking there may be some (underhand) twist in the purchase by insiders of shares at this discount driving the operation but given its insiders putting up the cash this would suggest its not a bale out sale before the company drops bad news on underlying business performance. For residual holders seems too good to be true (getting a bigger share of the residual company at a knock down price) ... so it probably is. Does anyone else have any insight as to what might be going on?

Gus.

FREng

Paul
Please don't write reports whn you are feeling too ill to do so. Your health has to take precedence over eveything else.

Stockopedia subscribers really value your insights and experience and the integrity shown in your reports. If we miss a few now until you are fully fit again, no-one should complain.

Please take this seriously. Your health deserves far more attention than the balance sheets of a few small cap companies!

FREng

Howard Adams

Hi Ken

I too hold S4 Capital (LON:SFOR).

I bought in very early, but sold on a dip, but am now back in as I think there is strength to this socks story and its pedigree.

From today's RSN I liked a couple of points ......

'New business activity is frenetic and the pipeline is still at twice the level of last year.' ... obviously words and not numbers and from an 'advertising agency'. But quite uplifting all the same.

I also liked these words ....

'The group is making progress in broadening and deepening existing relationships, the largest of which will double in size this year, and in establishing new ones. Notable new assignments in the first quarter were with Procter & Gamble's Braun, Nestlé's Starbucks® Coffee at Home, Mondelēz's Philadelphia, the creation of content studios with Avon and Shiseido, and two major NDA assignments with a major motor manufacturer and technology company.'

I particularly liked the growth in Asia Pac. (although from a small base), but in the part of the world which is developing fast, whereby new companies are fighting to attract attention of the growing middle classes. Also, where tech penetration is high and continuously rising. Companies will need to advertise to make themselves heard and seen. The RNS portion stated .....

'Geographically, all regions showed very strong growth. The Americas, representing 65% of total revenues, reported revenues and gross profit up 31% and 31%, EMEA, representing 27%, up 41% and 38%, and Asia-Pacific, representing the remaining 7%, up 134% and 170%. On a like-for-like basis, the Americas were up 26% and 25%, EMEA up 42% and 39% and Asia-Pacific up 130% and 169%.'

Full RNS is here which presents numbers ....
https://www.investegate.co.uk/s4-capital-plc--sfor-/rns/first-quarter-trading-update/201905030700019528X/

Worth paying attention to the programmatic media side of the business as this looks like the engine of growth IMO .... RNS stated ...

'The group's programmatic media planning and buying business, MightyHive, representing the other third of total gross profit was up 80% in reported revenues and 81% in reported gross profit, with 70% and 71% like-for-like.'

Obviously an early stage play, therefore not attractive to many. But some might want to take a look.

Finally, trading volumes since March are on the rise, which I think is positive as they are overwhelmingly buys and not sells.

Regards
Howard

tomps3

Paul, sorry to hear you've had such a rough week. While you're not on top form informing and entertaining us, piworld have just published this interview with Gervais Williams, which might slightly(?!) fill the space:

This covers a little about how Gervais got into fund management, those who have influenced his career, plus of course his thoughts on the current markets and how he's positioning the funds he manages.

We have loads of interviews of interest to investors, here.

BTW we produce these investor videos purely for YOU - all retail investors. We've been nominated for TWO(!) awards in the Mello 2019 Investor Awards, under the categories: 1. Best Educator Distributing Investing Knowledge AND 2. Best Investor Relations Research Provider. Incidentally, Paul and separately Stockopedia have been nominated too! Please vote for us all here.

clarea

HI Paul any chance of a gander at Numis (LON:NUM) half year results

Thanks

Whitbourne

Hi Glorenfeld, Hi gus 1065,

All holders in Trans-Siberian Gold (LON:TSG) have probably been reading the RNS and scratching their heads. This is not straightforward, because as gus says there are insiders buying as well as selling - as anyone would, if offered shares at 33p. It's worth remembering though that they traded at around this level throughout 2018. It's only recently that there was a sharp move upwards in the price, for reasons I don't entirely understand. So the discount, while large, is not an absurdly low price historically.

The way I look at it, we were always vulnerable as minority shareholders because the investment funds that have owned most of the company until now could, if they wanted to find a way, restructure the company to take us out. They could have de-listed for example. That is why the shares have been yielding well over 10% and perhaps that is also why the company cannot borrow at an especially competitive interest rate. It's not Rio Tinto...

Overall though it seems to me it is a good deal for remaining shareholders. Arguably more important than this RNS was the Q1 update on 29 April noting a 52% increase in gold production and over 100% in silver as compared to the same quarter last year. This confirmed full-year production guidance. Also, the heavy capex for a new pumping station is nearing completion. This has been a drag on cashflow.

Overall I am happy to continue holding. This now feels like a less risky, more 'normal' company that is on track to deliver its promises (certainly for 2019) and continue to provide an excellent income stream for years into the future. They have even taken a 20-year concession on another prospect nearby, so there is scope for expansion.

Nicowilson

Paul, your reports are not useless. In fact, quite the opposite.

back2value

Get well soon Paul - and feel no pressure from this subscriber, as you and Graham do a great job. Look after yourself. If any trolls remain, they are at least subscription paying trolls...

B2V

bobsandy12

Indeed Paul.......wish you well swiftly

Small Cap Value Report (Fri 3 May 2019) - DPP, MYSL

DP Poland (LON:DPP)

MySale (LON:MYSL)

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Paul Scott

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