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

LeoInvestorUK 12th Jun '18 3 of 42

Boohoo.Com (LON:BOO) reports headline 50% revenue growth YoY for Q1.

Interestingly (and as others predicted), fully owned has hardly grown revenue and has reduced gross margins, whereas PLT where the management's family retain a 33% direct stake has grown 160% and increased gross margins. I am also unclear of the motives for PLT moving to a 3rd party managed warehouse, though on the face of it it should make the apportionment of costs more transparent.

My calculations are that owned revenue has grown 41% as has owned gross profit. Still very good. Nasty Gal is performing well.

Blog: LeoInvestorUK
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MrContrarian 12th Jun '18 4 of 42

My morning smallcap tweet: FastForward reverse.

FastForward Innovations (LON:FFWD), £K3C, Cyanconnode Holdings (LON:CYAN)

FastForward (FFWD) previously said it was in negotiations to sell its entire holding Leap Gaming. FFWD is 'pleased to announce' that it's done the opposite! It's invested €1m. This "reflects rapidly changing market conditions and the ability of the directors of FastForward to react quickly and decisively to maximise shareholder value." It's like trying to sell your car, getting derisory interest and repairing it instead.
K3 Capital Group (K3C) FY trading "comfortably in line with market expectations." Also "KBS Capital Markets has received regulatory approval from the FCA...enables the Group to broaden its services by providing deal execution for clients wishing to sell down minority stakes in addition to its current offering."
CyanConnode (CYAN) Pre-AGM Update. That's a new one. Further cost reductions of £500k pa, effective immediately "in response to shareholder feedback" after recent pisspoor results.

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Julianh 12th Jun '18 5 of 42

Boohoo.Com (LON:BOO) of course. Clearly not a small cap any more, but maybe we can allow successful graduates from the Small Cap Academy to revisit occasionally so that they can remind current students what is possible.

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Reacher 12th Jun '18 6 of 42

Morning Graham, it looks like you have a fair amount to get through. However, if you have capacity, I would be interested in your views on B.P. Marsh & Partners (LON:BPM) which released a couple off RNSs. Firstly the full year results to 31/1/18 and secondly a placing of shares to an external investor that is based overseas but wishes to expand their operations into the U.K. the placing represents 19% of the share capital.

I wonder if this potentially means the investor will acquire the company in the future?

The primary focus of the business is a venture capitalist in the insurance industry and there appears to be value on offer: the shares are trading at 280p whilst the underlying NAV is 339p.


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whitmad 12th Jun '18 7 of 42

Hi Graham, I'd be grateful if you could add Trifast (LON:TRI) to the list, growth continuing, but is it enough?

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Julianh 12th Jun '18 8 of 42

In reply to post #372764

Replying to my own post after the market opens...
Boohoo.Com (LON:BOO) seems to have a special super power - the ability to follow an excellent trading update with a significant share price fall. As I write the share price is down 3.4%. Do investors want even more from a company with a forward p/e > 50? Or are they worried by the talk of record levels of investment in infrastructure? But isn't that what we should be wanting from a business seeking to enhance its market leading position?

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Matboulton 12th Jun '18 9 of 42

Morning Graham,
Thoroughly impressive set of results from Motorpoint (LON:MOTR). Lots of boxes ticked and operating within the resurgent automotive retailer space.

Repeat customers up at 26% (which is incredible considering the average time owners keep cars  is quoted at 4 years by the RAC)  and the opening of their 12th site (last year). I was beginning to think the valuation in this sector was starting to look a bit toppy but maybe companies like Motorpoint (LON:MOTR) and Vertu Motors (LON:VTU) (I hold) still have some legs.

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0ctag0n 12th Jun '18 10 of 42

In reply to post #372789

It may be that the market had already factored this increase in to the price and the update didn't show enough growth to push the price up again.

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Camtab 12th Jun '18 11 of 42

I would certainly be interested in any and all comments on Air Partner. Seems to me the company has been run by buffoons but in fact it is a sound business (running itself). Decent balance sheet, div. For the time being I am a holder although perhaps I wish I hadn't made my initial purchase. May see a relief bounce but hard to see how serious investors can invest until they have won confidence.

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Lgarvey 12th Jun '18 12 of 42

In reply to post #372769

The results looked decent.

The highlights of the results are:

· Increase in the Equity Value of the Portfolio of 31.3% (£18.9m)

· Net Asset Value of £98.9m (31 January 2017: £79.7m), a 24.1% increase, net of Dividend

· Net Asset Value increased to 339p per share (31 January 2017: 273p)

· Total return to Shareholders in the year of 25.5% (2017: 13.9%)

· Consolidated profit after tax of £20.2m (31 January 2017: £9.8m)

· Average Net Asset Value annual compound growth rate of 12.0% since 1990

· Final Dividend of 4.76p per share declared (31 January 2017: 3.76p), a 27% increase

· Cash and treasury funds balance of £5.4m at year end

· Four new investments - two in Lloyd's Brokers and two in the USA

· Two disposals - Besso and Trireme

· Further investment into LEBC of £7.1m

· Provision of follow-on funding to Nexus of £4m

· Current uncommitted cash of £0.5m

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ppdrs 12th Jun '18 13 of 42

In reply to post #372789

I guess the relatively modest growth in revenue within the core boohoo business and slippage in gross margin might have something to do with it? When you have a forward p/e of 50, the market leaves no room for even small disappointments....!

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FREng 12th Jun '18 14 of 42

In reply to post #372769


Why are all the stockopedia ranks (SR/QR/VR) for B.P. Marsh & Partners (LON:BPM) zero?

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sharmvr 12th Jun '18 15 of 42

Since it caught your eye - I would be very interested in your thoughts on Ted Baker (LON:TED)

Solid company, solid performance - was not happy about rising debt at last results, but fortunately no balance sheet this time!
My understanding sales / sqft on constant currency are rising, but this is driven by online / wholesale / licensing and the growth in wholesale is guided lower than 1st half - so would there be any like for like increase at full year.

I hold and intend to do so for the long term , although given above, I feel there will be opportunities to buy this company at a very attractive valuation.

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Trident 12th Jun '18 16 of 42

Have I missed something or has Paul gone AWOL?

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Whitbourne 12th Jun '18 17 of 42

In reply to post #372834

I don't feel the assessment that Air Partner (LON:AIR) "has been run by buffoons" is right. My view, reading yesterday's statement, is that it was a textbook case of how a responsible executive team and board should act. They took the issue seriously as soon as it was notified to them, they were as open as they could be with shareholders and left no stone unturned to get at the truth of what had happened and why. This is actually an example of good corporate governance.

The fact that the issue came to light from internal sources and not the external audit I also find reassuring. Certainly it shows a lack of controls in the finance department and that is something that the company will no doubt address. (I hold)

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Reacher 12th Jun '18 18 of 42

In reply to post #372854

That's interesting, FREng. But I can't think why that would be the case. I notice there are a number of companies within that industry (collective investments) that aren't ranked - eg Woodford Patient Capital Trust (LON:WPCT)

Maybe one for the Stockopedia boffins?

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mojomogoz 12th Jun '18 19 of 42

In reply to post #372794

Hello, what do you think is toppy for Vertu Motors (LON:VTU) out of curiosity? I ask as interested owner. In past cycles when they are in a bottoming to potential recovery phase in profit trajectory (2013) they traded at about 14x with a significantly poorer underlying margin and return on capital performance. So today Vertu seems like a bigger and better business. Thanks

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mercury61 12th Jun '18 20 of 42

In reply to post #372794

Motorpoint: falls after Numis downgrade
* Vehicle retailer Motorpoint falls 8 pct after house broker Numis downgrades to "add" from "buy"
* Says shares still have upside but have been on a strong run (+78 pct in the last year)
* Sees cash generation as solid, plans to roll-out one new site per year on track
* Rating means it now sees less than a 20 pct upside to shares, according to the broker's own methodology
* Worst day for the stock since October 2016, top faller on Stoxx 600

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james1n 12th Jun '18 21 of 42

Hi Graham,

Looks like you already have a lot on your plate for today, but if you are looking for something extra to add to the challenging list you already have for today, could I suggest iomart (LON:IOM) which has announced FY results today and whilst the company continues to growth, arguably, the pace is slowing and the RNS today seem to be more concerned about self-congratulatory comments regarding the past 10 years, rather than what comes next. Keen to hear your thoughts on it!


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Graham Neary 12th Jun '18 22 of 42

In reply to post #372714

re: Air Partner (LON:AIR), I'll see if I can squeeze it in, may have to drop something else! Thanks for the suggestion. G

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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. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »


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