Small Cap Value Report (Thu 31 May 2018) - CARD, BRY, CFYN, PTCM

Wednesday, May 30 2018 by
69

Good morning, it's Paul here!

No more Italy comments, I promise! 2 days is enough. I've been stopped out of some of my hedge, at breakeven. As a reader correctly pointed out, it's very difficult to decide how much, and what stop losses (if any) to use on hedges. The ideal hedge is a Put Option, but they're far too expensive, in my experience. Still, I might wait for volatility to reduce, and then buy an index put option, just to protect the downside from a disaster-type scenario.

Having discussed Italy with a very savvy bond investor (who made a killing on the last Euro crisis), he reckons Italy will play out just like last time in 2011 - i.e. posturing by Italian politicians, who are then likely to be battered into submission by the ECB and Euro Group. Voting for populist politicians is a cry for help by the electorate - just as it was with Greece some time ago - but ultimately those politicians are making promises they can't deliver.

Euro-membership is a straight-jacket that countries can't get out of. It will ultimately collapse of course, because it's unworkable, but who knows when? In the meantime, the Southern European countries just have to accept that, if they want sound money, they probably won't get any economic growth. Meanwhile Germany prospers, because they're so good at making stuff that people want, assisted by a highly advantageous exchange rate.

As Varoufakis made clear in his book, you only have leverage with the EU if you're genuinely prepared to exit the Euro - which would be a catastrophic process in all likelihood. To date, countries have toyed with that idea, but always pulled back from the brink.


Mello - Kent - 14 June

I've just been chatting to my long-standing shares friend, David Stredder. David and I met at the AGM of retractable syringes semi-fraud, Medisys. I say semi-fraud, because the company did have a product. They just omitted to tell us that it didn't work! So the £200m market cap in the tech boom subsequently melted away to virtually nothing. I have my Medisys shares certificate (remember them?!) on the loo wall, for 8 shares, to remind me not to be a muppet and buy blue sky, massively over-priced junk shares! Still, one good thing came out of it, in that I met David.

David and I…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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Card Factory plc is a specialist retailer of greeting cards, dressings and gifts. The Company operates through two segments: Card Factory and Getting Personal. The Card Factory segment retails greeting cards, dressing and gifts in the United Kingdom through a network of stores. The Getting Personal segment is an online retailer of personalized cards and gifts. Its physical store network operates in three areas: single cards, non-card items and Christmas box cards. Its single cards include individual cards for everyday occasions, such as birthdays, anniversaries, weddings, thank you, get well soon, good luck, congratulations, sympathy and new baby cards, and seasonal occasions, such as Christmas, Mother's Day, Father's Day, Valentine's Day, Easter, thank you teacher, graduation and exam congratulations. Its non-card offerings include gift dressings, small gifts, party products and other non-card products. The Company operates through a chain of approximately 800 Card Factory stores. more »

LSE Price
167p
Change
2.7%
Mkt Cap (£m)
555.3
P/E (fwd)
9.1
Yield (fwd)
8.6

Brady plc is a United Kingdom-based provider of trading and risk management software to the global commodity and energy markets. The Company combines integrated and complete solutions supporting the commodity trading operation, from capture of financial and physical trading, through risk management, handling of physical operations, to back office financials and treasury settlement for energy, refined, unrefined and scrap metals, soft commodities and agriculture. The Company's business units are Commodities and Energy. Its clients include various financial institutions, trading companies, miners, refiners and producers, scrap processors, tier one banks, various London Metal Exchange (LME) Category 1, 2 clearing members, and other European energy generators, traders and consumers. It offers commodities solutions, energy solutions, credit risk, cloud services, and client services and support. more »

LSE Price
64.25p
Change
 
Mkt Cap (£m)
53.6
P/E (fwd)
54.5
Yield (fwd)
n/a

Caffyns plc is a motor retail and aftersales company in the southeast of England. The Company is engaged in the sale and maintenance of motor vehicles, including the sale of tires, oil, parts and accessories. The Company is engaged in new car sales and offers used cars for sale, corporate sales car servicing, car repairs, wholesale parts, Motability and accident repair. The Company is operated and managed on a dealership-by-dealership basis. The Company operates from its own freehold properties, which offers long-term returns. It focuses on approximately three key areas, including used car sales, used car finance and aftersales. The Company represents a portfolio of six franchises, comprising Audi, Seat, Skoda, Vauxhall, Volkswagen and Volvo. The Company operates through approximately seven franchises. The Company offers deals on various cars in over 10 locations across the southeast of England. The Company provides fleets to companies across Sussex, Kent and Hampshire. more »

LSE Price
405p
Change
 
Mkt Cap (£m)
10.9
P/E (fwd)
n/a
Yield (fwd)
n/a



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


38 Comments on this Article show/hide all

Bonitabeach 31st May 19 of 38
10

In reply to post #368549

"The board appear to be taking all the right measures."
This board does not partake of its own cooking.

The Chairman owns 5,000 shares, one non-executve director 2,327 the other two non-execs none at all. The chief executive, Mark Briffa owns 97,511; his last transaction was to sell 179,935 shares in October 2017.

The structure of the Board is in my experience defective. Mark Briffa is the only executive director on the Board who knows what is going on in the business on a day to day basis - the non-execs have to believe what he feeds them; not a healthy situation.

Bonitabeach

No position.



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crazycoops 31st May 20 of 38
1

Hi Paul,

Yes, I do remember Medisys, and few other “semi-frauds” too. I was also following you and David on TMF and didn’t invest in Lo-Q - thereafter, it always seemed I had missed the boat. Oh well, we live and learn!

One small point, David mentioned on Twitter that Beeks Financial Cloud (LON:BKS) would also be at Mello South - a relatively new holding for both of us I believe. Perhaps they are no longer able to attend?

Cheers
Simon

Blog: Share Knowledge
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Trident 31st May 21 of 38
1

I hold Card Factory (LON:CARD), and its been through a bit of share price roller-coaster with regards to minimum pay and dollar pressures, but has been making efficiency adjustments for that, and seems to be hoping to negate those later this year.

Hard to argue with the dividend levels. I have these inside my ISA on a reinvestment basis, so I am hoping that with the dividend reinvestment policy I have effectively a slow averaging approach, which will help ride out some of the troughs, whilst increasing the base for future dividends, assuming all things stay equal.

I am taking the Einstein view that nothing is so powerful as the power of compounding. Mind you he was used to thinking in terms of aeons!

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homebrewruss 31st May 22 of 38
5

Hi Paul,
Have you considered any gold miners as a hedge instead of gold which give additional leverage should the gold price go up?
AAZ is the one I hold which I believe is set to do well whether the price of gold goes up much or not. It has great management, a very low cost base, is about to become net cash positive and a dividend is mooted for later in the year.
Lots more positives and may be worth a look if you can bring yourself to look at a miner :)

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DMG2305 31st May 23 of 38
1

Paul,

Your comments about the eventual break up of the euro remind me of the book "the Big Short" where Scion Capital and some other hedge funds figured out a way to short the US housing bubble and collateralised debt market and made gazillions when the whole thing blew up, now the question is how do we or can we do the same should the euro collapse? Any response will not be considered investment advice!
Best Regards DMG

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gus 1065 31st May 24 of 38

In reply to post #368669

I thought looking at minors was a criminal offence these days?!

Gus.

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mammyoko 31st May 25 of 38
3

Card Factory (LON:CARD) has NTAV of negative £114m at the last balance sheet date. I know this is normally an obstacle for you, Paul. Is there some reason why you would break your rule for this share?

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mark giffin 31st May 26 of 38
4

Paul hi
Just to say I think you're opening summary on the Italian and EU straight- jacket is an excellent and succinct summary of the broad situation. There's a wider journalist in you waiting to get out !

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kenobi 31st May 27 of 38
2

I hate to mention Italy when Paul has deliberately not mentioned it but isn't this disaster just put on hold ? surely inevitably this is going to go through the greek model where they elect people wanting changes or to leave the eu, and there will be a stand off, I suspect this time there will be some sort of compromise and they will do some sort of reforms to keep everyone in line, but obviously it depends on the German position.

It isn't inevitable that the EURO fails after all the dollar hasn't but for it to survive it'll need to be some more economic integration, with central funding and distribution of resources to make up for the inability of currencies to adjust. This inevitably means more money going from richer to poorer countries, whether the German electorate will stomach this remains to be seen. I'm not sure they realise what a great deal they get from the euro, their point of view might me more along the lines of now you have a strong and stable currency as opposed to the mickey mouse perpetually falling currencies you had in the past,

both views have some merit, especially from the point of view of those who hold them.

G

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cholertonandrew 31st May 28 of 38

In reply to post #368679

Hi, not sure but I have a holding in gold partly for that reason. I would expect it to rise if the euro should collapse, gold being seen as a safe haven.

Regards
Andrew

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DJCP 31st May 29 of 38
1

Mamma Mia, eesa beeen sowted

Looks as though the Italy situation is being resolved - maybe !

Time to close your shorts, Paul ? - If you pardon the expression lol

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DaviStoVest 31st May 30 of 38
1

I think "resolved" is a serious overstatement.

But the parties have kicked the can down the road far enough to provide some more time for a compromise agreement to be found. I think Five Star and the League recognised that, if they forced the opportunity this crisis presented to them, it would ultimately have back-fired on them.

From the investor standpoint, it is good that there is a little more calm for now. But this is far from over.

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timarr 1st Jun 31 of 38
7

There's been at least one Euro crisis every year for the past decade, everyone of which has precipitated cries of imminent doom. I've no doubt the thing will fall apart eventually, but the chances of anyone actually predicting when that will happen seem vanishingly small to me. Every doom-monger so far has a 100% record of failure.

People smarter than me are no doubt able to make money out of these situations, for my part I just hope to pick up a few shares on the cheap. However the final crisis plays out continuing to invest in good companies making and doing things that people need will turn out OK eventually.

timarr

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simoan 1st Jun 32 of 38

There's been at least one Euro crisis every year for the past decade, everyone of which has precipitated cries of imminent doom. I've no doubt the thing will fall apart eventually, but the chances of anyone actually predicting when that will happen seem vanishingly small to me. Every doom-monger so far has a 100% record of failure.

People smarter than me are no doubt able to make money out of these situations, for my part I just hope to pick up a few shares on the cheap. However the final crisis plays out continuing to invest in good companies making and doing things that people need will turn out OK eventually.

Amen. I guess Taleb wasted his time writing those books... :-)

All the best, Si

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paraic84 1st Jun 33 of 38

In reply to post #368579

Thanks for flagging this. I also took a look to see if it would impact companies like Next (LON:NXT) but the proposals about catalogue credit and store cards seem fairly light-touch:

"We are consulting on new rules to:
• Require catalogue credit and store card firms which offer ‘buy now pay later’ (BNPL)
and similar offers to provide consumers with clearer explanations of the implications
and costs of not paying back within the offer period.
• Require these firms to remind their customers when the offer period is about to
come to an end to prompt repayment.
• Give catalogue credit consumers more choice about whether and how their credit
limits are increased.
• Ensure catalogue credit firms do not give credit limit increases to customers in
financial difficulties or increase the interest rate on their account.
• Require firms to use the information they hold to identify customers at risk of
financial difficulty and take appropriate steps. We also propose to apply these rules
to store cards.
• Require firms to offer customers in persistent debt help to repay it more quickly. We
also propose to apply these rules to store cards

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Edward John Canham 11th Jun 34 of 38
1

In reply to post #368629

Air Partner (LON:AIR)

Accounts promised today - expected at 7:00, still not out.

Taking it to the wire.

Phil

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simoan 11th Jun 35 of 38

In reply to post #372299

Accounts promised today - expected at 7:00, still not out.

Taking it to the wire.

Yep, but don't see why they need to be released at 7am whilst the shares are suspended. They only promised they would release the results today and that could be any time whilst the shares cannot be traded. I assume they could release them after the close and return from suspension at 8am tomorrow.

All the best, Si

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Edward John Canham 11th Jun 36 of 38

Hi Si

Fair comment - should have said I expected them at 7:00.

They obviously have until 23;59 tonight and you might well be correct that they always planned to release after close - but that suggests to me there is something to digest.

Not sure if the BOD have covered themselves with glory here - but we'll see.

Phil

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simoan 11th Jun 37 of 38

In reply to post #372439

They obviously have until 23;59 tonight and you might well be correct that they always planned to release after close - but that suggests to me there is something to digest.

As long as everyone gets time to read and consider the results well in advance of the lifting of the suspension and trading restarting, I don't see a problem. Releasing results after the close is good enough for the NASDAQ :-)

Not sure if the BOD have covered themselves with glory here - but we'll see.

No they haven't. It's been a total farce and the FD has rightly gone. Their credibility is not in great shape and they badly need to regain the trust of shareholders. At this point I have little faith in them, what with us still waiting, and I'll review whether it's a company I want to have any investment in once I've seen the  FY results.

All the best, Si

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Edward John Canham 11th Jun 38 of 38

In reply to post #372489

They're out there now.

But my tea's ready.

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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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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