Small Cap Value Report (Thu 12 Apr 2018) - CPR, QUIZ

Thursday, Apr 12 2018 by

Good morning, it's Paul here. Apologies, I forgot to put up the placeholder article last night.

So far, the following have caught my eye;

Carpetright (LON:CPR) - CVA & fundraising proposals

QUIZ (LON:QUIZ) - trading update

There's still no news on who has bought the big block of GAME Digital (LON:GMD) shares. Having had a ponder overnight, I jumped the gun by suggesting that the buyer might be Sports Direct. It still could be, triggering a bid for the whole company. On balance though, I'm more persuaded by Gromley's suggestion that the overhang was probably placed with various institutional buyers. Anyway, the overhang is gone, which is good news.

EDIT: all has now been revealed in subsequent "holding in company" RNSs. I was correct that Elliott Advisors (Duodi) has sold out completely, its 36.5% stake in GMD. However, my theory that Sports Direct might have bought the overhang, and launch a bid, was wrong. Gromley's theory was correct - that the overhang has been placed with institutions.

There are some excellent new names on the GMD major shareholder list, in particular I very much like that Gervais Williams' outfit, Miton, has taken 13.1% of the company at 35p. Canaccord has taken 11.8% for discretionary clients (possibly something to do with Hargreave Hale, I wonder?), and J O Hambro has taken 5.1%. The balance I suppose would probably have been distributed to under 3% holders, hence not requiring an RNS.

All in all, whilst falling short of my hopes for a takeover bid, this is a very pleasing outcome. A huge overhang of GMD shares has been eliminated in one fell swoop. We also have some big name institutions coming on board at 35p, which very much reinforces the bull case for the new strategy of developing "BELONG" format stores, both standalone, and within Sports Direct shops.

End of EDIT

Escalating tensions in the Middle East, and President Trump's unique & bizarre way of handling things, is certainly introducing fresh nerves into the market. It sounds as if the USA is about to launch missile strikes on the Assad regime again, and Russia is threatening to shoot them down. All rather worrying, and not helpful to markets.

On the positive side, apparently warm weather is on the way for…

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Carpetright plc is engaged in providing floor coverings and beds. The Company operates through two segments: UK and Rest of Europe (comprising Belgium, the Netherlands and Republic of Ireland). The Company trades from approximately 440 stores and concessions in the United Kingdom, as well as over 140 stores across Holland, Belgium and the Republic of Ireland. The Company offers free home estimating services. The Company's product range includes carpets, mattresses, headboards, laminate flooring, engineered wood flooring, rugs, vinyl flooring, luxury vinyl tiles and flooring accessories. Its luxury vinyl tiles are available in a range of designs, including tile, oak, pine and stone. It offers a range of beds and bed products, including divan beds, roll up mattresses, bed frames and others. It offers a range of options from memory foam mattresses to open coil and pocket spring mattresses. Its brands include Kosset, Essential Value, Storeys, Carpetright Clearance and Carpetright. more »

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QUIZ plc is United Kingdom-based global women's wear brand company. The Company is focused on providing occasion wear and dressy casual wear primarily for 16 to 35 year olds and offers clothing, footwear and accessories. The Company’s occasion wear provides maxi and mini dresses, matching tops and bottoms, and footwear, bags and other accessories that are designed to complement a particular outfit. The Company’s dressy casual is designed to provide the latest on-trend clothes, shoes, bags and accessories that have a glamorous edge. In addition, the Company’s products includes denim, playsuits, shirts, tops and skirts. The Company also provides a range of outerwear such as faux fur jackets, parkas and biker jackets. Footwear offers dune River Island, missguided and ASOS. The Company’s brand operates in 19 countries through 65 international franchise stores, concessions and wholesale partners. more »

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

23 Comments on this Article show/hide all

Aislabie 12th Apr '18 4 of 23

In reply to post #352603

I too am holding QUIZ (LON:QUIZ) and,like you,I was dismayed by the way in which the very respectable growth news is immediately negated by any substantive quantifying of what is presumably a profit miss against expectations. By not giving some mention of this obvious point the company is clearly avoiding it.
A profit warning is not good but a transparent attempt to avoid making one is much worse, apart from anything else the company's PR consultants (Hudson Sandler) should have the experience to put their foot down on this.
I am going to remain a holder and hope that the company is learning the ropes as a public company rather trying to mislead, but doing it again in future would be a sale signal for me.

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matylda 12th Apr '18 5 of 23

In reply to post #352628

Trying to understand...

You seem to be presuming that this is a veiled profit warning and that you are forgiving them and ignoring it in the hope they don't do it again. But, if they do, you will sell then rather than now.

Do please correct me if I am wrong, just trying to work out what you're saying.

I do not hold but could be tempted if Profit growth was in-line with Revenue growth.

Blog: Briefed Up
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Aislabie 12th Apr '18 6 of 23

In reply to post #352653

Apologies Matylda, I could have been clearer on QUIZ (LON:QUIZ). I am continuing to hold for what, long term, is I think a good company and I anticipate that although there will be a net profit shortfall against expectations it will not be enough to be a concern.
But - if the shortfall turns out to be significant then I will have made a mistake,and will consider selling, and if the profit shortfall is. as i expect, only small then I would still sell if there is a future indication that the company has not got the message to be more transparent about profit performance

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matylda 12th Apr '18 7 of 23

In reply to post #352663


No apology needed at all, just wondered what you were saying.

Life could have been easier if they had provided Profit guidance in black and white. Will be interesting to see the actuals when they come through. I may be joining you, I won't even mind paying up at 200p if the Profit growth is anywhere near the Revenue growth.

Wishing you well with the holding.

Blog: Briefed Up
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Zipmanpeter 12th Apr '18 8 of 23

Re Norcros (LON:NXR) - (Stockrank 97) Capital Day Presentation today

Last 9 years have decent and steady progress with revenue and ROCE growing (in a supportive market) and acquisitions integrated well, Same strategies and focus going forward
Detail given on each business and for Group including market share and growth data. Broadly all doing OK to well apart from tiles which is now focusing on a small tile niche for in house UK manufacturing

Update with new goals - now targetting by 2023 : £600Mn in revenue (roughly x2). 50% ex- UK, 15% ROCE

Key takeouts for me
1. Re-assuringly stable in its strategic focus - still bathrooms and kitchens related items, same markets but a bit more export focus to non-UK, non-South Africa, big push on NPD for a bathroom company. Even Group KPIs above very similar to before (a positive for me)
2. Clear focus on sensible opportunities that appear relatively easy to execute - no grand plans just consolidate/grow market share, leverage growing group synergies, keeping doing the NPD funnels for innovation)
3. Given above - reasonable chance that key risks will steadily reduce (peie nsion overhang as group grows and int rates rise; SA political risk with new President and diversification of export markets)

Every chance will be a good long term GARP share with decent and growing divis for long term investors. I have held for several years and expect after reviewing this to hold for another 5 years

BORING BUT PROFITABLE core holding - suitable for investors not traders

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Dodge50 12th Apr '18 9 of 23

I won't comment on Carpetright's financial position as all has pretty well been said. However my recent experience of trying to purchase a branded carpet from them for a quoted 2300 pounds was bought eventually for 1900 from a small local retailer. the difference was made up of little admin cost add ons as well as higher carpet cost. If they can't with their buying power beat the locals then goodnight Vienna.

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Scoobydoit 12th Apr '18 10 of 23

In reply to post #352688


Norcros (LON:NXR) Some significant volume today 840,000 at 183p

Could there a bid coming ?

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Banzii 12th Apr '18 11 of 23

In reply to post #352703

Re Norcros (LON:NXR) If there is to a be a bid they have managed to keep it very quiet. Down 1.1% according to Stocko and 50d MA is -2.36%.

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paraic84 12th Apr '18 12 of 23

In reply to post #352683

H1 2017/18 EPS grew 35% yet brokers’ estimated 2018 EPS of 6.35p assumes EPS growth of 19% (that was estimated before today's update). So it could actually be the case that EPS in H2 grew at a slower rate than H1 but still above brokers' targets OR that brokers accurately predicted that H2 would be hit by higher costs. FYI revenue seems to have been almost perfectly in line with 2018 broker targets.

I am encouraged by the good internet and international growth.

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herbie47 12th Apr '18 13 of 23

In reply to post #352698

Yes I found the same, the carpet was about same price from Carpetright (LON:CPR) but all the extras were considerably more, such as underlay, gripper and they even charge delivery, anyway it was about £100 less from an independant so I went there. The other issue is Tapi have opened up stores right near to Carpetright in some areas, Tapi is run by an ex Carpetright director who is the son of the founder Lord Harris, sure he knows all about Carpetright.

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hayashi22 12th Apr '18 14 of 23

The ceo of CPR is useless which helps the competition no end in their endeavours to grab market share.

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matylda 12th Apr '18 15 of 23

In reply to post #352723

QUIZ (LON:QUIZ) - Perhaps, I guess we are guessing at the moment due to the lack of guidance in the update.

I too notice the Revenue is pretty much in-line and I agree, impressive, especially on-line.

Happy to wait and see actuals even if it means paying a higher price (assuming they hold up) later on.

Blog: Briefed Up
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HornBlower 12th Apr '18 16 of 23

on MTC CEO comment that "In this competitive climate,
promotional activity has been necessary to stimulate customer demand" might be meaningful when full results are out. (short)

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willhampson 12th Apr '18 17 of 23

Update from GAME Digital (LON:GMD) about 10 minutes ago confirming that Elliot have sold their entire holding and accordingly lost the right to appoint a non-executive. Still no news on who has taken over the 60 million odd shares...

EDIT: We now have an answer: Hambro, Canaccord and Miton. Decent institutions taking a stake it would seem. 

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mercury61 12th Apr '18 18 of 23

REG – GAME Digital PLC Miton Group Plc – Holding(s) in Company
Miton ups to 13.1%

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mercury61 12th Apr '18 19 of 23

REG – GAME Digital PLC – Holding(s) in Company
Hambro up to 5.12%

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mercury61 12th Apr '18 20 of 23

REG – GAME Digital PLC – Holding(s) in Company
Canaccord Genuity ups to 11.8017%

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mrosbiston 12th Apr '18 21 of 23

In reply to post #352773

guess this puts out the Sports Direct story (for now) - agreed on the alternative idea that this will stop some of the selling and put a bit of a floor in the shares.

and clearly on the weakness in the shares - a fair few people probably knew about these RNS's before they were coming

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slopsjon 12th Apr '18 22 of 23

Does anybody else see a comparison between Blockbuster vs Netflix and GMD vs online retailers. I don't see what GMD has to offer that can't be achieved with an online purchase. Everyone knows what a game box looks like and you can buy a game and have it delivered in two hours by Amazon.

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dahokolomoki 12th Apr '18 23 of 23

In reply to post #352823

Yes, but it's the physical location gaming arenas that GAME Digital (LON:GMD) are touting to shareholders as the future of the company...

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

About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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