Small Cap Value Report (Tue 9 Jan 2018) - EHG, TPT, JOUL, NEXS, TAST, GAW, CARR, BQE, WINE, FOUR

Monday, Jan 08 2018 by

Hello, it's Paul here.

It's busy for updates today. Please see the header above for the stocks that I shall be reviewing today.

Elegant Hotels (LON:EHG)

Share price: 85.5p (down 10.9% at 08:32 today)
No. shares: 88.8m
Market cap: £75.9m

(at the time of writing, I hold a long position in this share)

Results - for year ended 30 Sep 2017. This company is;

...the owner and operator of seven upscale freehold hotels and a beachfront restaurant on the island of Barbados.

It listed on AIM in May 2015. This is a rare exception to my usual (personal) blanket rule not to invest in overseas companies on AIM. The reasons being that it's profitable, has freehold property assets, pays divis, seems to have sensible management, and operates in a country which seems to be politically & economically stable.

Its major shareholders list is pretty impressive too;


Results today have clearly underwhelmed some people, as the share price down 10.9%.

Dividends have been reduced today, which could have upset some shareholders. Although as I flagged here on 12 Oct 2017, the company was clearly over-paying, so a cut in the divi was to be expected. The final divi this year will be 1.75p (PY 3.5p). The 2018 divi will be 4.0p, split one third: two thirds between interim & final. That will still give a pleasing yield of 4.7%, and looks a much more sensible level of payout. So personally, I'm absolutely fine with this. I'd much rather the company sensibly balances its divis and capex, rather than paying out too much in divis and starving its hotels of capex.

Some key numbers for 09/2017;

  • Revenue up 5.1% to $59.9m - with one additional site.
  • Adjusted EBITDA down 7.6% to $18.1m - so nicely cash generative, but we do need to take into account maintenance capex, which is heavy for hotels.
  • Adjusted profit before tax is down 22% to $11.1m
  • Adjusted basic EPS is down from 13.1c last year, to 10.1c this year (converts to sterling of 7.5p). Note that there doesn't seem to be any potential dilution from share options, since the basic & diluted EPS figures are the same.
  • At 85.5p share price, the 7.5p EPS results in a PER of 11.4
  • EPS seems to have…

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Elegant Hotels Group plc is a holding company. The principal activity of the Company and its subsidiaries is the ownership and operation of hotels and restaurants on the island of Barbados. It owns and operates six freehold beachfront hotels and a beachfront restaurant in Barbados. Its hotels include Colony Club, Tamarind, The House, Crystal Cove, Turtle Beach and Waves. It operates Daphne's restaurant, which is located on platinum West Coast in Paynes Bay, adjacent to The House and Tamarind in Barbados. Its Colony Club hotel is spread across six acres of tropical gardens with approximately 300 feet of beach frontage on the Caribbean Sea and lagoon style pools. Its Tamarind hotel is on the Platinum Coast. Its Crystal Cove hotel has three freshwater lagoon pools, two restaurants, two bars, two floodlit tennis courts and a fitness center. Its Turtle Beach property is on the south coast of Barbados. Its portfolio consists of over 550 rooms. more »

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Topps Tiles Plc is a United Kingdom-based retailer of tiles. The Company is engaged in the retail distribution of ceramic and porcelain tiles, natural stone, and related products. It operates in the Topps Tiles stores and online business segment. It supplies tiles and associated products to both trade and retail customer base, primarily for the refurbishment of the United Kingdom domestic housing. Its product categories include new products, bathroom wall tiles, kitchen wall tiles, mosaic tiles, kitchen floor tiles, bathroom floor tiles, ceramic tiles, porcelain tiles, underfloor heating, wet rooms, outdoor tiles, fireplace tiles and metro tiles. Its brands include Tile Adhesive, Tile Grout, Tile Preparations, Hardiebacker Board, Rubi Tools and Accessories, Warmup, and Homelux Tiles Trims. It offers tiles in various colors, such as beige tiles, black tiles, blue tiles, brown tiles, cream tiles and gold tiles. It has over 350 stores across the United Kingdom. more »

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Joules Group PLC is engaged in the design and sale of lifestyle clothing, related accessories and a homeware range, through the multi-channel business structure embracing retail stores, e-commerce, county shows and events and wholesale. The Company has three segments: Retail, Wholesale and Other. The Retail segment includes sales and costs relevant to Stores, E-commerce, Shows and Franchises. The Wholesale segment includes sales and costs relevant to the sale of products to other retail businesses or distributors for onward sale to their customer. The Other segment includes income from licensing. The Company's products include womenswear, menswear, Little Joule, Baby Joule, Wellies and homeware. The Company operates 97 the United Kingdom and Republic of Ireland stores (including five concessions) and three franchise stores. Joules branded products are sold through selected wholesale partners, primarily in the United Kingdom, North America and Germany. more »

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  Is LON:EHG fundamentally strong or weak? Find out More »

67 Comments on this Article show/hide all

iwright7 9th Jan '18 28 of 67

In reply to post #295038

Re Games Workshop (LON:GAW)

Comment is from this "source"

P.S. I have just looked at it again and the comment appears to be the writers "thought"  rather than comment.

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mammyoko 9th Jan '18 29 of 67

Stick to the Joules (LON:JOUL) directors, Paul. Totally unacceptable

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LeoInvestorUK 9th Jan '18 30 of 67

Impax Asset Management (LON:IPX) had another AUM update today showing strong new funds and capital growth. I have put together a spreadsheet of recent growth:

In the context of recent figures the last quarter also looks strong, but as you can see it hasn't always and won't always be like this.

I will try to write some more this evening.

Blog: LeoInvestorUK
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grumpy5 9th Jan '18 31 of 67


Well done for your typically trenchant comments on Joules' (LON:JOUL) lamentable IR standards.

I don't hold, and we have reached the stage in the consumer spending cycle when retailers have to spell out the case for investing in their shares rather clearly....

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Damian Cannon 9th Jan '18 32 of 67

In reply to post #295068

That's interesting Leoleo. The metrics for Impax Asset Management (LON:IPX) look fantastic but then again it looks to have had an excellent 2017. Whether they can remain flavour of the month I don't know but so much depends on them maintaining good performance - without that inflows will quickly turn into outflows!

Blog: Ambling Randomly
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Cockerhoop 9th Jan '18 33 of 67

In reply to post #295053

Re Games Workshop (LON:GAW)

Comment is from this "source"

P.S. I have just looked at it again and the comment appears to be the writers "thought" rather than comment.

So a complete fiction then! Kevin Rountree has and is doing great work at Games Workshop (LON:GAW) no need to unfairly trash his predecessor.

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Bushranger 9th Jan '18 34 of 67

In reply to post #295093

RE Games Workshop (LON:GAW).
Yes Cockerhoop that source is is virtually hearsay. Seems like someone who had a grudge against GAW started the page way back. However it is an interesting read and the overall narrative does seem to be backed by many different comments from other places. That being that GAW in the past didn't really care what their customers thought or the experience they had but that now that is a major focus. I found most interesting the comments regards GAW branching out into everyday merchandise, which is hinted that they previously didn't do. Maybe like movies GAW will finds these bring in as much revenue as the core product?

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InvestedGeordie 9th Jan '18 35 of 67

I wonder if Games Workshop (LON:GAW) would be a nice little bolt on for $ATVI ? I'm sure this will have been suggested before. £ATVI could perhaps look to extend into boardgames themselves, gradually, using Games Workshop (LON:GAW) expertise? Similarly, $ATVI could look to change / extend & develop Games Workshop (LON:GAW) offer in the online space, God knows they're the experts. Could Games Workshop (LON:GAW) IP tempt $ATVI?

EDIT - No idea why £ATVI won't link to Activision Blizzard :/ Tried both £ & $ before the ticker

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Wimbledonsprinter 9th Jan '18 36 of 67

I am slightly surprised Topps Tiles (LON:TPT) is up 7% today. The 3.4% increase in LfL sales in the first 13 weeks is clearly good news but it had already reported 3.2% LfL growth in the first 8 weeks - so this trading update is only giving us an extra 5 weeks of information. (i hold).

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grout123 9th Jan '18 37 of 67

GAW- Ive been a holder for about 18 months and have top sliced as the price has improved I am happy to say. Of concern was a recent visit to Kingston where they have a physical store. On the 23rd of Dec when I passed by, there wasn't a soul in the shop. I assume their online gaming stuff ( Warhammer ? ) is saving things but the lack of shop visitors was a worry.

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Paul Scott 9th Jan '18 38 of 67

In reply to post #295018

Hi boothbym,

Could you take a look at ILIKA(IKA). Their results are out today. Do you think the will need refinancing in the next 18 months?

I've had a quick look. In terms of liquid assets, Ilika has;

Bank deposits £3.27m
Cash                 £0.60m
Tax receivable £0.53m (I'm assuming this is R&D tax credits, so should be a cash receipt)

Total                 £4.4m

It looks to be burning around £3m-ish per year. So my guess is that, yes it would need to raise more equity maybe late in 2018, or early 2019. That wouldn't necessarily be a problem, as the company has some sexy-sounding technology, and we are in a bull market.

I remember going on a site visit to their facility in Southampton a few years ago. It all looked very exciting & space-agey, but there's not been anything commercially viable appear as yet. But you never know! Could be worth a fun money punt, I've punted on it before (unsuccessfully).

Regards, Paul. 

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martinthebrave 9th Jan '18 39 of 67

#GAW I exited these yesterday after 2 bagging in a year. These are spectacular results from a Fab company. The only reason I sold is that the results are generated by the Warhammer game and this has a finite life. Consensus PBT is £65m for 2018 dropping to £55m 2019. (Digitallook).

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wildshot 9th Jan '18 40 of 67

In reply to post #295163

Interesting observation there grout123 regarding Games Workshop (LON:GAW) stores. Recently I passed stores in Wakefield and Bristol and both were very busy. Maybe just by chance your timing caught a quiet time?

Well done on your report today Paul, that is a lot of companies covered!

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jsatchwill1 9th Jan '18 41 of 67

I used to play warhammer (40,000 and fantasy) about 12 years ago. I stopped when I reached 16 and discovered computer and console games, and the realisation of how expensive the products were.

I considered buying Games Workshop (LON:GAW) last year when I saw it had a good stock rank, however was put off as they had replaced fantasy warhammer with a "new easy to play" version in 2015 which I thought would alienate a lot of existing players. 

I would certainly be interested in how much revenue is from the the tie in with the Total War computer game series (which I understand to be a big success), how much is from existing games and how much is from this newer warhammer variant. 

With regards to the growth in revenue, I would guess a lot is to do with a new version of 40,0000 being released in July 17 and Warhammer Total War 2 being released in September 2017. A new version results in people haveing to buy new rule books and lots of new models will be released. From what I remember new editions of each game system are released every 2-3 years (e.g 7th edition 40,000 released in 2014, 1st edition Age of Sigmar (Fantasy) released in 2015, 8th edition 40,000 released in 2017) A third and supposedly final Total War game is supposed to be released late 2018/early 2019

I also understand that they are expanding in the US

On a side note I walked past a shop in maidenhead at lunch, it was closed. Not sure if this was a one off as it was open before Christmas
Shame i missed the boat last year

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Paul Scott 9th Jan '18 42 of 67

In reply to post #295153

Hi wimbledonsprinter,

I am slightly surprised Topps Tiles (LON:TPT) is up 7% today. The 3.4% increase in LfL sales in the first 13 weeks is clearly good news but it had already reported 3.2% LfL growth in the first 8 weeks - so this trading update is only giving us an extra 5 weeks of information. (i hold).

I have a theory on this. Some investors may not have noticed the 28 Nov 2017 results announcement from Topps Tiles (LON:TPT) because the RNS is entitled "Annual Financial Report". I always ignore RNSs with that title, because they are nearly always just confirming that previously released results are being posted to shareholders.

So it's entirely possible that other investors may also have not realised that the 28 Nov 2017 announcement contained the actual results published for the first time, together with the news on current trading.

In a nutshell then, I missed the current trading figures in Nov 2017, and only spotted the figures in today's update. That could explain why there was a decent rise in share price today.

Also, there has been bullish broker coverage out today, saying that they foresee the need to raise their forecasts later this year.

Regards, Paul.

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simoan 9th Jan '18 43 of 67

In reply to post #295228

I have a theory on this. Some investors may not have noticed the 28 Nov 2017 results announcement from Topps Tiles (LON:TPT) because the RNS is entitled "Annual Financial Report". I always ignore RNSs with that title, because they are nearly always just confirming that previously released results are being posted to shareholders.

I'm not sure this is correct. The closing price was 60.75p on 27th Nov and 75p on the 29th, which tells me the LFL numbers in the Nov update had been fully digested by the market. 

I would suggest that the new 13 week number today is not as humdrum as wimbledonsprinter has suggested if you "do the math". If the first 8 weeks of a 13 week period sees LFL at 3.2% and the outcome for the full period is 3.4%, then this means the LFL sales for the last 5 weeks must have increased at a lot more than 3.4 %! I think this more recent increasing trend is what the market is reacting to.

All the best, Si

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herbie47 9th Jan '18 44 of 67

In reply to post #294903

Games Workshop (LON:GAW) shares are now down over 5% which does seem an odd reaction, so I have topped my holding. Often they is a delayed reaction to good results but I did not expect a 5% fall.

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Cockerhoop 9th Jan '18 45 of 67

In reply to post #295188

Games Workshop (LON:GAW)


Whilst it's impossible to predict the future I would point out that at this stage last year 2018 results were forecast to be below 2017's (53.2p v 57.9p) and have clearly been blown out of the water with 97p in H1! So not necessarily a good guide.

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iwright7 9th Jan '18 46 of 67

In reply to post #295268

Agreed - Seems Games Workshop (LON:GAW) delight in keeping their house broker in the dark - All part of the GW mystique!

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Reacher 9th Jan '18 47 of 67

In reply to post #295258

Perhaps part of the reason for the drop in the price is the omission of an outlook statement or trading after the period end. However, I believe Games Workshop (LON:GAW) have done this in previous results announcements.

There still appears to be value in the shares: taking the difference in EPS between full year 2017 and 1H2017 and applying that to 1H2018 EPS results in 2018 EPS of 158p. This results in a PE of 16 which is reasonable. The big question is whether the popularity in its products continues.

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


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