Small Cap Value Report (Thu 11 July 2019) - SOS, VCP, SOM, MMH

Thursday, Jul 11 2019 by

Good morning! 

I added a section on Ten Entertainment (LON:TEG) late last night to yesterday's report. That report now includes Superdry (LON:SDRY), Equals (LON:EQLS), Alpha FX (LON:AFX), and Ten Entertainment (LON:TEG).

For today, we have:

Sosandar (LON:SOS)

  • Share price: 14.5p (pre-market)
  • No. of shares: 163 million (after Placing)
  • Market cap: £24 million (pro forma)

Placing to raise £7 million

Paul is going to chime in on this, but here are the facts:

  • Conditional placing at 15p (less than half of the share price at which it raised money last year).
  • Placing shares will represent 28.7% of enlarged share count. Meaningful dilution for existing holders, therefore.
  • General Meeting on 29 July to confirm the deal.

Analysis - It's not a huge surprise that Sosandar needs more funds, since cash had reduced to £3.6 million as of March 2019, and it is going to make loss this year while at the same time trying to almost double revenues.

Paul himself put it to management last week that "cash looks set to run out in early 2020", and received a reply he described as "generic".

It must be difficult for management teams in situations where we can see that they need more money, but they need to put on a brave face on things and give nothing away about conversations which might be happening in the background.

While I'm an outsider in this situation, I suspect that it was best to get this Placing away sooner rather than later. It's better to do it before the need for cash becomes desperate. Also, after a disappointing Q1, the direction of least resistance for the share price was downwards. Diluation at 15p might sting, but dilution at 8p after a weak Q2 would be far worse.

The size of the Placing is also quite interesting. £7 million should keep the wolf from…

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

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Sosandar PLC, formerly Orogen PLC, is a United Kingdom-based company that operates an online women’s wear platform. The Company’s clothing categories include dresses, jackets and coats, knitwear, shirts and blouses, tops, skirts, trousers, jeans, leggings, footwear, leather and suede, occasion wear, work wear, autumn trends, velvet and holiday shop. Its footwear products include Pewter Metallic Chelsea Boot, Red Leather Ankle Boot, Velvet Cylinder Heel Ankle Boot, Black Leather Stud Detail Ankle Boot, Black Suede Closed Toe Mule, Grey Velvet Court Shoe With Jeweled Brooch, Black Suede And Pewter Metallic Court Shoe, Black Leather Front Zip Ankle Boot, Leopard Print Leather Chelsea Boot, Steel Blue Leather Snake Print Ankle Boot And Black Suede Knee Boot. It also offers latest edit of day-to-night dresses, on-trend separates, luxe leather and outfit-topping shoes through its platform. more »

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Victoria PLC is a designer, manufacturer and distributor of flooring products. The Company's principal activities are the manufacture, distribution and sale of floorcoverings. Its segments include UK and Australia. It manufactures wool and synthetic broadloom carpets, carpet tiles, underlay and flooring accessories. In addition, it markets and distributes a range of luxury vinyl tile (LVT) and hardwood flooring products produced by third-party manufacturers. Its product offering in the United Kingdom ranges from both crafted, woven Wilton carpets to Tufted carpets in a myriad of fashion colors and styles. Its stock range offerings cover saxonies, tonals, velvets, twists and natural loop pile styles for residential use. The Company supplies its products to the mid to high end residential market and contract sector both in the United Kingdom and overseas. Its subsidiary, Munster Carpets Limited, is engaged in the manufacture and distribution of floorcoverings for the contract market. more »

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Somero Enterprises, Inc. is a manufacturer of laser-guided equipment. The Company's equipment automates the process of spreading and leveling volumes of concrete for commercial flooring and other horizontal surfaces, such as paved parking lots in North America. The Company's products include S-22E, S-15R, S-15M, STS-11M, S-840, S-485, CopperHead XD 3.0, Mini Screed C, PowerRake 3.0, 3-D Profiler and SiteShape. Its Somero Floor Levelness System monitors Laser Screed performance, operator performance and reports alert percentages of issues. The Somero SiteShape System allows for grade shaping automatically using users' motor grader, dozer or other grading machine. The Somero 3-D Profiler System allows automatic paving of contoured sites using a Somero Laser Screed equipment. The CopperHead XD machine encounters applications, such as chaired rebar, low slump and poor subgrades. The Somero eXtreme Platform (SXP) allows users use their Laser Screed equipment. more »

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  Is LON:SOS fundamentally strong or weak? Find out More »

50 Comments on this Article show/hide all

andrea34l 11th Jul 11 of 50

Arcontech (LON:ARC) (the provider of products and services for real-time financial market data processing and trading) states that annual profit for the year is expected to be comfortably in line with market expectations. Unaudited net cash at 30 June 2019 amounted to £4.05m (£3.2m).

In-line AGM update from Speedy Hire (LON:SDY) with Q1 revenue (pre disposals) +5.9% - hire and services revenues grew by 1.2% and 13.4% respectively.  Revenue from SME customers grew strongly, up 27.5%.Asset utilisation rates increased to 56.8% (55.7%).  Net debt at 30 June 2019 was £91.6m, broadly unchanged from year end.  ROCE for the 12 months to 30 June 2019 was 12.1% (11.8%).The Group anticipates delivering a full year result in line with the Board's expectations.

Scapa (LON:SCPA) announces that Scapa Tapes (North America LLC) files a complaint against ConvaTec for breach of contract with regard to a Master Supply Agreement (MSA), claiming damages in excess of $83.81m.Scapa Group/Tapes have also filed a motion to dismiss the complaint filed by ConvaTec with regard to the MSA. Why are ConvaTec making a complaint??

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mojomogoz 11th Jul 12 of 50

In other news....I think that the lack of response in volume or price to Somero Enterprises Inc (LON:SOM) pre interim trading update is interesting given that it is quite heavily followed and liked by private investors. What's the interpretation bulls and bears?

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simoan 11th Jul 13 of 50

In reply to post #491851

In other news....I think that the lack of response in volume or price to Somero Enterprises Inc (LON:SOM) pre interim trading update is interesting given that it is quite heavily followed and liked by private investors. What's the interpretation bulls and bears?

That's because it doesn't tell us anything new, nothing has changed. Today's update is just the scheduled mid-July trading update as opposed to the profit warning a month ago.

All the best, Si 

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ben matthew 11th Jul 14 of 50

Could you look at £INDV ? UP 33% today after raising FY guidance

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mojomogoz 11th Jul 15 of 50

In reply to post #491861


Thank you for your insight.

You help prove that saying nothing does have content

All the best, mojo

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Zipmanpeter 11th Jul 16 of 50

Graham has this right. If the extra product/marketing spend results in a new sales forecast of say £11+Mn this year and £20+Mn next, with greater resilience as well, then well done Sosandar (LON:SOS) Mgt (albeit off weaker trading in last 6M - hence 15p placing). If forecast remains around £9.5Mn, then it is a ‘stealth downgrade’ and I will feel I was mis-led at Finals time and mgt (and broker) credibility will be shot.

Shore capital's credibility is already paper thin as Paul reported 19/4/19 that "I should probably rely on the Shore Capital forecasts more, as their analyst has access to the detail which I don't. The latest house broker note shows net cash of £3.6m at 31/3/2019, and has this dropping only £0.5m this year, to £3.1m net cash at 31/3/2020. That seems a bit ambitious to me, but time will tell."  

I (still) hold as I like the Sosandar (LON:SOS) business and strategy including their plans announced with the placing to widen visibility of the product/brand through 3rd party sites.  If loyalty and % margins are good, then they need trial and revenue above all else.  

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simoan 11th Jul 17 of 50

In reply to post #491871


Thank you for your insight.

You help prove that saying nothing does have content

All the best, mojo

I don't understand the need for the personalised comment? Yes, to me it was stating the bleeding obvious and I only posted to help you. The only good news is that in the past month things have not got worse, which given the weather related nature of the warning should not come as a surprise to any US weather watchers.

All the best, Si

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rmillaree 11th Jul 18 of 50

Somero Enterprises Inc (LON:SOM) - i did waste 90 seconds of my life checking that the same numbers were actually the same and they are.

question - is an as it was update good or bad ?- i guess as trading was poor the lack of further worsening is good - but that was to be expected probably based on the bad news being weather related more than anything els and such a short period of time between then and now news wise.

I have just notice though the stockopedia downgrade in numbers for this year and next in the last month are somewhat chunkier than i would have guessed - 14% this year profits wise and 13% next year and EPS down similar amounts. I don't recall the news being quite hat bad - but i may have been lulled in to thinking things were only 10% down by by their use of the dreaded EBITDA - my mistake there i guess - presumably the same number comes off the bottom line as the EBITDA line leading to larger % fall - so although its as you were i have a slightly negative take on these numbers - i was / am still very tempted to top up though still though if the price is right and we aren't far away from the price being right here.

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xcity 11th Jul 19 of 50

re Sosandar (LON:SOS)

The placing must have been planned for a while. With the results would have been best, but I guess there was some argy-bargy over the price or amount.

Suggests that the previous statement 'we have been able to respond quickly to external forces, making the prudent strategic decision to hold back funds to invest for customer acquisition in future months where we expect to achieve a better return on marketing spend' should be reinterpreted as 'we realised we were running out of money and reduced spending until we had got some more'.

From an institution's point of view they were locked in anyway, subscribing reduces their break even price and it defers any possibility of having to write the investment off. No-one's going to criticise putting money in at the market price.

All-in-all, I'm content not to be a holder.

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mojomogoz 11th Jul This post is under review

In reply to post #491896


I'm guilty of some rough and tumble...but so are you. So I'm not sure why you are now pulling victim card on me.

I've had two interactions with you and the one before this was when you criticised my inanity re surprise surprise Somero Enterprises Inc (LON:SOM) - my guilt last time was to offer an analysis "...that could be made about any stock. Give me your biggest holding and I'll show you." (Or words like that).

Now what is the content in all this content rich discussion? One bit I'd guess is that you have a Somero position and you are nervous. I too respond to people that criticise stocks I own but with views and facts not snark (well at least not straight off).

Here's a deal:

Your side: I'm still waiting for you to get back to me on a critique of my biggest stock - I actually gave you handful Celtic (LON:CCP) , UP Global Sourcing Holdings (LON:UPGS) , RM (LON:RM.) , SCS (LON:SCS) - that illustrates the generic economic cycle nature of the points I made re Somero. 

Me: I tell you why and when to sell your Somero


Your mojo

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simoan 11th Jul 21 of 50

In reply to post #491926


This is the post you're referring to.  

The trouble is (I'm replying to mojomogoz and his 7 points negatives against investing in Somero Enterprises Inc (LON:SOM) here) I could make a list of negative points like that about any company you would care to name. I'm not volunteering to do it right now, but name me your biggest holding and I guarantee I could easily come up with a list of negative points about making an investment. Best still, you could probably do it yourself :-)

All companies have negative and positive points but the fact remains unless you closely watched the weather in the US you would not have seen this mornings warning coming. I knew instantly there was trouble without even reading the RNS because of the timing - the trading update is normally in mid July. Not a great way to end the week but my portfolio was still up 0.5% today, so not a disaster.

Anyway, you live and learn; I will be paying more attention to Michael Fish in future.

All the best, Si

I don't see any personal attack on you. It was the day before I went on holiday for three weeks and I made it quite clear I did not have time to respond. As it happens, I have no time now either but please fill your boots if you wish to continue personalising things. Contrary to your belief it is something I studiously try to avoid these days as it adds no value for anyone reading this blog.

All the best, Si

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RichardK 11th Jul 22 of 50

In reply to post #491826

Graham, thank you for an excellent analysis of Victoria (LON:VCP) in spite of its market cap being over the limit. I feel sufficiently reassured to continue to hold.


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bestace 11th Jul 23 of 50
That's a bit like saying everyone who weighs 90kg is fat. That might be true of a 1.6m tall pastry chef, it probably isn't true of a 1.9m rugby player.

This strikes me as a flawed (floored?) analogy. Debt could be viewed as analogous to weight, but surely a debt to earnings ratio (which is what Mr Wilding is taking aim at) is more analogous to a Body Mass Index, and it is reasonable as a rule of thumb to suggest that a BMI over 30 means you're obese, regardless of how much you actually weigh.

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davidjhill 11th Jul 24 of 50

Sosandar (LON:SOS) can't make up my mind on todays placing


  •  institutions have bought £7m at 15p so they clearly see value there
  • company now has £10m to use aggressively to acquire customers and increase revenue faster than before
  • Done at an ok price and premium to SP so no distressed pricing - much better than running out of money
  • With £10m in bank and a market cap of £22m given expected growth it looks pretty cheap again to me


  • Don't like the dilution : as a potential multi-bagger the upside reduces
  • think they should have done it at 30p+ : can only assume they didn't because they thought the cash was sufficient. This tells us it wasn't, so a bit of an amber flag in terms of cash forecasting maybe
  • This new money needs to be used wisely to generate new customers and revenue but they just told us that they have increased firepower from not spending in Q1 due to the poor weather. Can they really incrementally spend extra and boost revenue forecasts.
  • Otherwise I agree with other comments that it is a stealth downgrade and I don't like that at all. The £7m needs to be invested to generate high returns over and above current forecasts, else it is dilution for no existing shareholder benefit.

hmmmm...............hopefully Paul can discuss with mgmt and clarify.

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Glorenfeld 11th Jul 25 of 50

In reply to post #491961

If we equate it with BMI, then I'd say this actually supports the point being made. It's not true to say that a BMI over 30 means you're overweight as it's only concerned with "mass" not the composition of the mass. If the mass is made up of high quality muscle (or the cash flow is from high quality and sustainable earnings), then you won't (shouldn't be) classified as obese.

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Howard Marx 11th Jul 26 of 50

In reply to post #491946


Can I suggest that you DM Mojo?

Your bickering is of no interest to me nor likely anyone else on this forum.

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Wimbledonsprinter 11th Jul 27 of 50

In reply to post #491866

Ben. Also note that Reckitt Benckiser (LON:RB.) has also announced a $1.4b settlement with the USFeds today with respect to sales of Suboxone Film. Clearly relevant for Indivior (LON:INDV) - but unclear to me if positive or negative.

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simoan 11th Jul 28 of 50

In reply to post #491981

Your bickering is of no interest to me nor likely anyone else on this forum.

I thought that's what I said in my last reply? I have no interest in bickering but then I didn't start the personalised comments...  It seems some people are intent on causing issues every time I post. I find it hard to stomach that someone asks a question, you reply in a helpful manner, and they then bite your hand. Why should I put up with that?

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xcity 11th Jul 29 of 50

In reply to post #491966

re Sosandar (LON:SOS) dilution

I doubt that this is the last fund raise, unless it does poorly. They will need more capital to reach an efficient profitable size. So I see more dilution in the future. The hope is that it won't be for a few years and will be at a substantially higher price.

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mojomogoz 11th Jul 30 of 50

In reply to post #491946

Well, quite predictably Mr Marx is not a fan of the free market of speech and has told us both to quieten down or he will no doubt get the Cheka on to us. Nor are  the massed bullying horde in the red thumb brigade fans (must be a socialist thing).

I see that humour and banter is not very welcome and I will go away and sulk now. Don't worry I'll come back when you've all grown and toughened up a bit ;)

PS Simoan I didn't take anything you said as personal attack...just a bit gauche and deserving a similarly gauche response. You have interpreted it more personally. If don't want comments to be taken as a bit of jibe then you can soften your delivery and get a softer response. If you are stylistically non self-aware then ask one of the onlooking manners-thought police to assist.

mojo out, darlings

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 Are LON:SOS's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »


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