Small Cap Value Report (Tue 12 June 2018) - BOO, PKG, MOTR, TED, AIR, FDEV

Tuesday, Jun 12 2018 by

Good morning!

Of interest today are:

Sorry for the slow start this morning!

I'm updating the above list in response to reader requests and as I figure out which stories I want to prioritise.

Boohoo.Com (LON:BOO)

  • Share price: 213.25p (-3%)
  • No. of shares: 1149.5 million
  • Market cap: £2,450 million

Trading Update

This online fast-fashion retailer is an honorary small-cap, as many in this community have been watching it since it was a tiddler (relatively speaking).

The shares have been back on another great run since last April, up 50% since then.

We are firmly in the middle of the range created over the past year:


The sales table for Q1 shows a great set of percentages:


Growth in the core boohoo brand has slowed to 10% at constant exchange rates (CER). (For context, last year, the boohoo brand reported sales up 44% at CER.)

So the main growth driver has been PLT, whose revenues have surged again by almost 160% to £79 million.

I wonder if PLT has been stealing some of the growth that boohoo might otherwise have experienced? Although not serving exactly the same markets, they are each providing dresses and tops to 16-24 year old girls at a similarly cheap price point.

PLT remains 33% owned by the Kamani family. Perhaps there was some selling this morning out of disappointment that growth had been so heavily weighted toward PLT, which has this large minority shareholding, rather than toward the boohoo brand?

Nasty Gal also performed well, revenues up 150% to £7 million.

Outlook statement: trading has been in line with expectations.

For the full year, we continue to expect group revenue growth to be 35% to 40% with adjusted EBITDA margin between 9% to 10%. All other…

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All my own views. I am not regulated by the FSA. No advice.

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Boohoo Group PLC, formerly plc, is an online fashion retail group. The Company is based in the United Kingdom and has a presence in the United Kingdom, the United States, Europe and Australia, selling products to almost every country in the world. The Company owns the boohoo, boohooMAN, PrettyLittleThing, Nasty Gal, MissPap and Karen Millen and Coast brands. These brands design, source, market and sell clothing, shoes, accessories and beauty products targeted at 16-30 year old consumers in the United Kingdom and internationally. more »

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Park Group plc is a multi-retailer gift voucher and prepaid gift card business, which is engaged in delivering rewards and prepaid products to the consumers and corporates in the United Kingdom. The Company focuses on consumer prepayments and corporate reward and incentive programs. The Company's segments include consumer and corporate. The consumer segment includes the Company's sales to consumers, utilizing its Christmas savings offering. The corporate includes the Company's sales to businesses, offering primarily sales of the Love2shop voucher, flexecash cards and other retailer vouchers to businesses for use as staff rewards/incentives, marketing aids and prizes and all online sales. Love2shop is the multi-retailer gift voucher and prepaid gift card, accepted at over 140 retailers with approximately 20,000 stores in the United Kingdom. It offers flexecash, which is its information technology infrastructure. Its Park Christmas Savings Club operates through a network of agents. more »

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Motorpoint Group plc is an independent vehicle retailer in the United Kingdom. The Company's principal business is the sale of vehicles, of which are approximately two years old and which have covered over 15,000 miles. The Company sells vehicles from brands representing vehicle sales in the United Kingdom, with models from Ford, Vauxhall, Volkswagen, Nissan, Hyundai, Audi and BMW. The Company operates from over 10 retail sites across the United Kingdom. The Company has a national contact-center dealing with online enquiries. In addition to sales of vehicles, the Company operates, a business to business online auction platform for vehicles. The Company also offers ancillary products to customers, including customer finance packages, vehicle guarantees, insurance products and vehicle protection treatments. more »

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

42 Comments on this Article show/hide all

Julianh 12th Jun '18 23 of 42

In reply to post #372854

Stocko don’t give ranks for investment companies (investment trusts, etc. See e.g. Standard Life Smaller Companies investment Trust. I am sure the Stocko boffins can give a full answer. My guess is that ranks and guru screens might be considered meaningless because any trends identified would ne based only on the underlying investments which might be bought or sold at any time. The relevant information here is the growth of the share price, any dividend and the discount or premium to the net asset value.
Having said which, Stocko does provide rank scores for Burford Capital (LON:BUR) which is also effectively an investment company, though they invest in litigations rather than other companies.

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Laughton 12th Jun '18 24 of 42

In reply to post #372904

Actually Stocko does rank quite a few investment trusts and REITS but not all. Not sure how they decide which qualify for a ranking though.

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Ned Kelly 12th Jun '18 25 of 42

In reply to post #372874

I am inclined to agree with Whitbourne that I don't think Air Partner (LON:AIR) "is run by buffoons" although they should have picked up the problem earlier - that's why the FD has gone. Hopefully this issue is now covered although there will be an impact on the '19 results.
I also would be interested to hear your view Graham. I hold and bought more on the drop when the news of the problem came out as I thought it was likely to be limited in its impact on the business so happy with the SP response so far today

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MBFP 12th Jun '18 26 of 42

In reply to post #372924

I wrote on 31st May: 'The board appear to be taking all the right measures.' and noted the issue was raised internally and added to my position.
This appears to be borne out in their statements of yesterday and the SP has risen on the news.
The results made for good reading.
For me, it would be positive to see some directors buying shares.
Decent director share ownership gives investors confidence.

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Lgarvey 12th Jun '18 27 of 42

In reply to post #372769

I see Simon Thompson of IC has just written a positive review of B.P. Marsh & Partners (LON:BPM) rating then a buy

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Trident 12th Jun '18 28 of 42

Sorry if I have upset anyone, but I was merely asking why is Paul not doing his usual commitment from Tues to Thurs. I did look back to see if there was any holiday or absence mentioned, but couldn't see anything.

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Graham Neary 12th Jun '18 29 of 42

In reply to post #372859

Hi V, thanks for the insights on £TED!

It's not really a small-cap but I am interested to buy it around these levels (or preferably below!). As I say in the report, it's on the WL now.

Sales/sq ft down in the period - it would be good to know by how much exactly and what is the CER position. Online and wholesale both doing nicely.


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leishylegs 12th Jun '18 30 of 42

In reply to post #372794

Just to share a little personal experience - I bought my most recent car from Motorpoint in February this year and was impressed - with the quality of the stock and the whole purchasing process, which was simple from end to end and handled in both a professional and friendly manner. It couldn't have been easier.

I asked the salesperson at point of purchase whether they were seeing sales decreasing and he said quite the opposite. Perhaps people are reflecting upon the value to be had in a nearly new car with low mileage rather than suffer the depreciation of a new car. If so, that may play well to Motorpoint's business model.

For what its worth in terms of their comments on customer retention/repeat sales I would be very happy to use them again for future car purchases.


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MarkOR 12th Jun '18 31 of 42

Dear Graham,
Would love to know your views on what constitutes the moat at Burberry. I am no expert in these retail brands, and would really be grateful to learn more.

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HornBlower 12th Jun '18 32 of 42

In reply to post #373039

echo the request for what is the moat at Burberry

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matylda 12th Jun '18 33 of 42

Maybe I am being a bit thick here but isn't it the same moat as Coca Cola, Disney, etc. ?

Blog: Briefed Up
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Graham Neary 12th Jun '18 34 of 42

In reply to post #373044

It's just a powerful brand. The equestrian knight symbol, the reputation for excellence, the prestige (among Chinese and Middle East buyers more so than among British people), the history, this is why Burberry can earn 70% gross margin on very expensive products rather than 50% gross margin on very cheap products (ASC/BOO).

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Graham Neary 12th Jun '18 35 of 42

In reply to post #372894

Apologies james, I won't be getting around to iomart (LON:IOM) today. If there a slow day later in the week, I will circle back to it. Cheers. G

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chilligg 12th Jun '18 36 of 42

Hi Graham,

Re your comment on Burberry (LON:BRBY) (LON:BRBY), what is it about the brand that you think keeps customers loyal enough for it to act as a moat?

Keep up the good work,



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Beginner 12th Jun '18 37 of 42

Regarding Park (LON:PKG) , the Civil Service currently use their Love-2-Shop vouchers as rewards and payment for various voluntary duties carried out by staff and public. They are in the process of replacing these with Post Office vouchers that can be exchanged for cash. I am not sure what figures may be involved, but it may be considerable.

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Golspie 12th Jun '18 38 of 42

Until today I might have included BPM in the following query, but even then one assumes PSC are subject to some lock-ins, but do you have any thoughts about companies with very small free floats such as ASY and BPM?

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Trigger14 12th Jun '18 39 of 42

In reply to post #373069

Customers don’t have to be loyal to a brand for there to be a moat, they just have to be prepared to pay more for its unique attributes. Brands work through recognition, positive association and social dynamics. People are prepared to pay more for a brand because they recognise it, have a positive association with it and feel that other people see it the same way. Nothing special about Burberry other than it has achieved a state of being well recognised and associated with high quality and Britishness (which is particularly popular in Asia apparently).

Blog: Quality Share Surfer
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dahokolomoki 12th Jun '18 40 of 42

In reply to post #373124

Indeed, I got one through the post the other day, in exchange for someone coming to my property and asking me a whole bunch of questions, for some National Audit Office survey on macro-demographic trends in the UK.

Has Park (LON:PKG) flagged up any customer concentration risk in their annual reports?

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Beginner 13th Jun '18 41 of 42

In reply to post #373254

A good question for the Park (LON:PKG) AGM in September?

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mojomogoz 13th Jun '18 42 of 42

A bit late out of the gate with some thoughts on the infamous Boohoo.Com (LON:BOO) ...

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 Are LON:BOO's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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