Small Cap Value Report (Fri 4 May 2018) - TSLA, GAW, NUM, DPP, MMX, CTR

Friday, May 04 2018 by


Thanks for the early suggestions.

I've just been catching up with the latest Tesla (US:TSLA) news.

Elon Musk wrapped up his latest call with Wall Street analysts by refusing to answer a couple of questions. Now perhaps there is a larger context which explains it better, but I've listened to an excerpt and it's quite extraordinary.

Analyst: Where specifically will you be in terms of capital requirements?

Elon Musk: Excuse me, excuse me. Next, next. Boring bonehead questions are not cool.

After the next analyst tried to ask a question about car reservations, Musk said "Sorry, these questions are so dry. They're killing me." And moved on to talk to retail investors, instead.

Ben wrote a nice article on Stocko looking at Tesla's red flags. All of the Stocko metrics have deteriorated since he wrote that article:


What's particularly interesting about Musk's attitude to analysts and to "bonehead questions" is that Wall Street has, overall, been good to Tesla. Even today, with the stock being one of the most heavily derided among the professional investor community, there are still more Wall Street analysts with "Buy" ratings than "Sell" ratings on the stock.

The other point is that if Tesla needs to raise more funds (that's a point of controversy), it will benefit from friendly relationships with Wall Street. Musk appears quite sure that he can afford to step on a few toes. It looks to me like the pride which so often precedes a fall.

Is this of any relevance for UK small-cap investors, I hear you asking. Perhaps not too much. But it is a $56 billion dollar company (in equity + debt), and for me it's a barometer of the general levels of exuberance in the marketplace. It's one of the reasons I'm happy to keep some powder dry for now.

Incidentally, Tesla is one of the most shorted stocks in the market - 30% of the float has been borrowed. This makes it a consensus trade in the bear community. It could also make a bear squeeze incredibly painful. There is no easy way to make money!

Games Workshop (LON:GAW)

  • Share price: 2435p (-0.2%)
  • No. of shares: 32.3 million
  • Market cap: £787 million

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

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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 »

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Games Workshop Group PLC designs, manufactures and sells fantasy miniatures and related products. The Company's segments include Sales channels, Product and supply, Central costs, Service centre costs and Royalties. The Sales channels segment includes Trade, which sells to independent retailers and includes magazine newsstand business and distributor sales from its publishing business (Black Library); Retail, which includes sales through retail stores, its visitor center and global exhibitions, and Mail order, which includes sales through its Web stores and digital sales. The Product and supply segment designs and manufactures products and incorporates production facility in the United Kingdom. The Central costs segment includes its overheads, head office site costs and costs of running Games Workshop Academy. The Service centre costs segment provides support services and undertakes strategic projects. The Royalties segment includes royalty income earned from third-party licensees. more »

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Numis Corporation PLC is a United Kingdom-based independent institutional stockbrokers and corporate advisors. The Company offers a range of research, execution, corporate broking and advisory services to companies quoted in the United Kingdom and its investors. The Company's services include research, sales and trading, investment companies, corporate finance, corporate broking, principle capital fund managers limited (PCFM), Numis indices and asset management. The investment company's research-driven approach focuses on specialist or differentiated mandates, including quoted equity, private equity, infrastructure, property, debt and other alternative assets. The corporate finance services include advice and transaction execution in relation to mergers and acquisitions, secondary equity issuance, convertible securities and bonds. The Company serves corporate clients and institutional clients. It is managed as an integrated corporate advisory and stockbroking business. more »

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35 Comments on this Article show/hide all

Graham Neary 4th May '18 16 of 35

In reply to post #360993

Hi Ajay, Bahamas Petroleum (LON:BPC) is not the type of stock we tend to cover here. Apologies! G

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ridavies 4th May '18 17 of 35

In reply to post #360933

Sorry for late response, but to make sure that I have them all, could you list all the links again please. I was at Mello but as usual, I wanted to go to several at the same time, and then none for the next session of time! Sod's law. Thanks for this service by the way.

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Graham Neary 4th May '18 18 of 35

In reply to post #360978

Hi Ken, thanks for the comments on Numis (LON:NUM) and Cenkos Securities (LON:CNKS).

I've mentioned both in the article above. I do have a general preference for Cenkos Securities (LON:CNKS) as an investment. Large capital gains in Numis (LON:NUM) don't make much sense to me, since a handful of big transactions may be responsible for the boost in results. All in my humble opinion only :)

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Graham Neary 4th May '18 19 of 35

In reply to post #360963

Hi IG...! re: Charles Taylor (LON:CTR), I will have a read of this and get back to you later this afternoon. G

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SundayTrader 4th May '18 20 of 35

In reply to post #361078

Would also be interested in your view on Charles Taylor (LON:CTR), which I hold. My main take from yesterday's announcement is the direction of travel - they clearly want to build the software house component of the business.

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JohnEustace 4th May '18 21 of 35

In reply to post #361058

If you click on Tomps 3 profile all her posts are listed. Alternatively all the videos are on

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rmillaree 4th May '18 22 of 35


I am tempted to pickup some Tesla stock at the right price - (there was a recent spike to $250 dollars so the price is still over 10% above that level)

Now is pretty much the time of maximum uncertainty due to the splashing of the cash but that WILL pretty much reverse out within the next 9 months . Even though they are behind schedule its still something approaching 2k model 3 cars per week they are churning out - so its only a matter of time before they reach something approaching where they want to be.

i completely missed the boat on Apple/Google/Netflix/amazon/facebook/netflix (cant believe i didnt buy nexflix shares within 1 week of trying the product) - but the simple principle is if you give the punters what they want the buisnes will flourish and IMHO Telsa is up their with Apple with regard to customer loyalty - over 450k bods awaiting their cars patiently cant be argued with as an ultra impressive stat.

to me the solar/powerwall roofing tiles is thrown in free but again with the battery and solar advances this is a huge mostly untapped future market.

above everything the cars look simple - less bits than your petrol cars and less wires with the simplified console doing pretty much everything.

i cant see any reason why they will not be one of the most successful car companies 10 years down the road.

The only niggles i have are the disruption of self driving cars and whether that will avoid the need for ownership, even then the cars will need to exist and i am presuming - there will be options of what quality of transport you pay for when you hail one and as they need to be made the current manufacturers are best placed to tap that market.
also the company does now have debt so that has certainly upped the risk level somewhat

It may look as if Musk has dug himself a hole that he may not get out of but i guess if he has the kahunas to say i will succeed he is probably happy to take that risk and if it all goes t up they can always find someone slightly more sensible to step in :)

I am guessing though there is a few who will take the opposite point of view that this is a house of cards about to come crashing down with a shyster in charge.

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doublelutz 4th May '18 23 of 35

In reply to post #361043

ICANN is the official organisation that determines what top level domains can be used so everybody in this business has to deal with them. They were set up by the US government. China is where they make the bulk of their money particularly with dot vip. It seems very popular over there although whether the Chinese government could or would wish to interfere in any way in the future I have no idea. I think the fall in price is due to the fact that some were hoping that the strategic review would lead to the sale of the company but instead they have bought another business with 4 tld's for $10M cash and 225,000 shares which seems a lot for a business with net income of $3.5M. Also I would have thought the domains bought which are dot sex, etc are a bit odd on which to base the fortunes of a public company but perhaps that's just me.

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davidjhill 4th May '18 24 of 35

In reply to post #361098

As Graham notes Tesla is the most shorted stock out there (circa 30%) so if you are right and sentiment reverses the squeeze could be quite dramatic in your favour.
To be honest that is the only reason I am not short the company at the moment.
BBERG do quite a neat Model 3 production tracker using some quite sophisticated algos that seems to be quite accurate looking at their forecasts versus subsequent company guidance. I've included the link if you are interested

The fact that Tesla is valued at more than Ford and close to GM is still nuts though in my opinion. I don't think there is enough Cobalt in the world to hit Musks ambitions (Cobalt is key component of the batteries) and other manufacturers like VW are now heavily courting Cobalt producers for supply too. I believe that to grow anywhere near the ultimate production ambitions they will need to find new battery technology that doesn't use Cobalt, but at the same time is as efficient, and whilst I am sure there is an answer it is unlikely to come without hiccups in my opinion.

I am of the view that Tesla will end up surviving and probably be profitable but not to anywhere near the degree baked in by the market. They will have lots of loyal followers, but on mass production they will be caught up by the giant manufacturers. Therefore I would be short at the current price but am too afraid of a short squeeze to take the trade.

Ultimately I want Musk to succeed. The world needs entrepreneurs/mavericks/ambitious doers like him and I love his space programme stuff more than his electric cars.......but I will watch with interest on the sidelines....

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rmillaree 4th May '18 25 of 35

As Graham notes Tesla is the most shorted stock out there (circa 30%) so if you are right and sentiment reverses the squeeze could be quite dramatic in your favour.

as i don't own any its in my favour for the price to go down at present :)

i don't particularly think the high short interest is particularly a bad thing or something that would cause the shareprice to surge on reversal of the shorts. The valuation is pretty lofty whatever way you look at it so i would not have any great expectations of exactly where the shareprice will go i just see the products do work and are popular and ahead of the competition and Musk does have a fantastic ability to deliver (That spaceX  twinned rocket landing was summit else)  eventually even if he does sometimes go a  tad OTT at times.)

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IGotPoesJacket 4th May '18 26 of 35

In reply to post #361143

Sure, the cars work, but they’re awful, poor build quality, terrible materials and way too expensive.
They need the Model 3s to be configured to a high spec to make any money, but I suspect customers interested in a Focus size car aren’t interested in all the bells and whistles. I’m sure I read somewhere that loads of the expensive high tech kit is fitted to the cars even if the spec of the car means it won’t be used.
Another factor is, they’re not involved in any motorsports as far as I can tell - why does that matter I hear you ask.. Well, all the significant advancements in road going cars come from motorsports, the iPace electric motor has been developed as a straight consequence of Jaguar’s involvement in Formula E. The technical edge Tesla has will quickly reduce imo, and then all you’re left with is an expensive, poorly made alternative to a European or Japanese premium brand with much better build quality.
I strongly suspect that Tesla will become a DeLorean. In 10 years the Model S will be perfect for a reboot of Back to the Future!

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herbie47 4th May '18 27 of 35

In reply to post #361153

Motorsports probably because the battery weight and range would be an issue. The other problem with the Model 3 is it's not a hatchback, the best selling cars in Europe are hatchbacks so they are excluding themselves from a large part of the market. I think they need something like a Golf. Some of the extras are expensive but not everyone will want the self driving part. The problem in the UK is the infrastructure for EVs is just not there at the moment. In 5 years time I may consider an EV but not now, they also depreciate like anything.

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ken mitchell 4th May '18 28 of 35

Thanks Graham for your reply and for the very interesting comment on Numis.
Interesting that you prefer Cenkos. I've held both for around 2 years, and while Numis has more than doubled, Cenkos is DOWN about 10% and dipped today to a buy price just over £1.

When Cenkos issuedresults in March they were more downbeat about prospects than Numis today but still cautiously optimistic.

The big attraction of Cenkos has been very big dividends when things are going well, (they've paid out165p in dividends since floating in May 2006) but this time when I was expecting a dividend increase they actually cut it slightly. probably reflecting their caution about the economy , Brexit and the regulatory environment. But if Numis results and comment today is anything to go by presumably a good chance they will increase the dividend next time. And even if only held current dividend is 9%!

So with Numis doubling while Cenkos shares have fallen, and high Cenkos ratings on Stockopedia, other than momentum, surely a good chance of Cenkos share price catching up sometime this year?

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Nick Ray 4th May '18 29 of 35

Does the Tesla give you much more than Lane Assist, Adaptive Cruise and Collision avoidance in practice? All of these are available from the main brands now.

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hayashi22 4th May '18 31 of 35

Be interesting to monitor the performance of the companies presenting at Mello during the course of the year.

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timarr 5th May '18 32 of 35

Minds Machines (LON:MMX) is my portfolio's guilty secret, probably its only significant bet against Stocko's rankings. I hold because I can't think of a better moat for the digital age than taking an annual toll on the domain names that web businesses need to stay alive. I also think that the management has got to grips with the business over the past two years to expose the underlying value. Still, the ICM purchase is chunky, and must carry some execution risk.

Some of yesterday's price action will be due to disappointment that the company didn't simply sell itself. Personally I'm delighted, I think the opportunity is good, and the risk is relatively small.

Although they did mention blockchain in the commentary ... :)


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mcfly46 7th May '18 33 of 35

In reply to post #361178

yes it can drive full journeys, though for safety you have to keep your hands on or near the steering wheel.

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HHR 8th May '18 34 of 35

I hold $tsla shares and have made good money on them.

Sorry to get a bit emotive but it annoys me when investors in $tsla are characterised as amateur and gullible (which we regularly are by Stockopedia grandees and contributors).

I am aware of all of the bear points listed above and I agree with most of them.

I know the build quality is poor, I know Elon Musk consistently falls short on his promises, I know that other manufacturers will try to compete in the EV market with $tsla. But I think when I look at the $tsla market cap and the future prospects for the company I think it's a strong buy.

If you look at Elon Musks achievements  at paypall, and Space x not to mention $tsla I think if anyone is being a little naive it is the shorters betting against him!

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cig 8th May '18 35 of 35

In reply to post #361223

What proportion of registered domains is used by "web businesses"? The dudes who register stockopedia.bongobongo when the .bongobongo top-level domain is launched in the hope of selling it to Ed later are not going to renew (nor is Ed going to buy it). Vanity domains, failed ideas, etc likely have an even higher attrition rate.

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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 »


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