Small Cap Value Report (Mon 8 Jan 2018) - HAT, SYS1, AVG, MTC, CRW, TST

Monday, Jan 08 2018 by

Good morning!

Lots of trading updates today, so I will prioritise the companies I'm familiar with and which are most heavily requested in the comments.

I'm planning to start with:



(Please note that I own shares in H&T)


  • Share price: 338p (+3.5%)
  • No. of shares: 37.4 million
  • Market cap: £126 million

Trading Update

Another positive update from this pawnbroking group which I have held in my portfolio since 2013.

Profit before tax for the full year will be ahead of current market expectations.

The Group has delivered another good performance in its lending operations.  The pledge book increased 11.6% to £46.1m (31 December 2016: £41.3m) as a result of the higher gold price, the concession format and an increase in loans on quality watches.  The Personal Loans book has increased by 94.7% to £18.3m (31 December 2016: £9.4m) as a result of the expansion in our longer term, lower interest rate loan product.

Like its smaller rival Ramsdens Holdings (LON:RFX), H&T realised there were major opportunities in products related to pawnbroking. As you can see, its personal loans offering has taken off very well. I'm hoping to see it keep growing in size and maybe even start to rival the pawnbroking pledge book in the years to come.

Jewellery retailing is reportedly also going well, including through the development of click-and-collect online sales.

Finally, the outlook statement is confident. CEO comment: "Demand for our products remains strong and we look forward to the future with confidence."

You can see for yourself the evolution of H&T's earnings forecasts over the past year:


The updated EPS forecast now is likely to be pushing 30p, based on increasing another 7-8% from here.

Checking some gold/GBP charts, the average price of gold in 2017 was indeed materially stronger compared to 2016.

H&T has a lot more going for it, though, than just the price of gold.

The personal loan product (see here) is very competitive for that segment…

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All my own views. I am not regulated by the FSA. No advice.

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H&T Group plc is a non-trading holding company. The Company provides a range of simple and accessible financial products tailored for a customer base, which has limited access to, or is excluded from, the traditional banking and finance sector. Its segments include Pawnbroking, which is engaged in providing secured loans against collateral (the pledge); Gold Purchasing, which is involved in buying Jewelry directly from customers through its stores; Retail, which is involved in retail sales of gold and jewelry, and the retail sales are forfeited items from the pawnbroking pledge book or refurbished items from its gold purchasing operations; Pawnbroking Scrap, which comprises various other proceeds from gold scrap sales other than those reported within Gold Purchasing; Personal Loans, which comprises income from its unsecured lending activities, and Other Services, which comprises third party check encashment, buyback, prepaid debit card product and foreign exchange currency services. more »

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System1 Group PLC, formerly BrainJuicer Group PLC, is a United Kingdom-based company, which is focused on marketing and brand consultancy, with proprietary market research and advertising solutions grounded in the principles of behavioural science. The Company’s services include System1 Agency and System1 Research. System1 Agency is advertising agency, that creates advertising proven to translate emotion into profitable brand growth. System1 Research produces the FeelMore50, an annual ranking of the world’s 50 TV and digital ads. The Company offers its client create 5-Star, fame-building communications. The Company operates in the United Kingdom, the United States, Continental Europe, Brazil, China and Singapore. more »

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Avingtrans plc is a United Kingdom-based company, which is principally engaged in the provision of engineered components, systems and services to the energy, medical and traffic management industries around the world. The Company operates in energy and medical segment. The energy and medical segment is engaged in the designing and manufacturing of machined and fabricated pressure and vacuum vessels and process plant and equipment for the power, oil and gas and medical markets. The energy and medical segment is also engaged in the designing and manufacturing of fabricated poles and cabinets for roadside safety cameras and rail track signaling. The Company's geographical locations include the United Kingdom, Europe, North America and Rest of World. The Company's subsidiaries include Crown UK Limited, Stainless Metalcraft (Chatteris) Limited, Composite Products Ltd, Hayward Tyler Ltd and Peter Brotherhood Ltd. more »

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74 Comments on this Article show/hide all

rhomboid1 8th Jan '18 55 of 74

In reply to post #294553

For those who missed GAME Digital (LON:GMD) , (or saw the trade too early , I bought in Q4 2016 iirc & scalped a quick 20% inc dividend in Q12017) there is a vastly larger US quoted but international comparison which is Gamestop Stock Rank 92 P/E sub 6 divi 8% actually growing (3Q’s on the bounce)and doing stock buybacks too, interestingly they have a fast growing collectibles division that is offsetting declines from online migration, there’s a November presentation here;
I hold a lot and it looks standout value to me epic is NYSE GME

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aflash 8th Jan '18 56 of 74

In reply to post #294403

Although you have made some good points your suggestions lean towards making Paul and Graham's SCVR a tip sheet. To my mind that is a danger. This is a site where data is provided so you can make your own decisions.


P.S. Just want to try this Edit function kindly pointed out.

Wow! Works!

There have been some good replies: 'Good' and 'Bad' being relative and changing places for the same company, ROCE based on TTM, importance of subtle signs of changes, so worthwhile discussion.

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ken mitchell 8th Jan '18 57 of 74

Strongly agree re Paul and Graham covering bad companies too. I don't and won't hold any share they give a strong thumbs down and on rare occasion of holding one, sell at once. With so many quality companies to invest in why hold on to potential big losers? I'm not bothered if the share price of the odd bad one subsequently goes up. It's pretty obvious that the higher the quality of our portfolios the greater the chance of them doing well. Also I find the analysis from Paul and Graham so informative and educational, including the way they comment on stock rankings of some of the shares covered. And some of the comments are such good quality too.

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Graham Ford 8th Jan '18 58 of 74

"So I wonder how many people might be tempted to catch the falling knife at Mothercare (LON:MTC) , Debenhams (LON:DEB) or Carillion (LON:CLLN) for example? Or overpay for shares in companies which are inflating their profits? I think it's very important that we assess them impartially & logically here, and flag up the risks."

I think this is very important. All sorts of opinions fly around the board which is healthy. But often the opinions are based on misunderstandings.

e.g. from their comments some people have the impression that Debenhams are a company stuck in the past when in fact they have a very successful digital arm, if you go by sales revenue. By Gross Transaction Value the on-line side of Debenhams is bigger than BooHoo's revenue despite BooHoo's fantastic growth. Some people say that the consumer wants experiences rather products, but if you look at what Debenhams is trying to do at least in as far as is articulated by their strategy they are trying to embrace that. Others have made fair mention of the legacy from the PE days and long leases.

I think it is very valuable when Paul and Graham take a look at all these different situations as they often manage to cut through the numbers to see where the financial problems or positives lie and that is as useful for potential turnaround situations as for high flyers.

I held some Debenhams (LON:DEB) for a while to see if the CEO from Amazon could affect a turnaround. But it became clear that there are so many legacy issues it wasn't going to happen soon enough and so sold out.

However, if this got bad enough to go into administration I could see the on-line business coming out the other side, shorn of the physical stores, as a nice viable business.

One way or another, I don't think ignoring companies simply because the prospects for them right now is particularly helpful.

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Cisk 8th Jan '18 59 of 74

In reply to post #294523

Absolutely agree that it’s a very good thing to look at both good and bad companies. Read through across companies in the same sector can help cut potential losses and, of course, identify opportunities.

It’s taken me years of investing to realise the way to make money is to minimise losses and run your profits. Such a simple concept but harder to put into practice! It’s been several years since I took a total loss (think silverdell was the last one...) and these reports help a lot in this regard!

Also I periodically look through my share sales, look at what’s happened since I sold, remind myself why I bought and sold in the first place, and hopefully learn a thing or two! IMO one of the best things about investing is you never stop learning.

Graham, thanks for the comments on Avingtrans (LON:AVG). Price has been weak of late, compounded by a lack of announcements on contracts from the company after the recent acquisition. And the board giving themselves options hasn’t helped matters. However they have a very good track record at spotting opportunities, building a business and selling it on favorable terms. I think the HYT acquision will be the same, hopefully time will show they got a bargain. It was a sound business hampered by a lot of debt.

Paul and Graham keep up the good work, always appreciated and always my first read of the day (especially now I’m 8 hours behind on west coast USA!)

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seadoc 8th Jan '18 60 of 74

In reply to post #294378

Happy New Year Graham,

Thanking for looking at Avingtrans (LON:AVG) Stainless Metalcraft was one of the first shares I bought, it would have been end 1987 after the "crash" They built the stainless bits in MRI scanners, which to be superconducting, are cooled by liquid helium to near absolute zero. Helium can find the smallest hole so you need to be a good welder! They were good metal engineers but perhaps not such good financial engineers and became part of Ferraris Group. Avingtrans (LON:AVG) were a shell company that bought a company (Jena something, was East German remains of Jenaer Gewindetechnik GmbH, previously Carl Zeis) and they bought various bits off Ferraris including Stainless Metalcraft (perhaps even all?) from memory they did the fiddly bits for the RB211 fuel injection system. About 12 yrs ago I did a comparison between boards of AVG and a software engineering company. One had 3 times more higher degrees and the other paid 3 times the salaries. I moved the money from the software company into Avingtrans (LON:AVG) Avingtrans (LON:AVG) selectively grew the aerospace division until in 2016 it sold off the aerospace (much composite rather than stainless) to PE. It had a pile of cash and returned half to investors and used some of the other half to buy Hayward Tyler (LON:HAYT) a specialist in pumps in nuclear reactors (not easy to send a man in to change a part!).

So the board of Avingtrans (LON:AVG) seem to have very good engineering backgrounds, rather than just accounting backgrounds, but have none the less gradually and directedly built up, sold off, swapped and "engineered" an interesting, very high end, business between nuclear and medical fields. I wish that I had topped up at 180p last month (well at least replaced the shares I tendered at 200p in November and was planning to buy back).

Well worth looking into, I hold and still looking to top up.

Regards, Seadoc

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Cisk 8th Jan '18 61 of 74

In reply to post #294603

Ken, Paul and Graham provide a superb service with the daily reports, often entertaining and always informative, and the reports have helped me a great deal over the years.

But I guess one of the ways they have made money over the years is to go against the herd, buying unloved companies, when others wouldn't.

Personally I would never not buy a company because they gave it a strong thumbs down, or sell it if I already owned it; conversely I wouldn't go ahead and buy, just based on their positive commentary. I do however use their comments as a pointer for further research, as I do for stock ranks. However some of my best investments have had low stock ranks and, on the surface, would appear not to be of great quality.

But each to their own, the best thing for me about the site is that it's a community, you develop your own investing style and have some fun while doing it!

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purpleski 8th Jan '18 62 of 74

In reply to post #294333

Hi IGotPoesjacket

I agree and I like the commentary on “bad” companies and good. A good example was the on going commentary on Globo by Paul a couple years back, without which a lot of people here, I think, would have lost money.

As to Fevertree Drinks (LON:FEVR) IMO when you look their numbers, what they have done in five years (profits from £2m to £38m), there flexibility (they only employ 40 people), the managment and the addressable market, I do think that they are worth the PE but that is what makes a market.

I am long (very) Fevertree Drinks (LON:FEVR)


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Graham Neary 8th Jan '18 63 of 74

In reply to post #294348

Hi Richard - thanks for suggesting Touchstar (LON:TST). I've written up a few sentences on it. As you say, it's a bit small for us here.



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jonno 8th Jan '18 64 of 74

In reply to post #294378

Hi Graham

Thank you very much for your insight. As has been mentioned the share is expensive on a superficial PE basis, but operates in niche and very specialist areas. It is also financially sound and given past performance has adept management. In a reasonable time frame I think that the current share price will look cheap. As you will have gathered I hold Avingtrans.

Thank you and Paul for your daily reports that I find invaluable in helping to inform my investment decisions.

All the best


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ken mitchell 8th Jan '18 65 of 74

Cisk. I agree with most of your comments, especially so re going against the herd. The best time to buy is often after big falls if then most of the bad news looks priced in.

e.g I bought back Revolution Bars around £1 based partly on Paul's comments but I also always do my own research including Stockopedia figures and info before buying.

I also agree re some low ranking shares. E.g stockopedia marks/figures for early stage companies with great promise are likely to be low.

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underscored 8th Jan '18 66 of 74

In reply to post #294698

Do you have any data to support your thesis? Are all falls equal? How do you know the bad news is over?

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Lordyjordy 8th Jan '18 67 of 74

With everything going on line, what will happen to all the high street shops.......

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Paul Scott 8th Jan '18 68 of 74

In reply to post #294588

Hi rhomboid1,

Many thanks for flagging $GME - it looks quite interesting - very low PER and very high divi yield.

Looking at the figures, I'm not so keen on its balance sheet. At Jan 2017 it seemed to have $669.4m cash, and $815m in long-term debt, so overall a net debt position. This contrasts with GAME Digital (LON:GMD) which has a large net cash position, not far short of its own market cap (especially after recent £19m disposal).

Revenue streams at $GME look more diversified though, as you say. Also I note from the presentation that you linked to, it has short leases, so can exit from loss-making stores in a similar way to GMD's even shorter leases. I don't know how commercial leases work in USA, but would imagine not too different from UK.

The Stockopedia computers also like GameStop - check out all this green!!!


Anyway, thanks for flagging it up - looks potentially interesting, I might pick up a few on a spread bet.

Regards, Paul.

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Paul Scott 8th Jan '18 69 of 74

Smashing discussion here today, lots of interesting points made, thanks to everyone.
I like the idea of Stockopedia becoming the heir to the Motley Fool bulletin boards (now sadly closed down), for intellligent, troll-free discussion. We used to have some wonderful discussions on TMF, and that was where I learned so much to get me started as an investor. There were many experienced investors there who were happy to share their wisdom & insights with the next generation. So it's nice to see that many TMF folk have migrated here!
Regards, Paul.

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davetparkes 9th Jan '18 70 of 74

In reply to post #294763

its also fair to say many TMF people have also migrated to TLF (the lemon fool) site.

i find this stocko site excellent also .

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cig 9th Jan '18 71 of 74

In reply to post #294763

Motley Fool forums live on there:

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Gromley 9th Jan '18 72 of 74

In reply to post #294763

So it's nice to see that many TMF folk have migrated here!

Indeed Paul, and without wishing to swell your head too much, I think you have a lot to do with that.

I became a bit "dormant" sometime before TMF closed it's doors, but I did keep up with your blogs from time to time and had you not moved here I might not have found stocko - I tend not to "do" subscription sites.

As a couple have mentioned, some of the more "social" aspects of TMF have migrated to lemonfool - although I joined, I have been less active there, so I don't know they quality of their stock analysis, but  I have seen some good stuff on more general personal finance (and more).

I will be a bit quieter (probably) over the next few weeks as I'm dealing with a family bereavement - but will still be lurking and maybe chipping in a little.

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Paul Scott 9th Jan '18 73 of 74

I didn't realise the lemonfool is actually live. I assumed it was just to save the TMF archives from disappearing. Anyway, for me that TMF chapter is closed, albeit with many happy memories!


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Damian Cannon 10th Jan '18 74 of 74

In reply to post #295413

Curiously enough the one thing that lemonfool _doesn't_ have are the TMF archives! At the point of closure there simply wasn't enough time to arrange a transfer and I assume the TMF boards have been deleted entirely.

Fortunately the waybackmachine was pressed into service to archive as many boards as it could and I believe that it captured a large number of posts.



Blog: Ambling Randomly
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About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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