Small Cap Value Report (Thu 4 Oct 2018) - ABDP, EHG, IGP, DFS, BOOM, VLE

4th Oct '18 by Paul Scott

39 comments 10932 reads

Good morning!

Please see the header above for the shares that have caught my eye this morning.

CEO interview - Best Of The Best (LON:BOTB)

In case you missed it yesterday, here is the link to my audio interview with William Hindmarch, CEO of BOTB (in which I have a long position).

Sorry if this project rather curtailed yesterday's report. I've decided that it's too much to write a SCVR and do an interview on the same day. So in future, I'll only do interviews when Graham is writing that day's SCVR.

FinnCap research

Excellent news for private investors. FinnCap tweeted me last night, to say that all investors, including PIs, can now access their research. The website is here. I've just registered, and it works! So that's a very handy initiative to widen the distribution of research notes - something that I'm very keen to encourage.

Ab Dynamics (LON:ABDP)

Share price: 1472p (up 14.8% today, at 11:08)
No. shares: 19.5m
Market cap: £287.0m

Trading update

AB Dynamics plc (AIM: ABDP), the designer, manufacturer and supplier of advanced testing systems and measurement products to the global automotive industry, is pleased to provide a trading update in advance of the publication of its final results for the twelve months ended 31 August 2018.

A very nice update today;

The Group has performed well through the year and the Board expects both revenue and profit before tax to significantly exceed market expectations.

Most of the growth has come from track testing products, used for autonomous vehicle development.

My opinion - I'm not sure how to value this share, as I don't have any updated forecasts. So I'll have to use some guesswork.

Stockopedia shows broker consensus of 34.0p EPS for y/e 31 Aug 2018. What does "significantly exceed" mean? Maybe c.40p EPS? At 1472p per share, that would be a PER of 36.8 - expensive.

Maybe the market thinks the company will achieve more than 40p then? And/or that the new year might deliver say 50p EPS? That would move the PER down to a still expensive 29.4.

As you can see from the Stockopedia graphs, this company has an outstanding track record, and the light blue forecast…

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RichardK

4th Oct '18

Re EHG and Barbados tax changes:
Effective July 1, 2018, the highest rate of corporation tax would rise from 25 percent to 30 percent.
Effective October 1, 2018, a health service contribution will be introduced at a rate of 2.5 percent on incomes, with 1.5 percent payable by employers and one percent by employees.
The incidence of the above will fall on EHG (and employees).

VAT on hotel accommodation will double to 15 percent from January 1, 2020, with a per night hotel room levy applying in the interim, which will range from USD2.50 to USD10 per night. In addition, a 2.5 percent product levy will be imposed on all direct tourism services. This will be collected by the providers of these services.

A 10 percent tax on all sharing economy transactions, such as those provided by Airbnb, Homeaway, Expedia, and others, will be imposed from August 1, 2018.

An airline travel and tourism development fee will be introduced from October 1, 2018. Passengers flying to destinations outside the Caribbean Community will pay USD70, while those flying to destinations within the Caribbean Community will pay USD35. This fee will be in addition to the departure tax.

The incidence of the second group will be on tourists rather than hotels, but may reduce demand for tourism.

Source: https://www.tax-news.com/news/Tax_Regime_Overhaul_Announced_In_Barbados____76835.html

I hold EHG.

sharw

One caveat to the finnCap research is that you do have to tick a qualification box the minimum for which is High Net Worth Individual. I have found that defined as:

If you earn at least £100,000 a year or have net assets excluding property and pensions of at least £250,000, you can self-certify yourself as a high net worth individual (HNWI) or a ‘sophisticated investor’.

from https://www.nelsonslaw.co.uk/h...

Paul Welsh

Hi Paul

Out of interest, when did you sell EHG?

On 12 Oct you said you were long:
https://www.stockopedia.com/content/small-cap-value-report-thu-12-oct-2017-ehg-nxr-rno-rbg-227808/

Back on 9 Jan you said you were happy to hold:
https://www.stockopedia.com/content/small-cap-value-report-tue-9-jan-2018-ehg-tpt-joul-nexs-tast-gaw-294743/

dahokolomoki

On Elegant Hotels (LON:EHG), there was also a preliminary bid approach from the Accor Hotel group. So that's another consideration, that they could become a nice acquisition for one of the large chains, all who have been doing well recently and probably hungry for some growth in their portfolio.

rogergreen

Three cheers for FinnCap (and thanks for flagging it Paul).

FREng

Why not "self certified sophisticated investor"?

StandardModel

Hi Paul

Any opinion on £TED? I know it's not a small cap but you have commented on it before ... Is today's drop an overreaction?

thanks
Mick

Gromley

I hadn't looked at Ted Baker (LON:TED) for ages and my recollection was that in stockrank style terms they were a High Flyer (high Quality and Momentum but little by way of Value credentials).

But no longer, the momentum has gone and they are now considered as a Falling Star.

And it is not just the shareprice that has lost momentum , earnings forecasts have been consistently downgraded throughout the year.

Not a happy picture.

I have hardly even skimmed the surface of the results, but I do note that Stock are showing a forecast 7% increase in revenue for the year but for the half year they are +3.5% (+5.5% at constant currency) .

With no obvious reason why H2 will be any better I would expect further downgrades to come.

On this basis I didn't look any further.

shanklin100

Hi Paul
Many thanks for the heads up re FinnCap
Best Regards
Martin

Beginner

https://twitter.com/MrContrarian

A succinct explanantion by one wiser than me.

peterthegreat

Thanks for the comments on Intercede Paul as the company does look interesting. I went to the company's web site to find out more but found it quite difficult to evaluate the company. A key strength promoted on the web site appears to be that the company's "team of experts has deployed millions of identities to governments" and other organisations which sounds impressive but I haven't a clue how you measure the significance of this. Also I found that the video on the web site explaining the "PSD2 Hub" does not exist so I am none the wiser on what that is. I then clicked on the link on the web site "rapid.intercede.com" to find out about the company's RapidID technology and the link did not work! If Intercede can't even get their web site up to standard I wonder how they manage with more complicated tasks?

AnonymousUser252054

I managed to sign up to Finncap as a 'sophisticated private investor', and so far they have totally failed to spot that I'm an idiot.

JohnEustace

There is a definition of "sophisticated investor" and I will be surprised if many people qualify:
Sophisticated investors
23.—(1) “Certified sophisticated investor” means a person—

(a)who has a current certificate in writing or other legible form signed by an authorised person to the effect that he is sufficiently knowledgeable to understand the risks associated with participating in unregulated schemes; and
(b)who has signed, within the period of twelve months ending with the day on which the communication is made, a statement in the following terms:
“I make this statement so that I can receive promotions which are exempt from the restriction on promotion of unregulated schemes in the Financial Services and Markets Act 2000. The exemption relates to certified sophisticated investors and I declare that I qualify as such. I accept that the schemes to which the promotions will relate are not authorised or recognised for the purposes of that Act. I am aware that it is open to me to seek advice from an authorised person who specialises in advising on this kind of investment”.

Does anyone know who would issue such a certificate?
www.legislation.gov.uk/uksi/20...

Lion Tamer

And a supplementary question to John's (re the definition of "sophisticated investor"):

I notice the definition of a Certified high net worth individual is on this page:
http://www.legislation.gov.uk/uksi/2001/1060/article/21/made
It states a number of conditions (basically you've got either an annual income of over £100,000 or net assets after house, potential insurance benefits & pension etc. £250,000 or more). However the copy/paste certification text also has to be signed by the recipient’s accountant or by the recipient’s employer. Well I've got neither an employer or an accountant, as I'm early retired and do my own accounts / tax returns (always have done, which may be why I could afford to retire:)). So although I meet the conditions, I'd be unclear how to arrange the certification.

For the record, this is a rhetorical / academic question, since I took the pragmatic approach of clicking "High Net Worth" on the FinCap registration page and signed up anyway. Let the authorities come looking for me if they've nothing better to do!

peterg

The FinnCap category is "self certified sophisticated investor", so the question of who issues a certificate doesn't really arise.

davidjhill

The best place for Broker research in my opinion is Research Tree that includes many brokers to small/medium cap companies.

It is an aggregator of most research houses and Edison, FinnCap, Liberum, SP Angel, Zeus, N+1 Singer, Cenkos, Capital Network. WH Ireland are all on there.

I subscribe and if you haven't already taken a look I think they do a 30 day free trial from memory.

ps edit : I was just looking and I see 2 notes on Elegant Hotels (LON:EHG) for example so you can compare what different brokers think/say.

Paul Scott

Yes, I agree, Research Tree is a fantastic service. I'm a big fan.
It's very handy to have things in one place, and the £25 pm fee is insignificant, compared with one losing trade, if you didn't have important information. A lot of people tend to be pound stupid, but penny wise, in my view - re scrimping on important services such as Stockopedia & Research Tree.

5th Oct '18

I think I can work out who would issue it for a "self certified sophisticated investor".

Isn't this all about shifting any liability for bad decisions on to the investor (where it should be)?

davetparkes

8th Oct '18

tried finncap.

it wont accept my password - along the lines of Eabcde01x[

stepone

Maybe it's upper case O rather than 0?

Small Cap Value Report (Thu 4 Oct 2018) - ABDP, EHG, IGP, DFS, BOOM, VLE

CEO interview - Best Of The Best (LON:BOTB)

FinnCap research

Ab Dynamics (LON:ABDP)

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Paul Scott

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