Small Cap Value Report (Thu 16 May 2019) - BLV, MYSL, SFE

16th May '19 by Paul Scott

10 comments 6430 reads

Good morning, it's Paul here.

I have to be very quick today, due to Mello commitments. Apologies for that.

Pre-8am brief comments

Belvoir Lettings (LON:BLV)

Says it's delighted that Q1 has been robust.

Good growth stats announced from all 3 divisions.

Outlook for 2019;

Consequently, the Board is confident of meeting market expectations for the year ending December 2019.

I flagged it up here on 31 Jan 2019 as a bargain.

With a good Q1 under its belt, maybe full year forecasts might rise as 2019 progresses?

MySale (LON:MYSL)

A small disposal has completed.

Current trading sounds bad;

Whilst current trading continues to be very challenging the group remains focused on reducing its cost base...

My opinion - too risky for me, now the original plan seems to have gone wrong.

Safestyle UK (LON:SFE)

Not a company that I'm interested in, whatever today's update says.

Looks like a profit warning, buried in a lot of waffle;

Despite the progress, margin improvement has been slower than expected, impacted by higher lead generation costs and the pace of recovery in improving the Group's operational effectiveness. Consequently, whilst the Board does expect turnover to remain broadly in line with current market expectations and continues to forecast a small profit for the full year, it does expect this profit to be below current market expectations.

There are a couple of superfluous "does" in that paragraph alone. 50p prize to anyone who can spot any more in the rest of the RNS!

Given the history, I wouldn't go anywhere near this share.

I can't see anything else interesting on the RNS so far today.

Someone did mention whether Plus500 (LON:PLUS) is worth looking at again? Not one for me, but with the crypto nonsense seemingly having another burst of activity, that could augur well for PLUS, perhaps?

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MrContrarian

16th May '19

My morning smallcap tweet: Thos. Cook cooks outlook

Purecircle (LON:PURE), Ergomed (LON:ERGO), Tarsus (LON:TRS), Aeorema Communications (LON:AEO), Seeing Machines (LON:SEE), Safestyle UK (LON:SFE), Lidco (LON:LID), Yu (LON:YU.), MySale (LON:MYSL), Thomas Cook (LON:TCG)

PureCircle (PURE) renews supply agreement with Merisant, one of the world's leading producers of low- and zero-calorie tabletop sweeteners. No numbers.
Ergomed (ERGO) guides rev and EBITDA materially above current market expectations. "Demand for our full range of pharmaceutical services is generally buoyant."
Tarsus Group (TRS) trading in line and forward bookings towards the top end of targeted growth range of 5% to 10%. FY19 is heavily H2 weighted.
Aeorema Communications (AEO) mixed trading. Rev above mkt expectations but new business wins are on reduced margins from certain areas of client business. Profit will be broadly in line with market expectations.
Seeing Machines (SEE) Fleet update (so not a trading stmt?): "we have modified the Fleet business model to bring forward recurring revenue, the biggest driver of value. Sales momentum is building in all our major markets...we expect to deliver scale benefits from 2020." Probably not a beat or SEE would say so.
Safestyle UK (SFE) AGM stmt. Warns FY profit below current market expectations due to weak margins.
LiDCO Group (LID) AGM stmt: Q1 rev above the Board's expectations but sticks with FY in line.
Yu Group (YU.) FCA ends investigation and has no present intention to take action.
MySale (MYSL) completes sale of UK arm, says current trading still very challenging. Perhaps that's in line!
Thomas Cook (TCG) H1 and warns on FY. Net debt up £340m to £1.25bn due to a lower working capital position and higher non-cash items. Recent economic and political uncertainty has led to high levels of promotional activity hitting FY19 EBIT

shauniekent

Crypto nonsense :-)

I’ll raise my lone head once again to give a different view…. A decentralised trust network is unfolding in front of our eyes, with huge ramifications in the future. It’s right there if anyone cares to look.

Short term swings in price may be crazy and are of little interest to me. I am sure that the eventual price will many orders of magnitude higher.

If anyone wants to spend time to understand more, a great place to start is watching some youtube presentations by Anton Antonopoulos who is one of the best known advocates and experts on Bitcoin and its underlying technology and principles.

Shaun

threeputt

RA International (LON:RAI) In ternational going under the radar with some recent contract wins ? $13m annual profits and cash of $27m. mcap £83m, Ipo'd last yearat 56
Would appreciate a viewing Paul

Glorenfeld

No argument from me (or many others that I've seen) that decentralised block chains may have useful/valuable applications.

I am sure that the eventual price will many orders of magnitude higher.

The price of what though? Why any one particular cryptocurrency that is currently available vs any other or any yet to be developed?

spantic

Don't know if anyone here has looked into Kinesis yield-bearing digital currencies based 1:1 on allocated physical gold (KAU currency) and silver (KAG currency). The Kinesis currencies offer a unique yield system

LongValue

Safestyle UK (LON:SFE) was a company that I looked closely at and put on the back burner (Thankfully). The one lesson that I learned from this saga was that it makes good sense to leave most IPOs alone. Let the company settle down and perform. And then evaluate its performance. As someone has pointed out before, the sellers know far more about the business than the buyers. They can pick their moment very carefully to maximise their returns. Skeletons can be pushed very firmly against the back wall of the closet. Only falling out after the passage of time.

On an operational level, the company appears to have no “Moat”. It's in a very competitive environment with few differentiating factors. The large cash buffer that it once had has simply disappeared and along with it the dividend. The laws surrounding cold calling have been tightened in recent years making new business more difficult and expensive to come by. And, I get the impression that most of the low-hanging fruit, the easy sales, have been taken. It's also cyclical with non-recurring revenue.

Having said all that, the UK suffers from an old housing stock. Not just windows but conservatories need replacing. There are also issues surrounding energy efficiency. So the macros are not that bad. It also has modern manufacturing facilities. However, this strikes me as a company that needs to be rebuilt and that will take a long time.

MiserableJacktPotato

Gold and silver don’t generate a yield. They just sit there looking pretty. Well, not even that in silver’s case.
We left the gold standard, it’s inherently deflationary.

Gromley

I'm not sure that Safestyle UK (LON:SFE) is a great exemplar for avoiding IPOs (although that is something I largely do). For the first nearly five years of it's life as a listed entity the share-price was healthily above the initial offering. By that stage you might have concluded that it had "settled down" and started "performing".

That would have been an unfortunate judgement.

I think you hit the nail more squarely on the head, when you identify the competitive market and lack of moat. To be honest though, looking back about a year, I thought it looked a decent proposition, but much too highly priced at the time.

FREng

17th May '19

I have written a guide to the blockchain and bitcoin in this talk for Gresham College.

Distributed ledgers are important. Bitcoin will have a place in history as the first application.

20th May '19

Gromley, that's a fair comment. Safestyle UK (LON:SFE) was admitted to AIM in December 2013 and the share price had an upward trajectory until May 2017 and also paid generous dividends (Up to September 2017). However, the industry body, FENSA, of which the company is a member reported a 6.6% contraction in the overall market for 2015 (The year in which the law was changed to crack down on telephone cold callers). The company's market share grew over that year but the market appeared to be entering a difficult period. That said, it was obviously bullish and even declared a special dividend for 2015. In its interim report for H1 2016, it was again optimistic and reported gaining greater market share. But pointed to a further contraction in its market of 2.2%, according to the FENSA figures.

The wheels really started to come off in September 2017, when it issued a profits warning. And again, quoting FENSA, stated that the market had contracted by some 18% for June and July compared to the same months in 2016.

Basically, the company appeared to do well in a shrinking market but then its financial performance was impacted. And, of course, it ran into legal issues with former employees starting a rival operation. The impression I have is that the vendors of the business understood the cyclical nature of the industry and the probable impact of a crackdown on cold callers – its services appear to be bought rather than sold. Put simply, they got out at the right time.

Small Cap Value Report (Thu 16 May 2019) - BLV, MYSL, SFE

Pre-8am brief comments

Belvoir Lettings (LON:BLV)

MySale (LON:MYSL)

Safestyle UK (LON:SFE)

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Paul Scott

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