Small Cap Value Report (Thu 1 Mar 2018) - CPR, KOOV, IDOX, IND

1st Mar '18 by Paul Scott

54 comments 18104 reads

Hi, it's Paul here.

Thanks for the reader requests in the comments. I appreciate people taking on board my request to post a few comments yourself, about the company you're requesting. That makes the comments section much more useful. Unfortunately, most of the things people have asked me to look at at over £500m market cap, so not within my normal remit here.

Just to flag up that I've gone semi-nocturnal this week, so my reports have been late, and flimsy initially, but I've then done loads more work on them in the afternoon & evenings. So you might have missed some (even if I say so myself) quite good new sections.

Here is the link to Weds report which now includes quite detailed reviews on:
Safestyle UK (LON:SFE) , Avingtrans (LON:AVG) , Foxtons (LON:FOXT) , Science (LON:SAG) , and Croma Security Solutions (LON:CSSG) . I'm enjoying doing more detailed work this week, but it's very time-consuming.

Tuesday's report, link here, ended up covering:
Johnson Service (LON:JSG) , Swallowfield (LON:SWL) , dotDigital (LON:DOTD) , Image Scan Holdings (LON:IGE) , and Crimson Tide.

Mello Derby - 26 & 27 April 2018

My friend, renowned investor David Stredder is organising a wonderful mainly small caps focused investor event again. His previous 2 investment shows were absolutely brilliant, with about 1,000 investors converging to meet interesting companies, and hear interesting presentations from a wide range of top quality speakers (e.g. Giles Hargreave, Lord Lee, Leon Boros, Katie Potts, Gervais Williams, and many others). To get a flavour for what a terrific event Mello Derby 2014 was, please take a look at this short video. You might even spot some upstart doing a live SCVR, blink and you've missed it!

Anyway, 4 years on, and David is putting the finishing touches to Mello Derby 2018. More details are here. As you can see from the website, there are proper companies…

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willhampson

1st Mar '18

Interesting point, but I can't say I really see the read across for Boohoo.Com (LON:BOO). Koovs is an operator focusing on the Indian market and Sosandar targets a different - read more mature - audience than Boohoo. Quiz is in the same demographic as Boohoo, but online forms a small (but growing) part of its operation; its still primarily a bricks and mortar company.

I do, however, agree with you on the significant capital expenditures required for these sorts of businesses to thrive. The press is reporting that Boohoo needs yet another warehouse, but this is not necessarily a bad thing if the growth continues. I have a small speculative position in Sosandar (LON:SOS), but none of the others.

gsbmba99

Alpha Financial Markets Consulting (LON:AFM) looks interesting. There's a fairly significant overlap between the example customers in the interim results presentation and the list of significant shareholders in the IPO document. Janus Henderson (8.5%), Schroders (6.2%), Fidelity (5.1%), and M&G (3.0%) are all customer shareholders. One would imagine that they wouldn't be shareholders if AFM didn't provide valued advice.

Future growth to 3/19 and beyond looks potentially modest given historic growth rates and today's "ahead" announcement for 3/18.

I have a few.

ridavies

Re Redde (LON:REDD) thanks for that. This isnt double counting is it, or when Woodford went solo did these two split their holdings? Just a thought, probably an incorrect one. Seems a big shareholding for each.

beatingmrindex

I don't get the read across comment - you are taking a basket case company to compare to Sosandar (LON:SOS) - I have no idea about QUIZ (LON:QUIZ) though. Sosandar (LON:SOS) has been setup to take advantage of a perceived gap with products that are worn by popular people e.g. Fearne Cotton. You may be right that break even is further away than planned and may require additional capital.

Boohoo.Com (LON:BOO) is a monster, propelled by PLT and NG - that's been extremely successful. Apart from the eye watering valuation and significant growth in the past year or so - I remain bullish long term

Redrichmond

Robert Walters (LON:RWA) - The looming IR35 law change in the Private sector will hammer this one briefly and STHREE .(which fell off a cliff when IR 35 hit public sector ) Look out for it to be implemented in 2019 and for confirmation by the government very soon this year,, )

https://www.stockopedia.com/content/gathering-thoughts-on-robert-walters-236278/

This law effects how contractors (mainly High charging IT contractors) can work. Any recruiters whose majority income is made of UK contracting market , beware..

ricky65

"...It's always a very difficult decision on when to just cut your losses, and say enough is enough". It doesn't have to be. If you use a stop loss with your broker as soon as you've bought the stock, it's actually easy to protect your principle capital. If your stop is hit then your position is automatically sold for a small loss. No emotion, no hassle. Just cold calculated risk management.

FREng

Readers here may have a stake in the way that companies treat intangible assets. There is an open consultation on regulatory changes here: https://www.gov.uk/government/consultations/review-of-the-corporate-intangible-fixed-assets-regime

MiserableJacktPotato

Also, my understanding is Sosandar (LON:SOS) outsources pretty much everything. Distribution and warehousing is dealt with by Clipper Logistics (LON:CLG).
Due to the connections of the CEOs they get a lot of cut price exposure on daytime TV, their clothes being beamed into the homes of the target demographic, with b-list celebrities posting on social media their love of the brand (a bit like Boohoo.Com (LON:BOO) in this regard).
Additionally Sosandar (LON:SOS), as stated are targeting a different market, not just in terms of age but also economic sector, a much more affluent and quality conscious customer, more like Ms M&S or Ms John Lewis than Little Miss Primark.
The UK is well connected with good links both in terms of internet access and road infrastructure to enable easy deliveries.
With Sosandar (LON:SOS), the question for me is, are they going to try and grow organically using just the cash in the bank or are they going to make a cash call.
We really need to see some numbers from Sosandar (LON:SOS), I am tracking their social media presence and their number of followers is growing by 1% per week but the last few days has seen an acceleration - it's only a few days though so I will be watching the trend with interest. Tom Winnifrith stated he'd met the company and that they were doing better than expected. I am hoping they reached their £1M sales target for the year ending 31st March 2018 before 31st December and that would be a real plus in my eyes as they're expecting to sell £3.3M this year (31 March 2019)- another reason I am avidly watching their Social Media numbers...
In short, I don't think the read across from Koovs (LON:KOOV) is especially relevant to Sosandar (LON:SOS).

Well, it sounds simple, until an institution decides they like the company as much as you, trigger a bear strike, stop you out your stock, nab your shares and leave you with a 10% loss and no shares on a company that's now back to the price it was before the bear strike...

Funderstruck

Agreed, with ref to the well known & successful investor John Kay, he says every fraudster quotes such numbers , never rounded, no matter how far in the future.

jonesj

Boohoo is managed by people who appear to know what they are doing and several years of PROFITABLE growth demonstrate that.

Koovs operate in India, which immediately makes it high risk. Paul shows what a basket case this is, with the usual direct & entertaining analysis.
Burning through capital year after year, with deluded statements by the management.
Having gone from almost 200p a share to 4 p, anyone in it has lost almost 99% of their capital.

Albertos

I think the clue is in the word "intangible".

I ignore these assets and I get the impression that at least most of the Stockopedia community do as well.

The IFRS regulations we/RoW have adopted are actually making financial statements more and more unusable with their focus on value accounting adjustments which virtually make anything below the gross profit line meaningless. This is actually why most companies are more and more reporting EBITDA or "Adjusted" profit figures (quite often referred to non-GAAP) to get back as close to cash figures as possible. The accounting profession, I believe, is on a road to self-destruction where they will ultimately produce one set of figures which everyone, including the accountants themselves, ignore and companies will produce in the same document more and more "non-GAAP" information which the investors will use.

Phil

Sure, there are going to be many times when you get stopped out and a stock comes right back up. So what! Stop-loss protection is about protecting yourself from a major setback or, worse, financial ruin. It has nothing to do with being right all the time. You can always buy back in if it sets up again.

DJCP

Re: Stop-losses.

I'm sure I've read about opening prices/spreads being wide and therefore closing stop-losses. On some sites, the closing prices show strange bid/offer prices sometimes, and not sure if these would trigger a stop-loss.

I've been playing about with IG index demo trading site and like the idea of a trailing stop-loss, but unfortunately, this facility isn't available for my AJ Bell SIPP.

Yes, opening prices can fluctuate. I know on Halifax they don't activate stop losses until the first 5 mins of trading have elapsed (8:05).

I'm not a spread better so couldn't comment on IG or any of the others.

jules2k6

I could not agree more Ricky, once your in a stock it's all to easy to watch it wither. Much better to set a reasoned stop when initially purchased and forget it if it gets hit.

Damian Cannon

It's true that bringing IR35 into the private sector will cause a lot of upset for contractors who aren't really independent. However Robert Walters (LON:RWA) already derives 71% of its sales from outside the UK and overall 68% of its revenue comes from permanent positions. So I don't see this legislation as being hugely damaging to the company - which is probably why they haven't referenced it as a key risk in these preliminary results (although they might in the annual report). Worth keeping an eye on though thanks.

Damian

2nd Mar '18

I believe one of the investors emailed them to ask the actual qustion

1)What was the percentage of earnings /profit by UK contractors
2)How will the law change effect your business

Not a peep

Investor relations should be better than this.Can you or anyone try and contact them to get a statement to
put this to bed? This will tell you how good the management are at listening to
Investors, if they cant be bothered to reply dont invest

I had SOM (Somero) and BUR (Burford capital) both reply to my questions on another matter via investor relations. With SOM the 2 directors actually set up a call for me.

Try emailing
investor.relations@robertwalters.com.

I've dropped investor relations an email asking about the IR35 changes. If I get anything back I'll add it here.

carmensfella

With regards to Mello2018.....Many thanks to Paul for an excellent review of what we try to achieve at these big investor events and do come along and join us if you have never been to one before and wonder what it will be like....you will not regret it....total investor heaven especially if you like seeing quality speakers and small to mid sized growth companies.

David

Small Cap Value Report (Thu 1 Mar 2018) - CPR, KOOV, IDOX, IND

Mello Derby - 26 & 27 April 2018

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Paul Scott

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