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

aflash 14th Apr This post is under review

I'm thinking about experimenting with the format here,

Can you experiment with 'About Paul Scott' at the same time please

You wrote this the other day:

I'll do my best, as your small caps guide. But please remember that I'll be right:wrong about 60:40 in a good year. 75:25 in an amazing year (e.g. 2017). And maybe 40:60 (or less?) in a bad year. So the onus is to figure things out for yourself. If I can help, by pointing out a wobbly balance sheet, etc., then I'll try.

A suggestion you put that as your C.V. instead of  'disco bunny' was well supported. After all you are not offering dancing lessons. Start off with 'I trained as an accountant with a top five firm..' then your text above and you will save yourself a lot of trouble with new subscribers.

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matylda 15th Apr 2 of 78

I vote for keeping the disco bunny!

Blog: Briefed Up
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wilkonz 15th Apr 3 of 78

In reply to post #469206

Agreed. It's a well known fact that Warren Buffett started life as a disco bunny,

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MrContrarian 15th Apr 4 of 78

My morning smallcap tweet:

Impact Healthcare REIT (LON:IHR), Sanderson (LON:SND)

Impact Healthcare (IHR) placing to raise at least £25m, at 106p, a 2.3% discount.
Sanderson Group (SND) guides H1 ahead of management's expectations with rev up 16%, adj operating profit up by over 30%.

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Paul Scott 15th Apr 5 of 78

In reply to post #469196


Sorry, but I'm rather busy at the moment, reporting to subscribers on the morning's stock market announcements.


Incidentally, I haven't had any trouble whatsoever with new subscribers, so this bit is nonsense too! (I could really do without garbage like this first thing in the morning);

A suggestion you put that as your C.V. instead of  'disco bunny' was well supported. After all you are not offering dancing lessons. Start off with 'I trained as an accountant with a top five firm..' then your text above and you will save yourself a lot of trouble with new subscribers. 

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slopsjon 15th Apr 6 of 78

I was tempted at the last London Mello to ask Paul to demonstrate disco bunnying but I thought that I would just get a load of red thumbs down.

XP Power (LON:XPP) trading update good and not so good. Group revenue for the three months to 31 March 2019 was £46.9 million (2018: £46.6 million), up 1% on Q1 2018 on a reported basis, or 5% below in constant currency. On a “like for like” basis revenue decreased by 12%.

We continue to expect further revenue growth in 2019 which will be weighted to the second half of the year.

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stevePo 15th Apr 7 of 78

In reply to post #469196

Now that we're paying customers with rights and all that, surely Paul should have to do a dance every Friday if enough of us vote for it?

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Paul Scott 15th Apr 8 of 78

In reply to post #469251

Morning stevePo;

I'm sure that could be arranged!  ;-)

Regards, Paul.

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elviron 15th Apr 9 of 78


"'I'm thinking about experimenting with the format here, and might trial the idea of posting some earlier, briefer, comments each day."

I think that's a great idea, and one that I was hoping you might implement at some point. That gives us readers an earlier heads up should we wish to act quickly on interesting developments.

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GJR 15th Apr 10 of 78

In reply to post #469196

Didn't someone say that going to a subscription based service would stop these abusive sort of posts? and the there we are first comment under the new regime.

Bring back the great unwashed - and the disco bunny !!!!

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mrosbiston 15th Apr 11 of 78

Love the new format experiment

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ken mitchell 15th Apr 12 of 78

I also think the earlier briefer comments is a great idea. And maybe  less detail on the many "middling" updates? That would save Paul and Graham time and reduce ther workload a bit too. I read all the detail in their reports on shares that look well worth following up, but tend just to scan the middling ones, mainly to check for hints of better investment opportunity ahead. And that stage is when the depth of detail is so appreciated.

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andrea34l 15th Apr 13 of 78

In reply to post #469281

I think "less detail on the middling" (or even poor-performing) updates is a brilliant idea!! Some daily reports seem to be awash with immense detail on basket-case/jam-tomorrow companies that have issued further profit/trading warnings, and I really don't need this much detail to persuade me not to invest (or sell out, if appropriate). For me, more commentary on positively performing shares to give me ideas for companies to look at and potentially add to my portfolio are of much more use.

One thing I will say is that I prefer the idea of the proposed 'experimental format' to what has been provided before now (by Paul), which is lengthy updates which one might have to wait most of the day for. Some time ago updates were provided much earlier in the day, which I found much more useful, but at that time there was a proposed change to the format to in-depth reports when it was possible to provide them, and most people seemed to vote in favour of waiting for that. Perhaps the new format is the best of both worlds for everyone... briefer, timely updates to start off with, where one can take action (with further research, as appropriate) while the market is more active, and then more in-depth commentary for those that want to return later... 

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sharw 15th Apr 14 of 78

One feature of XP Power (LON:XPP) (HQ Singapore) is that it reports in £ despite (quote from last annual report) "Approximately 84% of our revenues (2017: 82%) are denominated in US Dollars". Hence we are always going to get (as we have this morning) substantial swings between "as reported" and "constant currency".

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simoan 15th Apr 15 of 78

In reply to post #469211

Agreed. It's a well known fact that Warren Buffett started life as a disco bunny,

The correlation between dancing and investment success has long been proven. It's a little known fact that Terry Smith was world breakdancing champion in 1983, long before he started Fundsmith. I enjoy a bit of okey-cokey myself.

Anyone any thoughts on the updated CEO employment agreement announced by Spectra Systems (LON:SPSY) this morning? I can't say I'm happy about his shiny new golden parachute:

The Updated Agreement also includes provisions as follows:

·     To (a) increase the severance payment to Dr. Lawandy, in the event of termination without cause, from 100% to 150% of his base salary, which remains at USD 375,000, and 100%, as previously, of his annual target performance bonus, which remains at USD 100,000, and (b) advance the payment thereof such that two thirds (previously one half) of such aggregate amount shall be payable in a lump sum on or about the date of termination and balance of which shall be payable in equal instalments during the six months (previously 12 months) following the date of termination;

·     To enable him to exercise all vested and unvested options in the event of termination of his employment without cause upon or following a Change of Control;

·     To pay for medical benefits for up to 12 months in the event of termination without cause; and

·     To limit (a) the scope of his existing 12-month non-compete to any business activity in which the Company has been involved during the term of his employment in the fields or applications of authentication, security and/or banknotes and (b) the scope of any inventions which he is obliged to assign to Spectra to only those in the fields or applications of authentication, security and banknotes.

Not the kind of thing I like reading first thing on a Monday morning. A small, speculative position for me so I'll grin and  bear it for now, particularly in light of the significant share buy-back program announced recently. 

All the best, Si

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jonesj 15th Apr 16 of 78

In reply to post #469281

1 I prefer the reports to carry on exactly as they were, as I can still learn from reading about good, bad and indifferent companies.

2 (Different Topic). I presume the post by Aflash was sneaked in just before the subscriber deadline became effective. 11:45pm on Sunday. As it's a 100% disruptive post with nothing else to offer, I suggest it is deleted.
Hopefully he is not a subscriber & if that is the case, good riddance.

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andrea34l 15th Apr 17 of 78

In reply to post #469196

I vote for everyone being pleasant on this site :-/ Treat others as one would like to be treated oneself...

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BIACS 15th Apr 18 of 78

In reply to post #469196

@aflash - all I can say in response to that is:


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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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