Small Cap Value Report (Wed 10 July 2019) - SDRY, EQLS, AFX, TEG

Wednesday, Jul 10 2019 by


There is still an overhang from yesterday, but for now I'm studying today's results. I got as far as TEG by close of play:

Superdry (LON:SDRY)

  • Share price: 436p (-3%)
  • No. of shares: 82 million
  • Market cap: £358 million

Final Results

This is within our small-cap limits - not something that I would have expected, if you asked me a couple of years ago! These shares were changing hands at £20 at the start of last year.

Co-founder Julian Dunkerton is back and his first priority is to "steady the ship", in his own words:

All the team in Superdry are working incredibly hard to deliver the direction set out, with a real focus on returning the business to its design-led roots and getting the retail basics right.


  • revenue flat (£872 million), gross margin down 250bps to 55.6%
  • underlying PBT £42 million (from £97 million)
  • net cash £36 million


There is no crumb of praise for previous management, who get the blame for the problems which now need to be fixed:

Given the scale of the trading downturn in FY19 and the lead times required to rectify the product range and proposition, management view FY20 as a year of reset, creating a platform from which Superdry can return to long-term profitable growth. We expect our financial performance in FY20 to reflect market conditions and the historic issues inherited.

Revenue is set to show a "slight decline" in FY 2020, "particularly in the first half".

Dunkerton's statement

This is important - it outlines his vision for reinvigorating the brand and the company. Nothing else really matters.

Key objectives:

  • focus on design, rather than the "buyer-led approach" of the previous CEO. Using a combination of in-house designers (which Dunkerton will work with) and the SuperDesign Lab (a consultancy led by SDRY's other co-founder).
  • return to previous quality of product
  • reduce lead times, drive cost efficiency
  • create "more…

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All my own views. I am not regulated by the FSA. No advice.

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Superdry PLC, formerly SuperGroup PLC, designs, produces and sells clothing and accessories under the Superdry brand in approximately 670 points of sale across the world, as well as online. The Company offers a range of products for men and women. The Company operates through three segments: Retail, Wholesale and Central costs. The Retail segment's principal activities consist of the operation of the United Kingdom, Republic of Ireland, European and the United States stores, concessions and all Internet sites. The Retail segment is involved in the sale to individual consumers of its brand and third party clothing, footwear and accessories. The Wholesale segment's principal activities consist of the ownership of brands, wholesale distribution of its brand products (clothing, footwear and accessories) across the world and trade sales. It offers a range of products, including t-shirts, polo shirts, hoods and sweats, joggers, tops, dresses, jackets, shirts, footwear, bags and accessories. more »

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Equals Group Plc, formerly FairFX Group Plc, is a provider of foreign exchange (FX) payment services to both private clients and corporations through prepaid currency cards, travel cash and international money transfers. Its segments include Currency cards, FairPay, Dealing and Central. It sells foreign currency through technology platforms offered on the Internet. It has a cloud-based peer-to-peer payments platform that enables personal and business customers to make multi-currency payments in a range of currencies and countries, and across a range of FX products through an integrated system. It offers prepaid currency cards, including Euro Card and US Dollar Card. Its travel cash service offers delivery of banknotes directly to customer using Royal Mail. Its international payments service includes FairPay, which offers a solution for payment of property maintenance and mortgages; payment of expenses abroad; buying goods or services, and sending money to family and friends. more »

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Alpha FX Group PLC is a corporate foreign exchange (FX) broker with a focus on helping its clients to control the impact currency volatility has on their business. The Company operates Alpha FX. Alpha FX develop tailored hedging programmes that help businesses balance when, how much and how far forward to buy currency. Its Approaches include Passive Hedging, Active Hedging, Hedge Accounting, Dispute Resolution and Key Features. Passive Hedging Strategies are focused on protecting businesses from the unpredictable nature of currency markets in order to provide a predetermined level of financial stability. Active Hedging Strategies provide the protection and stability of a passive strategy. Hedge Accounting helps businesses, who are susceptible to volatility in their Profit and Loss over their reporting period. Dispute Resolution provides a resolution to mis-sold FX options. Key Features include technical analysis, hedging facilities, settlement, reporting and pricing. more »

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

42 Comments on this Article show/hide all

dpshares 10th Jul 3 of 42

I'd like to hear thoughts on AFX. It seems to be delivering on its promise of high revenue growth, albeit over a relatively short-time scale so far in the grand scheme of things. It is also delivering profit while expanding into new markets and taking on further staff, although I expect the office move later this year will have some impact on the bottom-line.

It is not cheap, being on a closing P/E of circa 33 yesterday, but given the growth this does not seem unjustified. Interesting company.

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JohnEustace 10th Jul 4 of 42

In reply to post #491366

It’s worth noting that the CEO at Alpha FX (LON:AFX), Morgan Tillbrook, is just 34 years old. I see him as a name to follow fo the future.

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rmillaree 10th Jul 5 of 42

3 sets of updates for my shares today.

J D Wetherspoon (LON:JDW)

For the 10 weeks to 7 July 2019 like-for-like sales increased by 6.9% and total sales increased by 6.6%. Year-to-date like-for-like sales have increased by 6.7% and total sales increased by 7.4%.

they are approaching the end of their year (28th July) and the numbers for this year seem very acceptable - note they have disposed of more pubs than they have opened so they may slightly be pimping the numbers by ditching the under performing units - no bad thing sweating your assets etc.

Deffo an expensive company so i wouldn't be adding at current prices  but this is my ultimate buy an hold share of the ones i have left (Greggs having departed the sausage factory)

Ten Entertainment (LON:TEG)

The Group traded well during the first half of the financial year, with total sales growth of 9.6% and like-for-like sales growth of 7.4%. The half benefited in LFL sales growth as a result of the comparative period experiencing extreme hot weather conditions during May and June 2018.  Underlying LFL growth remains stable and encouraging


the business is on track to meet our expectations for the full year

Everything seems pretty stable - i was tempted buy these on the shareprice weakness on the back of Woodford presumably being a  forced seller. Price has rebounded a bit since i purchased. Not sure the quality metrics are as good as the other listed bowling operator but all basic numbers seem fine - and the pe of 10.2 ish still seems cheap for a company growing earnings and paying a chomping dividend. Lets hope they are not under investing for the future. - that doesn't appear to be the case here.

Superdry (LON:SDRY)

Ok can the magic man work his stuff or will he be a later day  Don Majkowski. quick cheat by looking at the stocky numbers and its down 7.75 at the opening  suggests there aint no magic

Ok i am only interested in the outlook here 

management view FY20 as a year of reset, creating a platform from which Superdry can return to long-term profitable growth. We expect our financial performance in FY20 to reflect market conditions and the historic issues inherited.Despite early, albeit small positive results from new initiatives across the Retail channel, we expect Group revenue to show a slight decline in FY20, 

Ok the magic man is not even going to replicate last years poor results - that will explain the decline i shareprice - ye 28/4/20

To be fair to Dunkerton restoring success was never going to be an instant thing  - and it does make sense to start with low expectations - however a year of backward progress will probably see the shareprice go nowhere at very best  - pe of 9 may become at least 10 if there are further downgrades. If i was on the sideline i would probably want to see earnings being upgraded before taking the plunge. I have started looking in shops as i pass on my travels and they do seem to be everywhere and the smaller shops i have popped my head in don't seem quieter than similar outlets next to them - although thats comparing stinky apple v stinky apple at present. I bought due to excellent overseas growth and excellent wholesale growth at the time and that didn't really last beyond one update sigh.

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rmillaree 10th Jul 6 of 42

Alpha FX (LON:AFX) - comments on this company would be appreciated - i have added to my watchlist and company seems to be going places - results ahead of expectations - share price up 8.8% - perhaps the boat is sailing here quickly .

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brianbathgate 10th Jul 7 of 42

SDRY not sure if its a small cap now, interested in your thought on today's slam dunkerton results

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golfnut59 10th Jul 8 of 42

In reply to post #491366

Im a holder and big fan of Alpha FX. Morgan Tillbrook is a young and talented CEO with a seriously high work drive. His passion and drive has created a winning culture within the business. The staff are happy to work long hours including many weekends. They also all have skin in the game. It comes as no surprise to me that AFX is on track to smash its 2018 numbers. The groups EPS has been growing at 50% per year and this looks set to continue. If you like owner operated companies that are built through organic growth then Alpha FX fits the bill.

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ambrosia 10th Jul 9 of 42

GDP figures from May are due to be released today, apparently theyre gonna be zero, are we headed to a recession, already feels like a big slowdown out there

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Edward John Canham 10th Jul 10 of 42

Steppe Cement (LON:STCM)

Seems a bit below the radar but produced a good TU today with sales up 34% in local currency (probably half that in USD).

Produces (unsurprisingly) cement in Kazakhstan and has turned round in the recent past and essentially paid off its debt. SR of 99, fwd PER of 5 and projected dividend yield of 20% (holders receive last year's 3p on Friday).

Would be interested in comments.


I hold some

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ambrosia 10th Jul 11 of 42

Steppe Cement (LON:STCM) interesting company you found Edward, but on the balance sheet, under Other Equity its got a high negative number which I'm a bit confused by

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Edward John Canham 10th Jul 12 of 42

In reply to post #491426

Steppe Cement (LON:STCM)

This is the translation reserve which basically reflects the depreciation of the Tenge against the US dollar and it's impact on the Balance sheet. The negative amount went up by $9.5m in 2018 mainly on retranslation of its fixed assets (begining rate @ 330 closing rate @385).


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Graham Neary 10th Jul 13 of 42

In reply to post #491391

Hi Brian/rmillaree - yes SDRY is first! G

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JohnEustace 10th Jul 14 of 42

In reply to post #491401

Brexit stock builds that disguised the poor underlying trend are now unwinding. It's anyone's guess what will happen so no point in further planning, just deal with it when it happens.

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mikelevie 10th Jul 15 of 42

Dunelm (LON:DNLM) too large for this report but +15% LFL store revenue during Q4 is impressive, not to mention +37% online sales. One of a small group of retailers bucking the high street slump.

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Wimbledonsprinter 10th Jul 16 of 42

Graham, I would be interested in your view of 600 (LON:SIXH) in which I have a small position. The accounting issues here are complex but should get more simple going forward. Since the resolution of pension scheme issue (just after the end of the FY19), the big issue has been resolved. There is still the £8 million of expensive 2022 debt outstanding offset with warrants at 20p (around which the stock price is finally flirting). Assuming this debt is converted into equity (a big if), then there will be a significant dilution but also a largely debt free group, mostly exposed to the US trading on a modest multiple and will some organic growth.

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Nothingventured 10th Jul 17 of 42

I hold Bango and Alpha FX.

I'm wondering if a company like Bango might face trouble in future due to the move into Crypto Curency by Facebook? This might become the global payment system for small trnasactions.


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Nothingventured 10th Jul 18 of 42


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Asagi 10th Jul 19 of 42

In reply to post #491486

Assuming this debt is converted into equity (a big if), then there will be a significant dilution but also a largely debt free group

in this circumstance, the dilution of EPS would be little over 10% as 600 (LON:SIXH) would save £680k in debt payments. The shares today trade at 6.3 times 2020 forecasts.


(long £SIXH)

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abtan 10th Jul 20 of 42

Someone asked a couple of days ago about the Solid State (LON:SOLI) presentation from Monday.

I emailed Walbrook who sent me the presentation from the day.

I've only glanced through it and there doesn't seem to be much added information, though a few short case studies were marginally interesting.

If you'd like a copy then I've been told that you can request through the following email:


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Gromley 10th Jul 21 of 42

In reply to post #491506

600 (LON:SIXH)

Despite having made a nice turn on these shares probably about a year ago; I have failed to take advantage of the recent advances.

I'm seriously put off by the debt, the almost total lack of assets (having sold them all of in recent years) and the historic cash outflows in a business that is quite cyclical.

I do agree therefore that conversion of the debt in to shares at the 20p warrant price, would be a positive for shareholders.

However, how likely is it really to happen? At the moment the bond holders have a nice predictable income and presumably first call on what assets there are. I think they would want the share price to be substantially above 20p in order to transfer this comfort for illiquid shares in the company. And indeed if they did exercise the warrants I would expect them to be looking to flog them off pretty quickly.

However, I've been significantly wrong on the market sentiment towards 600 (LON:SIXH) over the last couple of months (+ c.50%) so what do I know?

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FREng 10th Jul 22 of 42

Bango (LON:BGO) looks interesting. Growing fast, cashflow positive, stable cost base. New products ...
I'm tempted. What's the bear case?

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 Are LON:SDRY's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »


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