Small Cap Value Report (Mon 28 Sept 2020) - FUL, GETB, RCH, VANL, BAR

28th Sep '20 by Paul Scott

54 comments 10631 reads

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

Here are the company updates which have caught my eye this morning;

Fulham Shore (LON:FUL) - casual dining chains - trading update

Getbusy (LON:GETB) - Trading update & completion of loan facility

Christie (LON:CTG) - AGM statement - sorry, I ran out of time to look at this, but it doesn't look very good, from a quick glance, so we're not missing anything.

Van Elle Holdings (LON:VANL) - AGM statement

Reach (LON:RCH) - Half yearly financial report

Brand Architekts (LON:BAR) - Final results

Timings - I need to be finished by early afternoon today, in order to prepare for the Mello Virtual online shares event this evening. They want me to discuss a few small cap shares with other investors.
Update at 13:56 - today's report is now finished.

Fulham Shore (LON:FUL)

Share price: 8.25p (up 4%, at 08:07)
No. shares: 609.6m
Market cap: £50.3m

Trading Update

Publication of audited accounts for y/e 29 March 2020 is extended from end Sept, to c. 15 October. It says that both AIM and Companies House have extended the deadline for filing accounts to end Dec 2020, so there's nothing to get worried about here. Other than that it's a bit slow to produce accounts, even allowing for covid disruption.

Here's a summary of today's update, with my comments;

FY 03/2020: revenues up 7.2% to £68.6m - this only clips the start of the covid lockdown, so not a terribly impressive growth rate. There should be many more opportunities to open new sites on low rents in the current situation.

Current net debt (at 25 Sept 2020) is low, at £3.52m. It says £7.46m undrawn on £25.75m, which suggests the gross positions must be as follows (my workings);

Cash: £14.77m
Debt: £(18.29)m
Net debt: £(3.52)m

Couldn't they have just provided a table with those numbers in, instead of the confusing text? Note to everyone who writes or edits RNSs: tables are always the simplest, clearest way to present figures.

It looks as if FUL has drawn down heavily on its bank facilities, and is sitting on a big cash pile, as a comfort blanket. I understand why some companies are doing this, but it usually…

Unlock with Email

Unlock with Google

Already have an account?
Login here

Paul Scott

28th Sep '20

Thanks Gromley & DVB99, interesting comments on Reach (LON:RCH) and I note the share price is up strongly today, so I'll move that up the agenda, and look at it next.

Phuntt

The fact that a short seller has a prominent quote in the article makes me think the entire story is a plant designed by frustrated short sellers to try and drive the price down. The entire class action suit might be (although this thought might be caused by my rampant paranoia and binge watching too many episodes of Billions over the weekend).

The market seems to be ignoring it for now - focused on the results due out Wednesday. If they hit their numbers, it will have another nice boost.

EDIT: Should have noted here - I don't hold Boohoo (LON:BOO) anymore - sold out on Friday as once it hit £3.60 it was above my personal valuation so no more margin of safety for me. Thanks to Paul and all here for the great information and pointing me to it - wishing you all the best with it going forward.

lewisbabbage

Thanks kgb1953, I read all sorts of forums and social media and its difficult to know what is factual, a bit of exuberance, or just made up. Because of that any comments which I can't validate, with figures or a reliable source, aren't much use, however helpful the poster might think they are.

mojomogoz

I hold Getbusy (LON:GETB) from sub 30p.

I'm surprised that the share price is up today on fairly meh update that says steady as she goes in two established divisions (with the tone being slightly down in the most cash generative division Virtual Cabinet and up in the rapid going but heavy investment SmartVault) and things moving slowly in its cash consuming new eponymously named GetBusy division. The £2m loan from Silicon Valley Bank really just tells you that they are going to burn more cash short term as they chase growth on two fronts (SmartVault and now GetBusy!

Shows the insanity of investors at the moment whereby anything right vibe-y is bid. Perhaps some people like that SVB are providing the finance...as its a vibe-y bank.

ed_miller

Re: Analysing company accounts:

Roger,

I recommend Phil Oakley's free series of articles on analysing accounts: https://knowledge.sharescope.c...

I hope Stockopedia will forgive my posting a link to a rival website.

arfournier

Pedant alert Getbusy (LON:GETB) the loan is with Silicon Valley Bank. They specialize lending to tech companies and are based as the named implies in Silicon Valley. They specilaize in lending to tech companies and have done since the mid 80's. So they have been around the block a couple of times. They issue quarterly reports on the industry which are worth reading if only for context about the tech industry. They certainly see something they like in Getbusy (LON:GETB) . A slight positive sign for the company though not necessarily a reason to buy.

Gromley

Hi Paul,

Thanks for covering Reach (LON:RCH) , always interested in your views. Even if we'll have to agree to disagree on the conclusions ;-)

Just a couple of clarifications :

1. The year on year figures are not influenced by acquisition as the last was more than 2 years ago.

2. Cash generation.

the low PER isn't very relevant, because it ignores pension scheme cashflows

True but the cash generation is still pretty prodigious :

PBT (exc exceptionals)£m	53.5

Op Cash-flow	63.5
Pension Payments	-22.0
Release re phone hacking	-1.0
Free Cash-flow (ongoing)	40.5
"Deferred consideration (Express & Star acquisition)"	-22.0
Retained Cash-flow	18.5

Those figures might be slightly flattered by the Covid schemes (or perhaps rather the PBT suppressed) , I will have to check. They do though reflect the continued impressive cash-flow from the business.

As you say, perhaps they will begin to be considered as a sexy digital business.

SVB specialise in hardware not software businesses historically as they like to lend against assets....like a regular bank. Once upon a time they were really quite strict about the asset backing...I know first hand having approached them for loan for software businesses.

It would arguably be a more positive sign to have a loan from, say, dull old Natwest and on more favourable terms. That would mean they had persuaded Mr Boring that their business is exciting.

Getbusy (LON:GETB) is a great business, well run, good eye on how to grow etc ....but I'm still mystified why punters see today's news as a positive signal when clearly what it signals is that they are going to invest beyond cash on balance sheet and op cash flow produced. They just released a RNS saying that the risk has gone up but they provide no corresponding news on extra revenue sauce...if anything they deflate that by saying GetBusy product is going slow.

Like I said, investors lost their senses with some vibe-y stuff....

SVB have no compunction to lending to software business. There isn't that many hardware startups in Silicon Valley now a days. I just checked their quarterly FS in the loans that they extend under the "technology " umbrella 80% is to software companies.

I haven't looked a Getbusy all that closely so I can't really comment on the business perspective.

Richard Goodwin

@GloucesterBob I thought you meant that I was numpty - you would probably have been right! Thank you for mentioning Sunday's post, I thought no-one would see it as I wrote it quite late!

It would probably wipe shareholders out if the whole plc went in to Administration.

They might be able to put an operating subsidiary into administration and buy it back if they have a limited company within the corporate structure.

Phil Okley is a genius!

I suspect the issue for many pubs/restaurants is not the reduced hour of trading but the message it sends about going out to restaurants generally. My wife has decided that she doesn't want to go to any pubs/restaurants for a few weeks. We are not in a high risk category and we live in C London and traditionally eat out quite a lot.

MichaelFBS

I have some accounting background and I think with investing it is important to have some understanding of accounts otherwise it is going to be difficult to get a proper understanding of the company. That said I have not read the last five years of reports and accounts of every company in which I am invested. Heresy if heresies .

I think there are courses, I believe Graham Neary who used to write here runs a one.

My main source of learning has been reading and my list is at:

https://investing4value.wordpr...

I have read most but not all.

I would start with Intelligent Investor, Zulu Principle, Naked Trader, Buffett Letters and go from there.

I wouldn’t worry about macro calls like Brexit/US election etc, just too hard. Try find companies you understand, that are wonderful companies and buy them at a reasonable price. Finding them of course is the tricky part!

Hi arfournier,

Many thanks for pointing out my error, I've now corrected the article to say Silicon Valley Bank, not Silicon Bank. My handwritten notes have the correct name, but I clearly had a minor brainstorm when typing!

I very much encourage people to point out factual errors such as this, as I want to get things right. So you're not pedantic at all, your comment is actually very helpful. Thanks!

Regards, Paul.

Good points, thanks Gromley.

Just to clarify, I really don't have a strong opinion either way on Reach (LON:RCH) - I can see merit in the bull case, so don't think we're particularly disagreeing on anything :-)

Best wishes, Paul.

Logical David

Hi Richard,

Thank you for your response. When I posted my 9:11am comment today the previous links from your good-self, GloucesterBob and johnsmith68 hadn't appeared. It was only after I had clicked on 'Add Reply' that the 3 links materialised. I have since read your excellent Sunday post and it makes for very good factual reading. Furthermore, it perfectly answered my question. Keep up the informative posts.

rogerh

Many thanks to jht76, Ed_miller and MichaelFBS for the helpful feedback

Hi mojo,

I'm enjoying your input of late, thanks.

Dragon

I recommend Phil Oakley's "How to pick Quality Shares" book. It's possible a good way to pick value shares in a depressed market but not a quick fix to a profit.

Small Cap Value Report (Mon 28 Sept 2020) - FUL, GETB, RCH, VANL, BAR

Fulham Shore (LON:FUL)

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...