Small Cap Value Report (Mon 8 Feb 2021) - OTB, FCCN, BOO, LOOP, UPGS, TRX

8th Feb '21 by Paul Scott

143 comments 20229 reads

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

Timing - TBC

Agenda -

On The Beach (LON:OTB) - Trading Update - from Friday last week, which I looked at over the weekend.

French Connection (LON:FCCN) (I hold) - Mike Ashley ( Frasers (LON:FRAS) ) dumps his entire 25% stake - who's bought it then? We don't know yet.

Boohoo (LON:BOO) (I hold) - confirms that it is buying Arcadia brands Wallis, Dorothy Perkins, and Burton out of administration, with completion of the deal set for tomorrow, 9 Feb 2021.

Loopup (LON:LOOP) (I hold) - in line trading update, but a big deterioration in H2 vs H1

Up Global Sourcing Holdings (LON:UPGS) - another strong trading update

Contribution from Jack :

Tissue Regenix (LON:TRX) - Trading update for FY 12/2020

Mello Monday tonight

The popular investor evening on Zoom is back.

I’ve been roped in to comment on the BASH session at the end, to give Jack a break!

One of the companies presenting is Scs (LON:SCS) (I hold) so I’m looking forward to that one. It’s a boring value share, but looks well set to resume paying good divis in future, in my view. So I think this could be one for readers to consider researching, as a long-term income share, e.g. for SIPPs in drawdown. The share price never seems to go anywhere much, so probably not of interest to people who like to trade in & out of things. Anyway, see what you think of management this evening.

David Hornsby of Ideagen (LON:IDEA) is retiring soon apparently. Investors that backed him following his first Mello presentation would now be 25 times the richer, and he's entertained us along the way too! What next? David will hopefully share his thoughts on the next entrepreneurial journey with Mello viewers and also reveal how he sets about delivering amazing returns for investors.

You can see the full programme and recordings of some previous shows here

https://melloevents.com/mellomonday-8th-february-2021/

Discount code for Stockopedia subscribers: MMStocko21

On The Beach (LON:OTB)

355p - mkt cap £559m

Trading Update

On the Beach Group plc (LSE: OTB.L), the UK's leading online retailer for beach…

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AJC0504

8th Feb '21

Angle (LON:AGL)

Damm-old man syndrome

Sorry

Boon

As I mentioned in my comment on Saga (LON:SAGA) on Friday's SCVR, they have "gamed the KPI" to show lots of forward bookings for their first two cruises.

They offered cancelled cruisers two choices:

Full refund, you get back 100% of your money
Rebook to a later cruise, get 111% (10% discount on rebooked cruise). AND still have flexibility to change dates, get future travel voucher, etc

Of course if you do this you get lots of people choosing Option #2 - rebooking for the first few cruises. Who wouldn't turn away an option get 10% off, but still get the choice of a refund or further changing their dates?

The proof in the pudding is, when we get to 1-2 months out from the first SAGA cruises in May and June, how many further changes and cancellations do we get.

Gareth C

Amazon just pass the tax down the line to the sellers by increasing the merchant fee % they charge them (already happened last year with 0.3% increase). This then gets passed onto the consumer. Shit always flows downhill.

It would have been silly not to at 0.25p per share and 70+% discount to the prevailing share price at the time?

If I had the privilege to participate in the Tissue Regenix (LON:TRX) fundraising at such a deep discount, I would have done the same!

WhaleHQ

It seems as though their plan is to operate the Topshop brands from the asos site. I'm not sure why they aren't maintaining standalone websites/ apps etc I think it's a bit like boarding up a few display windows in a shop personally.

timarr

Yep, that's right. I listened to the analyst call and their position was (roughly) that the ASOS website gets a billion hits year and the Topshop websites about 50 million (which tells you why Topshop went bust when their stores were forceably closed), so the latter is a rounding error for the former. They kept the social media team.

It did seem a bit head scratching to close the existing websites instantly, but that's what they've done. They've just stuck a redirect notice on the old Topshop website.

Dojosan

Graham covered Duke Royalty (LON:DUKE)

What's the implication of re-shoring and removing subcontracting, on purchase prices from its Leicester suppliers by Boohoo (LON:BOO) ?

On cruises to nowhere - is there lots of appeal? I'm yet to be convinced that Saga (LON:SAGA) will see the same demand if its two cruises in May are revised to cruises to nowhere, without ports in the itinerary.

Before COVID there were cruises to nowhere - but they were mainly booze and party cruises, and limited in duration (2-3 nights). But people might be desperate enough now to cruise again, so maybe even a cruise to nowhere would appeal. Don't know.

Not just ESG concerns holding Boohoo (LON:BOO) back but also:

Spectre of some sort of online tax
Leicester supply chain disruption - no subcontracting any more. Temporarily disruption? Higher costs?
FCA investigation into BNPL, of which Boohoo uses in the form of Clearpay
Higher returns rate in the coming year, as the returns rate normalises. Headwind on margin
Management risk being stretched with Debenhams relaunch, now also with Dorothy Perkins brands. Acquisition indigestion is a real thing for many companies.

The tailwinds are of course:

Return of partying and socialising boosting sales
Debenhams £££
Dorothy Perkins brands £££
USA sales growth continuing
Institutions buying back into Boohoo

They are also able to offer keener prices than normal OTAs like Expedia.

Expedia's "package" is just selling you the flight and hotel at the same time. They give you a small discount, out of their regular commissions for the publicly available list price of the flight and hotels on their website.

What package providers do is negotiate special rates on the flights and hotels, cheaper than the list price on OTAs.

Why would suppliers give package providers lower prices? Because the airline or hotel forbid the package provider (eg On The Beach) to sell the flight or hotel on its own. So customers never see the discounted "price" compared to the list price, because in a package you can't tell how much of it was flight, and how much was hotel.

I'm probably not explaining this well, but a search on google for opaque pricing in package, hotels etc will explain it better!

This is also why British Airways does British Airways Holidays, sometimes much much cheaper than buying separately - because they are effectively able to sell excess seats cheaper, without having to lower prices on the main British Airways website for the flights-only bookings.

gus 1065

Looks as though MA’s 25% holding in French Connection (LON:FCCN) has been picked up in a single bloc by a Mr Apinder Singh from Newcastle.

https://www.stockopedia.com/sh...

No immediately obvious link apparent to the two bidders already disclosed so potentially a third player or perhaps just a HNW punter with access to Mike Ashley’s ear wanting to take a stake in the game. Company search suggests interests in clothing/retail so possibly more than just a speculative punt. Time will tell.

GrahamF

I don’t understand what you’re saying I’m afraid.

Opaque pricing as I understand it is when the customer is buying a package holiday that doesn’t specify which hotel will be provided. The customer only finds that out after the booking has been made.

So, many UK flights are now with airlines like EasyJet and Ryanair (and others who will just sell a flight) that it is very often easy to check what the cost of the flight is on its own.

It’s also easy to compare the price of the package bought through Expedia with say the same bought through Tui.

Albertos

Notice Tesla got publicity today for buying $1.5bn of Bitcoin - and sent it rocketing.

They also mooted accepting payment for their cars in Bitcoin.

This is what I don't understand.

The powers that be will warn about Bitcoin investing but won't get involved - caveat emptor. If people start actually buying things with Bitcoin then the Money Laundering laws come into play - as far as I understand, as a fundamental principle, the source of Bitcoin funds are untraceable. Therefore surely the DoJ in the US will start investigating Tesla and probably fine them - $1.5bn seems like a good number.

Bemused

Phil

mark1308

9th Feb '21

What the largest position to everyone else ????

UK_Investor_8888

Re Tesla Bitcoin

This sounds like a crazy move from a James Bond villain who fears his game is up. Its either genius or insanity.

Checklist:-

- Exotic cars
- Exotic locations
- Space ships
- Insane AI
- Masterplan
...

Snoo

Not quite.

Actually airline tickets is a complex subject and there exists many fare 'buckets' into which availability is placed.

Such buckets allow the management of revenue. When you see the price of a flight jump, it most likely means the tickets allocated to that fare code have gone, and the next ones are more expensive.

The fare buckets allow different rules to be created. For example a ticket involving a weekend stay could price out cheaper than one that doesn't, because availability of these tickets are from different buckets.

Some fare codes are also allocated to the online travel agents and come with different terms and prices; some can be allocated to their own holiday sites. That give rise sometimes to 'arbitrage', but this is not that common and needs a combination of the underlying flight becoming expensive and also the cheap flights in the holiday bucket not selling out.

What I don't get is where this leads into any competitive advantage for On The Beach. The rest of the online sites can access the same bucket too if they want to offer the same products. If you want a flight/hotel to Tenerife, there must be dozens of companies you can go to for it.

Their P/E is on a par with something like Ryanair, which strikes me as a little absurd considering one has a moat and the other one does not.

Maniacal laugh?

Roy Edwards

10th Feb '21

As the week progresses, I am looking at the divergence in updates of On The Beach (LON:OTB) and Saga (LON:SAGA) where it appears the former is recognizing the issues around Government announcements relating to Foreign travel and the latter has yet to take this into account. Saga (LON:SAGA) is most definitely rolling over the 2020 bookings but clearly the effect of loosing travel time through to June currently is just recirculating 'old money'. They have additional sources through Insurance etc but, for the travel sector, new additional bookings will be very much required. The fact that #SAGA have said that Customer retention across both businesses remains high; the average proportion of Cruise guests who have re-booked rather than take a refund stands at an average of 69% through the travel suspension period, but rose to 86% more recently, showing the pent up demand for Cruise amongst our guests who will benefit from the first round of the vaccine roll out has not taken account of the need for additional new monies. Also, the vaccine roll out in other countries is very much lower at the current time. Hopefully, this will accelerate because this will add to the delay in opening up the sector. BUT, here is what has not been picked up by that #SAGA update. MANY of their customers whilst eager to return to the seas and other holidays rolled over their monies from 2020, re-booking 2021. Those roll overs between now and June are themselves being cancelled. We have spoken directly to the Covid weary agents dealing with this. Our view is that #OTB has given a more realistic perspective of what is ACTUALLY happening. We continue to hold off from investments in this area as we research fully all information available.

Hi Roy

Our view is that On The Beach (LON:OTB) has given a more realistic perspective of what is ACTUALLY happening. We continue to hold off from investments in this area as we research fully all information available.

Who are "we"?

Anyway, independently of this I sold both On The Beach (LON:OTB) and Saga (LON:SAGA) today. There are too many uncertainties around the rest of 2021 to be comfortable in the overseas travel sector.

Small Cap Value Report (Mon 8 Feb 2021) - OTB, FCCN, BOO, LOOP, UPGS, TRX

Mello Monday tonight

On The Beach (LON:OTB)

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Paul Scott

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