Small Cap Value Report (Tue 9 Oct 2018) - XPP, MYSL, CNKS, VLE, YOU

Tuesday, Oct 09 2018 by

Good evening/morning, it's Paul here.

Graham and I are both short of time this Tuesday (I have to go to London for a meeting, and Graham is doing a CEO interview). Therefore we've decided to pool our efforts here, writing a couple of sections each. I'll be reporting on results from MySale (LON:MYSL) (in which I have a long position) and am meeting management this Weds. So I'll report back on my impressions from that meeting.

I decided not to report on Bioventix (LON:BVXP) results yesterday, because it's specialised, and I don't have any sector knowledge. Suffice it to say though, that the company is amazingly profitable - PBT of £6.9m, on revenues of £8.0m, that's a net margin of 86%. Remarkable indeed. Although the share price actually fell 5% on the results. I think we're seeing quite a bit of nervousness in the market at the moment, and some people taking money off the table - particularly with highly-rated growth companies. 

I note that Fevertree Drinks (LON:FEVR) peaked at 4000p under a month ago, and is now 2890p. This is despite there being no news from the company. Has the big momentum trade of recent years finally come to an end? Who knows. I'm certainly wary of over-paying for anything now - I think the market is starting to pay closer attention to valuation now.

Maybe equity valuations need to correct to more rational levels? Especially now that interest rates, and bond yields are rising, which usually pulls down equity valuations. Plus all the macro & political uncertainty of course, isn't good for confidence.

To get you started on Tuesday morning (I'm writing this on Monday evening), here is a reader request from yesterday;

XP Power (LON:XPP)

Share price: 3000p
No. shares: 19.2m
Market cap: £576m

Trading statement

XP Power, one of the world’s leading developers and manufacturers of critical power control components to the electronics industry, is today issuing a trading update for the quarter ended 30 September 2018.

  • Order intake for the 9m to 30 Sep 2018 was up 8% on a LFL basis, and 11% higher including acquisitions (18% on a constant currency basis).
  • Revenues for the 9m are up…

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XP Power Limited is a United Kingdom-based developer and manufacturer of critical power control components for the electronics industry. The Company provides power solutions, including alternating current (AC)-direct current (DC) power supplies and DC-DC converters. The Company's segment include Europe, North America and Asia geographical. It designs-in power control solutions into the end products of blue chip original equipment manufacturers, with a focus on the industrial, healthcare and technology sectors. Its product categories include high efficiency/convection-cooled, chassis mount/open frame, configurable, external, encapsulated and printed circuit board (PCB) mount, DIN rail, baseplate-cooled, through hole mount, surface mount, light-emitting diode (LED) drivers and distributed power/hotswap. more »

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MySale Group plc is engaged in operating online shopping outlets for consumer goods, such as women, men and children's fashion clothing, accessories, beauty and homeware items. The Company's segments include Australia and New Zealand, South-East Asia and Rest of the world. It operates with flash sales Websites in Australia and New Zealand (ANZ), South-East Asia (SEA) and the United Kingdom. Its Websites host time limited flash sales in each of its territories. These flash sales are focused on fashion, apparel, health, beauty and homeware categories and are undertaken on a consignment inventory basis. Its retail Websites also focuses on these product categories using drop-shipped inventory. Its flash sales brands include OzSale and BuyInvite in Australia, NzSale in New Zealand, SingSale in Singapore, and MySale in Australia, New Zealand, Malaysia, Thailand, the Philippines, the United Kingdom and Hong Kong. more »

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Cenkos Securities plc (Cenkos) is a United Kingdom-based independent institutional securities company. The Company's principal activity is institutional stockbroking. Cenkos provides corporate finance, corporate broking, research and execution securities services to small and mid-cap growth companies, and other companies, across a range of industry sectors, as well as investment funds. The Company offers its clients access to equity finance at various stages of their development. The Company's activities also include institutional equities and market making. It provides technical advice on all forms of corporate transactions, including initial public offerings (IPOs), fundraisings, mergers and acquisitions, disposals, restructurings and tender offers. The Company's subsidiaries include Cenkos Nominee UK Limited, Cenkos Securities (Trustees) Limited and Cenkos Securities Asia Pte Limited. more »

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

34 Comments on this Article show/hide all

gary3980 9th Oct '18 1 of 34

Morning Paul/Graham.

Graham, appreciate time is tight today but if you get the chance this week will you be sharing your view on the sale of Impetus at Volvere (LON:VLE) ? I haven't seen anything but may have missed it.


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timarr 9th Oct '18 2 of 34

Paul, thanks for the review of XP Power (LON:XPP) - I remain a content holder.

It's an interesting company though - it's actually incorporated and domiciled in Singapore, although they voluntarily follow the UK Corporate Governance Code.  The UK listing, as far as can tell, is historic, because the original company was UK domiciled before they switched to Singapore in 2007.

I've held the shares for a long time now and never had any concerns about governance, but obviously there are people who are uncomfortable investing in UK listed but overseas domiciled companies. 


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MrContrarian 9th Oct '18 3 of 34

My morning smallcap tweet: A one week trading stmt!

Lighthouse (LON:LGT), STM (LON:STM), Toople (LON:TOOP), MySale (LON:MYSL)

Lighthouse Group (LGT) New affinity contract: adds 336k union members.
STM Group (STM) enters UK auto-enrolment market by buying Carey Pensions.for £0.4 m max.
Toople (TOOP) Never seen a one week trading stmt before: "the first week of its new financial year has started ahead of management's expectations...a new record of 115 businesses signing up." Prev 2 months av was 67 pw. Statisticians will raise an eyebrow, not a glass, at this RNS.
MySale Group (MYSL) CFO resigns, leaves today. He is thanked.

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greyster 9th Oct '18 4 of 34

I would be interested in views on Kin and Carta results (previously St Ives SIV), as results show numerous adjustments after a year or disposals and reorganisation. Adjusted eps of 10, and now purely in digital marketing space. Lots of confidence from new CEO. I appreciate Paul and Graham are busy today, but other knowledgeable posters may know more about this area of the market. I purchased as when I saw them stripping out the legacy businesses I saw them as an ideal takeover target, but I don’t claim to have any background in digital marketing.

At share price of 100p, could be due some level of re-rating. I hold.


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runthejoules 9th Oct '18 5 of 34

It's funny we spent so long talking about political instability yesteday and no-one mentioned a company well-poised to take advantage of it: YouGov (LON:YOU) , Mcap £498m, EPS up 75% yoy today. However, the price is also up and much of this is US-based so could they be prone a fall in the (high) dolla or will that income benefit from rising interest rates? No position. As yet...

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fredericktug 9th Oct '18 6 of 34

MySale (LON:MYSL) results appear on the surface to be good with the company on an improving trajectory on a range of metrics. Puzzling then that the Sp falls by 15%, or is that the lingering seller that Paul has mentioned in Twitter?

Request for MySale (LON:MYSL) Paul, I'm sure you'll cover as it's something you have written about before!

Disc - I'm long, and considering a top up.

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runthejoules 9th Oct '18 7 of 34

In reply to post #405729

Frederick I'm presuming MySale (LON:MYSL) 's drop is because some bought in expecting it to make profit. In today's environment paring losses just isn't a good enough result. Traders will be taking losses and moving on. LTHers will stay put for the next update given the spread, I presume (tiny position).

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unwise2 9th Oct '18 8 of 34

Fevertree's stellar growth rate slowed a while ago, after previously posting 100%+ EPS growth year on year EPS "only" grew ~55% in H2 2017 and 36% in H2. I was surprised it peaked at £40 after posting results, paying a sky high P/E on a fast decelerating growth share aways ends badly.

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Paul Scott 9th Oct '18 9 of 34

In reply to post #405734

Section on MySale (LON:MYSL) now added to main report.

The figures are pretty good. It's the sudden departure of the CFO that has probably spooked some people.


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purpleski 9th Oct '18 10 of 34

In reply to post #405684

Hi Timarr

I have held since (and accumulated) since 2012 and like you see no reason to sell.

My wife headed up the Dell (EMEA) Internal Audit function 18 years ago (OMG is it that long ago) and rated Duncan Penny and she is half Singaporean. So I see no problem with the listing in Singapore or with Penny, and actually think I will use the recent weakness and undemanding PEG and PE to add some more.


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murrb 9th Oct '18 11 of 34

LON:CNKS - Is there any interest from readers in the news that the CEO has resigned? Crystal Amber is a big holder and the share price is at recent lows after poor first half interims. Graham commented recently that cash and assets at last finals were higher than the current market cap and Paul is a long term holder.Disc.: I bought back a small position yesterday.

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dscollard 9th Oct '18 12 of 34

Fevertree Drinks (LON:FEVR), Blue Prism (LON:PRSM), First Derivatives (LON:FDP) have all had rapid fall-offs in price: extraordinary number of double digits sell-offs in AIM yesterday: Fist time the index has dropped below its daily 200MA since the referendum result in 2016. 

Given AIM is largely domestic and skewed to PIs I reckon it is a bit of a sentiment indicator and possibly a pre-Brexit flight to cash or to more defensives. Either way it is a change in trend.

That said, AIM has had a stellar run since 2016 up 80% in 2 years so a healthy bit of profit taking is only to be expected. Whether it is part of a more concerted move remains to be seen but there is no doubt there are a lot of fingers hovering over sell triggers. Always tricky to know exactly where we are in the business cycle but interest rates and rising oil prices are probably giving good clues.


(click image for larger version)

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Munday 9th Oct '18 13 of 34

As you ask my view,I feel a market correction is on the cards, and therefore AII stocks are due for a fall.

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rmillaree 9th Oct '18 14 of 34

XP Power (LON:XPP)

They are always at pains to point out that they are continually investing in future product launches that should reasonably provide some backstop against a general drop in demand for current products. Although when cash runs (customers cash) out future unconfirmed orders probably may be easier to chop.

In the recent past they have also always had excellent spare cash available to bolt on extra acquisitions without really having to issue shares or dig deep into debt. Debt is up but still of the very modest type (not a bad thing)

Every dog has its day though and one does wander if the good news can carry on forever though - hey ho - lets hope so while i continue to hold.

i would say on a p/e ratio - its lower now than it probably has been since the sub £1.00 good old days - however i would expect future earnings growth over the next 5 years to be lower than the excellent past 5 years. I am still happy to hold and perhaps add if shares drift much lower and forecasts don't worsen materially.

Looking at an all electric future (yeah right?) it seems right they are in the right sector area too that should in theory have growth potential.

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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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