Small Cap Value Report (Mon 17 Feb 2020) - ALY, VLX, HDD, WHR, SHRE,

17th Feb '20 by Paul Scott

54 comments 7190 reads

Good morning, it's Paul here with Monday's SCVR.

Please see the header for the companies that have caught my eye from the 7am RNS.

As there's not much company news today, I'll write some macro stuff later, as there was lots of interesting news in the Sunday papers. Change of plan - I'll put this into tomorrow's placeholder article instead.

Estimated time of completion - 1pm

Edit at 12:56 - today's report is now finished.

China / coronavirus interview

The only update I can find today which refers to the situation from China, is another update from Volex (LON:VLX) - see the section below.

I was thinking last week, that this is such a topical issue, that I should do an interview with an expert on china supply chains. Accordingly, I'm pleased to advise that the CEO of Up Global Sourcing Holdings (LON:UPGS) has agreed to talk to me, in an audio interview, this Thursday. (NB. I am not charging a fee, and don't hold any shares in UPGS, so it's a genuinely independent interview).

Rather than bombard him with lots of detailed questions, I'll mainly be asking him to just brief us on how things are going re China supply chains, and how UPGS sees things developing, both for them & the many other companies which rely (arguably too much) on China supply chains.

If you have an specific thoughts on this, then feel free to leave a comment below. I usually read all your comments, and am happy to incorporate any particularly insightful points/questions that you raise, in the interview. It should be published on this Thursday early evening. We'll put a link up here of course, in Friday's SCVR. Should be interesting!

Laura Ashley Holdings (LON:ALY)

Share price: 2.2p (down c,33%, at 08:45)
No. shares: 727.8m
Market cap: £16.0m

Response to press speculation (trading update & warning of possible insolvency)

Laura Ashley Holdings PLC (the "Company" and, together with its subsidiaries, (the "Group") notes the recent press speculation regarding its financial position.

Poor trading - sales are down sharply in the last 6 months, although some of the fall could be due to store closures perhaps? The more meaningful like-for-like (LFL) sales drop is not given. This is bad either way;

Trading during the current financial year has…

Unlock with Email

Unlock with Google

Already have an account?
Login here

LeoInvestorUK

17th Feb '20

Up Global Sourcing Holdings (LON:UPGS) - My question would be whether they would feel obliged to try to supply customers at almost any cost (e.g. air freighting), potentially causing losses from some product lines, or whether the main risk is that supply issues might reduce sales.

Devlishcunning

Re Warehouse Reit (LON:WHR) for those who do not know, REIT's (in a trading account) deduct 20% withholding tax from any stated dividend, so you receive less than you might expect, but are tax free in an ISA or SIPP.

Mike Jones

Hi Paul. I held Hardide (LON:HDD) for a couple of years as a 'turnaround' opportunity after buying ~1p and then adding. There was a subsequent 1:40 share consolidation and I was in-profit at one time, but sold when the gain had eroded to b/e. Before selling I attended its last AGM as the only PI and had the opportunity to ask lots of questions, including about the share consolidation (which was explained as ... required for its USA clients who were uncomfortable with the penny share label). There were two new NEDs present at the AGM and I was quite impressed with them, so it was rather unfortunate that the Chairman mixed up their names a few times to their obvious embarrassment. I also encouraged the company to attend the last Mello, which it did. Unfortunately, its presentation was poorly attended and I spoke to the CEO and CFO at length after the presentation. They said that the company had been given a poor start in life when it was divested and had always struggled from that point on. It has a great product and an impressive client list, but volumes are restricted by physical capacity. They are addressing that with the UK relocation, but I could tell that would take time and money they could ill-afford, so I sold with the 'option' to return if ever they made a maiden profit? It will have a new CFO soon. Probably rude to say, but it might benefit from a new Chairman as Roger Goddard was appointed Jan 2008 and its track record since then is plain to see. Hope it gets out of its rut soon... as I said to the board a maiden profit would probably make all the difference and they all nodded in agreement!

Martin Verlaine

Hi Lumped on

many thanks for the Benchmark comment. I think we all have this type of jam tomorrow company which we regret buying into. I did see the large write down and took the view this maybe kitchen sinking all the old problems. I understand Strategic Capital ( the smaller companies IT )is looking or has taken a stake and they tend to go in with a large investment and generally are the epitome of a nosy investor who has flags that they keep to religiously in terms of deciding on the extent and time scale for holding. My general thoughts were to watch a while before deciding on a modest investment. It seems the salmon farming industry in Scotland could be a football for BREXIT and from your comments one wonders if this new solution is going to be anything other than a short term fix and hence not a long term material income stream

muzmano

Cornavirurs. I mentioned this on another thread but has anyone been following Novacyt Sa (LON:NCYT) . It has announced this afternoon that it has released its cornavirus test . The test is able to produce a result in 2 hours.

I noticed the company on its first announcement of a developed test on 31 January but thought the way it was being pumped on bulletin boards was suspicious. It was then around 15p. It broke through 200p today but has fallen back a little. I have no way of gauging what the prospects are and feel that the share price is massively sentiment driven. Interesting one to watch. In its announcement today

"Demand for the tests has come from China, the US and the UK, as well as many other countries around the world. The Company continues to see a high conversion rate from quotations to orders. However, it is difficult to predict how demand for the test will grow as the epidemic is still in its early stages. Since the initial reports of COVID-19, the Company has invested in manufacturing capacity to meet the current and potential future demand for its tests"

Lincoln Green

After all the bad news from China it is good to see a bit of good news in the Daily Mail today. A pavement made of bouncy material that could save 'thousands of lives' is in development. Nearly 100,000 people a year in England suffer hip fractures, and falls are the most common cause of deaths from injury in those over 75. An elderly lady who lives near to us, tripped up on a paving slab last year and finished up with black eyes and nose, lucky that her glasses flew off on her way down.

The new pavement surface works similarly to the material in the ground in play areas which helps prevent broken bones if children topple from swings etc. But the new type of asphalt is durable enough to cope with pedestrians. On a conventional road surface, a fall from just 8 inches carries a 90% risk of head injury, and a 55% risk that it will be severe.I post this as an interesting article ? but wonder if it would impact a firm that was reliant on making a lot of paving slabs, if there is such a firm.

garbetklb

I run several accounts with Share Centre in my mother & aunt's names. I've found the service excellent and the pricing competitive - especially with a 25% discount for holding a few Share plc shares.

I don't like the idea of holding unlisted ii shares - and wonder if they will be able to be held within an ii account? Huge own goal if not - and one that, I suspect, is likely to prompt people to investigate moving accounts, disproportionate to the amounts involved.

I also run accounts with ii as a result of their takeover of Alliance Trust Savings and have been pleasantly surprised with service & value.

BUT, I've deliberately spread our family holdings over 3 platforms to spread risk and don't really want to double up, so will look for an alternative - suggestions would be v welcome! We already use IWeb - I'd be especially interested in hearing any comments about the various accounts offered by Jarvis Investment Management, where we also hold shares........ We only hold AIM shares.

RichardK

I have been very happy with Jarvis as a budget platform. I have both nominee and ISA accounts. Someone on this site (maybe Graham?) described it as the Ryanair of broking, but in my experience it lacks the irritations of Ryanair.

Good luck

Richard

SundayTrader

Hi

Thanks for the comments re Hardide (LON:HDD) - it is one that I have been watching for a long while, but haven't bought - it always looked as if it was having to spend more money to get to a profitable position, and a 30 million plus market cap looked a bit demanding. Still, they are clearly making progress.

Should have been a reply to Garbetklb.

Wilbraham

Re Hardide (LON:HDD) for 15 years I've been invested in the unquoted Greenkote. Not targeting quite the same markets as Hardide, but offering a then-novel diffusion-based cleaner alternative to traditional zinc coatings with exceptional corrosion resistance. The company has struggled - was hit hard by the GFC and perhaps over-investing in plants around the world in advance of winning business. Still, they've survived, and revenue now slightly above Hardide's. My take, from shareholder reports over the years, is that customers tend to be extremely cautious and it can take an age of testing to win even a small new contract. One classic was when they announced a contract for coating the tiny screws for a mobile phone maker - I hadn't the heart to ask how much revenue that generated, when the total value of screws per phone (inclusive of coating) surely can't exceed a couple of pence!

So my one take-away is don't expect fireworks - the coatings industry will only ever be slow burn.

CamRaid

Some interesting stakes being taken in Naked Wines (LON:WINE)

Brookeda

Thanks for the write up on £WHR Paul. I bought some of these back in Sept at about £1.05 and am sitting on about 11% return since then. I see this type of share as a buy and lock away type investment. I think with stock prices on the high side this is they type of stock if you want to keep fully invested but being more defensive.

Brilliant Leader

If considering Warehouse REIT (LON:WHR) then Urban Logistics Reit (LON:SHED) is also worth a look (similar to WHR but focused on “the last mile”).

I don’t own either of these but have them and a few others on my watchlist.

Agreed, last mile is a critical part of every internet retail company and most will pay a premium if it can cut down the overall logistics cost

Phil Mc

I have been with interactive since around 2002 when they were called ample (I think). I have always found the service and their support on any issues to be good. My queries have ranged from transferring other ISA's in to queries about receiving shareholder perks and converting paper shares to electronic as well as general queries about regular investment. I have always found the platform to be reliable and the telephone support efficient. I find the fees reasonable for the service but maybe I need to compare to others again.

alan000@yahoo.com

18th Feb '20

I agree I was initially surprised they opened a store in Duke Street, London. However, it is fair to provide some context. I believe French Connection started the last financial year (@Jan 19) with 33 High Street Leases. They made a total Retail Loss of £10.2m to Jan 19, and the vast majority of that Retail loss will be in those 33 Leases. The Balance of "Retail" are Concessions in House of Fraser, which are individually small and with flexibility to close any with 6 months notice. If you keep track on their Store Planner on their website, you can see that 11 of those 33 High St stores are now closed: Oxford St, Argyll St, Cornhill, Canterbury, Oxford, Cambridge, York, Leeds, East Kilbride, Montreal, Newmarket. A year of good progress in reducing the High Street stores.

The new Store in Duke Street is not "prime pitch" and has a much more narrow front that those which closed...especially Oxford St, a huge corner unit next to Selfridges. The Rent on Duke St will therefore be a small fraction of that paid on the expired Oxford St Lease, which was quoted at £3.2m pa. I suspect they hoped a small and cheap store on Duke St might pick up some turnover which they used to take on Oxford St and Argyll St.

Santawani

Like you, I have family holdings on more than 1 platform to spread risk and have had experience of quite a few.

Also, like you have recently been moved from ATS to ii.

I think on the whole these platforms are very loosely much of a muchness, however, the real test is when push comes to shove and something goes wrong.

In this instance, I have definitely found AJ Bell to be superior. Probably not everyone thinks this way, but in my experience they are more likely to listen.

I always say that Stocko and AJ Bell are the only two websites in the modern system where you can communicate with the boss - be it Ed here or Andy Bell at AJ Bell.

Good luck with your decision

Santa

rwedgbury

19th Feb '20

No one seems to have mentioned how many people have fully recovered from the virus, how long it took them and whether there is a delay or restrictions on getting back to work. If it is around 2 to 3 weeks then surely the lost output can fairly easily be made up during the rest of the year

GrahamF

17140 cases now closed, of which 15126 recovered (88%) and 2014 (12%) died.

But this leaves 58,165 active cases. So, it clearly takes significant time for cases to resolve.

Also, it needs to be remembered that a case is someone confirmed as having the virus. There are many others who are in isolation who are not confirmed yet.

So, impossible to say what the impact on output is going to be even assuming that these reported numbers are accurate and representative.

Small Cap Value Report (Mon 17 Feb 2020) - ALY, VLX, HDD, WHR, SHRE,

China / coronavirus interview

Laura Ashley Holdings (LON:ALY)

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

54 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...