Small Cap Value Report (Mon 11 Dec 2017) - SOS, OnTheMarket, PHTM, BOWL, MRL | Graham Neary

11th Dec '17 by Graham Neary

54 comments 20292 reads

Good morning,

Thanks for the comments, I'm planning to cover at least the following:

Sosandar (LON:SOS)
On The Market (new float)
Photo-Me International (LON:PHTM)
Hollywood Bowl (LON:BOWL)

Will then assess what to cover after that, possibly Marlowe (LON:MRL).

Best,

Graham

Sosandar (LON:SOS)

Share price: 18.4p (-3%)
No. of shares: 107 million
Market cap: £20 million

Trading Update

This is an online womenswear brand which recently (last month) reversed into a shell on AIM. Adam Reynolds, who has been involved in similar deals to bring shells back to life, was Chair of the shell prior to the deal.

There are some great comments on this in the thread below, including one by Paul. So on the basis that Stockopedia is a "hive mind" of sorts, producing far more intelligence than any one individual could ever produce, I strongly recommend that you check out the comment thread!

Today's update is brief:

Sosandar plc (AIM: SOS.L), the online women's fashion retailer, is pleased to announce that trading since 31 August 2017 to the end of November has exceeded management expectations. The new funds raised at the time of the reverse takeover on 2 November 2017 are enabling the business to acquire larger and wider ranges of product and has also enabled the business to accelerate its media and marketing activities. Investment in new marketing channels has yielded strong results and will be further expanded in order to drive new customer acquisition.

I've taken a quick look at the Admission Document on the company's website. Sales for the five months ended August 2017 were c. £240k with cost of sales £123k.

Given how early-stage it is, this is almost purely a bet on the management team. The joint-CEOs are the founder and former editor of Look magazine. You can imagine how their experiences at Look might be very helpful and give them a fresh approach to online retail.

It's a bit too early-stage for my portfolio, but it's probably worth taking a look at this for anyone interested in ASOS (LON:ASC), Boohoo.Com (LON:BOO), etc, as another competitor in the space.

The…

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runthejoules

11th Dec '17

Happy Monday all: Sosandar (LON:SOS) = 'Sosandar plc, the online women's fashion retailer, is pleased to announce that trading since 31 August 2017 to the end of November has exceeded management expectations. The new funds raised at the time of the reverse takeover on 2 November 2017 are enabling the business to acquire larger and wider ranges of product and has also enabled the business to accelerate its media and marketing activities. Investment in new marketing channels has yielded strong results and will be further expanded in order to drive new customer acquisition.

Julie Lavington and Ali Hall, Joint CEO's, commented: "We are delighted with the progress we have made to date and the additional funds we have recently raised has allowed us to drive significant momentum into the business. Our depth of product is expanding, we are now able to buy larger lines of product, thus reducing lead times and increasing margin."

I know what Paul would say: but what *are* management expectations? Wondering what you think Graham, thanks! I hold a smidgeon.

The Phoenix

photo me please

PS Also voting for Hollywood Bowl (LON:BOWL) where profits are up 50% and £YU to which Ofwat has just granted the licence to sell water services to businesses, both of which I seem to have missed the boat on. Is Yu (LON:YU.) still a momentum trap?

daveinthelakes

photo me please

Click!

MrContrarian

My morning smallcap tweet:

Sosandar (LON:SOS), Ukrproduct (LON:UKR), Aquatic Foods (LON:AFG)

Sosandar (SOS) trading since 31 August 2017 has exceeded management expectations.
Ukrproduct Group (UKR) OTP Bank loan extended again to March 2018. Bank has agreed in principle to a 3 year extension to the OTP Loan, needs extra time to ut the 3 year extension into place. What, months?
Aquatic Foods Group (AFG) NED Mircle Yap Ching Chai resigns.

Aislabie

A most unusual announcement from Spectra Systems (LON:SPSY) in that they say they have had to postpone the AGM for lack of a quorum! With a float of 73% there should surely be enough to gather a quorum amongst the Directors and inside investors, but it appears not.
This is another aspect of the ridiculous situation that most private investors find themselves in as nominee holders prevent us from directly participating. It requires effort (which I admit to not often putting in) to get the nominee to provide an authorization for the holder to attend meetings (and I am not sure that attendance on such terms would count towards a quorum anyway)

Although no longer a small cap at £1bn, the short announcement from Plus500 (LON:PLUS) of a licence to operate in Singapore, their first in South East Asia, where I believe there may be one or two "gamblers" is significant.

Agree unquantifiable good news from Sosandar (LON:SOS). Management expectations plus X%, where X could be a very large or very small number! Not sure Graham can produce an analysis on this announcement?

iwright7

A vote for Polar Capital Holdings (LON:POLR) H1 results - Have others noticed that most of the Investment management companies are doing well at the moment?

matylda

Hi Graham,

Not sure if they're "your bag" as I don't think you've covered them before but would love your view on the following if suitable...

Marlowe – 340p – £116.9m – PER 23.4

Interim Results For The 6 Months To End September 2017 – Revenue up 104% to £36.0m, PBT up90% to £2.4m (£1.3m last time) and EPS up 23% from 5.1p to 6.2p. “The second half of the year has started well and we remain confident of delivering a full year performance in line with market expectations”.

Having looked into this a little more I like the forecasts (they’re massively greater than any historic performance) and the fact it’s got Cash in the bank (albeit a small amount). IF the forecasts are met (and it looks like they may be based on this update) this is looking quite attractive here.

K3 Capital ( £K3C ) – 149p – £62.9m – PER 13.7

Trading Update – Expects “Interim Results will demonstrate a continuation of the Group's strongperformance across all three divisions with significant uplifts from the comparable prior year period”. Expecting to report record revenue of approximately £7.5m, a LFL increase of 34 per cent and EBITDA of approximately £3.3m, a LFL increase of 27 per cent - Comfortably in line with market expectations for the full year ending 31 May 2018.

Quite like the look of this, it looks good value here. It's going on my Watchlist (but I hate EBITDA, why can't the tell us the real PBT - Arggghhhhh!) until I see the actual results.

Thanks in advance.

Forgot to mention late news from Friday for Boohoo.Com (LON:BOO) holders-

Announced after market close on Friday. BOO CFO and NED increase holdings. CFO insignificant 1/2% but NED 6% increase.

fwyburd

Another request for Marlowe (LON:MRL) please and Spectra Systems (LON:SPSY). Thank you

grout123

Morning Gents. Ive there is a chance you could look at Vela,VELA I would be grateful. It has some interesting investments in blockchain and the like and looks to be rising with the price of crypto currencies in general. It could be described as an investor in disruptive technology firms.
Appreciate its a tiddler but I think it looks like a proxy play for those that have not jumped on the bitcoin train.

Another John

Any interest in £PHTM? Results this morning with laundry revenue +75% and dividend +20.1%

Paul Scott

Sosandar (LON:SOS) - trading update makes generally positive noises, but gives no figures. Since the share price already has considerable expectations built into it, I think today's news won't necessarily move the share price up. It should however give holders comfort that things are going to plan (or rather, better than plan), hence preventing the share price from going down.

The only forecasts I have are a detailed note from Turner Pope from Aug 2017, which is the broker that floated Sosandar. This shows forecast revs of £1.0m this year 03/2018, rising to £3.3m 03/2019, and £9.4m 03/2020.

PBT is forecast at -£1.9m this year, followed by -£1.4m 03/2019, and a small maiden profit of £0.1m in 03/2020. Whilst these figures may look unexciting in terms of profitability, they look very exciting in terms of revenue growth. The market would extrapolate out the rapid growth rate, and value the shares on a racy multiple. I can foresee a £50-100m valuation within a year or two, if growth is strong. That may sound crazy, but we're in a bull market, where online fashion businesses that are demonstrating strong growth are given hefty valuations. Just look at the bonkers valuation given to hapless Koovs (LON:KOOV) a while ago, even though it was generating tiny revenues and huge losses.

SOS is well-funded for now, and exited the IPO process with net cash of about £7m, I believe. So it shouldn't need to come back to the market for more cash for the foreseeable future.

SOS is now one of my largest personal holdings, because I'm backing the experienced, and capable management. If you look at what they achieved in 1 year from startup, it's astonishing. Hence why I think the premium valuation is justified.

Note that there is about 18% potential dilution from share options for the founder management, as they had been diluted down to only 5% each from previous funding rounds, and the key people need to be incentivised. Not ideal, but I can live with it. Critics have said that there's something wrong with Sosandar, because management got diluted so much in the early stages, compared with say Boohoo.Com (LON:BOO) founders who retained almost 100% control before floating. What these critics overlook is that BOO was funded by an existing, highly profitable wholesale business (called Jogo/Pinstripe). So the BOO founders already had pots of money, so were able to fund BOO from scratch without dilution. Founders of Sosandar just weren't in a financial position to do that.

Anyway, time will tell whether this is an inspired stock pick, or bull market froth!

Regards, Paul.

Small Cap Value Report (Mon 11 Dec 2017) - SOS, OnTheMarket, PHTM, BOWL, MRL

Sosandar (LON:SOS)

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Graham Neary

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