Small Cap Value Report (Fri 5 Feb 2021) - VTU, ALU, FCCN, CTG

5th Feb '21 by Paul Scott

90 comments 12720 reads

Good morning, it’s Paul here with the SCVR for Friday.

Timing - update at 12:02 - sorry, I've been massively distracted by the big news on FCCN, it's now one of my largest holdings, so needed time to properly think everything through. I'm about to start writing the next section on Christie (LON:CTG) which should be up by about 13:30 . Today's report is now finished.

Agenda -

Vertu Motors (LON:VTU) - Trading Update from yesterday

Alumasc (LON:ALU) - Interim results, H1 to 31 Dec 2020.

French Connection (LON:FCCN) (I hold) - Two potential cash bid approaches

Christie (LON:CTG) - Trading update for FY 12/2020 issued yesterday.

Vertu Motors (LON:VTU)

33.8p (up 2% at 11:22) - mkt cap £124m

Trading Update

This is a chain of car dealerships. I’ve previously been quite positive on this share, as it has a nice mix of reasonable valuation, and strong balance sheet, with tons of freehold property. So you’re really getting a hybrid of a property company, and a car dealer (3 profit streams from new car sales, secondhand, and service/repair/warranty work). That’s true of most other listed car dealers, and there’s not a lot in it between them, they’re all quite similar in my view. Although Lookers (LON:LOOK) had all that previous trouble with accounting misstatements, so that one doesn’t interest me.

The current financial year is FY 02/2021, so only a month left to run.

The latest update sounds encouraging -

Group's trading performance ahead of prior year and Analysts' forecasts

The Group announced in early December that trading performance in the nine months ended 30 November was ahead of prior year and original budget levels.

Despite the impact of regional lockdowns throughout December and the national lockdown from 4 January, strong marketing activity, maximisation of the Group's omni-channel retailing functionality and cost control have meant that trading performance in the two-month period to 31 January 2021 continued this positive trend. Overall profit performance also benefited from the previously announced cost reduction programme and the continued business rates holiday on showrooms.

Current trading - February & beyond are being & likely to be impacted by covid restrictions.

Overall -

… the Board now expect that the trading result for the year ending 28 February 2021, at…

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Gromley

5th Feb '21

Thanks Terry,

And yes I should have added a disclaimer as of Thursday I do have a small long position in Vertu Motors (LON:VTU)

It's not what I would call a "conviction holding"; but to be honest I'm not sure I even do those anymore.

MiserableJacktPotato

National waters are 12 miles offshore. Outside that that they’d still likely to be called on to provide aid, though outside coastal areas there’s significantly less chance of the cruise ship needing aid

UK_Investor_8888

I want to know when "pulling" comes back.

Tony Drew

My diesel is not dead. It has done 23000 miles and does 600 miles to a full tank. I won’t be changing to an electric car until this one drops or is banned. Many people think like this and will not be changing in a hurry!

samanddee

CTG has gone nowhere in years. I purchased almost 10 years ago it kind of doubled before falling back down again. Quality ranks are very low suggests if it is best in market it can’t make much margin even on that basis.

JohnEustace

So yes Cathal isn't everyone's cup of tea. But I have found him worth listening to. He freely admits to being very lucky to pick up Open Orphan (LON:ORPH) when he did from the wreckage of the Woodford empire. Hearing him tell the story made me wonder if there were any other neglected gems left over from that and I bought a stake in the inheritor fund £SUPP. I'm now up 30% in that after a 10% rise today based on the IPO pricing of their holding Immunicore. I was early and vocal in my criticisms of Woodford but not everything he backed was rubbish and there were definitely opportunities there post his fall.

Logical David

Yes Tony, I'm in the same camp as you. I pay Nil road tax on my diesel car which has 57,000 miles on the clock (diesels are generally good for at least 150,000). Furthermore, it does 66 miles to the gallon. I also won’t be changing to an electric or hydrogen car until this one drops or is banned.

Paul Scott

6th Feb '21

Fair point. Lord Lee did chuckle that the only people who think Christie (LON:CTG) is undervalued are him (holding for about 20 years!) and the CEO.

Things change rapidly.

Zipmanpeter

NEW diesel purchases are almost dead - most people buy diesel to do lots of miles in so running cost saving from electric is big if you can charge easily /cheaply at home or work and do less than 200miles/day. Witness Amazon/UPS changing vans over so fast. Only if range between charges is frequently an issue is a large tank a big benefit (600miles = 12+ hours of driving!)

OLD diesel with only 23000 on the clock - probably environmentally good run for another 100,000 to avoid scrapping too soon....but expect your fuel costs to rise and to replace with electric.

rmillaree

Couple of weekend random items

There is current consultations going on ref potentilaly limiting gambling stakes online + potentially ghaving to provide proof of funds to bet - my mates who work in the industry say this could be potentially penal for oerators - i havent looked at the detail here - may be worth DYOR for those invested in such companies - it may be amountain over a molehill.

https://www.gamblingcommission.gov.uk/news-action-and-statistics/Consultations/remote-customer-interaction-consultation-and-call-for-evidence

The other one is slightly bizarre in that the FCA are looking into the buy now pay later interst free )providing you pay on time ) operators.
Not sure who would be impacted here and whether there there could be a read across to the wider industry ??- i probably shouldnt worry about companies like next as i am not presuming there is any read across - but they make a fortune on offering finance for people to buy clothes - all legal but could they come onto the radar soon?. It doesnt quite sit right that people should be buying clothers on tick and paying through the nose for it.

https://www.thisismoney.co.uk/money/news/article-9215121/At-Klarna-clampdown-begins-not-moment-soon.html

Boon

7th Feb '21

BNPL: N Brown (LON:BWNG) operates in this space, but they seem to be one of the few that is already fully FCA regulated, and maybe a beneficiary if their competitors need to newly comply with FCA? The target of the FCA investigation are the likes of Klarna, Clearpay, and Paypal Credit. Note that Boohoo (LON:BOO) uses Clearpay.

There may be a clear plan of the rules to get onto cruise ships like Saga (LON:SAGA)

But people take cruises so they can also stop at ports along the way. Those rules have not been clarified yet in Spain, Portugal, Italy, Greece, etc... can cruise passengers nip into busy ports for a day trip?

Especially with S.A. variant spreading in the UK. Especially with the UK variant taking on similar mutations to the S.A. variant. British tourists might be bargepoled for yet a while longer. Vaccines don't prevent you from getting the virus or spreading it - they just lessen the chance of severe or deadly symptoms.

If not - the appeal of a 10-14 days "cruise to nowhere" - anyone knows if people are still desperate enough to cruise to do that?

Agreed - it is a structural issue. But the great thing with new cars is that they don't need to hold stock, tie up working capital in inventory, etc. All the cars are made to order. And they are very big ticket items - AOV is huge.

I think a more relevant comparison would be to compare their margins to their peers - Pendragon, Inchcape, etc

I thought Quiz (LON:QUIZ) was a bargain value too. But upon digging further, they were struggling as a brand already pre-COVID. Their online operations are also sub-par compared to ASOS, Boohoo, etc.

Therefore, my view is while they will see an uplift once restrictions are lifted, soon they will be back to treading water or negative growth as the better players in cheap partywear outgun them in online. The one consolation is that they will have much less competition on the high street...

So for that reason, unlike strong brands like Joules (LON:JOUL) that will definitely thrive after lockdown, I am sitting on the sidelines with Quiz (LON:QUIZ) for now

But Saga (LON:SAGA) has gamed the KPI.

They offered cancelled cruisers two choices:

Full refund, you get back 100% of your money
Rebook to a later cruise, get 111% (10% discount on rebooked cruise). AND still have flexibility to change dates, get future travel voucher, etc

Of course if you do this you get lots of rebookings later. The proof in the pudding is, when we get to 1-2 months out from the first cruises in May and June, how many further changes and cancellations do we get.

Bonitabeach

SAGA (LON:SAGA)

The enquiries and bookings seem to send the very clear message that cruise ship companies are not going to struggle to fill whatever capacity they are allowed to offer.

It is going to be SUPPLY (controlled by 'regulation' etc. ) that is the limiting factor in the near term, imho.

It will only take one bad news story of a coronavirus infected cruise ship that nobody wants docking in their port for confidence to evaporate: a high risk share I pass on.

timarr

The target of the FCA investigation are the likes of Klarna, Clearpay, and Paypal Credit. Note that Boohoo (LON:BOO) uses Clearpay.

Boohoo uses all of them, as do all of the other online companies (including Next). However, Boohoo appears to be the major user in line with the demographics - more 18-25 year olds use BNPL than older people.

N Brown are more a finance company rather than a fashion company, but in any case the companies aren't interchangeable. You won't find a 19 year old instagrammer buying a frock from N Brown no matter what the BNPL issues are. In fact, if BNPL users can't get access to funds then they won't buy anything.

Research here for those interested in detail rather than headlines:

https://www.money.co.uk/guides...

Breakout Trader

9th Feb '21

Update on £VTU.

Volume has come in, with a noticeable increase on previous days. Price accelerated up to hit the initial target in just 3 days. However, this is on the 'ask' (buy) price.

The 'bid' (sell) is still lower, peaking at around 41p.

Personally, I'm in the trade, and I'll be looking for momentum to continue, using the 21EMA as a trailing stop.

mojomogoz

Thanks for the response David. Excuse my late response....we rolled into another week.

I know someone seeking funding and development for a somewhat related periphary monitoring/indicative medical technology that has been around a while and 'proven by users' but not verified by regulators sort of thing. That creates limits on who will engage with you and what you are allowed to do.

Its not the same as wearables and probably is less scientifically aligned in that it doesn't have scientifically significant the database you reference.

I don't have direct medical knowledge but I do have some (old) medtech related knowledge and the medical second hand knowledge that gave (electronics degree at university that was big on medtech research). I think using heart rate and blood oxygenation levels for anything but the most basic signal will be difficult without using it 'unethically'...ie rough and ready diagnosis. A watch could tell you to go to the doctor...but it couldn't say why...it may provide data to your doctor but its hard to see that the doctor would want/need this.

I'm probably just wrong

Ciao for now

Small Cap Value Report (Fri 5 Feb 2021) - VTU, ALU, FCCN, CTG

Vertu Motors (LON:VTU)

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Paul Scott

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