Small Cap Value Report (Fri 8 June 2018) - GAW, DIS, RDL, IPX, OTMP, APH

Friday, Jun 08 2018 by

Happy Friday!

Of interest today are:

Turning to yesterday's announcements, I would like to catch up on:

Games Workshop (LON:GAW)

  • Share price: 2900p (-5%)
  • No. of shares: 32.3 million
  • Market cap: £936 million

Trading Statement

This collectible wargames designer and retailer has confirmed that sales and profit growth has continued since May:

We expect the Group's sales for the 53 weeks to 3 June 2018 to be approximately £219 million and the Group's profit before tax to be not less than £74 million.

Some shareholders might have been misled by early headlines, e.g. this one:


It's easy to make mistakes when moving quickly. To be fair to the journalists involved, Games Workshop did not include any comparative figures in the RNS. That would have been helpful, and would have prevented the above mistake.

GAW has declared a 30p dividend, payable in July.

This is smaller than the March dividend (35p), but larger than the dividend paid in July 2017 (20p).

I've quickly checked the 2017 annual report. As far as I can tell, the company does not have a progressive dividend policy. Instead, it follows the principle of returning "truly surplus cash" to shareholders.

That's perfectly reasonable, and I wouldn't read too much into this 30p dividend, except that the company thinks it has 30p in spare cash per share.

It uses return on capital as a key performance indicator and has produced very attractive returns by this measure, and I am inclined to think it deserves the benefit of the doubt that it will be putting its retained earnings to good use.

Today's numbers are pretty much as were expected following the May update, so I don't think this is a major news story. The only unusual elements are the journalistic error re: the dividends, and the share price decline. It looks like some people were hoping for yet another upgrade.

I like this stock…

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

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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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Distil Plc is a United Kingdom-based holding company. The Company is engaged in marketing and selling of Blavod Black Vodka, Blackwood's Gin and Vodka, Blackwood's Limited Edition Vintage Gin, Diva Vodka, Jago's Vanilla Cream Liqueur and RedLeg Spiced Rum domestically and internationally. The Company markets and sells its brands in various international markets, including the United Kingdom, the United States, Germany, Spain, Australia and Russia. RedLeg is a premium Caribbean rum, infused with spices. Jagos is the vodka-based cream liqueur with a vanilla cream flavor made with whole cream. Blavod is made using grain vodka, triple distilled and double filtered. The Company's subsidiary is Distil Company Limited. more »

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RDL Realisation PLC, formerly Ranger Direct Lending Fund Plc, is a United Kingdom-based company focused on realization strategy and a managed wind-down. The Company’s investment objective is to seek to effect a managed wind-down with a view to realize all of its investment. It seeks to sell its investments either to co-investors in the relevant investment or to third parties. more »

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

35 Comments on this Article show/hide all

TheWatchmaker 8th Jun '18 16 of 35

In reply to post #371639

Shows how lazy many people are - rely on the interpretation of another rather than do the leg work themselves and form their own conclusions.
Stimulus-Response = amoeba
Stimulus-Thought-Response = human (only small proportion though)

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herbie47 8th Jun '18 17 of 35

In reply to post #371544

Games Workshop (LON:GAW) Now down to 2800p, so over 8% down on the day. Did continue to fall to 2750p now bounced up to 2835p. 

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mcfly46 8th Jun '18 18 of 35

In reply to post #371669

Go on, crowbar your worldview in there lad.

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kenobi 8th Jun '18 19 of 35

I think you mean 2900p not 29p for the GAW shareprice

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Graham Neary 8th Jun '18 20 of 35

In reply to post #371714

re: Games Workshop (LON:GAW), thanks.

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simoan 8th Jun '18 21 of 35

EPS is going to rise very substantially (forecast EPS for FY 2018 is 10.2p, versus 6.2p in FY 2018).


Actually, Stocko is showing 12.6p for FY 2018 (following a recent upgrade) which is quite a step up from 10.2p. BTW I guess you mean FY 2017 before the closed bracket! :-)

All the best, Si

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MarkOR 8th Jun '18 22 of 35

Re Impax Asset Management (LON:IPX). There's a small note in their results which says that Run Rate revenues are currently £63.1m. At 1H18 profitability, this would be EBITA(?) of £19m, which means EV/EBITA is at 10x which is a standard multiple for asset managers. Could this £11bn AuM business become five times as large in 5 years, retaining 53bps of revenue yield as it does so? Decent chance given Jupiter (at 60bps revenue yield) is 7x as large and Schroders (at 42bps revenue yield) is in 60x as large!! Well aligned management team (like Ashmore) is also a buy-signal for me!

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simoan 8th Jun '18 23 of 35

In reply to post #371729

Actually, Stocko is showing 12.6p for FY 2018 (following a recent upgrade) which is quite a step up from 10.2p.

Apologies for replying to my own post but I have a screen for broker upgrades in the past month and Impax Asset Management (LON:IPX) is not showing up. For some reason, the FY 2018 upgrade is not reflected in the "#1m upgrades" field (it is set to "-" instead of "1") and so is incorrectly omitted from the screen results. 

Does anyone know why this is?

All the best, Si

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Graham Neary 8th Jun '18 24 of 35

In reply to post #371764

Impax Asset Management (LON:IPX). Hi Si, I think I might be missing out on that upgrade, too (although Stocko isn't). Let me know if you figure out what is going on! Ty. G

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AlanJenkins2 9th Jun '18 25 of 35

In reply to post #371574

Might be worth checking the market caps of the companies which it has signed deals with.

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runthejoules 10th Jun '18 26 of 35

In reply to post #371854

DOW chemicals are quite big, if the ADVFN experts' detective work is correct.

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AlanJenkins2 10th Jun '18 27 of 35

I suspect that the 'ADVFN experts' were guessing.There was an official RNS stating 'Versarien has signed an agreement with a US global chemical supplier to collaborate across a number of projects'. Versarien didn't name the company.If it had been Dow Chemical,surely they would have wanted to name it.However,with the help of ADVFN posts like that,some people will have believed that it was Dow Chemical,and that will have boosted the share price.

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shanklin100 10th Jun '18 28 of 35

Rather disappointing to see this inaccurate reporting re Games Workshop (LON:GAW) in the Sunday Times today...

The reality is that the annual dividend increased from 80p to 130p.

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shanklin100 10th Jun '18 29 of 35

FWLIW, have just sent the following to the The Times. Hopefully it is self explanatory...

Dear Sir or Madam

I am sending this feedback/letter to you as your "Post Comment" section on your web-site is not currently working, so I cannot comment directly on the article. I must admit I would expect your reporters to do a bit more due diligence before publishing their articles.

Best Regards

Martin Townshend


"Dear Mr Conradi

The third part of your article today might better be titled...

"Forget accurate reporting, I only need to believe fake news."

As a Games Workshop shareholder, a little responsibility on your part for your own investments should mean you read the company's regulatory news statements (RNS's) not just believe commentary from third party news summarisers.

On Friday, Alliance News inaccurately stated

"Games Workshop Group PLC on Friday said it intends to half its full-year dividend in spite of revenue and profit growth."

This is completely inaccurate, as the annual dividend has been increased from 80p to £1.30

Despite being contacted by a number of shareholders, my understanding is that Alliance News never corrected their headline although they did add a comment that the full year dividend is £1.30. This obviously led to a lot of people, who cannot be bothered to read brief trading statements, being inaccurately informed.

Perhaps you could correct this in the online version of your article and by issuing an apology/correction in your article next week.

Best Regards, Martin Townshend, a fellow Games Workshop shareholder"

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runthejoules 10th Jun '18 30 of 35

In reply to post #371964

If you want to investigate further, I suggest you go back and read the posts on superg1's moderated thread at the time - in mnay of the collaboration RNSes there are a lot of similiarities between how companies describe themself and how £VRS's RNSes describe them. There's little doubt VRS would have wanted to name them, but that's not how non-disclosure agreements work! Now it's possible that the CEO is just cutting & pasting from the descriptions of larger companies than those they are working with to boost the share price, but if he were I think he would have sold more than he has so far (a few at about 80p to endow a lab at his old school). It's right to kick the tyres, however, and of necessity there is no proof of who these 'collaborations' are with. But there are so many of them now I believe if only a couple of them come off it justifies the share price. It certainly won't suit everyone's investing style, but it suits my developing strategy to do more research into the small companies that really have game-changing tech, dedicated management and, for the moment at least, a wide moat. I am not all in like some, and I am not buying any more, though I did buy the recent forced-seller induced dip.

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rhomboid1 10th Jun '18 31 of 35

In reply to post #371994

Hi Runthejoules...Who was the forced seller you’re referring to ? Thx

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runthejoules 10th Jun '18 32 of 35

In reply to post #372029

It was Miton. They were big backers but once it went over 100m mcap they had to sell out of their Micro fund, which I should have foreseen happening and sold above 100mMcap spike, but wasn't paying attention enough, then, according to the board member who does most research on Versarien (LON:VRS), superg1, 'The key factor for the 60's was not charts but Miton suddenly seeing a 10% redemption request level where in previous years it has been 1%.

The obvious sell for them to meet that was VRS as we had the volume to do it. We even gave the dates where the redemption issue would end and the SP would likely bounce 20p-30p when it was done.

It all went as suggested and no charts involved.' Which is true, I was following it, and should have sold out till the day before the last day redemption could have happened which was certainly whenit strated climbing back up from 59p.

As I say, should have paid more attention to what constituent funds were doing because selling by Lombard Odier, who dramatically changed policies to sell ALL their small caps was what gave me an entry point below 20p. Wish I'd bought more, natch.

Is it overvalued now? Well, the last spike was due to excitement over this China deal supposedly getting signed during Theresa May's trade visit to China in February. Realistically that was not going to happen so quick so again, should have put 2 + 2 together and derisked on the basis of mug punters getting too excited too soon.

Now it's back at those levels, a lot more 'true believers' topped up in the 60s, a lot more collaborations since then and the China deal may actually be getting signed next week. So I do fear, whether it does or doesn't, there will be news sellers so I'm ready to take enough off the table as FOMO will allow me to if it falls, to BTFD.

But the real two catalysts to me are the changing of brokers from basket case WHI who did nothing to facilitate the big sells from Miton into swaps, to Arden, and the secondment of Matt Walker, the government guy. UK PLC seems well behind this one, and I hope it is some of his mates that have been picking up 200k chunks recently rather than hedge funds who may well simply lend this lot to shorters and we'll end up as a stressful yo-yo like IQE has been.

Long-term I think it has amazing potential as long as no-one else cracks the code - I just hope they can continue to have access to Manc & Cambridge's research into different 2d material extraction methods, given their continued investment, rather than spending most of the dividends I would like to live off on R&D :-)

Phew, that might be TMI but it's been good to collect my thoughts on the matter!

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AlanJenkins2 10th Jun '18 33 of 35

In reply to post #371994

What someone I generally trust wrote was that Versarien was seven times as big as its 'major' Indian partners. Of course there is no legal definition of the word 'major' that would prevent Versarien from describing those partners as 'major'. Since I am not a holder,I can't be bothered to check that out. Since you are a holder,I suggest that it might be worth your while to look into that - assuming that they haven't all conveniently signed non-disclosure agreements.

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runthejoules 10th Jun '18 34 of 35

Alan, yes I had noticed that - and I am not overly impressed with the Arrow Greentech Mcap or its recent SP plummet. The RNS is another iron in the fire and more income up front however. The real questions to me are a) Has anyone else got smaller-layer GNPs than Versarien (LON:VRS), or made CVD cost-effective yet? If someone else does they'd be screwed, for sure, and b) What's the Mcap of the Chinese State? Because they are by far the partner with the biggest potential. If graphene does half what tests say it can acquiring it becomes a matter of national security. But the question is, how long is the valley of death and how likely are its big fans to hold on through it?

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TheWatchmaker 11th Jun '18 35 of 35

In reply to post #371709

Worldview? Can't take credit for that. If anything it is Amos Tversky/Daniel Kahneman with a Gary Larson spin on it. "Stimulus-Response, Stimulus-Response. Don't you ever think?"

Looks like some people have misunderstood my intended meaning though as I have several red thumbs of shame.

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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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