Small Cap Value Report (Mon 15 Apr 2019) - IGR, SND, SYS1, CARR, XPP, RCN, FLTA

Monday, Apr 15 2019 by

Good morning subscribers! It's Paul here, I'm on duty this week.

Thanks to Graham for his interesting reports last week. I think he made a compelling case for Tandem (LON:TND) and I picked up a little stock myself after reading Graham's report. Although tiny, illiquid shares, can be problematic, especially in turbulent markets, as it can be very difficult to sell. The bid/offer spread was horrible.

The so-called Brexit cliff-edge seems to have receded until end Oct 2019 now (and likely to drag on well beyond that). So I think we could see buyers returning to oversold small caps. Or at least ones which report positive trading updates.

I'm experimenting with the format here, and have today trialled the idea of posting some earlier, briefer, comments each day. Then expanding on the more interesting announcements in more detail, as the day progresses, and when I've had time to do some more digging, got broker updates, etc. Let me know what you think!

IG Design

IG Design Group plc, one of the world's leading designers, innovators and manufacturers of Gift Packaging & Celebrations, Stationery & Creative Play, Giftware & related product categories announces its trading update in relation to the year ended 31 March 2019.

Strong final quarter, which was expected, as the result is in line with expectations (not above);

The Group's strong trading performance continued in the final quarter delivering revenue and profit growth across all regions in the year.

As a result, the Board anticipates the financial performance of the Group to be in line with market expectations and significantly up year on year.
  • Results helped by acquisition, called Impact
  • Net cash better than expected, and improved on last year
  • Dividend will be increased
  • Directorspeak emphasises international operations
  • Outlook - nothing specific, but management sound positive about further growth

My view - remains positive. This group has a superb track record to date.

Valuation of 19 times FY 3/2020 forecast earnings looks justified.

StockRank of 77 is good. Classified as a "High flyer".

(above written at 07:30)


UPDATE: The initial market reaction to IGR's update seems somewhat underwhelmed, with the share price down slightly - albeit with only 45k shares reported as having been traded so far. Of course it's only the small trades that are reported straight away. Larger trades could…

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IG Design Group plc, formerly International Greetings plc, is engaged in the design, manufacture and distribution of gift packaging and greetings; stationery and creative play products, and design-led giftware. The Company's geographic segments include UK and Asia; Europe; USA, and Australia. The Company sells its products in over 150,000 stores across approximately 80 countries. It also offers a portfolio of licensed and customer bespoke products suitable for sale through multi channel distribution. The Company's products include crackers, pens and pencils, stickers, single cards and gift wrap. The Company offers its products under the brands A Star, B Stationery, Papercraft and Pepperpot. Its subsidiaries include Artwrap Pty Ltd, International Greetings UK Ltd, International Greetings USA, Inc, International Greetings Asia Ltd, The Huizhou Gift International Greetings Company Limited, Hoomark BV, Anchor International BV and Hoomark S.p.z.o.o. more »

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Sanderson Group plc is engaged in software and information technology (IT) services business specializing in digital retail technology and enterprise software for businesses operating in the manufacturing, wholesale distribution and logistics sectors. The Company's segments include Digital Retail and Enterprise Software. Its digital retail solutions include in-store technology; back-office systems for processing sales and fulfilling orders, and mobile and e-commerce solutions to underpin online operations. Its systems allow retailers to keep pace with new devices, technologies and channels, driving consumer engagement and retention. It offers Enterprise Resource Planning (ERP) software for manufacturing in general manufacturing, engineering, and food and drink processing businesses. The Company offers industry-specific software and warehouse management systems, delivering sales growth across wholesale distribution, cash and carry, fulfilment and logistics businesses. more »

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System1 Group PLC, formerly BrainJuicer Group PLC, is a United Kingdom-based company, which is focused on marketing and brand consultancy, with proprietary market research and advertising solutions grounded in the principles of behavioural science. The Company’s services include System1 Agency and System1 Research. System1 Agency is advertising agency, that creates advertising proven to translate emotion into profitable brand growth. System1 Research produces the FeelMore50, an annual ranking of the world’s 50 TV and digital ads. The Company offers its client create 5-Star, fame-building communications. The Company operates in the United Kingdom, the United States, Continental Europe, Brazil, China and Singapore. more »

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

78 Comments on this Article show/hide all

WDWombat 15th Apr 59 of 78

a couple of things
I sold my IG Design in early March after about three years as I thought most of the excellent news was in the price - the success of the US acquisition, and especially the fact that they were making inroads into Walmart, plus the new machine in the Netherlands and generally what seems to be a sensible but quite aggressive management. The rate of growth this year is clearly going to decrease substantially as the initial impact of the acquisition declines. And the returns, though good, are not outstanding though we shouldn't expect this with a company that manufactures low price novelty packaging etc. But perhaps I have left something for other investors, not for the first time.
I have always had a good impression of Carr's - dull can be extremely good if results are consistent. But I am very concerned that our agricultural sector is already in a referendum-induced mess and isn't going to get better. That can't be good news. When you listen to farmers saying they are cancelling orders because they have no idea of future pricing perhaps prices will go up enough to offset some of the stress but I wouldn't bank on it. At CARR cash flow is already down and borrowing up. So I shall continue to avoid.

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Robbie Burns 15th Apr 60 of 78

Frankly I'd rather know more about Paul's disco dancing
days than what he did as an accountant !

We need more characters and people with a zest for life in this
world. Enjoy his writing and entertainment - very few people are themselves.
Let's face it, there are enough grumpy old gits who will moan about
everything. Why not just enjoy his style, wit and incisive analysis whenever
it appears. And this fantastic website which is pure gold.

I would like to dedicate this song to Paul that I played on my first
podcast - all together now: "Cheese!" It's at 1:04:30

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covkid 15th Apr 61 of 78

Well said Robbie !

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InvestorJohn 15th Apr 62 of 78

Hi Paul thanks for the reports thumbs up from me

On Filta Group (LON:FLTA) you said
I find franchise businesses very difficult to analyse, as it can be difficult to work out where the profit is actually coming from? i.e. from trading profit, or from selling new franchises? If it's the latter, then profits can dry up quickly in an economic slowdown.

From talking to Franchise Brands (LON:FRAN) at the uk investor show they say that in an economic downturn they sell more franchises as people loose jobs and turn to starting their own businesses... Their last boom in new franchises was in 2009 after the 2008 debacle...

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matylda 15th Apr 63 of 78

In reply to post #469576

Got to agree - Just let the fella get on with it - Accept his genius and his quirks, surely it's time to quit the - I want this, I want that.

Here's to a more readable thread of on topic (shares) comments tomorrow.

Blog: Briefed Up
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Graham Ford 15th Apr 64 of 78

I think the format of the report is good. Yes, I could slog through all the RNS myself to pick out the interesting ones (and obviously do look at any issued by companies I hold or that are on my watch list), but I find it very handy that MrC and Paul are covering in brief some that I would not otherwise look at.

If you are somewhat more “erratic” in your postings, or more often late for meetings etc. than other people, my primary concern is your health and welfare. I hope it is not a sign that you are not damaging your own health through your lifestyle choices. Having a good work-life balance and healthy relationship with food and alcohol must surely be good for clear, calm, non-emotional investment analysis and decision making. (Sorry if that sounds preachy or presumes too much, hard to find the right words to get the tone right).

I would rather have happy Paul providing high quality analysis than tired, or hungover, or stressed out Paul firing from the hip with analysis that is much less valuable trying to keep more plates spinning than is manageable.

If that means fewer companies are analysed and reported on or reports are completed later in the day that’s ok. No one is day trading on this, so I don’t see that it needs to be early in the day and better to have three complete reports by the end of the day than six rushed or incomplete ones in my view.

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JohnEustace 15th Apr 65 of 78

If you don’t want people to judge a half written article, then don’t post a half written article.
Post it when it’s finished. It will save time and effort all round.

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sharmvr 15th Apr 66 of 78

In reply to post #469596

Here here - look forward to this board moving back to stock analysis
Of course, I have put my thoughts down in an earlier post!
insert your own black kettle gifs

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clarea 15th Apr 67 of 78

In reply to post #469576

Great to see the momentum master turning up on the Stocko boards, any chance we can have the odd comment from you on stocks that are of interest or maybe a dance off with Scotty with you busting some of your fave 80's house music maybe Mars "pump up the volume" remember that changed nightclubs overnight back in the day

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mlane 15th Apr 68 of 78

Hi Paul, always great reports, keep it coming and I will keep it read. I like the early hit and then the update! Cheers

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Paul Scott 15th Apr 69 of 78

In reply to post #469576

Thanks Robbie, that made my day!

I think I lurve you! :-) Be-dum-be-dum-wahhh!!

Best wishes, Paul.

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jonthetourist 15th Apr 70 of 78

In reply to post #469616

"If you don’t want people to judge a half written article, then don’t post a half written article.
Post it when it’s finished. It will save time and effort all round."

I don't find that helpful, although presented as such.

I think Paul is saying his process involves two passes at RNS news. A brief review, followed by more investigation of the ones he deems of interest. And he has chosen to experiment with showing both passes, publishing the first before going to work on the second.

That is potentially a significant improvement. I wasn't planning to get involved in the discussion because one day is far too little evidence from which to draw conclusions. But how about we let Paul and Graham do what they want, and not leap to judgement too early?


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InvestorJohn 15th Apr 71 of 78

In reply to post #469591

From Filta Group (LON:FLTA) results... The strength of the US economy has led to very low unemployment and, whilst this helps in service sales, it has the potential to reduce the number of people looking to buy franchises. However, we have experienced a steady level of enquiries from potential franchise owners, with many superior quality candidates coming forward, through the course of the year.

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pippasfan 16th Apr 72 of 78

In reply to post #469416

Hi Paul.
You got me thinking here, Why do I like Carr’s. Living around farms, animals, farmers (all of whom smell the same) most of my life. I see the company’s logo every day around these places. I know they recognise customer loyalty, and deal with complaints quickly and effectively. Farmers, horsey set , can be pretty awkward folks. They have a very good reputation I guess

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jonesj 16th Apr 73 of 78

In reply to post #469736

Pippa, Paul,
I clearly see an argument for "boring" stocks, on the grounds they might be unappreciated by the market.
I was thinking Carr's would be the kind of stock that might grow a little, pay a dividend, but not be a 10 bagger.
Yet, if we expand the chart out, it has 20 bagged since October 1998 !

I don't know how long they have paid the dividend for, but IF the recent yield is extrapolated back, then the return with dividends reinvested would be substantially higher.

Worthy of some investigation. Looking at the oldest data available on their website, they turned over £100 million in 1999, now approximately 4x that. Profit after tax was £2.36 million, now approximately 5x that. Some of the directors from 1999 still seem to be in place.

Disclosure: No position.

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rhomboid1 16th Apr 74 of 78

In reply to post #469736

Re Carrs.. Carr's (LON:CARR) I held them briefly but then started digging around into some of the accounts filed at Companies House for a company they bought...I then found I couldn’t reconcile what they were reporting to shareholders with what I was reading

I sent them an email asking for response

It wasn’t big numbers but it looked as if they were being more positive in their public presentation of the benefit of the acquisition than the hard numbers support ...but without an answer I sold my entry level holding.

They have some fascinating nuclear engineering businesses though so I might revisit at some point

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pippasfan 16th Apr 75 of 78

In reply to post #469751

Jonesj, excellent understanding there, if my iPad allowed me to do the thumbs up......

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pippasfan 16th Apr 76 of 78

In reply to post #469786

rhomboid1, your research is excellent, I am clearly a novice at this kind of behaviour, well done

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brballs 16th Apr 77 of 78

In reply to post #469871

I hope he doesn't mind the unsolicited mention, but I recommend following Rhomboid on Twitter - you will learn a lot from him, and his red pen!

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Howard Marx 16th Apr 78 of 78

In reply to post #469451

Jane you wrote:

"The new format being trialed today is very poor, imo, being simply what anyone can glean themselves from very cursilory scanning the day's RNS"

"Anyway, I really can't be bothered with confrontational and squabbling responses"

Jane, this new format is the best YET! 

Don't be angry! 

Come join us!

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

About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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