Small Cap Value Report (Thu24 Sept 2020) - PMP, DISH, CCT

24th Sep '20 by Paul Scott

76 comments 8458 reads

Good morning, it's Paul here with the SCVR for Thursday. Apologies for the placeholder being a little late (07:24), this is because my phone was accidentally turned off, and so my alarm didn't go off as usual at 06:50.

Timings - TBC.

Agenda -

Portmeirion (LON:PMP) (I hold) - Interim results

Bigdish (LON:DISH) (I hold) - funding update

Character (LON:CCT) - trading update

Bigdish (LON:DISH)

Share price: 2.0p
No. shares: 275.7m
Market cap: £5.5m

(I hold)

Funding Update

This is a tiny, pre-revenue share, so I'll keep it brief. It's one of my larger personal holdings, because I see interesting highly speculative upside. The concept was originally a discount dining app, that used yield management principles to allow restaurants to offer discounts for specific half hour slots, in order to get bums on seats at times they would otherwise be empty. It worked superbly, and I used it at least twice per week, pre lockdown.

The business model was recently broadened, to expand into takeaways, link into EPoS systems, and become a package (initially free, to rapidly gain market share) intended to disrupt existing booking apps, and in particular to start eating JustEat's lunch (who price gouge takeaways by charging 14%).

The market potential for an ordering & discounting app is clearly much larger now, as restaurants need to manage the flow of customers more closely, in order to maximise revenues, given that capacity constraints and 10pm closure are being imposed to help battle covid.

Quite an ambitious plan, and it needed funding of $5m, with the remaining cash close to running out. The Chairman told me he didn't want to dilute existing equity, so was looking at alternatives. Since DISH has a full listing, not AIM, a conventional equity fundraising would be too expensive, needing a prospectus to be produced. He's proven adept at raising money before, getting c.£2m from a US investor last year, at 7p per share (price now c.2p per share). Technology investors will pay mind-boggling money for startups these days, especially in America.

Today we're told of a deal that's been done, but it's subject to quite stringent conditions.

Short term funding of £540k has been secured as a loan, which extends the cash runway until June 2021 - good news. Although I don't suppose the loan…

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kgb1953

24th Sep '20

US system is much cleaner. You sign on as temporarily unemployed. They then give all unemployed a supplementary benefit..As jobs return they come off unemployment.

Berksbee

Not long ago LON:RR would have been one for sure. Sadly ....

TamzinPiworld

Tremor International (LON:TRMR) H1 20 results presentation by Ofer Drucker, CEO, who outlines Tremor's vision, H1 highlights, market trends, KPIs and the outlook.

Video or Podcast.

finnCap say, H1 is ahead of forecasts & with a strong Q3 update, they have upgraded FY20 forecasts, have a target price of 500p.

Tomorrow, we will publish the piworld interview with Cockney Rebel, from the live webinar today. It was superb. I'll post a link here on the SCVR, and you'll also find on piworld, as a video or podcast.

We should also be publishing results presentations from Litigation Capital Management (LON:LIT) & Judges Scientific (LON:JDG). Just awaiting permission to publish!

Phuntt

It’s similar to divi stocks - cut the dividend and share price follows - those who hold lose both income and capital value

Whitbourne

"I hope the new CCO will also address the desperate looking permanent 50% off list price pricing strategy" re. Portmeirion (LON:PMP)

Couldn't agree more, Zipmanpeter. It reminded me of Paul's comment the other day about discounting by Superdry. If you disrespect and devalue your own brand, what signal does that send to your customers?

Dogon

Does anyone know the reason behind the goco fall today?

abtan

Funding Circle Holdings (LON:FCH)

Hi Camraid

Thanks for your input on this company.

EARLY HOPES

I held earlier this year on the hopes that they would be in prime position to take advantage of the PPP loans in the US, and CBILS and BBL in the UK.

They put out lots of little clues over how well they were doing on LinkedIn and Twitter at the height of the crisis and I thought they would be quids in.

After all, a large chunk of the PPP loans were 100% backed by the US Treasury. All Funding Circle Holdings (LON:FCH) had to do was be in a position to find borrowers and take their 5% fee.

Imagine issuing $1b of PPP loans (out of c$300b issued in total) and taking a 5% cut - that's revenue of $50m right there in 1 country in just a few months.
(FYI the company generated £167m in FY19 in total)

It was one of those golden opportunities.

HOPES SHATTERED

Sadly, the company has clearly been massaging their announcements and it was soon obvious that they were performing nowhere near as well as they had been insinuating. Today's update has not changed this point of view.

As an example, they said this:

"Since being accredited, Funding Circle has become the 5th largest CBILS lender in the UK with a market share of c.20% of loans approved. We have approved c.£1.2bn and originated c.£815m of CBILS loans"

There's a footnote saying these figures are correct as of September 20th.

We know from the UK governments' website published that same day (link here) that £15.45b worth of loans have been approved.

By simple maths, that makes a market share BY VALUE of 5.3%.
So the 20% highlighted above is correct, but it's clear they have purposefully avoided the more important value, the value I would be more interested in knowing.

It's little things like this that made me sell my holding.

REPORTED LOSS

I sort of lost interest half through reading the results this morning, but from what I could see the loss came down to a revaluation of the Asset Backed Securities (ABS) on the balance sheet - business loans they funded and packaged up with the intention to sell to institutional investors in the US who aren't able to directly give money through Funding Circle's platform.

Which would have been fine, until a once in a century pandemic came along. I think I read that the company state they only have $110m exposure to the ABS, but from memory I thought they had $300m of cash invested in it - one to explore in more depth for anyone interested.

If it was $300m and they are able to receive that money back, I think the EV would actually be close to zero (or at least it was when I was looking into it earlier this year), which would significantly de-risk the shares.

CONCLUSION

There could be hidden value here, but I've been put off by the simultaneous bullish commentary and poor revenue generation to spend more time looking.

Goco (LON:GOCO)

I hold.
Maybe it's to do with the launch this week of an energy switching service by rivals Moneysupermarket.com (LON:MONY) ?

Or it could just be down like everything else in my portfolio today, which looks more like a Tarantino movie than a happy share portfolio.

Jeffay

Hi Paul - you had TEG on yesterday's list but, what with dog grooming etc....you must have run out of time to give everyone your latest view. Despite the general trend south this week, TEG is holding up well so I assume their limited reopening is going quite well, but would be great to hear your take on it please?

Bluesky Ventura

I can confess it is deliberate, but out of the desire for civic duty.

If people still invest at least they are aware of the pleather of warnings signs highlighted to them.

As always DYOR and don't trust the vloggers and bloggers

BSV

Michael C

I visited Covent Garden during a 3 day walking tour of central London 25 - 27 August. Covent Garden was dire, absolutely dead in the water. My contacts in London say things did start to pick up the following week but this week's madness will have sent the place back to square one. I will be interested to see how much of the rent Capital & Counties Properties (LON:CAPC) were able to collect today (September quarter day). But perhaps the CG leases are monthly base + turnover - I don't know.

FWIW I took some video inside Harrods and Peter Jones during my visit. I know a dead department store when I see one, and I was looking at two of them then. They are demised. They have ceased to be. They have expired and gone to meet their makers. They have shuffled off this mortal coil. They haven't actually run down the curtain yet. I'm guessing that will be January, around the time IAG do the same to British Airways.

Martin5760

Paul did get round to commenting on it on yesterdays review - https://www.stockopedia.com/co...

Logical David

Thank you shawr and Glorenfeld for your helpful feedback. As you say, when you flick between the two reports you can clearly see that many of the figures have changed. I notice in particular that the Net Gearing has fallen off a cliff from 21% to 438%. I believe Ten Entertainment (LON:TEG) will survive due to the fact that it is profitable with only 50% capacity in use.

Dojosan

Great choice. I don't hold yet. Used to walk past covent garden each week for weekly dim sum with the family. After C19, some places, particularly Grade A prime props like these will go back to doing what they do best. Thanks for pointer

err you can always "groupon" them instead !!!!! On the otherhand, probably not good idea either!

Might be watchful on the time stated on the google prices / charts. For the less liquid stocks, they can be out by 15 minutes still. If I really need to know the exact price at a certain time, as a freebie, I use IG and see instant share price movements there. In that way, I know what I am seeing is in real time.

Been seeking to buy VLG on its dips. However, it hardly ever dips!!! It's now over 100p!

I’ve always learnt that sells by management should be treated with caution as a signal unless they are enormous or give away control by a founder or something of that nature. 349,000 shares sounds like a lot but in value it’s less than £8k - maybe his roof had a serious leak or he needed a new car or a holiday. It might mean something, granted but it might not.

Buys by management are a different matter. I always liked the quote from Phil Town (which I’m sure he stole from someone else) “I know of a hundred reasons why someone might sell stock but I only know one why they might buy some”.

MiserableJacktPotato

It's on a PER of 50 is that statement.

Is that forward PER or historic? If historic, if they grow at 40% this year, that becomes a PER of 30, another (let's not overplay this) 20% growth the year after then puts it on a PER of 24.

Historic PER is meaningless in that context. Fundamentals indeed.

25th Sep '20

Thanks abtan I'm a bit out of touch since I met them a couple of years ago, but they seem to have good momentum with their own switching service and imagine there is room for 2 or 3 players including compare the market. I wouldn't have thought people were assuming they would completely dominate the space.

Small Cap Value Report (Thu24 Sept 2020) - PMP, DISH, CCT

Bigdish (LON:DISH)

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Paul Scott

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