Small Cap Value Report (Thu 22 Mar 2018) - CVR, SFE, KETL, COG, VLG

Thursday, Mar 22 2018 by

Good morning!

There is no shortage of company announcements today, so I'm going through them personally at the moment. As usual, I'm happy to take requests in terms of which ones to cover here.

My final list is as follows:

Also, Paul updated yesterday's report with more sections. You can read that here.



Conviviality (LON:CVR) (suspended)

Update on progress and potential equity fundraise - Conviviality, the alcohol wholesaler and retailer produced an update at 6pm last night.

In short, it looks like a horror show for existing shareholders. The only ray of hope is that we still don't know at what price the new money will be raised, so there is still a chance that the forthcoming dilution will not be too severe. But it is now inevitable that those who take part in the forthcoming fundraise will end up owning the majority of the company.

If you remember the recent timeline, Conviviality discovered a £30 million tax payment coming due shortly and that it hadn't made provision for. This came after an error had led to the company miscalculating its profit forecasts, and trading margins had weakened. The shares were suspended and the CEO stood down, though staying on to help with the transition.

Originally, I thought that the company might only need to raise £30 million, plus a little bit more for extra comfort. After all, there was no clue up until recently that it had any short-term funding requirement. The balance sheet wasn't pretty and its lending facilities were maxed out, but it was thought to be profitable.

It turns out that the company needs to raise far more than £30 million. It is looking for £125 million, for the following purposes:

·      "Resolve overdue payments with its creditors and return them to normalised trading terms;

·      Settle payments with HMRC;

·      Repay the Company's £30.0 million revolving credit facility in its entirety; and

·      Provide working capital headroom and fund costs…

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

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Conviviality Plc is a United Kingdom-based distributor of drinks and impulse products serving consumers through its franchised retail outlets or through hospitality and food service. The Company's activities consist of the wholesale and retail distribution of beers, wines, spirits, tobacco, grocery and confectionery within the United Kingdom to the on-trade and off-trade market. Its Conviviality Direct is an independent wholesaler to the on-trade, serving over 23,000 outlets from hotel chains to food-led pubs. Its Conviviality Direct brand includes Walker & Wodehouse, Catalyst PLB, Peppermint Events and Elastic. Walker & Wodehouse focuses on supplying wine merchants and regional wholesalers with products and producers as part of wine portfolio. Catalyst PLB brand is the agency brand and supply solutions division. Peppermint Events delivers event concepts and bars at outdoor events. Elastic is a brand activation agency that provides support and insight to the Company's supply base. more »

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Safestyle UK plc is a United Kingdom-based company engaged in the sale, manufacture and installation of replacement un-plasticized poly vinyl chloride (PVCu) windows and doors for the United Kingdom homeowner market. The Company's segment includes the sale, design, manufacture, installation and maintenance of domestic, double-glazed, replacement windows and doors. The Company has over 30 sales branches and approximately 10 distribution depots located throughout the United Kingdom. Its product range includes EcoDiamond WINDOWS, EcoDiamond UPVC DOORS, EcoDiamond BI-FOLD DOORS, EcoDiamond REPLACEMENT CONSERVATORIES, GuardDoor, Pavilion and Inspire. It has manufactured over 279,000 frames and carried out approximately 60,000 installations. The Company's subsidiaries include Style Group Holdings Limited, Style Group Limited and HPAS Limited. more »

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Strix Group Plc is an Isle of Man-based company engaged in designing, manufacturing and supply of kettle safety controls and other components and devices involving water heating and temperature control, steam management and water filtration. The Company’s core products are kettle safety controls, which are responsible for disconnecting the power to the heating element when either water has boiled, operated with no water present, or in some products when the kettle is lifted off its base. Its control set series include U18/U88, R-series, KeAi-series, KeAi-set, U11 series, U17 series, U67 series and U9 series. Its Aqua Optima is a range of domestic water filtration products, including jugs, water filters and other related appliances. Its other products include steam boiler, instant flow heater and turbo toaster. more »

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

65 Comments on this Article show/hide all

barnetpeter 22nd Mar '18 46 of 65

I think this report is wonderful! We would all miss it....

Would like comments on the mkt in general myself; ftse breaking down through 7000 now and Dow down another 700 points plus. Could be a stampede soon to dump stock I think.

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pastysupper 22nd Mar '18 47 of 65

In reply to post #343683

Lion Tamer- you have articulated my view of how the SCVR has changed, far better than I ever could.

I think it's time to stop reader requests and let Paul and Graham do what they want. Nothing wrong with readers discussing among themselves though.

Also, having to set up the template the night before must be really irritating. It's not exactly laborious, but it stops Paul and Graham from ever being able to entirely switch off. Could this not be automated by the Stocko team?

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ISAallowance 22nd Mar '18 48 of 65

In reply to post #343453

"Key seems to be the Seimens Troponin project and that seems to be in the lap of the gods"

I don't think that Troponin is as key as is sometimes assumed.  There is an excellent post by VegPatch after he met management on a thread here:

(Post 12).  He (VegPatch) is quite clear that they are his estimates/guesses, not managements words, but they look sensible to me and show potentially 3 income streams having the potential to grow individually to replace NTproBNP (1m lost from FY18 onwards) by FY21 - drugs, Progesterone and Troponin.  Any one of them meeting those estimates would be +1m from today individually.

As for the upcoming results, I've no idea what they will be like, but I know what I'm looking for.  Bioventix (LON:BVXP) did 3.12m in H1 2017, and 4.12m in H2 (+32% HoH).  Assuming 0.45m and 0.55m for NTproBNP for H1 and H2 respectively, and assuming no NTproBNP royalties in H1 2018 (there may still be some), then zero growth in everything else from H2 '17 to H1 '18  would see +15% (sales) H1 '18 vs H1 '17.  I would regard that as a poor result.  20% growth from H2 '17 to H1 '18 in everything else would see +37% H1 '18 vs H1 '17.  I would regard that as an outstanding result.  10% growth H2->H1 would see +26% H1->H1, that's what I'm realistically hoping for.

Bioventix (LON:BVXP) is one of my 3 largest positions (the others are Burford Capital (LON:BUR) and £ACSO), so hoping for a good update!

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mercury61 23rd Mar '18 49 of 65

In reply to post #343718

I thought all comments were from subscribers only .If not what are the criteria, if any, for non members to comment. Maybe this could be flagged up as member/non member? Just a thought.

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matylda 23rd Mar '18 50 of 65

In reply to post #343913

Only members can comment.

Blog: Briefed Up
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sharw 23rd Mar '18 51 of 65

In reply to post #343923

I think use of the word 'member' is ambiguous. Comment is open to anyone who has registered whether they have paid a subscription or not. Those who have paid a subscription are labelled 'Premium' on the profile page.

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sharmvr 23rd Mar '18 52 of 65

In reply to post #343638

Fair point - to be honest I was more concerned about Zeus Capital! Will wait for now and do more research/follow price - maybe one for new ISA season

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matylda 23rd Mar '18 53 of 65

In reply to post #343933

Aha - Was not aware one could register for free to comment - That in my opinion should be changed.

Blog: Briefed Up
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herbie47 23rd Mar '18 54 of 65

In reply to post #343948

Yes indeed, that’s why there is spam sometimes, I agree think this forum should be for subscribers only. Certainly there would be more control.

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mercury61 23rd Mar '18 55 of 65

In reply to post #343993

That is the point I was trying to make. Comment for paid up subscribers only. OR one could show premium member status and those that have registered and are not paid up ....

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Johnny2509 23rd Mar '18 56 of 65

I disagree with the above few posts. I first started contributing to Stockopedia when it started and was not a subscriber. I picked up a huge amount of information with many others, some subscribed and some didn't. The problem with subscription only contributions is that you limit very good information being passed on through the forum. The whole point of Stockopedia is to enlighten and educate those who have an interest in share ownership and it should not matter if the odd contributor comes across as less insightful than the volume posters.

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herbie47 23rd Mar '18 57 of 65

In reply to post #344018

Maybe a different colour for subscribers and non-subscribers, everyone is blue currently, maybe green for non-subscribers? Then is would much easier to see their status.

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Edward John Canham 23rd Mar '18 58 of 65

In reply to post #343788


Bioventix (LON:BVXP)

Many thanks for that.


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Zipmanpeter 23rd Mar '18 59 of 65

Further votes on community maters

1. Paul/Graham to write as they wish - I liked comment from someone that good quality commentary from the balance community likely to get them to write about the company (maybe on the news cycle)

2. Comments by subscribers only - reward for paying my money and best posters are likely to be more experienced/larger shareowners and thus willing to invest in Stockopedia (I think Stockopedia ethos is DYOR first and education/community/bulletin board second).........personally I enjoy both and read all comments every day but it is the data provision I buy!

3. Stockopedia mgt to think perhaps about other 'channels' than SCVR - eg employing weekly column commentator on popular areas (eg have suggested Retail/F&B in the past; others could be Large Cap focus, Financials and Resource stocks ie those NOT so often covered here..

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dfhscgfsd 23rd Mar '18 60 of 65

I don't see the need to know whether a contributor has paid or not while reading their post. If i feel there's an ulterior motive click name, click view profile, are they premium? if no, when did they sign up and latest comments. This forum is the most polite and pleasant place i have ever been online, the regulars point things out to new people without the need (very often) for moderators and administrators, i love it.

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timarr 23rd Mar '18 61 of 65

The subscription pays for access to the Stocko data, not for exclusivity into Paul and Graham's opinions.

It's been said before, but it's probably worth saying again - many people here started as non-subscribers and only became subscribers after participating. So I can't see why Ed and the team would block off their own best marketing channel.

And quite why subscribers would want to deny themselves a constantly interesting and often knowledgeable set of non-subscribing posters a platform here is a mystery. The minor downside that you get occasional spam and the odd idiot posting is offset by the fact that some subscribers are sometimes idiots and that we all occasionally generate spam of our own.

Frankly, this is just about the best moderated and most polite set of investing boards around.  All making the boards exclusive will do is allow people to give free reign to their feelings - there's lots of research showing that people feel that paying for something gives them the right to abuse it. As it stands a subscriber can be blocked for being abusive just as much as a non-subscriber - and quite rightly so.

Keep the boards free, minds open and conversations flowing. It benefits us all.


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Deeping 23rd Mar '18 62 of 65

For me it’s not about whether one is a subscriber or not, it is about bringing an end to readers requests. I thought Lion Tamer put the point across very well, I agree with everything Lion Tamer wrote.


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ISAallowance 25th Mar '18 63 of 65

In reply to post #344118

Hi Phil,

Thanks, but in hindsight the only useful part of my post was the link to VegPatch's post.

My musings about upcoming results completely neglected to consider currency effects and seasonality (shouldn't post at 23:45!). Looking though Bioventix (LON:BVXP) last 3 years I see:

H1 2015: £1.93m
H2 2015: £2.40m
H1 2016: £2.37m
H2 2016: £3.15m
H1 2017: £3.12m
H2 2017: £4.13m

So there appears to be some significant seasonality in favour of H2. In light of that, I won't be panicking if H1 2018 revenue comes in similar to H1 2017, given that it won't include much NTproBNP.

(I've used H1 to refer to the interim results half, Bioventix confusingly seem to refer to this in H2 in the interim statements since it falls in the second half of the calendar year).

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jonesj 25th Mar '18 64 of 65

1 Paul & Graham should write about what they want to cover. That way, we keep the quality up.
2 Allowing free access to their reports is an excellent marketing channel for the subscriptions to the paid for service.
The current business model works just fine.

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Edward John Canham 26th Mar '18 65 of 65

In reply to post #345023


Bioventix (LON:BVXP)

I picked up the seasonality when I looked into further after your post - and I did put my toe into the water on Friday.

Interims look good to me. Have grown from H1 2017, ignoring the back-dated royalties following audit, which implies the existing core antibodies etc have grown by 20%+ to replace and more the lost revenue. Would have preferred some more detail on Troponin but I guess it's still early days.

I think a big plus for me was the update was remarkably upbeat compared to their normally cautious statements. I guess I should beware reading between the lines but it is somewhat reinforced by the 20% increase in interim dividend.


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 Are LON:CVR'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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