Small Cap Value Report (Tue 12 Feb 2019) - SOS, PLUS, DEB, LOOP

Tuesday, Feb 12 2019 by

Good morning, it's Paul here.

I finished off yesterday's report in the early evening, adding new sections on Avation (LON:AVAP) and Stride Gaming (LON:STR) . So if that interests you, here's the link.

I will be busy this afternoon, planning & recording my telephone interview with management of  Sosandar (LON:SOS) (in which I hold a long position). That should be published by early evening today. I will tweet out & put a link into Weds SCVR here. There seems to be a lot of interest in the company from you, so many thanks for the interesting questions you submitted to me. Time constraints mean I probably won't be able to cover all of them, but will do my best. We can always do a follow-up interview after the FY 03/2019 results are published in the summer.

On to today's trading updates & results statements.

Plus500 (LON:PLUS)

Share price: 1105p (down 32% today, at 12:35)
No. shares: 113.7m
Market cap: £1,256m

Preliminary results - for year ended 31 Dec 2018

Only a brief comment, as it's far too big for a small caps report. However, lots of us are fascinated by this company - the key questions being whether its massive profits & cashflow are real - that's an easy one, the answer is yes. But are those profits/cashflows sustainable? That's the big question mark - hence why the shares have only attracted a fairly low PER, and huge dividend yield in the past.

The 2018 financial results look absolutely stunning; 

  • Net profit us up 90% to $379m
  • Cash generated from operations is up 78% to $495m
  • Dividends of just under $2 were paid (c. 155p per share) - a yield of  14% at today's share price

Profit warning - here's the problem, in the "current trading" section;

Following our latest assessment of the impact of the ESMA regulatory measures, FY19 revenue is expected to be lower than current market expectations.

This, combined with our intention to maintain our marketing spend, is likely to result in 2019 profit being materially lower than current market expectation...

Directorspeak - The CEO doesn't sound too worried about this downturn;

"In summary, our highly…

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Sosandar PLC, formerly Orogen PLC, is a United Kingdom-based company that operates an online women’s wear platform. The Company’s clothing categories include dresses, jackets and coats, knitwear, shirts and blouses, tops, skirts, trousers, jeans, leggings, footwear, leather and suede, occasion wear, work wear, autumn trends, velvet and holiday shop. Its footwear products include Pewter Metallic Chelsea Boot, Red Leather Ankle Boot, Velvet Cylinder Heel Ankle Boot, Black Leather Stud Detail Ankle Boot, Black Suede Closed Toe Mule, Grey Velvet Court Shoe With Jeweled Brooch, Black Suede And Pewter Metallic Court Shoe, Black Leather Front Zip Ankle Boot, Leopard Print Leather Chelsea Boot, Steel Blue Leather Snake Print Ankle Boot And Black Suede Knee Boot. It also offers latest edit of day-to-night dresses, on-trend separates, luxe leather and outfit-topping shoes through its platform. more »

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Plus500 Ltd is an Israel-based company that develops and operates an online trading platform for individual customers to trade contracts for difference (CFDs). Its online trading platform allows its customers to trade CFDs on over more than 2,200 different underlying global financial instruments comprising equities, indices, commodities, options, exchange-traded funds (ETFs), crypto currencies and foreign exchange. The Company enables individual customers to trade CFDs in more than 50 countries. The trading platform is accessible from various operating systems, such as Windows, iOS, Android, and Surface, as well as Web browsers. more »

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Debenhams plc is a United Kingdom-based company, which is engaged in multi-channel business. The Company’s brand trades through approximately 240 stores in 27 countries. The Company's segments are UK and International. The UK segment consists of stores in the United Kingdom and online sales to the United Kingdom addresses. The International segment consists of international franchise stores, the Company-owned stores in Denmark and the Republic of Ireland, and online sales to addresses outside the United Kingdom. The Company's stores trade under the name of Debenhams other than the Danish stores, which operate under the Magasin du Nord banner. Its stores offer customers a range of services, including restaurants and cafes, personal shopping assistance, hairdressing and beauty treatments, nail bars and wedding or celebration gift services. Its Debenhams Direct ( offers a range of products and services for online customers. more »

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

30 Comments on this Article show/hide all

andrea34l 12th Feb 11 of 30

In reply to post #446058

Personally I think the price GB (LON:GBG) has paid is ridiculous, at over 18 times current EBITDA!!

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Math 12th Feb 13 of 30

Hi Paul, sorry its late to ask but maybe worth mentioning to Sosandar. I have asked a friend who to look at it from a woman's perspective in terms of ordering. Whilst she was impressed with styles and website, she was put off ordering as she came across negative comments on mumsnet regarding the time it takes to get refunds.

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Daniel Neale 12th Feb 14 of 30

Hi Paul if you could please cover MPM, Mporium this morning that would be fantastic.

RNS this morning looks very positive:

"Across its businesses, Mporium has billed revenues in excess of £1.0 million for each of the past two weeks. For comparison, H1 2018 revenues totalled £1.2 million."

and this RNS from 25th of Jan as well:

"The Company expects that the Strategic Collaboration Agreement with Allay will deliver revenue and EBITDA several orders of magnitude greater than that achieved by the Company to date

On the basis of which, the Company expects to be profitable and cash generative in the year ending 31 December 2019"

Looks to be the maiden profit in a sexy tech advertising space, and a massive change in revs for the serial dissapointer Mporium.

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Edward John Canham 12th Feb 15 of 30

Debenhams (LON:DEB) : QUIZ (LON:QUIZ)

Been watching QUIZ (LON:QUIZ) for a while following Paul's article of 14/1/19.

Seems to me QUIZ (LON:QUIZ) has been significantly derisked by the Debenhams announcement. No current risk (I presume) of Debenhams (LON:DEB) not paying the Xmas takings across, more time to replace concession income .......

Still risks there but looking more attractive - considering putting my toe in the water.


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HornBlower 12th Feb 16 of 30

Debenhams (LON:DEB) raising an extra £40m liquidity facility. Net debt at 5 January 2019 was £286m, with £200m of bonds and £320m of bank facility. To need new liquidity a month later implies a massive cash outflow in the last few weeks, perhaps £200m or more.

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RadioactiveMan 12th Feb 17 of 30

In reply to post #446243

I've seen a lot of the same criticisms on Facebook and trust pilot. While the reviews are generally positive, the amount of negative feedback regarding returns seems too high.

I second the request for this question if it's not too late.

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Aislabie 12th Feb 18 of 30

Relentless selling of Premier Technical Services (LON:PTSG) since they announced the significant purchase of Trinity has driven the price down by more than a quarter. It is an important holding for me and, in this case a stop loss would have been helpful, although generally I am wary of having stop losses in the volatile AIM market.
But with no announcement to throw any light on the massive drop, inevitably there are some dark speculations. Has a large shareholder bailed out (Danske?)? Have they found something nasty in the Trinity woodshed? Have the very high receivables revealed some payment problems, aside from the stated slow terms on cradle contracts? Or is it just that the market is rerating a group in a lowish margin business with modest LFL growth?
Does anyone have any insight?

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mrosbiston 12th Feb 19 of 30

In reply to post #446293

the positive move in Debenhams (LON:DEB) would be due to the adjustments in the covenants. Which in their present form would have implied some kind of end-game. I assume that DEB would have presented plans to the banks on how it could repay given some breathing space and restructuring - without having to ask for bondholder haircuts. Also probably means a CVA can be avoided for now

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rwalford 12th Feb 20 of 30

It would be great if you had time to take a look at Elektron Technology PLC Elektron Technology (LON:EKT) which gave a positive trading update last week, including the news that they " received an unsolicited indicative offer for the Bulgin business at a substantial premium to the Group's current market capitalisation." Whilst that offer did not proceed, it suggests that there is value hiding in there.
Disc: I hold
Many thanks

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bluecurve 12th Feb 21 of 30

In reply to post #446373

Hi Ricardo - Paul covered Elektron Technology (LON:EKT) on the 5th feb when the news came out. You can find all the articles on a stock by putting the ticker into the search bar. Or click here:

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mammyoko 12th Feb 22 of 30

Hi Paul - appreciate that rules are there to be broken but both accesso Technology (LON:ACSO) and Learning Technologies (LON:LTG) have weak balance sheets - both had negative NTAV at the last balance sheet date. It may be coincidence, but all of my holdings with weak balance sheets have under-performed in the recent uptick whereas those with strong balance sheets have out-performed. Perhaps some of the market reaction in both of these shares is a realisation of the weakness of the balance sheet as well as the reassessment of their earnings multiple?

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rwalford 12th Feb 23 of 30

In reply to post #446383

Thanks - and sorry for wasting everyone's time.

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Trident 12th Feb 24 of 30

In reply to post #446453

I don't know if anyone can recall when Elektron Technology (LON:EKT) was bid for by Microgen years ago. It seemed like a bizarre company for Microgen (LON:MCGN) to bid for, and what is more unusual is that they then went aggressive, and failed to acquire, when the Directors rejected its approach.

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FREng 12th Feb 25 of 30

Scientific Digital Imaging (LON:SDI) has just issued an RNS:

PrimaryBid Offer

At 4:30 p.m. on 12 February 2019 the Company issued an announcement through RNS (the "Announcement") of a placing (the "Placing") at an issue price of 34 pence per New Ordinary Share (the "Issue Price"). In addition, the Company is pleased to announce an offer for subscription for up to 294,117 New Ordinary Shares at the Issue Price through PrimaryBid Limited (the "Offer"). The Offer, if subscribed for in full, would fully utilise the Company's remaining existing authorities to issue and allot for cash New Ordinary Shares in the Company. The funds raised by way of the Offer will be used to strengthen the balance sheet of the Company by reducing its net debt position following the acquisition of Graticules.

The opportunity to participate in the Offer is at an issue price of 34 (the "Issue Price") pence per New Ordinary Share.


The Company values its retail investor base and is therefore pleased to provide private and other investors the opportunity to participate in the Offer by applying exclusively through the platform and the PrimaryBid mobile app available on the Apple App Store and Google Play. PrimaryBid does not charge investors any commission for this service.

The Offer, via the platform, will be open to individual and institutional investors from 4.31 p.m. on 12 February 2019 to 9.00 p.m. on 12 February 2019. The Offer may close early if it is oversubscribed.

Subscriptions under the Offer will be considered by the Company on a "first come, first served" basis, subject to conditions (which are available to view on with any investment request over GBP25,000 first requiring consultation with the Company.

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willhampson 12th Feb 26 of 30

In reply to post #446533

Interesting one, isn't it. I haven't studied the deal enough yet to make up my mind on its merits (to the extent I could even do that...) but I thought the use of PrimaryBid - albeit for a token amount - was an interesting step.

My slight initial hesitation is that, although a welcome gesture to give retail investors a chance to participate at the placing price, it is often quite possible to pick up shares below the placing price if you exercise a bit of patience. I think I will sit this one out and look to add if it drops much below the placing price. I'm quite happy with my current holding in Scientific Digital Imaging (LON:SDI) so either way is fine with me.

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AnonymousUser252054 12th Feb 27 of 30

Spare a thought for Highline Capital Management, shorting Plus500 (LON:PLUS) since the start of the year, and throwing the towel in last Friday.

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Gromley 12th Feb 28 of 30

Interesting to see that Paul has gone in for Learning Technologies (LON:LTG) . I have been tempted myself, but (rightly or wrongly) I've been waiting for an uplift in sentiment.

As Paul mentions their is a recent "short dossier" from stockviews who I have not heard of before. If I'm reading their website they appear to be a bunch of private short side analysts offering to sell their research to institutions. Frankly that does not sound a particularly credible business proposition, does anyone know anything about them?

Anyway, Paul describes the shorting dossier as "fairly weak", whereas Tom Winnifrith describes it as "pretty damning". I should say that TW is no stranger to hyperbole when it suits his case, so I'd be more inclined to trust Paul's judgment here.

If Paul is looking in (or anyone else knows), would it be possible to have a brief précis of the short case? Is it simply valuation or are they inferring some kind of dodginess in the accounts?

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herbie47 12th Feb 29 of 30

In reply to post #446608

I saw Odey sold 1% last friday, still holds over 9%, I guess you can only sell so much at once.

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Carey Blunt 12th Feb 30 of 30

I second Gromely's comments above. If anyone has an understanding of the short case then we would love to hear about it in the ongoing LTG thread here:

Does it differ from the concerns I have brought up previously?

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 Are LON:SOS'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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