Small Cap Value Report (Fri 6 July 2018) - Carluccio's, FFX, IGP, IPX, Hipgnosis, CBOX

6th Jul '18 by Graham Neary

41 comments 11659 reads

Good morning!

A slow start this morning.

I was out last night in Carluccio's in Dublin.

This restaurant chain has been in the news in recent months, as creditors agreed to a CVA. 30% of UK sites are closing while the rest will benefit from an investment programme. I have read that £10 million is being ploughed in by its majority owner, the Dubai-based Landmark Group.

Nothing was out of place last night, however - apart from a very loud fire alarm, which caused patrons to run for their lives (just kidding, nobody panicked).

It was a great value menu, very flavourful and authentic, reflecting well on this medium-sized chain sticking to its roots. I had olives, calamari and chicken saltimbocca. A large photograph of a romantic Italian town served as the backdrop to our seating.

It's a shame that so many restaurant chains are struggling, even those providing such an excellent service to customers. Reading around some commentary on Carluccio's closures, it's clear that the pain is also being keenly felt by smaller chains and independent restaurants who lack the resources of the larger groups.

Things will remain desperate until supply matches demand. There is no other solution that I can think of, apart from fewer restaurants. There are still too many empty chairs at empty tables.

The RNS wire is a bit quiet today.

I am planning to take a look at:

FairFX (LON:FFX) - Half-Year Trading Statement
Impax Asset Management (LON:IPX) - AUM Update
Hipgnosis Songs Fund - Result of Issue

FairFX (LON:FFX)

Share price: 129p (+13%)
No. of shares: 155 million
Market cap: £200 million

Half-Year Trading Statement

This is an international payments group, serving both retail and corporate customers. I last covered it at its full year results in April.

Foreign exchange is a gigantic industry and an exciting place for new entrants at the moment, due to the complacency of high street banks.

Banks know that most people won't shop around, so their rates tend to be uncompetitive.

More and more people are shopping around, however. Consider the increasing popularity of the services provided by pawnbrokers Ramsdens Holdings (LON:RFX) and…

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tomps3

6th Jul '18

Many thanks Graham.

Here's the Impax Asset Management (LON:IPX) presentation from ShareSoc April

http://www.piworld.co.uk/2018/04/23/impax-asset-management-group-ipx-sharesoc-presentation-april-2018/

Quite a good overview of the fund.

bobo

Carluccio has suffered by the owner not caring a s''t. Last time I was in, none of the staff was Italian, the food that was supposed to be fresh was at least yesterdays and when I challenged the staff on this, I was told that it was sent out from central processing and just got delayed by a day sometimes.... Booze prices hiked to up to try and make a profit out of the low levels of demand. I was with an Italian and as each dreary dish was presented it just got funnier and funnier to the point that we had to walk out. The staff kept interupting our meal with nonsense questions. It has lost its way and needs to be shot to leave space on the high street for sensible restaurants.

CliveBorg

Hi Graham, I was interested in your positive experience in Carluccio's of Dublin. The branch in Durham that my wife and I visited was, on the other hand, awful - a very long way indeed from our expectations of the standard of food and service we would receive. I wonder whether other readers have had experiences more similar to yours or mine at this restaurant chain? If the latter, this could be another reason for the overall problems experienced by this company. Regards, Clive

Graham Neary

Hey Matylda, thanks as always for your contributions & requests! FairFX (LON:FFX) was included. Cheers. G

Hi EI, nice request re: Cake Box Holdings (LON:CBOX). I haven't looked into it in great detail yet but it sounds good. Thanks. G

jonesj

Never forget to consider the competition to FairFx.

After my supposedly mutual nationwide building society charged me 3% to transfer money to Singapore, I started shopping around for better deals.
I now use Transferwise, who charge me about 0.5% total (total loss measured against XE mid-market rate). The money can also be there within 30 minutes. [That's less time than it would take Jeremy Corbyn to get from Buckingham Palace to no 10, if thinking of scenarios where speed matters]

FairFX do not seem to offer transfers to Singapore, so that's loss of competitive edge #1.

If I transfer £10,000 to Euros, FairFX give me Eur 11,160
For the same transfer with Transferwise, I get Eur 11246, at the same point in time.
Loss of competitive edge #2.

I wouldn't use FairFX to move money. Why would anyone else ?

So, as an investment, where is their moat & competitive advantage ?

[Incidentally, if anyone else wants to use Transferwise, they have a referral scheme where you get one free transfer & I get an incentive after 3 transfers. PM me if interested]

ls2g08

I'm really interested in Hipgnosis, it reminds me a little of Burford Capital. Investments in non traditional assets which shouldn't be affected by the market cycle, run by people with very credible backgrounds in the industry.

The promised 6.5% annual dividend as well as 10% NAV return looks good. I assume this is 10%, with 3.5% retained as capital instead of 16.5% total return? I also believe the affordability and quality of streaming services has completely disrupted illegal downloading. All my friends used to download songs illegally circa 2006, even as early as 2012 everyone I knew was signed up to some sort of subscription service when I was at uni. Admittedly this could be driven by age.

handybrownone

BTW Transferwise is privately owned but Draper Esprit (LON:GROW) own a slice. It's an interesting service where the match bank transfer going in both directions - a bit like the gambling sites that match opposite bets. Works well but would only use it for small regular transactions. Increasingly small business are using it.

fwyburd

Re: Intercede (LON:IGP)
Wow, how about that for the Paul Scott effect!

He posts about his investment case at 11.39am today and at 11.45 the SP starts moving up. At one point this afternoon it was 26% up, all before I had even started my research on them.

Have a great weekend, especially tomorrow afternoon. Perhaps if Paul comments about the bull case for England's footballers, great things will also happen for them (and us)...?
Cheers
Francis

The "Paul Scott effect" seems to be on quite tiny volume.
Paul's post is timed at 11:39.
There are approximately £25k worth of buy trades since then, spread over 15 trades.
Approx £24k worth of sells, over 4 trades..

john652

Hi HDO, interesting suggestion Draper Esprit (LON:GROW), interesting portfolio, thanks.

An FX company to also have a look at is Alpha FX (LON:AFX) , they are corporate fx brokers. Very strong SME management & this is an area the banks make a fortune but offer a poor & expensive service.

Hi jonesj,

If your numbers are correct it’s a very good example of why price is so arbitrary, and probably why prices often make little sense, 26% movement on £25k is nuts.

runthejoules

Sold out of FairFX (LON:FFX) at a tiny profit after looking at it and considering FX can only be a race to the bottom of decreasing margins really. And given I sold out of Ramsdens Holdings (LON:RFX) due to the strengths of transferwise...

Not sure where that leaves my SafeCharge International (LON:SCH) position, hmm...

[Incidentally, if anyone else wants to use Transferwise, they have a referral scheme where you get one free transfer & I get an incentive after 3 transfers. PM me if interested]... ;-p

matylda

7th Jul '18

Much appreciated comment Graham - Thanks - Have a great weekend Sir!

Paul Scott

Hi jonesj,

The big price move on Intercede (LON:IGP) on low volume, on Friday was nuts, I agree.

If the market makers see a flurry of buying in a micro cap, they just jack the price up, because usually they run a neutral book, so don't want to be short after a flurry of buys. It's a pity if people then buy on such a spike up in price, as more often than not, the price comes back down again within a few days.

I hate it when this type of thing happens - the last thing I want to do, is to move share prices with my comments. That just ends up causing grief for everyone - people accuse me of manipulating the price, and blame me when it drops back down again, leaving the eager beavers who bought the spike up out of pocket.

There's nothing I can do about this. If people want to rush in and buy things that I comment on, then there's nothing I can do to stop them. It just goes with the territory in small caps.

The one thing I can reassure on, is that I have never, and will never, post a positive comment about any company, and then sell into any subsequent spike. To me, I've always seen that as crossing a line. I know plenty of people who do exactly that, but it's a red line to me.

Also, these days my position sizes are too big to be able to trade in & out of micro caps, so I don't even try. All my micro cap positions are conviction buys, which I hold usually for at least 6 months, and usually for several years - as you can see from BMUS - which is a distilled version of my real portfolio small caps. Although holding period is dependent on newsflow - if something goes wrong, then it gets ditched - e.g. with one of my failures, recently Connect (LON:CNCT) .

Anyway, time will tell if IGP becomes a success or failure - it's all dependent on the company's ability to win increased (lumpy) sales - so it's clearly a speculative & high risk share.

Regards, Paul.

Hi Paul,
Don't worry Paul, I see nothing but total integrity & honesty with your input. Some of us recognize good character.
I'm just genuinely astonished at this stock moving so far on microscopic volume.

I suspect my portfolio is a fraction of the size of yours, but even I would not be interested in some of the small trades that apparently moved the price of this stock up so ffar.

Jeff

Carcosa

8th Jul '18

Cake Box Holdings (LON:CBOX)

FWIW I wrote a little piece about Cakebox here.

Housemartin2

I have not been to Carluccio's since they opened in my south midlands town some years ago. I thought it was over priced for what it was. Occasional glances at its menu in passing since has not indicated any change in the pricing. My wife visited with a friend for a coffee and a cake a year ago. The place was half empty but that did not stop a waitress putting a bill on the table unbidden. My wife resolved to never go there again

vik2001

30th Aug '18

Intercede (LON:IGP) looks like its going to break out.

letap73

Interesting spot, it has just about reached the high point from mid July - could do with more volume, worth watching tomorrow.

Small Cap Value Report (Fri 6 July 2018) - Carluccio's, FFX, IGP, IPX, Hipgnosis, CBOX

FairFX (LON:FFX)

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Graham Neary

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