Small Cap Value Report (Mon 2 Nov 2020) - PURP, HMSO, SEE, PIER, KBT, ACRL, NWF, PPH, STU

2nd Nov '20 by Paul Scott

81 comments 19697 reads

Good morning, it's Paul & Jack here with the SCVR for Monday.

We could have a bit of volatility to deal with this week, with a new lockdown for England having been announced, and of course the US Presidential election taking place on Tuesday.

Timing - Jack's kindly done most of the work this morning, but I'll (Paul) be adding bits this afternoon until about 3pm. Update at 19:20 - lots more sections added, and today's report is now finished.

Agenda - as follows;

Purplebricks (LON:PURP) - Half year trading update (Jack)

Hammerson (LON:HMSO) - Completion of disposal (Jack)

Seeing Machines (LON:SEE) - Year end results FY 06/2020 (Jack)

Brighton Pier (LON:PIER) - Final results FY 06/2020 (Paul)

K3 Business Technology (LON:KBT) - Trading update (Paul)

Accrol Group (LON:ACRL) - Covid-19 business update (Paul)

Nwf (LON:NWF) - Cyber incident, suspension of shares (Paul)

Pphe Hotel (LON:PPH) - Q3 trading update (Paul)

Studio Retail (LON:STU) - brief comment on blocking its disposal (Paul)

Lidco (LON:LID) & Horizon Discovery (LON:HZD) - very brief comment on US takeover bids for these 2 companies (Paul)

Purplebricks (LON:PURP)

Share price: 62.5p (+8.9%)

Shares in issue: 306,806,039

Market cap: £191.8m

(Jack)

I wonder if there’s a post-Woodford bounce coming for certain stocks? Take Purplebricks (LON:PURP) for example - that’s a heck of a fall in share price since 2018:

6yx7TfYK5FTG0lpY5Jm1S5oPYXyqberQM1e6qgi1j0l6qyHCEwZRTbXFy_dJMxnfqdC0TeqoZfPskx-Ev7PiA8ALafgVA15al30QENG1AUmNv_bMLV9xxqAO9uUh6ytwB6ha5tyv

The group continues to burn through cash and makes some punchy, double-digit net losses though:

FY18 -£30.1m
FY19 -54.9m
FY20 -19.2m

Looking at the falling net cash balance, another equity fundraising isn’t out of the question. But see below - today the group reports an improved cash figure, which is encouraging.

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Stockopedia rates Purplebricks as a Momentum Trap but shares are up 8.9% on today’s Half year trading update so let’s see if the tide is turning. If it is, then let’s not forget the share price was approaching 500p in 2017…

It’s actually a very brief update, with much more detail to come on 15 December 2020. Some highlights for now:

Strong levels of new instructions during the last five months,
An 8% increase…

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Camtab

2nd Nov '20

I didn't.

Phuntt

George, I don’t want to sound like I’m any great knowledge on the stock market. However in my younger days, I did play semi professional poker for a long time. I’ve never seen anyone on the poker table who needed the money or who can’t afford to lose it be successful.
It’s too difficult to gamble successfully when you add the pressure of need to the psychology or mindset. I only mention this because of your plan to trade more, rather than a traditional investing plan. Especially in a volatile market like this, that is going to require some rigid discipline to pull off and I’d be extremely wary...

kgb1953

George honestly if you cant afford to lose the money stay out of it.

Dear Nigem it was me. I was suggesting to be careful about which wrapper - SIPP, ISA or investment account to put in a speculative investment. In my opinion its better to put an investment that you believe will make a large gain into an ISA or an investment account given that SIPP investment accounts are capped and you should try to maximise tax relief on contributions. Also if the investment makes a loss then that is bad news for the SIPP or ISA because you cant utilise the losses.

WarrantStar

Hi George, It's very important to recognize that you can't afford to lose money at the moment. My advice would be to stop trading completely for the time being. Cut your outgoings & try to find away of maximising your regular income. If you keep trading, then the emotional pressure to gain will become too much and you might make too many mistakes as a result. Please don't invest with money that you can't afford to lose because you could end up making the situation worse. I would suggest that you stop investing / trading for the moment & come back to it a bit later on when you have some money left over after paying your bills.

It's great that both Paul & Jack contribute so much good work. However, it will become necessary for both to keep saying who has posted every single part of the SCVR. Otherwise no one will know who to reply to / agree with / disagree with.

George20

Thanks guys, I save so paying bills not a problem. This is my capital and that is why I can't afford to lose it.... When I say trade more, what I mean is sell when companies are in black and cut losses as suggested by Mikex. Trouble with buy and hold is they go in and out of profit eg look at my oil stocks. Should have sold when in profit.... Cheers all

harvs19

I wonder whether Boohoo (LON:BOO) could look to introduce their own clothes recycling scheme. I know that H&M have something in place where customers can present a bag of old clothes in return for a £5 voucher to redeem against future purchases. Given that one of the criticisms of Boohoo (LON:BOO) is the throwaway fast fashion nature of their business, perhaps introducing something similar could show they are trying to do their bit to create a sustainable fashion future.

Paul, well done its clearly working for you so keep it up. I just wondered how big you tend to go on your large positions when you have a high conviction. Do you have any rules in place regarding initial position sizing on your large positions? I've been looking to do some work on this aspect as whilst I have had some good winners over the last few months, unfortunately the big multibagger winners have come from what were initially small holdings in my portfolio. Frustratingly the winners were not low conviction holdings but I just didnt size them to properly and as such feel like I have missed out on potentially portfolio game changing returns, purely down to neglecting this aspect.

Any comments from others regarding how they approach position sizing would be much appreciated.

Mark B

3rd Nov '20

I've never read in history about the damage done to businesses during a pandemic. It's always about the lives lost. Historically, money, businesses are replaced.

Paul Scott

That's why I put in a list at the top, to say who had written each section. Maybe we should put that in each individual section too. Or just reply about the company generally.

Mikex1

Oh and stay out of oil and gas!Too risky. You might like to look at these for long term holds EKF CDM KETL but pls DYOR. Good luck!

hayashi22

I have tended to prefer ISA over SIPP as that way there is no tax to pay. Anyone know what the tax position is is on SIPP withdrawals? There is a lump sum which is tax free. Not sure about the taxable element after that though.

smegster

My understanding is that (after the tax free lump sum), income from a SIPP is taxed the same as any other taxable income.

Eg. if your only income is from the SIPP, if you withdrawal £60,000 in one year
£12,500 is included in your personal allowance 0% tax
£12,051-£50,000 is taxed at 20%
£50,000 -£60,000 is taxed at 40%
Total tax to pay £11,500

If you have a job with £50,000 taxable income, and SIPP income of £10,000, total income is £60,000
Overall tax is the same at £11,500

So the tax rate you pay on your SIPP withdrawals depends on your existing taxable income and how much you withdrawal in a year. If you decide to withdrawal all your SIPP in one year to buy a lambo its likely a significant proportion will end up being taxed at the top 45% rates!

Jack Brumby

5th Nov '20

Thanks for the kind words Dan, brought a smile to my face!

It was great to chat - you've packed a lot of stock market experience into the past few years and I'm pretty sure the best is yet to come for you. Impressive stuff.

Talk soon - and keep up the morning round ups. They continue to be one of the day's highlights.

Cheers,

Jack

A_Private_Investor

7th Nov '20

Yes, but money going into the SIPP is effectively tax free. So pre-tax I have £1000 to invest: under a SIPP that means a £1,000 starts working for me straight away. Under an ISA, it is only an £800. However, you can only access the pension at 55 going up to 56 and then 57, so lSAs give you more flexibity, so a balanced approach (given your needs) is best.

BUT, if you have enough ISA investments and other savings, yet are approaching the age when you want to start drawing income from your SIPP, then with the 25% tax-free drawdown, you could argue that putting all your spare money into the SIPP gives you the best of both worlds: tax-free before you put it in and tax-free when you take it out.

SaarfLondon

8th Nov '20

George , you need to trade LESS and INVEST more . Investment definition ; 3-5 year timeframe. Define your own attitude to risk and capacity for loss

Martin VT

13th Nov '20

How tragic that the clothes are not reused, when clearly many could be and would be appreciated. Instead all that labour to turn them into blankets.

But wonderful and fascinating film, the women involved come across with such dignity, cheerfulness and positive attitude to life.

Rusty2

Even if you are not paying income tax, the tax man will put money into your SIPP. I came quite late to SIPPs as I thought you had to be working to have one but even retired people can open one.

There are some tax advantages with SIPPs on overseas dividends, they can reclaim all the tax in certain countries, this may depend on which broker you use though.

Inever

24th Nov '20

£STU

The blocking of the sale of Findel Education to YPO is disappointing but will hopefully not distract from the excellent trading results in the main brand Studio Retail. H1 (Apr-Sept) results will be formally released on December 8th but they have already announced a 39% increase in product revenue and a 5.5% increase in financial services revenue in H1.

Not only that, but because the impact of Covid 19 hit the UK in March, the directors were obliged, under IFRS9, to assess the macro economic impact of Covid on debtors. A £20m bad debt IFRS 9 Covid provision was included in the March 2020 accounts, even though the directors reports confirm that "the business is yet to see any material indications of this increased provision being converted into cash loss." This provision should therefore be reversed at some time in the future, but the commentary implies there will be no need to increase the provision in H1.

Small Cap Value Report (Mon 2 Nov 2020) - PURP, HMSO, SEE, PIER, KBT, ACRL, NWF, PPH, STU

Purplebricks (LON:PURP)

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Paul Scott

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