Small Cap Value Report (Thu 6 Jul 2017) - Quiz, BLTG, ENTU,
Good morning, it's Paul here.
Quiz
As promised, I'm coming back to you about my meeting yesterday with QUIZ. This company is a Glasgow-based omni-channel clothing retailer, which is due to float later this month. The RNS giving some details about the company is here.
It was almost like looking back in time for me, as the company's business model is so similar to my old employer "Pilot" - where I was Head of Finance from 1993 to 2002. Quiz operates from around 67 UK stores, plus about 140 concessions in department stores such as Debenhams. It also has growing overseas, and online sales. It sells about 60% of online sales through its own website & apps, and the balance through third parties, such as Debenhams.com
Its product is fairly cheap, and slightly niche - in that the company focuses on "dressy" items - i.e. special occasion wear for women, e.g. party dresses, evening wear, weddings, etc. So the company doesn't try to compete on basics, but targets higher margin special occasion wear. I noticed from the company's app that everything I looked at was 100% polyester. So what one of my friends refers to as, "all fur coat, and no knickers!"
I went in to the meeting feeling rather sceptical, but at the end of it was impressed. Management & shareholders are a British Asian family, which is usually best for the clothing sector in my experience. They're self-made people who know the sector inside-out, so a tick in the box there for management.
I also found their presentation well put together, with lots of positive facts & figures - e.g. decent profitability & growth. Although I struggled to hear the softly-spoken CEO - he definitely needs amplification to be heard over the noisy aircon at Panmure's offices. The meeting was full, with analysts and brokers, plus me & my broker. Sandwiches were placed in the middle of a large board room table, which most people couldn't easily reach, so few were consumed.
You can tell a lot from the way management answer questions. The first question was from a fund manager friend of mine, who asked management to elaborate on the company's insolvency in 2009. A tricky question, but management gave a clear & honest answer, saying that their rents were too high, which combined with the recession, meant they…
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37 Comments on this Article show/hide all
"... although there's about a 50% chance that might be derailed by me stopping off at the pub".
I will happily offer evens to anyone that wants to bet against Paul stopping off at the pub!
In reply to post #197931
Return rate is likely to grow as online sales grow. I would also add from experience of over 30 yrs in the trade , a high returns rate can be a result of weak quality control systems in place. The trial and repeat model will also not help QC, many corners are cut to get the fabric and garment manufactured to those tight lead times.
In reply to post #197999
It's Thursday..
It's bloomin' hot...
I'd want much better odds than that, far too much risk given the above macro
Cheese I reckon
I'm struck by the similarity of the related party transactions at Entu (UK) (LON:ENTU) rightly being viewed as a big red flag yet Quiz has a big related party conflict with the vendors remaining the owners of the new distribution centre. I bet that's not on a 5 year lease...
I've no knowledge of the detail but if it's as described above that alone would rule it for me
Paul,
Is incestuous a prerogative term, financially speaking? You (or was it Graham) flagged up float of DP Eurasia NV (LON:DPEU) at 200p. Thank you, it made interesting (as in "may you live in interesting times") reading but it got a 10/10 bargepole rating from me, 90% cash to previous holders, most of remaining10% new cash to be spent in Russia. But any traders who bought in at 160p on day one of trading could have made 20% in a week. And it will go on my watch list at 20p.
Regards,
Seadoc
In reply to post #197943
Hi, can I ask where you source the Major Shareholders and dealing chart you post? Thank you
Re Entu, I have learned the same lessons as Paul with an additional one. In the early day, I tried and tried to make contact with the CEO and other mgt. I called, emailed, wrote etc. and was repeatedly fobbed off, at one point actually overhearing somebody (don't know who it was) in the background saying "Tell him I'm away from my desk and that I'll call him back" which he never did.
I had emailed my questions in advance and they were very benign and reasonable, it wasn't an inquisition. So, I figured that there was something fishy and sold out. Luckily for me I lost nothing and after I had sold received a chunk of that unsustainable divi!
With regards high dividend paying floats, hasn't an expensive yacht painting company just "floated" with a divi north of 6.5%? If I were allowed (work compliance prevents it) I'd be as short as a short thing on that!
In reply to post #198027
James,
http://images.stockopedia.co.uk/user/595e302ec737ebltg.JPG
Hope the link works,
Seadoc
In reply to post #198031
Regarding incestuous relations, does Accrol Group (LON:ACRL) have some form of arrangement where it manufactures but an intermediary sells? If so, this may be another barge pole. (Is there such a thing as a 'yacht pole'?)
In reply to post #198047
Re: (Is there such a thing as a 'yacht pole'?)
Experts call it a "mast"
In reply to post #198047
Beginner,
"(Is there such a thing as a 'yacht pole'?)"
Bit OT but yacht poles? YES. Google Twistle or twizzle rig. One pole good, two poles better.
Sea(bit of a clue)doc
Edit and PS: FREng, umm masts? yup, need at least one of them as well! Have sailed with up to three, but not on my Tupperware
In reply to post #198011
yes I find that highly dubious, why wouldn't that distribution centre be part of the business if it's owned by the same people ? with a correction in valuation to allow of course. It may not be material but it does introduce a conflict of interest, where by it's in the interests of the founders to pay too much for that property. Now I don't know that they will, but I do know that they've left themselves the temptation to. Now if the answer is that it's a temporary arrangement while another facility is built or something, then it makes sense, but if it's a long term arrangement, how does it make sense ? other than to benefit the founders , and leave some assets outside the company in case it fails ? Does not seem right to me.
Which country is Quiz registered in? There are no registration details on it's website and I can't find it on the Companies House website. Quiz Limited seems to be a private defence company from Bristol.
In reply to post #198067
The company appears to be Shoar holdings limited after a quick Google ,if that's it I'd value it about £15m on a pe of 10, not sure if that is the IPO price...
In reply to post #198071
Not enough turnover, but Shoar could be a subsidiary. I expect the full admission document will provide all the details.
Interestingly, Quiz Clothing Ltd and Quiz Limited were registered in Jersy in Feb and March 2017
In reply to post #198079
Shoar is the main holding company according to their latest confirmation statement on Companies House.
The T&Cs on the retail website reference a company called 'Tarak International Limited' which is registered in Scotland and is consolidated into Shoar (Holdings) Limited along with a couple of other companies, Kast Retail Limited and Tarak Manufacturing Limited.
As you say, the group accounts for Shoar don't tally with the figures declared in the RNS so maybe there are some other trading companies out there not consolidated into the Shoar group accounts?
In reply to post #198027
from SharePad which I get as part of a subscription to Sharescope .
Sharepad.co.uk
Think you can take a free trial
My first post - thanks for the column - much enjoy the quality writing.
A while ago - in 23 May 2017 - you were quite positive about Entu (UK) (LON:ENTU) connected company Epwin (LON:EPWN), who make the money on making the windows that Entu sell. With Entu smelling funny, what's your thought about Epwin? If Entu is in trouble, surely Epwin will struggle. I've the sold my Epwin, feeling a little nervous. Any thoughts anyone?
Great post
Re QUIZ
In case you missed this yesterday, there was an RNS giving details of this IPO.
First dealing date is expected to be 28 July
The admission document is now available on the company's website. Here is the link