Small Cap Value Report (Tue 14 Nov 2017) - ITQ, TRI, SRT, ESCH, CAR | Paul Scott

13th Nov '17 by Paul Scott

55 comments 18452 reads

This is the usual placeholder article, ready & waiting for your comments on RNSs from 7am.

Main article to follow.

Good morning it's Paul here.

I'm multi-tasking this week, being a NED for a small restaurant/pub chain in which I invested - setting budgets, KPIs, reviewing accounting procedures, etc. So my apologies, but the SCVRs will have to be a little briefer than usual.

Interquest (LON:ITQ)

I was asked the other day to nominate the small company which seems to worst treat its outside shareholders. Interquest was the obvious choice. Our archive here contains the details of shareholder value destruction by management who seem incompetent, and not to be trusted. They seem hell-bent on taking the company private by whatever means they can, after their lowball takeover bid was not accepted by enough shareholders to push it through. Then they sacked their NOMAD, and took so long to find another one that the shares were suspended.

Today's latest wheeze is that they're trying to dilute existing shareholders, presumably to make it easier for them to have another go at taking it private. Or it might be in order to raise monies for an acquisition possibly?

The purpose of the meeting is to extend the director's authority to allot shares from one third of the issued share capital of the Company as currently authorised pursuant to the Annual General Meeting held on 23 May 2017 to 75 per cent. of the current issued share capital of the Company.

The purpose of which is to authorise the directors so that they may have flexibility to issue shares in the case that these are required as part of any future acquisitions or other dealings.

Clearly the last thing outside shareholders would want, is to give authority to issue shares to Directors who have repeatedly acted against the interests of minority shareholders (something which can actually be challenged in court).

Anyway, it's an awful company, with awful Directors. I have little doubt that they will succeed with their grubby plans to take the company private. I've made a mental note never to invest in anything these people bring to the stock market in future. Leopards don't change their spots.

Trifast (LON:TRI)

Share price: 238.25p (down 3.9% today)
No. shares:…

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barnetpeter

14th Nov '17

RBG revolution bars tanking away I see. Now just 153p after the failed bid at 200p.

Would be interested in views....is this a long / short and is this going down to nearer 100p? The price suggests the next results will be dire.

Billlynch

Many thanks to all who commented on the STM price drop
Can of worms indeed!?

fwyburd

Fellow posters,
1. Please put a £sign before the ticker. Out of 37 posts today, 15 don't do this.
2. Paul said he was done for the day when he posted this morning so there is no point making requests after that for stocks he hasn't covered.
3. There is little point filling this board with vacuous commentary or questions of stocks not covered by Paul and Graham today unless the RNS has arrived late. The place for such hypothesising about current or future price falls/rises is not here. Posts about Revolution Bars (LON:RBG), Patisserie Holdings (LON:CAKE), Boohoo.Com (LON:BOO), SRT Marine Systems (LON:SRT) are examples.
4. Paul and Graham cover small caps (mostly) with occasional reviews of large caps that illuminate the investing landscape. I don't recall them ever talking about B&M European Value Retail SA (LON:BME) in that vein.

Less noise and more intelligent discussion makes this place worthwhile.

Francis

gsbmba99

If you hold shares in uncertificated form, you should still be able to vote them. Check with your broker. Some charge money.

By way of example, Halifax send me a photocopy of the resolutions, a form to indicate how I want to vote (or if I want to attend) and a free reply envelope for all AGMs and EGMs. They do this automatically "in accordance with my instructions." I can't imagine that's economical for them.

Sutherland

B & M Retail interim results today. Does have any comment?

gus 1065

Hi fwyburd.

Fair comment, but SRT Marine Systems (LON:SRT) is the third stock covered on Paul's list today so is presumably fair game for discussion.

Gus.

Hi Gus, sorry, my mistake. I was so incensed with red mist I got that one wrong.

Really? Please read post 38.

Chris Brown

Re. Carclo (LON:CAR) I had it on my shortlist in August as the trading outlook sounded promising, but then removed it because of the balance sheet. This was based on a very quick look: basically £100m market cap, £200m pension fund with £30m net liability, a further £30m net debt, combined with inconsistent operating profit oscillating around £5m-£6m per year from 2012-16 (also low margin).

You don't find many genuine growth companies with that profile, hence the low PER. My takeaway from a skim-read of today's H1 results is they expect full-year to be 'in-line' but this relies on strong improvement across the divisions in H2 following some issues in H1. So some risk there.

I'm putting it back on my watchlist but I think it needs to prove itself by meeting the full-year expectations in six-months time, and by beginning to demonstrate that profits can rise consistently from here.

Redrichmond

"Revolution" of turning pubs into flats

https://www.stockopedia.com/content/sif-portfolio-why-revolution-bars-wonrsquot-be-joining-the-portfolio-188094/

Noticed a new one in putney recently, opposite all the dives and cheap places.. Being local to here for 10 years that wont last long, prices too expensive. If there was a way to see how many sites they own the building freehold.

The site in richmond by the river must be worth £20 million +(houses up behind there are for sale for £15 million) - google and ebay have offices next door

Selling these london sites off for flats would be a goldmine..

VegPatch

£fwyburd - personally if investors want to discuss the days newsflow that hasn't been covered by Paul or Graham then that's fine by me. That's what this forum is for. Mixed views, some positive some negative. In fact Paul often comments on large caps in the retail sector like Next (LON:NXT) or Marks and Spencer (LON:MKS). Strictly speaking he shouldn't be commenting on Boohoo.Com (LON:BOO) or Fevertree Drinks (LON:FEVR) as they all have mkt caps over £1bn. But that for me is the beauty. Informed comment and everyone welcome to comment as long as it's constructive in approach. Anyone can be negative on a stock as long as it's a reasoned argument. If you want to rant and rave please ask them to go to ADVFN. that place is a proper loony asylum !!

I agree. But there are several posts today which should be committed to the ADVFN asylum.

iiimurray

Hi Paul
I am a long term holder of Carclo but for all of the progress being made particularly with Wipac division they still suffer from legacy of failed conductive ink technology business which in space of 6 months had board moving from statement of significant positive impact that will transform the company to decision to withdraw from sector and write off large capital investment as US partner failed to convince major equipment manufacturers that technical superiority justified higher price than other alternative systems. This U-turn was then exacerbated by another board blunder as declared dividend had to be cancelled as pension fund trustees demanded surplus disposabe cash be directed at shortfall. Share price still way below where it was 3 years ago. Current performance and forecast growth encouraging and perhaps first target should be restoration of a dividend.
Peter

hayashi22

15th Nov '17

I seem to recall also the then ceo of Carclo piled out of the shares near the all time top -left a very unpleasant taste. Shares got to near 500p from memory and don't look like going back there anytime soon.

Howard Marx

Interesting angle, but sadly Revolution Bars (LON:RBG) is not an asset play given that its Fixed Assets are almost wholly leasehold.

In fact of the £59m of its Fixed Assets, only £1m relates to Freeholds (possibly their HQ)

Thanks for this, An all bar one recently closed that was behind the Richmond revolution, just too expensive... and now is the ivy restaurent in richmond and another restaurent opened next to revolution. With west london licencing laws very strict. Richmond Revolution is 11.30pm closing every day, I cant see how this is a feasible business. Fantastic location by the river but tarquin and the other stock traders and magistrates who own multi million pound houses dont want drunk kids loitering around fighting and causing trouble.. Friday and Saturdays used to be horrific with police vans everywhere. Now people go to kingston for nightclubs /late drinks

I have no experience in this sector but do know hundreds of pubs closing in the Uk and more restaurants wine bars opening, especially in richmond. Recently a tiny nightclub closed and was rebranded in a coffee shop.

I would say the vultures are circling, good luck to any that hold that it. Hopefully a take over but the 80s/90s yuppies have long gone and now go to posh restaurents that can have late licences

tightfist

I am astonished by post#38, "incensed with red mist" and comments of the ADVFN asylum. Is this an open community or one that is operating it's own private rules and repelling anyone new who dares to want to contribute?

Geronimo9999

16th Nov '17

Interquest (LON:ITQ) Thanks gsbmba99 - I have now written to Interactive Investor to request relevant pro forma or whatever other mechanism they may offer - I appreciate your helpful suggestion. :-)

Mnomis

1st May '18

Regarding InterQuest (LON:ITQ), any updates? Late to the "party" - looked into it as screened well and new to Stockopedia, but guess when you throw in the "Do the directors care about their fiduciary duties?" screen, the Stock Rank approaches 0 (all IMHO of course) and certainly the one independent director should not be included in the above.

Wimbledonsprinter

The cancelled dividend in 2016 for Carclo (LON:CAR) has been for me a factor why I think this share should trade at a discount. From my recollection, the reason for the cancellation was not the attitude of the pension fund trustees but the legal requirement that a company cannot pay dividends if it does not have sufficient distributable reserves. DYOR. The company blamed it on the sudden drop in interest rates (discount rates on the pension deficit) between the dividend declaration and payment date.

I see from the 2016/17 annual report (p7), the Chairman said the intention was to restart the dividend in the 2018/19 financial year.

Small Cap Value Report (Tue 14 Nov 2017) - ITQ, TRI, SRT, ESCH, CAR

Interquest (LON:ITQ)

Trifast (LON:TRI)

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Paul Scott

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