Small Cap Value Report (Mon 1 July 2019) - FUTR, GFIN, GAN, SAG/FST, CRL

Monday, Jul 01 2019 by

Morning folks,

I'm looking at these today:

  • Future (LON:FUTR) - trading update - ahead of expectations 
  • Gfinity (LON:GFIN) - trading update - slightly ahead of expectations 
  • GAN (LON:GAN) - update, sounds positive
  • Science (LON:SAG) bids for Frontier Smart Technologies (LON:FST)
  • If I have time, I will scroll back and look at Creightons (LON:CRL).

Future (LON:FUTR)

  • Share price: 1072p (+11%)
  • No. of shares: 82.5 million
  • Market cap: £884 million

Update on current trading and Board change

This is a short trading update, so let's just briefly confirm what it says:

  • more positive trends, performance tracking ahead of expectations
  • The CFO is becoming "Chief Strategy Officer" from January 1st, 2020. A new CFO will be found before then.

My view - I don't have a strong view on Future's financial prospects, but I can comment on the CFO movement. 

It's worrying when a CFO steps down. And it's more worrying when you have a complicated, acquisition-led strategy which a new CFO will need to take over.

In this particular case, we have a CFO moving into a new, non-Board position. Stepping down from the Board means having less overall influence, I think, even if the new title sounds important. While each case is different, a move like this can sometimes be the prelude to the individual leaving the company.

I understand that shareholders in Future have been extremely active this morning, with possible explanations for what has happened.

In my view, the CFO moving into a non-Board role is net neutral for shareholders. If the CFO was unhappy with her prior work for the company, or could predict bad news in the short-term, she would have resigned and moved on as quickly as possible.

For her to stay around means that she still believes in the company's prospects, at least to some extent. It also means that she could potentially help her successor to deal with particular problems, if it is needed.

It also means that Future has the opportunity to hire someone for the next phase of the company's growth.

Changing CFO every four or five years is not so unusual, after…

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

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Future plc is a United Kingdom-based company, which is engaged in publishing of special-interest consumer magazines, applications and Websites. The Company is also engaged in the operation of events in the areas of technology, games and entertainment; photography, and creative and field sports. The Company operates through media, magazine and other segment. The media segment consists of Websites and events. The magazine segment consists of magazines. The Company's geographical segments include the United Kingdom and the United States. The technology and photography brands include T3, MacFormat, Maximum PC, Mobile Choice, Digital Camera, N-Photo and Photo Plus. The games and entertainment brands include Official PlayStation, PC Gamer, SFX and Total Film. The creative and design brands include 3D World, Computer Arts and net. The music brands include Guitarist, Rhythm, Computer Music and Acoustic Magazine. It has a portfolio of over 200 print titles, applications, Websites and events. more »

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Gfinity plc is a United Kingdom-based company, which is engaged in e-sports business. The Company is a provider and broadcaster of e-Sports competitions; both off-line events typically staged from the United Kingdom's e-Sports arena in Fulham, London and online events hosted on It is a provider of complete end-to-end e-Sports solutions, including the bespoke Tournament Builder Application, which is for Xbox One users, allowing e-Sports users to create and manage their own e-Sports competitions; Gfinity TV, which is the Company's own online television Player, giving the viewers control over their viewing experience, and Gfinity Tournament Client for personal computers (PC), which provides anti-cheat technology and also provides matchmaking and tournament entry for users. It hosts live tournaments. The Company operates a Website where subscribers gain access to information on the video games, watch streamed videos of competitions and themselves compete. more »

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GAN plc, formerly GameAccount Network plc, is a provider of enterprise online gaming software, operational support services and online game content development services to the casino industry. The Company's segments are business to business (B2B) and business to consumer (B2C). The Company is engaged in the provision and development of real money gaming software and the supply of Internet gaming systems to the online industry, and the provision and development of simulated gaming software and underlying systems to casino operators in the United States and other international markets. It offers GameSTACK Internet Gaming System, which is licensed to online and land-based gaming operators. The Company also licenses gaming content to a range of United Kingdom, Spanish and Italian gaming operators. In New York, the Company offers a Simulated Gaming Website, It offers a virtual reality (VR) simulated gaming application, containing Class III slot machines. more »

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

34 Comments on this Article show/hide all

Graham Neary 1st Jul 15 of 34

In reply to post #488231

Hi FREng, I continue to respect Cenkos Securities (LON:CNKS) but the deal market isn't exactly popping at the moment, is it? The mood in the City, at least according to those I've spoken with, is deflated until Brexit gets out of the way. Without any bumper deals, Cenkos profits could be disappointing... strong balance sheet, though, so might be low-risk. They have a great track record of never making a loss!


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Graham Neary 1st Jul 16 of 34

In reply to post #488226

Hi Francis, thanks for the suggestion --- not sure I have any insight into Malvern International (LON:MLVN) but might check it out later on, if there is time. Thanks. G

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FREng 1st Jul 17 of 34

In reply to post #488341

Thanks, Graham. I plan to continue to monitor Cenkos Securities (LON:CNKS) and to decide when to add. It looks unreasonably cheap and getting cheaper!

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davidjhill 1st Jul 18 of 34

In reply to post #488321

Jetman there was a lot of discussion on Manolete Partners (LON:MANO) the other day on one of these threads (results day) so check those out. My personal opinion is that it is well over valued and am looking to add around 330p for the reasons given in previous threads.

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LovelyLovelyGorgeous 1st Jul 19 of 34

I sold most of my GAN (LON:GAN) when they put themselves up for sale. Typically the price has moved up substantially since. Strangely there has been no further comment on the sale process

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brucepackard 1st Jul 20 of 34

In reply to post #488346

One red flag for Malvern International (LON:MLVN) is just how long it's taken to produce their results for 31 Dec ! For a company with market cap below £10m, it surely can't be that difficult to add up a few numbers?

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tjl 1st Jul 21 of 34

Andrew Black more likely the Betfair founder?

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jim knight 1st Jul 22 of 34

Hi Graham and Paul, thanks for the daily analysis and comments. Great stuff. Maybe off topic, but I'd appreciate some observations from Paul, if possible, about the steady decline in the Sosandar share price during the last 3 months. Apologies if I have missed anything reported by either of you recently.

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Graham Neary 1st Jul 23 of 34

In reply to post #488386

Yes --- I found the middle name of the shareholder and you're right, it's that guy. Thanks. G

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yamaha865 1st Jul 24 of 34

H & T (LON:HAT) acquire 65 shops from the Money Shop- having read the RNS it seems to lack the financial information to assess properly! Any comments would be welcomed!

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WDWombat 1st Jul 25 of 34

Two things, my views of course, on two stocks I own
Future - the CEO and CFO have been colleagues for years and one suspects have a strong private friendship. The CEO is an extremely dynamic woman who was in fact the previous CFO. The addition of a large US business (PURCH) last year must have put abnormal pressure on the CFO but it appears to have been a transformational deal for this, I believe, outstanding company. I cannot say I am surprised that she would prefer a slightly less stressful life and role. The share has , after tripling in a matter of months, been subject to a bear raid on some 'research' published by one of these market troll organisations.
Manolete - the commentators who compare MANO to Burford and LIT don't get it, I think. MANO is entirely a specialist in insolvency litigation and buys the deals from various sources, principally accountants and solicitors. They assess the potential returns ( essentially any assets left in the business or realisable directors' guarantees) and decide whether the debtor is worth pursuing. It is undergoing a very rapid but controlled geographical expansion in the UK whose limits are unknown. Effectively it takes its costs from the settlements and splits the net result with the creditors.
Like FUTR, the stock took on a sort of jet propulsion (liquidity is poor) and appeared to have moved far ahead of the realised business number. But I see no reason, in either case, why the shares will not recoup all their losses and more given time and continued profitable growth allied to improving returns. But they are very high beta and not without risk.

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cholertonandrew 1st Jul 26 of 34

In reply to post #488396

Re Sosandar,

The share price decline might reflect other industry players reporting tough trading conditions and Sosandar has been running periodic sales on its own stock, perhaps more than they would choose to in better conditions.

I still hold. I still think they have a good chance of building a very good business medium term but maybe gross margins across the industry are facing downward pressure.


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Trident 1st Jul 27 of 34

In reply to post #488441

There was talk in the weekend of sales for online retail suppliers tailing off. Maybe some of the novelty is wearing off, or maybe it is some other economic factor is affecting it (curious though, if wages are rising, as often reported?).

This does not necessarily affect discrete situations which may be doing well on their own account, of course.

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Pantastic1 1st Jul 28 of 34

NO! Science Group is NOT "Yuk" . It is a well run Company, as confirmed by StockRank figures. They get a lot of revenue from the USA. I have been an owner for some time, and will probably add to it soon.
They are the right sort of management to achieve something from Frontier Smart Technologies.

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davidjhill 1st Jul 29 of 34

In reply to post #488436

Manolete Partners (LON:MANO) oh we certainly get it.......even the house broker compares Manolete Partners (LON:MANO) to the book value multiples of Litigation Capital Management (LON:LIT) and Burford Capital (LON:BUR). Though the models are a little different they are certainly seen by the market as a peer group and thus comparable. They will likely always trade somewhat in step from a broad industry category.

The key point about Manolete Partners (LON:MANO) is not whether they look to be a good company going forward with a nice specialism, but whether they should trade on 6* BV when others trade on 2*. That looks well ahead of events to me. One can justifiably argue whether they should be at a premium or discount to the others but that should be around the edges in my view and not 3* greater. Liquidity is low and therefore volatility high and feels like this got run up as money flowed in and the risk is always that it reverts some of the way.

As I said up at 500p I have zero interest at those elevated levels but will certainly revisit that around 350p and would likely buy at 330p as we would be back around 2.5 to 3* at that point. I think I have a reasonable chance of that but we'll see. If not there's always something else, no point chasing valuations you consider too high.

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Graham Neary 1st Jul 30 of 34

In reply to post #488461

Pantastic, my "Yuk" did not refer to the management at Science (LON:SAG). It referred to the phrase "Science-as-a-Service".

"Mining-as-a-Service" and "Mobility-as-a-Service" evoke the exact same reaction from me. This phrase needs to die!



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Lord Gnome 1st Jul 31 of 34

In reply to post #488356

Sold out of my Cenkos Securities (LON:CNKS) this morning at 50p while there was still something left to sell. What a dog of an investment this has been for me. Involved in the Woodford fiasco. No real direction except down. Balance sheet is strong, with lots of cash, but the recent share price performance has been dire and I've had enough.

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Paul Scott 1st Jul 32 of 34

In reply to post #488396

Hi Jim,

I'd appreciate some observations from Paul, if possible, about the steady decline in the Sosandar share price during the last 3 months. Apologies if I have missed anything reported by either of you recently.

A lot of people have been messaging me about Sosandar (LON:SOS) . I understand that its results & current trading update, should be issued this week, on Weds 3 July. So I'll comment then, when we have information.

I don't normally comment on companies in between results/trading announcements, as that would just be idle speculation.

Regards, Paul.

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paraic84 1st Jul 33 of 34

Fantastic write-up of Creightons (LON:CRL) Graham and I am very happy you flagged the share to me previously!

There is some really helpful detail in that PI webcast - it's a pity that some of that ambition and transparency doesn't really come through in their RNS statements. E.g. it would have been really good to have seen the RNS last week note that sales are up 20% so far in the new financial year. Did anyone ask if they will get a new PR company for their investor relations?!

I am not sure I see much point of that dividend - the excitement with this share is its revenue and profit growth, not a tiny dividend. I'd rather they use those funds for acquisitions.

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Graham Neary 2nd Jul 34 of 34

Hi paraic84, cheers!

I also wouldn't mind if they cancelled the dividend but most investors seem to favour at least some small payout as a gesture to shareholders.



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 Are LON:FUTR's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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