Small Cap Value Report (Tue 19 Dec 2017) - DOTD, KOOV, NWF, KMK

Monday, Dec 18 2017 by
86

Good morning, it's Paul here.

Firstly, please accept my apologies for the break in coverage last week. Things are back on track now, so we'll have full coverage this week. Hopefully I'll also be able to recap on one or two interesting things from last week too.

Today I'll be reporting on results or trading updates from: DotDigital, Koovs, NWF, and Kromek.




dotDigital (LON:DOTD)

Share price: 97.0p (up 1.0% today, at 08:15)
No. shares: 295.8m
Market cap: £286.9m

AGM statement (trading update) - this company calls itself;

... the leading provider of intuitive software as a service ("SaaS") and managed services to digital marketing professionals through the 'dotmailer' platform


This share has been a long-standing favourite of mine here over the past 5 years, but (stupidly) I've always baulked at the high valuation - even when it was 17p per share! It just goes to show, that good companies grow into, and soon overtake an apparently high valuation.

The company has a 30 June year end, so today's update covers the bulk of H1 06/2018.

"The Group has seen the positive trading momentum highlighted in the 2017 preliminary results continue into the first half of the new financial year.

This progress is in line with management expectations and is driven by strong international sales and growing demand for dotmailer in the ecommerce market...


Sounds good.

Note that the company spent about half its cash pile recently, buying a group of companies called Comapi for £11m. This is a messaging software company, which seems to be in the process of being integrated into DOTD's existing software.

My opinion - this seems a quality outfit, which hasn't put a foot wrong. The market has rewarded that with a multibagger share price over the last 6 years.

The StockRank sums it up very clearly - quality & momentum, but pricey;


5a38d42e00c4fDOTD_SR.PNG


The interesting thing here is that bulls could argue that DOTD is only scratching the surface of its potential markets. More detail is given in today's announcement about the "Connectors" between DOTD's dotmailer platform, and ecommerce leaders such as Shopify, and Magento (which are widely used platforms for ecommerce sites).

Another impressive trait of DOTD is that its growth is…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way

Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


Do you like this Post?
Yes
No
86 thumbs up
0 thumbs down
Share this post with friends



dotdigital Group Plc is a United Kingdom-based company, which is engaged in providing software as a service (SaaS) and managed services to digital marketing professionals. The Company offers dotmailer, which provides e-mail and multi-channel marketing automation platform with various tools that enable marketers to create, manage, execute and evaluate various campaigns. In addition to its automation technologies, the Company also provides multi-channel marketing consultancy and services for businesses seeking to manage customer acquisition, conversion and retention. The Company also has pre-built integrations with e-commerce platforms and customer relationship management (CRM) products, such as Magento and Salesforce. dotmailer helps in using contact data to design, test and send automated campaigns. The Company's subsidiaries include dotmailer Limited, dotsearch Europe Limited and dotmailer Inc. Through its subsidiaries, it is engaged in providing Web- and e-mail-based marketing. more »

LSE Price
87.5p
Change
 
Mkt Cap (£m)
258.8
P/E (fwd)
23.8
Yield (fwd)
0.9

Koovs plc is a supplier of branded fashion garments and accessories for sale by a third party through Koovs.com Website principally in Republic of India. The Company offers dresses, tops, jumpsuits and playsuits, skirts, trousers and leggings, cardigans and pullovers, lingerie and sleepwear, and swim and beachwear, among others, for women. It offers shirts, t-shirts and polo shirts, vests, jeans, jog pants, shorts, hoodies and sweatshirts, coats and jackets, and innerwear and socks, among others, for men. In addition, the Company offers bags and wallets, accessories, sunglasses, jewelry and watches. The Company offers its products of various brands, including Knockaround, KOOVS, Kultprit, Pataaka, Pepe Jeans, Shuffle, Sole Threads, Vans, Voi Jeans, Modello Domani and Mr Button, among others. The Company's subsidiary is Koovs Marketing Consulting Private Ltd. more »

LSE Price
8.75p
Change
-4.4%
Mkt Cap (£m)
16.3
P/E (fwd)
n/a
Yield (fwd)
n/a

NWF Group plc is engaged in the manufacture and sale of animal feeds, the sale and distribution of fuel oils, and the warehousing and distribution of ambient groceries. The Company operates through three segments: Feeds, Food and Fuels. The Feeds segment is engaged in the manufacture and sale of animal feeds and other agricultural products. The Food segment is engaged in warehousing and distribution of clients' ambient grocery and other products to supermarket and other retail distribution centers. The Fuels segment is engaged in the sale and distribution of domestic heating, industrial and road fuels. The Company's subsidiary, Boughey Distribution Limited, is engaged in warehousing and food distribution. Its subsidiaries, NWF Agriculture Limited, S.C. Feeds Limited, New Breed (UK) Limited and Jim Peet (Agriculture) Limited, are engaged in animal feedstuffs and seeds supply. Its subsidiaries, NWF Fuels Limited and Staffordshire Fuels Limited, are engaged in fuel distribution. more »

LSE Price
192p
Change
1.9%
Mkt Cap (£m)
92.7
P/E (fwd)
13.1
Yield (fwd)
3.4



  Is dotDigital fundamentally strong or weak? Find out More »


31 Comments on this Article show/hide all

Julianh 19th Dec '17 12 of 31
16

In reply to pastysupper, post #2

Pastysupper is so right. We can cope with the occasional break in transmitting because what we get from you is proven in depth analysis, independent thinking, your honest opinion and lots more.
You are worth your weight in cheese!

| Link | Share
DavidWithers 19th Dec '17 13 of 31
2

Paul, if you get a chance could you cast your eye over the trading update from AIM listed soft drinks manufacturer Nichols (LON:NICL)
When I first read it I thought it was an "in-line" update but the market seems to be interpreting it as a significant profit warning. I would value your views.

| Link | Share | 1 reply
ratioinvestor 19th Dec '17 14 of 31

Paul, Gocompare.com's takeover of Vouchercodes may be worth assessing?  Not really sure if Vouchercodes is a fading brand?  I saw the pitch for Pouch on Dragon's Den and that looks like the way things are going.

| Link | Share
herbie47 19th Dec '17 15 of 31
3

In reply to DavidWithers, post #13

I think this is why the Nichols (LON:NICL) shares are down today "In our international business, we anticipate the strong growth trend in Africa to continue in 2018. However, the current conflict in the Yemen coupled with some reported slowing in the Saudi economy indicates that sales to the Middle East region in the year ahead are likely to be less than previously anticipated. As a result, management currently expects low single digit percentage profit growth in 2018 in comparison to the current year."

| Link | Share
tony akram 19th Dec '17 16 of 31

Paul
Your thoughts on Nichols would be most welcome -thanks

| Link | Share
Paul Scott 19th Dec '17 17 of 31
6

I don't know anything about Nichols (LON:NICL) and have never covered it before, so will have to decline that one I'm afraid. £575m market cap is a bit above my normal cut-off. Sorry about that.

Regards, Paul.

| Link | Share
prem14 19th Dec '17 18 of 31

HI, Please could you cover the new kid on the block FAB - fusion antibodies?

| Link | Share
johnsmith68 19th Dec '17 19 of 31
1

A very warm welcome back Paul. I concur with other commenters that absolutely no apology is necessary. I wonder if you might find time to circle back on the preliminary results from Oxford Metrics (LON:OMG) last week. The results looked positive to me but met with little response from the market until today when a 5% drop came against no new announcements. I'd really value your reading of the results announcement. Many thanks.

| Link | Share | 1 reply
bobo 19th Dec '17 20 of 31
1

I used to try to compete with NWF, it was a joke, they are slow and just grow into owning more and more of a shrinking load of farmer shops/supplies. Whenever we came up with some piece of technology the attitude would be "too expensive" so we sold it to the farmers using mail order and internet. Avoid, should be private.

I used to work next to DOTD at the bottome of the last down turn and they really suffer when the market is quiet. The market opportunity is big but there are a shed load of good players with no moat available, buy for the market movements rather than underlying value

| Link | Share
bobo 19th Dec '17 21 of 31
2

NICL has the fantastic opportunity of being the maufacturer of choice for all soft drinks during the Muslim festive month, unfortunatly this rotates each year to another month and always confuses the pundits as the business is 13 monthly operating in a 12 month world.

If you want to make money on this one buy a couple of months after EID and sell before results. Sooner a Saudi company buys them up the better.  I did this for two years and made money, but the strategic message of looking for another "big bang" drink, forget it, they up against coke and pepsi.  They are a niche player end of

| Link | Share
Lennart 19th Dec '17 22 of 31
3

In reply to pastysupper, post #2

Paul and Graham you are providing a great service to private investor. Many thanks!!!

Last week Luceco (£LUCE) issued a profit warning. I suspect many of your followers would like to read your comments.

Len

| Link | Share | 1 reply
murrb 19th Dec '17 24 of 31

In reply to johnsmith68, post #19

Oxford Metrics (LON:OMG) Went ex-div at the end of last week, had large director sell and large director options exercised, about half of which were sold. Estimated EPS is reduced from 2017 to 2018 I think and as a result of this Stockopedia stock rank has dropped. Please correct me if I have got any of this wrong.

| Link | Share | 1 reply
jonesj 19th Dec '17 25 of 31

Receivables at £7.6 million for Koovs.

I thought internet retailers got credit card payment before the goods are shipped, so what credible explanation could there be ?
Offering credit to customers when the retailer is likely to run out of cash seems daft.

| Link | Share | 1 reply
Talygarn Tom 19th Dec '17 26 of 31
1

In reply to jonesj, post #25

My guess is that it may have something to do with Souq.com. They have a lot of items listed on the website and it all appears to be available from stock. Could possibly be a sale or return deal. One of the reasons that Koovs have always recorded low gross margins is because they have to commit to large minimum quantities required by suppliers and then clear a lot of excess stock. They don't sell everything below cost! Can't think what else it could be.

| Link | Share | 1 reply
Orangetree 19th Dec '17 27 of 31
3

I want to add a few things on Kromek:
1). Capitalisation development cost has ballooned to £11m, greater than annual sales. The condition for measuring Kromek is based on the number of units sold, regardless of profitability.
2). Annual cash burn is around £6m, but the company is good at raising money. £53m raised since 2011.

3). The market opportunity is less than £800m with market valuation at £66m. I agree with Paul that valuation is on the high side.

4). Risk: reward is 75: 25. It's not about having a large order book or even securing contracts. It's about cash profit from these contracts.

Blog: Walbrock Research
| Link | Share
sharmvr 19th Dec '17 28 of 31

In reply to Craig Hodges, post #26

Don't know the company or looked at financials but if they selling on consignment basis (and it's been a long time since I had to look at revenue recognition on consignment sales) but from much forgotten memory, consigner (Koovs) should not book revenue until agent (souq.com) sells the goods. They (Koovs) would keep the inventory on their books (physical location might change and associated costs). There should not be a receivable as they get cash at time of sale from agent (unless they give credit as well as risk free stock). If anything I would expect commission payable to the agent. Like I say, I don't know the company beyond scvr so probably completely wrong!

| Link | Share
VegPatch 19th Dec '17 29 of 31
2

Koovs (LON:KOOV) there was a comment about the large receivables in the text today

"Additionally, £5.90m (INR 516.8m) of marketing funds have been prepaid to secure significantly reduced media rates, and been recorded in the Statement of Financial Position under "Trade receivables, other receivables, prepayments and other assets".

Just all looks like pie in the sky to me. Especially when the CEO and Chairman tell you it's all going so well yet a) it doesn't even make a gross profit, 2) users are down 15% (as a result of reduced marketing?) and cash is dwindling fast.

I managed to short a measly amount at 24p today when it was only down a few % at the open. Paid for my Xmas lunch with friends tmrw. Maybe I'll increase the quality of the wine as welll...or just buy more...!

| Link | Share
johnsmith68 19th Dec '17 30 of 31
1

In reply to murrb, post #24

Thanks murrb. I imagine (hope) it's more to do with going ex-div as the options and director share sales didn't provoke much reaction last week. The CEO and CFO sold around half of their exercised options but the release did make the point that the net shares retained increased each director's shareholding and that the sales were for tax reasons. It didn't look great that they released such upbeat preliminaries and then the CEO, CFO and a NED all sold quite heavily the next day. Nonetheless, I remain long and was encouraged by the results and their clarity of progress towards their five-year strategic growth plan.

| Link | Share
CMWilliamson 20th Dec '17 31 of 31
1

IIRC, Richard Whiting, CEO of NWF (LON:NWF) explains in his investor videos that their margin on the fuel business is 1p per litre. The high pass-through cost of fuel does depress the overall operating margin. However, I think the much better ROE and ROCE figures give a truer indication of the business quality. Boring it might be, but it has been going for over 100 years and the 3 arms to the business give it some resilience. Now retired, I’m happy to keep collecting the dividends

| Link | Share

What's your view on this article? Log In to Comment Now

You can track all @StockoChat comments via Twitter

 Are dotDigital'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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

Follow



Stock Picking Tutorial Centre



Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis