Small Cap Value Report (Tue 19 Sep 2017) - PRV, EYE, FCCN, ESCH, CCT, SDY, BGO

Tuesday, Sep 19 2017 by

Good morning, it's Paul here!

There are loads of results & trading updates today, so I'll wade through as many as I can manage.

End of the momentum trade?

It's intriguing how so many share price charts look remarkably similar at the moment. When we're doing well on the markets, it's tempting to think that this is due to one's own genius! However, then you realise that many similar type of shares are all going up. In the last couple of years, the action has mainly been in growth/momentum shares. So anything that's showing decent growth, has been re-rated upwards. Then other people just started buying those shares because they had gone up a lot, for the momentum trade.

I think the momentum trade has possibly come to an end now. We're seeing lots of momentum shares falling sharply at the moment, as people bank profits. Also I think it's dawning on some people that a lot of shares have risen far too much, and are now over-priced.

Significant price corrections have happened recently on Purplebricks (LON:PURP) (in which I hold a long position), Fevertree Drinks (LON:FEVR), Hotel Chocolat (LON:HOTC) , Porvair (LON:PRV) , Frontier Developments (LON:FDEV) , Tristel (LON:TSTL) , and loads more shares that are popular with private investors. So I've been looking at these recent big fallers, hunting for bargains. However, even after a sharp sell-off, I'm really not finding any value.

Take Hotel Chocolat (LON:HOTC) for example. As you can see from the chart below, it's fallen a lot recently. However, Stockopedia shows the forward PER as being 30.7 - nowhere near value territory. The company is growing, but at a fairly pedestrian rate, so I certainly wouldn't pay anything near a PER of 30 for it. So what on earth were people thinking, when they chased the share up to 400p in May 2017? Maybe they thought that growth would be faster than existing broker forecasts?


My feeling is that, with valuations…

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Porvair plc is a specialist filtration and environmental technology company engaged in the development, design and manufacture of filtration and separation equipment. The Company's operating divisions include Metals Filtration and Microfiltration. The Metals Filtration Division designs and manufactures porous ceramic filters for the filtration of molten metals, principally aluminum. The Microfiltration Division designs and manufactures a range of filtration equipment for application in aerospace, energy, bioscience, water and industrial applications. It is developing a range of products, including the products for the manufacture of turbine blades, solar panel manufacture and energy storage. It operates Microfiltration division through its subsidiaries, Porvair Filtration Group, Seal Analytical and Porvair Sciences. It operates Metals Filtration Division through its subsidiary, Selee Corporation. It has plants located in the United States, the United Kingdom, Germany and China. more »

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Eagle Eye Solutions Group plc is a software as a solution (SaaS) technology company. The Company is engaged in the marketing, validation and redemption of digital promotions in real-time for the grocery, retail and hospitality industries. The Company's software platform, Eagle Eye AIR, integrates with all existing point of sale (POS) systems and creates digital offers, rewards and vouchers then delivers them to customers by e-mail, text or through a loyalty application for instant redemption. Eagle Eye AIR enables brands and merchants to set up targeted campaigns, choosing various media channels to reach specific demographics. Eagle Eye AIR captures real-time data on consumer activity and campaign success. Eagle Eye Promote is a rules-based platform for brands and retailers, which creates, builds and manages their promotional campaigns. Eagle Eye Gift allows tracking of gift vouchers, including redemption data. Eagle Eye Reward supports and enables the digitization of loyalty schemes. more »

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French Connection Group PLC designs and supplies branded fashion clothing and accessories for men and women. The Company operates retail stores and concessions in the United Kingdom, Europe, the United States and Canada and also operates e-commerce businesses in each of those territories. Its principal brand is French Connection, which designs, produces and distributes branded fashion clothing, accessories, such as toiletries and fragrances, shoes, watches, jewelry, eyewear, furniture and homeware through its distribution channels: retail stores, e-commerce, wholesale and licensing. Its other brands include Toast, Great Plains and YMC. The Company operates in approximately 50 countries around the world. Its subsidiaries include French Connection Limited, French Connection UK Limited, French Connection (London) Limited, Contracts Limited, French Connection Group Inc., French Connection (Hong Kong) Limited, Toast (Mail Order) Limited, French Connection (Canada) Limited and YMC Limited. more »

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  Is Porvair fundamentally strong or weak? Find out More »

49 Comments on this Article show/hide all

MrContrarian 19th Sep '17 1 of 49

My morning smallcap notes:
Speedy Hire (LON:SDY),NAHL (LON:NAH),Porvair (LON:PRV),Versarien (LON:VRS),French Connection (LON:FCCN)

◄Speedy Hire (SDY)► Adj pretax exp to be slightly above mgmt expectations.
◄NAHL Group (NAH)► H1 rev £24.9m (£25.8m). EPS 9.0p (3.2p). Div 5.3p per share (6.35p). H2 'has continued in line with our expectations.' FY F/C are for a 6% EPS fall to 23.7p, 14% div fall to 16.2p. F/Cs are from March & April though.
◄Porvair (PRV)► 9 month pretax ahead of management's expectations.
◄Versarien (VRS)► has won an order for ongoing supply of nanomaterials, including graphene, to the Centre for Process Innovation. Versarien will be supplying up to 1.2kg of graphene. No value given. 
◄French Connection (FCCN)► H1 EPS -5.9p (-8.2p). Outlook 'confident'. 2 NEDs out, 2 heavyweight NEDs in. Good luck trying to advise Stephen Marks.

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doug2500 19th Sep '17 2 of 49

Does anyone know why there's supposed to be a statement from Advanced Medical Solutions (LON:AMS) ? Or where it is?

I always thought it looked odd being scheduled a week after the half year update but both stockopedia and LSE both say there should be an announcement today.

Any clues?

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vik2001 19th Sep '17 3 of 49

Paul lovely analysis of the current market conditions trend before starting the reports, more of this when applicable. thanks

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runthejoules 19th Sep '17 4 of 49

Looking forward to hearing about Eagle Eye Solutions (LON:EYE) (small position), reaction desn't seem to live up to the good results. Maybe it was all in already. I do wonder where this end of momentum leaves Paul's large £G4M position, which still seems to be creeping up slowly atm. Versarien (LON:VRS) seems a better-quality spec graphene play.

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danyou 19th Sep '17 5 of 49

I know are you reviewing Keywords Studios ($KWS) later. It seems to be a classic example of a really good quality growth share whose SP has run away a bit too much. It is just as you have described in your introduction regarding momentum shares. Nothing wrong with today's results, but market clearly expecting a lot more....That said, as a long term B+H, it still is very appealing.

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paraic84 19th Sep '17 6 of 49

In reply to vik2001, post #3

I totally agree. As an amateur investor, with limited time for following stocks and shares, Paul's overview of what's happening in the wider market is invaluable.

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Thunderball 19th Sep '17 7 of 49

Any chance on Bango (LON:BGO) please Paul? I know you don't like it and claim it a 'Jam Tomorrow' stock, but they seems to be delivering and due to enter into profitability at the years end with huge growth potential. The price is up 8%+ on the day.

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truegent 19th Sep '17 8 of 49

In reply to doug2500, post #2

it was a couple of days ago ! interims i think.

[edit - ah, youre after an update AFTER the interims - next one usually a pre close update december 15th]

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back2value 19th Sep '17 9 of 49

FCCN - turning the corner, or not? But then, does it really matter when you're CEO and Chairman and you already have plenty banked from past glories?

Disclosure: the only lifestyle business I will invest in is my own...

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


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