Small Cap Value Report (Tue 18 Dec 2018) - Overdrafts/High-Cost Credit, ANG, SDI, TOOP | Graham Neary

18th Dec '18 by Graham Neary

26 comments 10168 reads

Good morning!

Paul has added new sections to yesterday’s report, so that’s worth checking out first thing.

Mourinho has been sacked - quite upsetting for me, as I bought some José-related memorabilia during my recent trip to Old Trafford, which I planned to give as Christmas presents.

On the other hand, maybe we can see some attractive football from the old club again, at some point in future.

Today I am looking at:

FCA proposals on overdrafts/HCC
Angling Direct (LON:ANG)
Scientific Digital Imaging (LON:SDI)
Toople (LON:TOOP)

Financial Conduct Authority

FCA Proposals on Overdrafts and other High-Cost Credit Products

This FCA work has been rumbling away in the background for a while.

Indeed, I reckon that the regulatory mood in relation to credit products has been affecting the valuation at H & T (LON:HAT) (in which I have a long position). This share currently trades at less than 8x forward earnings according to Stockopedia. But it won't be affected by today's proposals.

Where the proposals will have a massive impact is on overdrafts.

Several years ago, I was a very regular user of my overdraft - and deliberately so. The rate being charged wasn't particularly high, so it was worth it.

That all changed when the bank introduced flat daily fees - fixed fees up to £1,000, £2,000 and £3,000.

This was trumpeted as an improvement, as it made the overdraft fee easier to calculate, according to my bank (I didn't agree, because it meant that a complicated calculation was needed to figure out the implied APR).

Perhaps due to pressure from the powers that be, the bank also cut some of the heavy charges that applied to customers who went over their borrowing limits and who requested payments which could not be made.

The abolition of those charges meant that higher charges needed to be made to customers for their ordinary use of overdrafts.

Put it all together and the implied interest rate on my facility had become exorbitant. It was no longer economic for me to use it, and I have only rarely done so since.

Proposals

There are several proposals announced today. This is one of…

Unlock with Email

Unlock with Google

Already have an account?
Login here

Reacher

18th Dec '18

Scientific Digital Imaging (LON:SDI) have released interim results for 6 months to 31/1/18. I don't know much about them but was intrigued by the very positive statement made in the outlook section:

"Going forward, all our businesses are in good health and are prepared to trade profitably through any potential turbulence, while also developing new opportunities. The Board remains confident in the outlook for the year as current trading remains robust and comfortably in line with market expectations."

They have made acquisitions during the period and the balance sheet has intangibles on it but overall there is a positive NTAV position.

Does anyone have any views on the business or its management?

danielbird193

Dalata Hotel (LON:DAL) has released an "in line" trading update which gives impressive RevPAR figures in both Ireland and the UK, plus gives further assurance over their construction and roll-out programme. Paul looked at it in September and said "my initial review of this company is favourable... it could be an interesting long-term share to hold. Worth a closer look". Market cap is £745 million so I understand if it's too large for you to look at Graham, but I wanted to highlight it to other readers given the big share price drop since Paul's last review added to continued positive trading momentum.

(Full disclosure, I hold a long position).

MrContrarian

My morning smallcap tweet:

Integumen (LON:SKIN), EQTEC (LON:EQT), Byotrol (LON:BYOT), Redt Energy (LON:RED), Telit Communications (LON:TCM), China New Energy (LON:CNEL)

Integumen (SKIN) sells lossmaking TSPro for €1. gets shot of €1.34m (£1.19m) of short and long term liabilities.
EQTEC (EQT) takes it to the wire finding new nomad. Expects to appoint one by mid/late-January 2019 after due diligence process. Has until 1 Feb.
Byotrol (BYOT) H1 rev up 55%. Remains "confident in the outlook for full year, except for the US, which is expected to make a loss due to administrative delays to EPA approval of new product variants, which we now expect to be satisfactorily resolved in Q1 2019."
RedT Energy (RED) Year end update - sounds OK except first 40MWh of 700MWh German project portfolio won't reach 'financial close' this year as mooted due to modifications to the German market bidding mechanism.
Telit Communications (TCM) FCA has expanded investigation to consider the accuracy of earlier announcements by Telit.
China New Energy (CNEL) [last night] evaluating whether a primary listing on other stock exchanges will achieve a greater valuation, expects to make a decision in Q1 2019.

MarkOR

Good morning Graham. If you have time to look at Angling Direct, I shoould be very grateful. On the face of it, some gome good results this morning across the board.

andrea34

I am also interested in both of these please Graham:

Scientific Digital Imaging (LON:SDI) (which I hold) they now undervalued to me on on these very positive results, with good growth and clear synergies from acquisitions. Stocko ratings are FAB; the PEG has become a lot more attractive at 1.06 too.
Dalata Hotel (LON:DAL) which have announced a positive lfl update. I don't hold, I thought about buying at 450ish, watched them rise to a frothy 600+ and now are down around 35% to only 400 since September!!! Stocko figures aren't great though, and perhaps the debt is too high for some.

Also, does anyone have an idea who Hoxton Assets are? They sold a huge chunk of their holding in Gamma Communications (LON:GAMA) a few days ago, and sold more yesterday.

rhomboid1

Re Scientific Digital Imaging (LON:SDI) I hold a fair chunk so biased ..but I added heavily after attending the last AGM and meeting mgt for the first time...v down to earth team , v ambitious to grow a sizeable group in a non dilutive fashion..they use the same approach as Judges Scientific (LON:JDG) but are obviously much smaller , they use the same consultant to source deals ...as they buy smaller businesses to Judges Scientific (LON:JDG) , he attended the AGM too alongside all the division heads to answe any questions , great teamwork and less ego and more determination on show than is usual in buy & build companies, new FD has great experience to take the business to the next level as CEO was also previously FD of group companies so incredibly busy.

Lots of potential acquisitions but they’re really fussy about price/fit ..I liked the company a lot and intend this to be a lifetime hold as the potential rewards are enormous imho

Small Cap Value Report (Tue 18 Dec 2018) - Overdrafts/High-Cost Credit, ANG, SDI, TOOP

Financial Conduct Authority

Unlock the rest of this article with a 14 day trial

About the Author

Graham Neary

26 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...