Small Cap Value Report (Fri 6 Oct 2017) - BOWL, MOTR, FIF, IDP

Friday, Oct 06 2017 by

Happy Friday!

Hollywood Bowl (LON:BOWL)

  • Share price: 186.5p (+1%)
  • No. of shares: 150 million
  • Market Cap: £280 million

Trading Update

I last covered this ten-pin bowling operator at its H1 results earlier this year.

Like-for-like sales for that period were only up 1,2%, but the company said it had lost 2% due to unusually dry weather.

According to this update, like-for-like revenue growth for the full year is 3.5% - so H2 must have been a lot better. Total revenue, including new sites, is up 8.9% year-on-year.

Earnings are set to be marginally ahead of Board expectations.

It continues to hint at dividends:

Hollywood Bowl's business model means that it is able to sustain its investment programme going forward through its ongoing cash generation.  Therefore, as initially noted in April at the Group's half year trading update, the Board is considering returning capital to the Group's shareholders.

My opinion: This only listed in September 2016, and with the mess at Accrol Group (LON:ACRL) fresh in the memory, investors are right to be sceptical about the quality of some recent flotations.

But every stock should be treated on its own merits and this is a more interesting proposition. Offering modest but self-funded growth, it looks promising to me. Stockopedia computers appear to agree, giving it a StockRank of 63.


Motorpoint (LON:MOTR)

  • Share price: 142p (+5%)
  • No. of shares: 100.2 million
  • Market cap: £142 million

Trading Update

This used car supermarket (specialising in cars less than two years old) listed on the main market last year at 200p. Results for the previous financial year (ended March 2017) were marred by the operating expenses at four new sites.

Things are getting back on track now, as those sites have matured:

The Group has delivered more normalised margin levels in the first half compared to the same period last year, and the breadth and quality of stock on hand going into the second half of the year is encouraging.

 Underlying H1 PBT is set to be c. £10.5 million (vs. £6.4 million last year)

This sector as a whole is unloved, and it's understandably difficult to built an economic moat. Hence the cheap pricing.…

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

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Hollywood Bowl Group plc is a bowling entertainment operator in the United Kingdom. The Company is engaged in the operation of ten-pin bowling centers, as well as the development of new centers and other associated activities. It has a portfolio of approximately 50 centers operating across the United Kingdom. The Company's centers are located in multi-use leisure parks, and each center offers approximately 20 bowling lanes, on-site dining, licensed bars and family games arcades. Its brands include Hollywood Bowl, Bowlplex and AMF Bowling. Its Hollywood Bowl brand has over 30 centers situated in prime locations at leisure parks. Its Bowlplex brand has approximately 10 centers in prime locations at leisure parks. Its AMF Bowling has over 10 centers in non-prime locations. The Company's family-focused arcades offer games, such as air hockey and basketball hoops, games with prizes and video games. The Company's licensed bars offer a range of soft and alcoholic drinks. more »

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Motorpoint Group plc is an independent vehicle retailer in the United Kingdom. The Company's principal business is the sale of vehicles, of which are approximately two years old and which have covered over 15,000 miles. The Company sells vehicles from brands representing vehicle sales in the United Kingdom, with models from Ford, Vauxhall, Volkswagen, Nissan, Hyundai, Audi and BMW. The Company operates from over 10 retail sites across the United Kingdom. The Company has a national contact-center dealing with online enquiries. In addition to sales of vehicles, the Company operates, a business to business online auction platform for vehicles. The Company also offers ancillary products to customers, including customer finance packages, vehicle guarantees, insurance products and vehicle protection treatments. more »

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Finsbury Food Group Plc is a United Kingdom-based bakery manufacturer. The Company is engaged in producing a range of cakes, bread and bakery snack products for retailers and the foodservice channel. The Company's segments include UK bakery, Overseas and Group Operations. The Company's UK Bakery segment manufactures and sells bakery products to the United Kingdom's multiple grocers and foodservice sectors. The UK bakery segment primarily includes the operations of Memory Lane Cakes Ltd, Lightbody Group Ltd, Campbells Cake Company Ltd, Johnstone's Food Service Ltd, Fletchers Bakeries Ltd and Nicholas & Harris Ltd. The Overseas segment is engaged in the distribution of the Company's product manufactured in the United Kingdom along with the sale of third party products primarily to Europe. Kara is the Company's foodservice brand. Its licensed brands include Disney, Thorntons, Weight Watchers, Vogel's, Village Bakery and Cranks. more »

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

25 Comments on this Article show/hide all

Ramridge 6th Oct '17 6 of 25

In reply to post #225958

Hi Graham - no prob. Thanks for coming back.

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andrea34l 6th Oct '17 7 of 25

In reply to post #225958

Is the RWS market cap actually any more than the market cap of BOO, Graham, which is often covered here? Shame no coverage in the offing of RWS, it looks VERY positive to me... much more than the other companies covered today :-(

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bestace 6th Oct '17 8 of 25

In reply to post #225963

RWS is a core holding for me so I was obviously pleased by today's statement. Yes it's on a high PE ratio but it's always been on a high PE ratio and justified IMO in light of the high margins, ROCE and growth opportunities.

It's the growth that probably provides the main scope for further share price appreciation since there isn't much room for multiple expansion. I was therefore pleased to see the comment in today's update about the pipeline of acquisition opportunities. They generate mountains of cash so I don't see the debt as a problem - it could be paid down very quickly from free cash flow if they wanted to, but even better if they can direct the cash towards growth opportunities.

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Ramridge 6th Oct '17 9 of 25

In reply to post #225973

Hi bestace - re. RWS Holdings (LON:RWS) I am getting up to speed with this company, but it seems to be on an excellent growth path.
The LUZ acquisition earlier this year looks a perfect fit and only a few days ago, the acquisition of AOP an online crowdsourcing platform, looks a bold move.
As you say as long as they keep on generating lots of cash and channelling that into wise acquisitions, the future could be exciting.

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Damien84 6th Oct '17 10 of 25

Good afternoon Graham.

Would it be possable for you to cast your eye over Lonmin if you get time? (LMI)
Its under 300M market cap and is super crazy volatile. 30% intraday swings are normal for this beast and it boggles my mind. I Seem to recall that you have a good grasp of the mining sector ( i do not understand it as a new investor) and if i can remember you said that all mining shares eventually go to zero. I think i read a while back that Lonmin trades at a significant discount to its TNAV And the announcement today has moved it.

I really don't understand this company so its uninvestable for me but i would love to hear your take on it.

Kind regards

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andrea34l 6th Oct '17 11 of 25

In reply to post #225973

Does anyone know what the "market expectations" are for profit growth for RWS? Their adjusted eps for YE 2016 was 10.9p, +40.8%, while the more recent interim eps was +35%. If one assumes that the YE 2017 eps was going to increase only 33%, along the lines of projected revenue growth in today's announcement, then this would result in an eps of 14.50 giving a current PER of only 29.8 at the present mid-price of 432 - using that basis alone, RWS seems to be undervalued by around 10-11%...? I expect I am looking at this rather simplistically...

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gus 1065 6th Oct '17 12 of 25

In reply to post #225983

Hi Damien.

As a (long suffering) holder of Lonmin (LON:LMI) I would also be interested to read Graham's take on the company. If you look at the LMI discussion thread, there were a couple of thorough dissections of the company done by Orangetree at the time of their (most recent) hugely dilutive rights issue in 2015 which highlighted what a basket case it was. Intera alia, these included a complex and opaque corporate structure, questionable management, beaten up platinum market in which they remain a relatively high cost producer, exposure to the gyrations in the SA Rand FX/US$ rate, massive political interference from the incumbent ANC cronies and the BEE and lousy industrial relations (several employees were killed during demonstrations in support of a year long strike a few years back) ... the list of problems is endless.

To be blunt it still is (a basket case) even after the rights issue breathed some life back into the dead horse. As one of the largest and longstanding producers of platinum put on a reasonably level keel by the 2015 refinancing, you would like to think they should be in a decent position but most of the issues mentioned above are still in play and notwithstanding today's share price spike (up about 22%) they are still down by about 2/3 from their post refinancing peak.

As I said in my opening comment, I am still a holder (and probably more by luck than judgement have made an OK return from jobbing in and out of the shares) but even so I'm not sure the returns justify the white knuckle ride shareholders have to put up with.


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RichardK 6th Oct '17 13 of 25

No a small cap, but does anyone know why Renishaw is down over 8% today? I hold, but cannot find any reason. There seems to be quite a bit of buying as well as selling.

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Damien84 6th Oct '17 14 of 25


Thankyou for your Excellent Reply. After doing some research on Youtube I actually found footage of demonstrations and stikes believe it or not and its VERY graphic. Enough to just make me stop there and leave it alone. A part of me (the foolish gambler i know is in me) wants to take a tiny "punt" on these and try to time a trade right as the mining sector is in full recovery mode and returing very considerably for shareholders, and its not hard to see why when you look at Cooper zinc ect .. But Lonmin has lagged behind.

Perhaps this is what compels my interest. but after reading your reply i think i will just keep it on the watchlish for now. Again Thankyou.

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Aesurgenor 6th Oct '17 15 of 25

In reply to post #226008

No a small cap, but does anyone know why Renishaw is down over 8% today? I hold, but cannot find any reason. There seems to be quite a bit of buying as well as selling.

I'm a holder too and I'm also mystified why the drop today? Seems to be making a little recovery this afternoon.

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davidjhill 6th Oct '17 16 of 25

Innovaderma (LON:IDP)

I bought these down in the 150p range and am relatively pleased to see a better working capital following the placing. No holder likes to see it done at a discount but every damn broker now demands a discount on small companies when building a book it seems.

I would note that before I bought the shares I asked various ladies I knew whether they had used the product. Most hadn't at the time. Two subsequently bought SkinnyTan and loved it ; both bought more and both told their friends to buy some, who did and I believe also liked it. Thus I am sceptical about the negative reviews being anything more than not everyone liking the same product. I also got to see the results and they were impressive - tan was natural and developed over a few days. There was no "Instant Orange"!!!

IDP has a clever marketing strategy that appears to be paying off and has found its demographic. It has strong brand presence location in national stores and appears to sell very well indeed. From what I hear its hair product for men, called Roots, is also beginning to sell well. Seems they have a lot of retailer interest.

I don't think their brand stable is a problem, or too soon, if they have the working capital to deploy to maximise revenues and after todays placing you might argue they do. The distribution/manufacture and network is all homogenous so shouldn't create too many issues. It is mainly the marketing I think where each segment has to be approached in a unique manner.

It is a business I can see being worth multiple times its market cap in a few years but appreciate that some will want to see H2 results before they buy the story.

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barnetpeter 6th Oct '17 17 of 25


If you are looking at an equally mad aim punt on a mineral tiny cap then PREM is the one. Has a ceo that I am not that keen on and has just raised more cash via primary bid but it has some serious assets including an area called Zulu that is simply full of scarce mineral assets.

Not for serious cash (although I admit to holding plenty) or for the risk adverse and often very volatile on big volume.......but no doubt this could be a big winner if the Chinese get interested in Zulu.

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gus 1065 6th Oct '17 18 of 25

In reply to post #226018

Hi Aesurgeoner,

I get it second hand - - see post at 12:27 - that Stifel today put out quite a bearish "sell" note on Renishaw (LON:RSW) basically saying they've had a good run post Brexit but the shares are now priced for perfection and look expensive. Probably fair comment having bought in at about £18 they possibly merit a bit of pull back. Also not hugely liquid and given higher volume (today roughly 3x daily average) the shares can move about a bit. A quality company in my view and a long term hold.


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Aesurgenor 6th Oct '17 19 of 25

In reply to post #226068

Thanks Gus

The same post/note has just been brought to my attention on Twitter.
Still a LTH for me too. I was just curious why the sudden dip today.


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gus 1065 6th Oct '17 20 of 25

In reply to post #226013

You're welcome Damien.

Please don't take my (or anyone else for that matter)'s word as gospel. Like many mining companies, Lonmin (LON:LMI) is constantly buffetted by the pull and push of often irrational bouts of fear and greed and given the volatility and relatively tight spread is a favourite play thing of the day traders. If you look at the recent price chart it is towards the bottom of the trough and there is probably a decent case to be made for some upside from here (I am, after all, still holder!). Just not one I would bet the house on or invest funds that I might need to cash in at short notice.



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ds1980 6th Oct '17 21 of 25

Sorry if this is off topic but noticed a discussion Paul had with a guy trying to persuade him he was wrong about student loan compound interest. As he's blocked me on there I thought I should post here to see if he would be as courteous to explain why compound interest matters on a loan that you only pay back above a certain salary threshold. I understand it matters for people who can pay it off due to higher salary but as the majority (90%+) will never earn that much then I'm struggling to work it out. This calculator seemed to uphold my thought that it doesn't No matter how much you change the interest rate everything else being equal you'd repay the same amount and therefore surely the loan value is irrelevant. Appreciate his or your input. Ta




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Catstycam 6th Oct '17 22 of 25

In reply to post #226008

Re RSW. The share price may have been hit by a broker (Stifel) downgrade from hold to sell according to Gaurdian Stockbrokers report this morning. I see the share price recovered somewhat from its low of the day. I can see no other obvious reason for the retrace. I very nearly invested in RSW at the end of August but chose BOY instead, but keep RSW on a watchlist.



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Catstycam 6th Oct '17 23 of 25

Apologies, just realised my post had already been covered by an earlier reply.


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runthejoules 6th Oct '17 24 of 25

In other news, anyone got any idea why Character (LON:CCT) is down over 6% today on seemigly no news (I really should have had a stop on these, volatile as they are) and also why the heck has Scotty bought BMW? I'm betting he's been at the margeritas...

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John Gibson 9th Oct '17 25 of 25

In reply to post #226148

I’m long Character and since the rns a few weeks ago about a director being terminated with immediate effect I’ve been wondering, worrying actually, if there is some dirty laundry about to be hung out...

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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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