Small Cap Value Report (Fri 7 Aug 2020) - SCPA, PURP

7th Aug '20 by Paul Scott

65 comments 8028 reads

Good morning, it's Paul here with Friday's SCVR.

Today's report is now finished, due to lack of relevant announcements.

Pubs and restaurants seem to be seeing a surge in demand, thanks to the Eat Out to Help Out Govt discount scheme. Industry data suggests that sales were up 70.9% in the first 3 days of the scheme (food up 114.3%). I decided to mystery shop/dine Wildwood, in Bournemouth, a pre-covid favourite of mine, on Weds earlier this week. I couldn't believe how busy it was - packed downstairs, and a good smattering of groups upstairs too (which is usually empty). I asked the waitress how business has been, she replied, "very busy, every day, since we re-opened on 18 July". Isn't that surprising? She said the Govt scheme has helped, but it was busy already. Bournemouth generally was busy with people at about 6pm, although being a seaside town, and the weather being pleasant, and people not going abroad, then perhaps those factors help. It looks very mixed anyway - central London is still almost deserted, but by the looks of it seaside/holiday towns are doing alright. I'm going to mystery shop Franco Manca for lunch today!

Scapa (LON:SCPA)

Share price: 91.6p (before market opens)
No. shares: 186.9m
Market cap: £171.2m

AGM and Q1 trading statement

Scapa Group plc is a diversified Healthcare and Industrial company focused on bringing best-in-class innovation, design and manufacturing solutions to its customers...

Scapa's year end is 31 March 2021. Hence Q1 update today covers April-June 2020.

Scapa has delivered FY21 Q1 revenues in the three months to 30 June 2020 well ahead of its COVID-19 scenario plan. Trading in both divisions has also continued to improve into FY21 Q2 to date. Scapa acted swiftly to implement structural costs changes across the business in response to the impact of the COVID-19 pandemic on the reduction in product demand, as well as ensuring variable costs were closely managed to match the new demand levels.

The combination of the better than anticipated business performance in FY21 to date, early cost intervention measures and continued improvement across both divisions mean the Group's outlook on full year trading profit is trending approximately 10% ahead of market expectations.

That's great, but it's a pity the company fails to provide a footnote detailing what market expectations are, which is best practice being followed…

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lpreidster

7th Aug '20

Hi Paul, I agree that local shutdowns will be the way forward and I used the word "country" in the broader sense. I'm long on a number of shares in this sector - it might just be a bumpy ride along the way :). The 90 minute test, if released to the public should hopefully make a difference to bringing us back to some sort of normality whilst waiting on a vaccine!

davidallen77

great job this week Paul no going to Sandbanks beach is full today!

mojomogoz

I responded to your post yesterday on £IMMO ....Uvisan -> product gross margin is in the 70-85% area

RayDC

Interesting reading your summary of PURP. Trying to buy a property via PURP has proved how cheap their price and what utter rubbish is their service i.e. there isn't any!! Wouldn't touch them even though insider buys alert investors. Have found other internet agents far more efficient.

davidjhill

Glad to hear it.

I think part of the value of this type of board led by Paul is that sensible investors can spot these type of opportunities and I would hope would offer them up on here so that we as a community can benefit from the analysis. I try and do that as I'd like others to do the same for me :)

Caper4

Thanks. Bet they wished they had opened today. Already it’s absolutely jammed on the riverside

thanks Mojo - that's good to know. I have no idea how well Uvisan will sell or how that will play out but I think it appears to be almost an entirely a free option, a rarity in todays excitable covid and tech market. If it does well I'd wager they will spin it out into a separate listing but we'll see.

Phillip Arghebant

Dear Paul

One of the brokers that covers Scapa has today published a note and is expecting earnings of 6p in the current financial year to March 2021, rising to 12.2p in the subsequent year. No dividend is expected this year and 1.88p is forecast the following year. As the analyst was already ahead of consensus estimates, there is only a slight nudge upwards to forecasts . More importantly, debt is forecast to fall to £19.8 million to March 2021 and then £16.6 million in the following year. This suggests to me good cash management following the recent equity raise and of course the impact of losing the Convatec contract which has yet to be resolved through the courts.

The share price response this morning also tells me that analysts are having much more difficulty in providing estimates when this management, alongside so many others, have withdrawn guidance. A multiple of 12x earnings two years out is, in my opinion, still not expensive for a business that was historically very highly rated but where the loss of the Convatec contract has clearly eroded investor confidence and this will take time to rebuild.

Kind regards

Phillip

Edinburgh Investor

Quite a few stocks on the move today, not the usual sleepy Friday. Naked Wines (LON:WINE) is breaking new into highs.

Well, I enjoy being a good Stockizen....what I know about Uvisan i put here:

https://www.stockopedia.com/co...

As you say, the guys that run the company know how to make things happen and Uvisan is an impressive little wiggle in current environment.

If it has legs it will need resources backing it that they don't have in place right now. The high margin long duration and low competition VR edutainment stuff is higher quality and durability IMO so I'd like them not to get too distracted. The Uvisan opp could be large but short duration. I think ideal structure if it develops beyond a bit of low maintenance and attention short term cash flow is to partner with a tech distribution business that will provide the expansion capital

wildshot

Thanks for another great interview Tamzin, an interesting watch and someone achieving enviable returns on average per annum. Also gives me some assurance that many of the stocks he discusses are holdings or in my watchlist, unfortunately most are in my watchlist!

Keep up the great interviews, along with Paul and the SCVR you are providing a very valuable source for us little guys and girls.

WDWombat

SCAPA

Net debt position vastly improved after equity issue (May, 30.7mn shares at 105). Good news if ias it has now rallied above that placement price. Has now raised £70mn over past three years so has not yet added much value. Deeply cyclical earnings pattern over past five years, largely low returns, competitive market. Why have margins been so volatile?

Trident

Obviously Imperial College read Stockopedia as a message has now arrived giving me my results. All clear!

Wimbledonsprinter

I bought Immotion (LON:IMMO) on spec earlier this year (pre-Covid). Having then gone to the O2 to test out the product, I sold it again. I see the O2 site is back up and running - I would suggest London-based investors try it out. (My own view was it was not bad but for me it did not have a “wow” factor.)

FREng

Have Immotion (LON:IMMO) been able to patent anything novel in their cabinet? Oherwise, their market lead may be rather short.

Funderstruck

Yes i agree, have used Sharescope for near on 20 yrs and love the fact i can have many different layouts for a whole range of analysis at the touch of a button . Subscribed to Stockopedia since day one and could not do without that either. Once Stocko ' was under way i noticed that Sharescope upped the standard of its analysis and filtering , possibly feeling the competition. However i would prefer to see them owned as separate entities to keep them competitive and on edge, after all neither is that expensive and easy to switch between with two screens. Yes I do all my stuff on a decent sized Desk top.

MiserableJacktPotato

Bad maths. 95% accuracy DOES NOT mean the missing 5% are all false positives.

9th Aug '20

FREng -> no. They have some distribution exclusives. I don't think Uvisan is likely to be the Immotion (LON:IMMO) story. But they have a product that the market wants (that they knocked up to make their customers feel safer with VR headsets). The VR headsets are not patented either (off the boat from China...but with a significant element of reengineering work from IMMO to make them lighter and cheaper...note that Mandalay Bay has a full set of backup headsets to ensure that there's no unnecessary down time due to breakage etc...this was standard before Covid and probably pretty handy now...it more profitable to ensure throughput when demand is high than ration the hardware). The only thing with significant protection is their VR productions and their 'cinematic' operating system (can't remember what its called technically but they have put a significant amount of proprietary coding and hardware refashioning into ensuring they can operate and sync 36 seats at once, up from 2 when they started out).

All in the hardware is a relatively small cost for all they do and the $$$ cost go mostly to the soft factors around their installations to entertain and suck customers into the experience

O2 and stuff they have in shopping centres is the old Immotion (LON:IMMO) plan. The new one if high throughput edutainment experiences attached to themed visitor attractions (eg aquariums).

I had a small bit a year ago and sold after visiting their Nottingham installation. Was in a gaming shop and was not popular for host of reasons.

The benefit of this shift is that they now don't spend nearly as much money on content.

I wouldn't be surprised if the company exits places like O2 and shopping centres. Partly wrong format, partly much more costly and takes much more interaction with support staff. That said, to date mgt say they stick with it as they want to find the right and higher profit formula in these sites

zipstuck

12th Aug '20

At 115p today this looks a reasonable entry point and I'm comforted that Octopus has increased its holding to over 9%.

Small Cap Value Report (Fri 7 Aug 2020) - SCPA, PURP

Scapa (LON:SCPA)

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Paul Scott

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