Small Cap Value Report (Thu 2 Jan 2020) - TAST, My Current Holdings

2nd Jan '20 by Paul Scott

27 comments 12303 reads

Good morning, and happy new year, it's Paul here!

I'm working the afternoon shift today, so should be finished here by 6pm.

Edit at 17:17 - this portfolio review is taking much longer than expected, so I'll just keep going until it's finished, est. 10pm. Apologies for any inconvenience. I'm sorry if some people don't like variable timings, but that's what achieves the best overall results - I'm not going to rush for deadlines, churning out sub-par quality.

Edit at 21:33 - today's report is now finished.

There's only 1 company to report on today. So I'll use the spare time after that, to do the previously promised commentary on my current small cap holdings. That will then complete everything I wanted to write about for 2019. I very much appreciated all the kind comments from subscribers about my end of year articles, so thank you for those.

Tasty (LON:TAST)

Share price: 3.75p (37% today)
No. shares: 141.1m
Market cap: £5.3m

Trading update & property disposal

Background- I don't normally go below £10m mkt cap for reporting purposes here, but there's nothing else to cover today, and Tasty has been on my watch list for a while as a potentially interesting company.

It operates casual dining restaurants, under the Wildwood brand (pizza, pasta, grill), and dim T brand (oriental). The Kaye family are involved here, who have had previous success with pizza/pasta restaurants - although perhaps their ideas are a bit dated & stale now? Arguably newer operators (e.g. Franco Manca by Fulham Shore (LON:FUL) ) are doing better, and more affordably priced pizzas. Wildwood relies on permanent discounting (amongst other discounts, they are trialling the BigDish (LON:DISH) platform in one site). Also, I think the everyday low pricing model (with no discounting) that Franco Manca uses is a lot more sensible than permanent heavy discounting.

As you can see from the share price chart below, this share is little more than a call option on the company surviving. Its previously reasonable level of profitability collapsed into breakeven/losses from 2016 onwards. The main problems?

Over-capacity in the hospitality sector
Rising wages costs (if anything this is getting worse, with a large recent increase in Living Wage announced by the Govt)
Unaffordable rent/rates

…

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Lion Tamer

2nd Jan '20

For those readers who prefer the new site for most pages but frequently want access to those features only available on the old site I suggest saving a bookmark to the new site (https://app.stockopedia.com) and leaving your profile setting set to the old site. You will need to visit the old site once in each new browser session to complete the site login / auto login process, before clicking on a new site bookmark. I've also bookmarked many frequently visited pages with the "app" address to save time. I hope this helps someone.

Happy New Year to all! And a special thanks to Paul & Graham as ever.

ambrosia

do the charts work better on the old site, theyre quite buggy on the new one, wont even show the volume at the moment

Ben1

Intercede (LON:IGP) Intercede is showing up 12% today. Has anyone seen any news to explain this?

Michael Taylor

Thanks for your continued commentary Paul and Graham, and a HNY to all!

Yellowstone Advisory

Hopefully you'll have a better year in 2020 Paul. Your Revolution Bars (LON:RBG) comment from the 31stDec seems to have got the stock going today! If you can have the same impact with the rest of your portfolio you'll have a bumper year. Many thanks again for all your thoughts and wisdom.

Paul Scott

Hi Redtop,

Your Revolution Bars (LON:RBG) comment from the 31stDec seems to have got the stock going today!

I doubt it, as I've been writing positive views on RBG for years, and it makes no difference at all to the price, so why should it now?!

The trouble is, we don't know why people are buying. It could be because Revs was mentioned on Gavin & Stacey, for all we know! Or that people think it might have traded well over Xmas/NYE?

There should be a trading update out fairly soon, last year it was issued on 14 January.

Regards, Paul. (long RBG shares)

Rusty2

Yes I think so, I only use the old site with the odd glance at the new one. Old site also has old charts on there which are very useful for a quick look.

davidelliott52

some great blogs over the last few days, id like to personally thank you for helping me with my investing over the last year or so aswell as with your quite brutally honest self assessment, its great to read such honesty. Im with you for the ride in RBG and SOS so best of luck for 2020 and thanks again.

Gostevie

Hi Paul,

This is brilliant. Just like the old ‘Paulyfolio’ heydays at The Motley Fool (TMF) back in 1999-2005. Since you are being so open and honest with us, I’ll attempt to be equally open and honest with you.

I first discovered TMF because I was in a lot of consumer debt and was looking for advice on how to clear it, and discovered that TMF had a brilliant bulletin board called ‘Dealing with Debt’, which contained some fantastically expert people whose guidance slowly helped me to clear my debts (like you did a bit later in different circumstances), paying back every single penny that I owed and never missing a payment.

But TMF also had a ‘Best Of’ board, where the most recommended – or ‘recced’ – posts of the past 24 hours were sorted into a sort of hit parade, and I was fascinated by it. In particular those portfolio reviews, by both yourself and a few others on the Paulypilot’s Pub’ board completely intrigued me and introduced me to a world of small caps that I barely even knew existed.

Not only was I intrigued but inspired. I thought “Right, this is I want to do” and that ambition seriously made me more determined than ever to clear my debts and build up enough capital to start a small portfolio of my own – which I did, even during the years when I was metaphorically at least living on beans on toast and living, literally, in a tiny bedsit. I must have read some of those ‘Paulyfolios’ dozens of times, such was the inspiration I drew from them.

I got there in the end, and with the discipline that paying off loads of debt had instilled in me, soon saved enough to open my first broker account and make my first share purchases. That feeling of having crossed the line from debtor to investor is one that I will never forget. It’s been a bit of a bumpy ride since then, as it has been for nearly all of us, but I am now seeing light at the end of the tunnel to the time when, at the age of 56, I might be able before too long to give up the soul-destroying 8 to 5 and support myself comfortably but not extravagantly from my investing activities.

So Paul, I salute you, you crazy diamond. Unbeknown to you at the time, your ‘Paulyfolios’, and similar portfolio updates from others who posted them in your virtual pub, played a major part in helping me turn my finances, and indeed my life around.

So thank you, Paul, and that lunch offer remains as open as ever.

sharw

Just for you Paul some screen capture with subtitles turned on:

Southendchelsea

3rd Jan '20

thank you Paul for your frank honest comments. One thing intrigues me: given your focus on balance sheet strength (aversion to debt), why have you not invested in house builders - which feature a visible business model?

MichaelFBS

Amazing report. Thank you. Fascinating insights in to your holdings and your reasons for holding them at the current time.

Here’s to a great 2020.

GTrader

Hi Paul, do you go long and use spreads for leverage? I see from your articles you allude to leverage in the past. If so I assume your concentration is super concentrated once the spread are added?

Kelvin Prescott

Wonderfully informative report, as always. Thank you.

My view is that although Loopup (LON:LOOP) and Cloudcall (LON:CALL) are both doing something that, on the surface, look similar they have very different futures in store.

Loopup's focus (collaboration between teams in and outside your company) is under huge threat from Microsoft Teams, which is one of the most successful SaaS launches I've seen in my career. IMO that is the reason that customers are using it less - Teams provides a better experience and has the advantage of ubiquity. The vast majority of corporate users are familiar with the Microsoft interface and that makes it very difficult to create a reason to use something else.

CloudCall's focus is on contact centre and CRM environments where there are many specialist niches that a small software company can fill. There is no single dominant CRM/contact centre provider so the risk of being outspent/overwhelmed by a strong incumbent is much lower.

(disclosure: I lead a sales team in the digital/telco market, we deliver a range of contact centre, collaboration and telephony solutions. No current interest in either, but considering whether to take a position in Cloudcall)

Zipmanpeter

Kevin - Re Microsoft Teams displacing Loopup (LON:LOOP) at the edges - thanks so much for the insight/observation. This sort of reader's comment adds so much value.

As an individual private investor, now separated from the world of work, I need to find outside perspectives to put against management presentations in analyst presentations.

However, yYour comment makes perfect intuitive sense - much more than the mgt explanation that there was a slow down in lawyers making calls due to Brexit!

Like Paul, I bought at 140p (on what I hoped was the way back up!). I thought charging video and extra sales pods on their core vertical would add sufficient revenue to overcome a soft patch. Now, if there is not crystal clear recovery at the next set of results, I will sell out and take the loss.

GrahamF

Many thanks for a very interesting piece, Paul.

I’m a bit confused about your view on Sosandar (LON:SOS). (No position myself)

Your write up of the trading update in November sounded like you were content to continue to hold as does your commentary on this post/thread.

However, if I read the BMUS transactions correctly, it looks like you sold out of 24% (£200,000) of your holding back in December for a substantial loss.

So, having thought I understood your view on this one I don’t think I do now. Would you be kind enough to clarify? Perhaps I missed something, a post where you already covered this sale perhaps, apologies for this if I have.

Rhydian

Hi Graham,

Paul discusses his reasoning for trimming his Sosandar (LON:SOS) holding in his end of year review here. Too large a position in his portfolio was the explanation rather than a change of view.

Had a read and I’m still puzzled as it appears that the proceeds of the Sosandar (LON:SOS) sale went into even higher risks stocks.

Perhaps, but it’s greater diversification nonetheless. Arguably, having 60% of your entire portfolio in one stock is riskier.

Meldrew

13th Jan '20

Does anyone know when the next SOS TU is likely to be issued?

Small Cap Value Report (Thu 2 Jan 2020) - TAST, My current holdings

Tasty (LON:TAST)

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Paul Scott

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