Small Cap Value Report (Thu 4 Apr 2019) - AO., IMO, NWF, HSS, MTC

Thursday, Apr 04 2019 by

Good morning, it's Paul here.

As usual, please see the header for the announcements which have initially caught my eye.

AO World (LON:AO.)

Share price: 93.25p (down 3.9% today, at 08:41)
No. shares: 471.9m
Market cap: £440.0m

Trading update

AO World plc ("the Company" or "AO"), a leading European online electrical retailer, announces the following trading update for the twelve months to 31 March 2019 ("FY19").

A slight disappointment by the looks of it;

Group Adjusted EBITDA (excluding exceptional costs) is expected to be at the lower end of market expectations...
2    Company compiled revenue consensus of £892.6m, with a range of £876.0m to £904.2m and EBITDA consensus of £0.7m, with a range of £-0.4m to £2.0m.

Footnote 2 is very investor-friendly, so well done to AO & its advisers. It makes life so much easier for investors when companies include a footnote to explain what market expectations are. Every company could & should do this. It makes sense to help investors quickly & easily understand performance, as we're more likely to buy the shares, if information is presented in a readily-understandable way.

  • Revenue growth is only 9% (organic) - not very impressive.
  • Revenue of £900m, but it still can't make a profit even at the EBITDA level. So what exactly is the point of this business existing?
  • Increased stocks ahead of Brexit
  • Additional £2.5m in exceptional costs
  • Outlook comments are mainly management-speak waffle
  • Expanding into new categories, such as garden & DIY
  • Also trying out product rental

My opinion - the original business model really hasn't worked. So why is this loss-making company still valued at £440m? It doesn't make any sense to me.

It's not clear how it will compete with Amazon Prime, etc.? Selling other people's stuff, at low margins online, just isn't a good business model. Online works better when product is unique, in demand, and high margin. That's not likely to ever be the case in electricals (nor garden & DIY either).

IMImobile (LON:IMO)

Share price: 316.5p (up 10.3% today, at 11:13)
No. shares: 66.7m
Market cap: £211.1m

Trading update

IMImobile (AIM: IMO), a leading communications software and solutions provider, is pleased to announce the following update ahead of its preliminary results for the year ended 31…

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AO World Plc is an online retailer of electrical products. The Company operates through two segments: online retailing of domestic appliances to customers in the UK, and online retailing of domestic appliances to customers in Europe (excluding the United Kingdom). The Company offers over 5,500 stock keeping units (SKUs) in the United Kingdom, approximately 2,000 in Germany and over 600 in the Netherlands. The Company offers a range of ancillary services, such as customer finance options, an unpack and recycle service, product care packs, and disposal and connection services. In the United Kingdom, the Company operates in approximately three categories: Major Domestic Appliances (MDA), Small Domestic Appliances (SDA) and Audio Visual (AV). The MDA market offers built-in appliances, such as dishwashers. The SDA market comprises small appliances, food preparation and floor care. The AV market includes television, audio, set-top boxes, digital versatile disc (DVD) and Blu-Ray players. more »

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IMImobile PLC is a cloud communications software and solutions provider. The Company's segments include Europe and Americas (Europe being substantially all to the United Kingdom), India and South East Asia (SEA), and Middle East and Africa (MEA). Its products include IMIconnect, IMIcampaign, IMIdigital, IMIchat, IMIsocial and Textlocal. IMIconnect is an enterprise cloud communications platform enabling information technology (IT) to create and deliver multi-channel digital customer journeys. IMIcampaign is a multi-channel campaign management platform to deliver personalized marketing campaigns in real time. IMIdigital is a content management system for end-to-end delivery of content services across all digital touchpoints. IMIchat is a mobile and social chat application for contact centers. IMIsocial is a built for radio and television broadcasters to develop audience engagement and live programming across mobile, digital and social. Textlocal is a cloud-based messenger platform. more »

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NWF Group plc is engaged in the manufacture and sale of animal feeds, the sale and distribution of fuel oils, and the warehousing and distribution of ambient groceries. The Company operates through three segments: Feeds, Food and Fuels. The Feeds segment is engaged in the manufacture and sale of animal feeds and other agricultural products. The Food segment is engaged in warehousing and distribution of clients' ambient grocery and other products to supermarket and other retail distribution centers. The Fuels segment is engaged in the sale and distribution of domestic heating, industrial and road fuels. The Company's subsidiary, Boughey Distribution Limited, is engaged in warehousing and food distribution. Its subsidiaries, NWF Agriculture Limited, S.C. Feeds Limited, New Breed (UK) Limited and Jim Peet (Agriculture) Limited, are engaged in animal feedstuffs and seeds supply. Its subsidiaries, NWF Fuels Limited and Staffordshire Fuels Limited, are engaged in fuel distribution. more »

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

79 Comments on this Article show/hide all

ericpiralta 4th Apr 60 of 79

In reply to post #465871

I have no issues with portfolio size, but if I had a portfolio, say, of £10,000, then £225/yr automatically shaves off 2.25% from the yearly performance. That is not immaterial. And if that's just one of 2-3 subscriptions you have for different data sources, then surely you can see that it's not an obvious decision. 

Edited to tame down.

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stephencrane 4th Apr 61 of 79

I cancelled my subscription yesterday after 2 years. It actually expires in May, so after then I’ll lose access. I’ve been an advocate of putting SVCR behind a paywall & ironically will now be a victim!
I love the ‘at a glance’ share summary pages, as all the pertinent information is readily available. However I don’t value the stock ranks or styles at all as I frankly don’t believe in them. As such I was paying solely for convenience, as all the classic financial data is elsewhere for free. I’m constantly fighting the urge to over trade anyway, so a little less daily analysis may help me to control the monkey within.
I’ll bowl along for a bit as a free user & reassess over the coming months. if I miss it, perhaps i’ll be back. As much as anything I have enjoyed reading the comments of the community here, so thanks to all, especially the regular posters. Thanks to all involved & good luck in the future.

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Camtab 4th Apr 62 of 79

In reply to post #465556

Hi, thanks for your reply ACounsell. I totally understand that the change to a low carbon environment will be extremely challenging and I appreciate your common sense response. Unfortunately I don't think nature will listen and we do need to reduce carbon output quickly according to Scientists or our investments are pretty irrelevant anyway. But to your real point the Norwegian Fund recently tried to remove Oil companies from their portfolio and ended up simply reducing them. I used to work with Pension Fund Trustees and their argument was always we are liable for the returns more than the investments. I note also Cambridge and Oxford Universitys are trying to reduce exposure tot hese companies through the sponsorships they provide. But yes they all struggle with it. I am sorry if you lost money on Patisserie I just got lucky with that one. Looked at it several times and couldn't get excited with it. And yes I agree the Directors do appear extremely culpable but in the end whilst they affect the individual shareholders they won't have the same impact on global trade that environmental warming will have.

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Johnny2509 4th Apr 63 of 79

I don’t see why some are deriding those that have been reading the SCVR for 6 years and apparently now  being viewed as having a free ride. They haven’t. It was free. Now they are asked to pay £200+ to continue reading. Why would they, if the SCVR is your only reason to visit the site? 

I’m more likely now to subscribe to Graham’s Cube Investments website at half the cost of the SCVR, with more relevant information to my needs. It’s interesting to note that Maynard Paton, Phil Oakley ( pre IC) and Richard Bedford don’t hide their analysis / content behind paywalls.

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douglas 4th Apr 64 of 79

Could there be a subscription service for the SCVR only?

I would be happy to subscribe for that.

I really don’t understand the bulk of the Stockopedia data. That is after 30 years of investing. Balance sheets are confusing and sometimes misleadeading. Not like the good old days.

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ken mitchell 4th Apr 65 of 79

Why are so many small investors unwilling to pay for quality information? If used judiciously it can vastly improve investment performance and mine has improved significantly since subscribing to Stockopedia. The SCVR is just a brilliant extra . There is a wealth of invaluable facts and figures available to subscribers. Ditto on Sharepad, but though currently subscribing to both, I use Stockopedia far more.

e.g small investors losing too often on rubbish, heavily promoted small company shares on often poor quality bulletin board elsewhere would have second thoughts as soon as seeing their potential multi bagger scores ZERO and with figures to show why!

What works best? Using quality subscription only information, or being swayed by so called clued up anonymous posters who are sometimes anything but? Indeed on one bb in particular hundreds of rubbish posts every day almost always means rubbish share.

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herbie47 4th Apr 66 of 79

In reply to post #465881

Not if your performance improves. But yes I take your point about several subscriptions, I only subscribe to Stockopedia, I have tried Sharepad but it was not for me and several others. I cancelled my IC sub. when I came here, I don't miss it. You should try the free trial, there is a lot more to Stockopedia than just the Stock Reports, I use the screening and charts quite a lot.

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simoan 4th Apr 67 of 79

In reply to post #465896

I don’t see why some are deriding those that have been reading the SCVR for 6 years and apparently now being viewed as having a free ride. They haven’t. It was free. Now they are asked to pay £200+ to continue reading. Why would they, if the SCVR is your only reason to visit the site?

Well... I wasn't deriding anyone. I read the SCVR for a year or two before I took a trial to gain access to the StockReports and then subscribed but it seems some will never subscribe, no matter what. However, it's a double standard to say how much you value something on the one hand and then on the other declare that you're not prepared to pay anything for it. IMO it's the same psychology as that of a poor investor who anchors only on price and doesn't understand valuation.


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dodge1664 4th Apr 68 of 79

I would only subscribe to Stockopedia if it had full backtesting functionality, otherwise its not worth it IMO. I'll miss the SCVR though.

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douglas 4th Apr 69 of 79

In reply to post #465901

Hi Ken
I have subscribed in the past to SCSW, IC, FT, MW and others whose names I forget.
I can no longer read a balance sheet. Correctly. I am pretty sure I am not alone.
I emessaged Ed (stocko) months ago re this. I suspect I am not alone. I suggested a BASIC tutorial website. That in turn would hopefully increase subs . Stocko seems to be aiming itself at mid level and middle aged investors
The reply suggested that any Stocko subscriber would know how to read current financials.
A close relative of mine who runs/owns a sub £10m company was recently on a course to help him understand balance sheets. He is us still struggling with this.

I don ‘t always trust my judgement when reading financials and I often find Paul and Graham’s reports illuminating.

As such I would seriouslly miss the SCVR and subsequent comments.

I would hope that Ed gives serious consideration to a BB only subscription.

Kind regards
(Now let the red thumbs descend!)

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tic_tac_toe 4th Apr 70 of 79

I'd really like to settle on a £10/month discussion board fee. Using principally sharescope and sharepad but I do really like the discussion here - which is something SC/SP really lacks. But I cannot justify running both services.

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mikemorris 4th Apr 71 of 79

In reply to post #465796

Re Motley fool, I find the daily investing articles commentary very useful, particularly on company news that has shocked the market. Today Saga has crashed, last week Superdry, where else can you get an overview as to what is going on, and whether these companies are still investable.

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mikemorris 4th Apr 72 of 79

In reply to post #465926

Like Douglas, I realised some time ago that I needed to understand balance sheets if I was to survive in the world of company investment. The game gets more interesting but deadly, in the Aim market where the likes of Quindell and Globo were allowed to roam, and fleece investors. Paul Scotts 'barge list' was brilliant at Red flagging. This was how I stumbled into his articles. A down to earth accountant who can read between the lines of company reports, and issue common sense commentary Just what I needed.
Yes I have purchased several books on reading company reports, but how boring for a non accountant. How time consuming. It is time consuming enough to keep up with all the daily company news, but how interesting. Saga at 63p, is it a bargain? Ted Baker at half price, all because of hugs, but is it still investible? Yes, I will be subscribing, because I so value Paul and Graham's viewpoint, on understanding company accounts, and appreciate the time they have put in. I cannot no longer invest in an Aim company without some feedback on the latest accounts.

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Graham Ford 5th Apr 73 of 79

I’ve no problem with the market commentary being for subscribers only.

What I do have a problem with is that the evolution of the stock reports and tools seems to have ground to a halt. It must be getting on for two years since the last major upgrades with the roll out of the risk ratings. Upgrades have been promised but not materialised so far.

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gbjbaanb 5th Apr 74 of 79

In reply to post #465981

and to add to that, truly bad display on mobile - I note there is a suggestion to improve the usability on mobile that was created ... 10 years ago.

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xxx 5th Apr 75 of 79

I'm a lurker by nature and cant remember how long I have been reading the small cap value report.
Though i look forwards to it and the thoughtful comments, which mark this site out as different, I have only owned 1 company that was reviewed in this time, as I have a different style, but read as Paul is a colourful character and I like the way he puts things.
Thus from the 12th, I'll miss the updates. So thank you for the last ?4 years or so of comment and general amusingness.
Be Lucky !

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Metatron 5th Apr 76 of 79

If a share like Immobile is on a Short Screen is there any argument for ignoring the Short screen and buying the share?
Whatever the bull arguments for Immobilie there must be other attractive shares that are not on short screens

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ken mitchell 5th Apr 77 of 79

HI Douglas

I guess most private investors don't understand balance sheets that well and that's where Paul and Graham's analysis of them is so useful. I took the line many years ago that if Auditors can fail to spot red flags then what chance have I got.

I DO think the key stock page for each share is invaluable. It can be used at any level, even from just seeing how many greens and reds, or at least just to take in to account the 3 key quality graphics figures. Also it's easy to find things that we really should know like debt and cashflow.

And if wanting to understand in more detail then maybe a few subscribers don't realise that every blue heading can be clicked on for full explanations AND also clikcing on the greens and reds brings up very useful figures.

e.g try it for EVRAZ quality graphics greens!

One problem is invevitably the figures are historic and don't and presumably can't (can they???) take account of subsequent trading updates. .Nor can they take in to account big changes ahead.... e.g for a cyclical share like Evraz, a big fall off in demand for their steel or whatever.

But the stock page is so useful for negatives. I've taken one quick look at some shares and looked no further. otoh the stock page is no use for early stage companies.... except perhaps to show the long journey ahead. We've seen early stage shares hyped on bulletin boards (e.g  BNN) with a score of zero. And that's how it ended up for BNN investors. That sort of thing alone makes STOCKOPEDIA subscription well worth the money imo.

I also find all the headings on other pages so useful. e. g top 10 for quality, value and momentum, biggest dividend payers lists and biggest forecast yield lists, and lowest PEG etc etc. We don't get any of those with Sharepad yet they can throw up some gems.

BUT imo it's also essential then to check out the latest news from the Companies themselves as rogue figures happen. e.g biggest dividend payers have sometimes had a profits warning and warning of dividend cut. This happened for ages with Connect and I did email Stocko about that and several others and they were then corrected.

So always best to  use Stockopedia in conjunction with info from the Companies themselves.

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douglas 5th Apr 78 of 79

Thanks for the reply Ken. Interesting and informative.
I would give you a thumbs up but cannot do so from an iPad.!

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purpleski 5th Apr 79 of 79

In reply to post #466101

Hi Douglas

For reasons unknown to me you can give thumbs up on the iPad if you are using Firefox. I happen to use Firefox on my iPad at the moment for my investing stuff and that is how I found out. Chrome no, Safari no.

Regards Michael.

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 Are LON:AO.'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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