Small Cap Value Report (Mon 7 Jan 2019) - SOS, RBG, TRCS, CHH, UPGS, EYE | Paul Scott

7th Jan '19 by Paul Scott

39 comments 13756 reads

Good morning, it's Paul here. I'll be writing all of this week's reports.

Graham posted an excellent end of year portfolio review of 2018 here. It's well worth a read, if you haven't seen it. The format is great - looking at winners & losers, and what he has learned from each.

I might do something similar next week, but am holding fire until then, because my (by far) 2 largest positions are both reporting imminently. Sosandar (LON:SOS) is my main holding, intended for the very long term, and is reporting on peak Q3 (Oct-Dec 2018) trading around Wed-Thu this week. That's the normal reporting schedule, if you look back at its previous updates. We already know that autumn trading has been good, as the company has said so, in recent results meetings & presentations.

Revolution Bars (LON:RBG) is my second largest holding, and its peers (Stonegate, and others) have reported very strong trading in Dec 2018. Particularly in town/city centres, and at the premium end (cocktails, etc), which is right in RBG's sweet spot. So we should hear positive news from them on Monday next week. The wild card is potential for takeover approaches to resurface. A competitor (Stonegate) offered 203p cash for it some time ago, so there's very obvious value now the share price is half that level.

I regard a lot of recent share price plunges as being spurious, and providing some excellent buying opportunities. However, only if accompanied by a positive, recent trading update. Profit warnings also seem to be, very selectively, providing some remarkable buying opportunities - if you can time purchases with skill.

There are some very good rebounds underway from recent disappointing updates too - e.g. ASOS (LON:ASC) and Superdry (LON:SDRY) , both up strongly in percentage times from recent lows, although both still miles below previous highs.

So, interesting times, especially for traders. Less so for buy & hold types like me (I hardly do any trading these days, having decided there's not much point - as gains seemed to net off against losses, thus making it a stressful waste of time!)

Tracsis (LON:TRCS)

CEO stepping down

Long-standing…

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Zoiberg

7th Jan '19

It is 1.50 a.m. Admittedly i'm a tiny bit pissed but has Paul's (non existant) article really been read 117 times

It's nearly 1 a.m. and to be honest I'm a little bit pissed, but already 117 people have read your article place holder and someone's already given it a thumbs up . It must mean you have an appreciative audience . Have a lovely day in these turbulent times !

/

Albertos

True quality shines with a beacon so bright it is not dimmed by brevity.

Two thumbs up now.

Happy hangover!

ChangFai

At long last AAOG has delivered :-0

MrContrarian

My morning smallcap tweet:

Avon Rubber (LON:AVON), Churchill China (LON:CHH), UP Global Sourcing Holdings (LON:UPGS), Mattioli Woods (LON:MTW), Infrastrata (LON:INFA)

Avon Rubber (AVON) wins US defence order worth up to $92.7m over a duration of up to seven years.
Churchill China (CHH) guides FY operating performance ahead of current market estimates.
UP Global Sourcing (UPGS) guides FY EBITDA above the market's expectations.
Mattioli Woods (MTW) guides FY profit in line with management's expectations despite rev growth slightly lower than expected.
Infrastrata (INFA) FY loss up to £1m. The gas storage development co issues going concern stmt, prob as expected. Did so last year

gus 1065

Outside the scale scope for SCVR, but homeware specialist Dunelm (LON:DNLM) provides a Q2 update this morning that gives another reference point for state of U.K. retail.

https://www.investegate.co.uk/dunelm-group-plc--dnlm-/rns/second-quarter-trading-update/201901070700032904M/

LFL revenues up 9% with OK store performance and strong online growth. Similar to Next (LON:NXT) report last week in that success in retail requires both barrels of the gun to be working together. Pretty downbeat commentary on prognosis for second half due to market uncertainties over Brexit etc., but suggesting they’ll be at top end of market expectations overall.

Gus.

FREng

Positive updates from MJ Gleeson (LON:GLE) and UP Global Sourcing Holdings (LON:UPGS) today. No financial details until next month.

jonno

Further vote for MJ Gleeson (LON:GLE) Paul. The inference in the trading update suggest a possible earnings beat for he full year to end of June, albeit early days.

Lloyd Garvey

Positive update for Real Estate Investors (LON:RLE) . A Midland based Real Estate Investment trust. Keeping away from the London Bubble seems to have helped them. Divi now over 7% rental inc. Up, occupancy up

rmillaree

Staffline (LON:STAF)

decent contract announcement today from the prison service £104 mill over 4 years. I am semi hopefully about trading update tomorrow(?) - they seem to be on track with their 5 year plan to get EPs to 200p per year - at current shareprice of under 1300p one would expect that would result in potentially 50% shareprice increase - nice Kahuna's to have the target but i guess we shouldn't get carried away and presume it will actually be achieved :)

I am always slightly wary about these larger government contracts too as they invariably get ditched a year or two after inception when they are found not to be working as planned - or turn out not to be profitable - i would say though any money spent invested in prison education and rehabilitation support will probably be well spent providing they get the basics right IF actually helps offenders get back on track, an area where we probably woefully under invest as a country.

Looking at the current 2019 forecasts as ever the pe seems to be stuck below 10 so still decent value on that basis- perhaps thats always going to be the case for recruitment type businesses - but up to now STAFF seem to have done a very decent job getting the fundamentals right. I guess we are only a recession away from it all going TU.

laurie

Re: Dunelm (LON:DNLM) I am not sure that the 9% LFL headline figure at Dunelm is quite what it appears. Several websites have been consolidated into the main Dunelm website (www.kiddicare.com, www.worldstores.co.uk). It appears that the rise in revenue online (35%) is due to this--that LFL is the combined revenue of all of the sites...but I can't be sure from the wording in the RNS.

[from the RNS-
4. Non-LFL Online - Worldstores.co.uk, Kiddicare.com and Achica.com (these websites are now closed)]

Do you have an insight here, Paul, accepting that it isn't a small cap...? This isn't how most of us understand LFL. NB: half year revenue in store up 5%, online up 35%, but YoY group total is up 1.2%.
(no position)

gbjbaanb

Can you have a look at Stanley Gibbons (LON:SGI) today - its looking like it might not be quite the dead duck after all (which is nice, as it'd be a shame to see a company like this destroyed completely by an idiot).

their interim report from last month said:

"This report covers the first six months since the refinancing in March earlier this year. The previous 2 years have been mostly about fixing things and plugging holes - this work is largely complete now as one-off costs diminish and we start to rebuild from a cleaner slate. It would be nice to say that our problems are behind us but as the results show we still have a lot of work to do to achieve sustainable profitability. However, the more rewarding rebuilding phase has commenced, and some exciting work-streams have been initiated which it is hoped will unlock the full potential of our business. Technology improvements are high on that list."

old stamps and new tech... interesting.

Collector

Good call laurie.
group up 1.2% - share price up 11% ?
When they must have the same Brexit/UK worries as friday, and every other retailer has.

Ramridge

Re. Sosandar (LON:SOS)
Happy to be corrected, but last year the trading update was issued on 12 Feb 2018.
Also InvestEgate has a useful feature which shows forthcoming results, one week and one calendar month ahead. No mention of SOS.

John McArthur

Paul

Many thanks for the comment on Tracsis today and my pending transition. Very kind words and, no, I'm not fussed at all about lack of share price movement - quite the opposite.

As per the RNS, I will remain in post as CEO for at least the next 3 months if not longer but I'm happy to field any and all questions from your readers.

Best regards and catch up soon,

John

tony akram

Hi John ,

This is why I think you are fantastic CEO , I wish you every success in the future .
Regards

Tony

nicobos

£G4M (Gear4Music) it looks like Directors have started buying (albeit in modest amounts). Less risk of any imminent fundraising and demonstrates confidence in the business at the current price. Could we see a bounce from here?

Nicobos

At these modest levels, it could be a coordinated effort to try to indicate confidence rather than evidence that they really believe the fall is a major overreaction.

doug2500

Hi John,

Firstly, I hope you enjoy your calmer life when you step back (is it semi retirement?)

Secondly, My opinion on today's shareprice is it's a reflection on the way the changeover has been handled, the quality of the new CEO and the fact that you will remain with the company.

Thirdly, since you asked, a question: Rail related news seems to be more negative and more frequent these days. Does this offer opportunities for you, threats or just business as normal? Will a franchisee in trouble call the experts, or try to cut costs, even if short sighted?

Thanks

peterthegreat

Thanks for the coments on Churchill China Paul. The other point potential investors may wish to consider is whether our likely exit from the EU would affect Churchill's business owing to the potential loss of protection provided by EU anti-dumping regulations for ceramic products from China (China from China!). I believe that there have been calls for the UK to introduce similar regulations if we leave the EU. My opinion is that the impact on Churchill will be limited so I remain a holder.

Small Cap Value Report (Mon 7 Jan 2019) - SOS, RBG, TRCS, CHH, UPGS, EYE

Tracsis (LON:TRCS)

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Paul Scott

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