Small Cap Value Report (Wed 13 Dec 2017) - placeholder

Wednesday, Dec 13 2017 by

Good morning! It's Paul here.

It's going to be a more relaxed writing day today. I'm still reeling, after having to write 6 sections by 10am yesterday, which nearly killed me! I'm 50 next birthday, so maybe it's time to slow down a bit, on several levels?!

As you know, I'm not a morning person. I have a London meeting after lunch. So the plan for today is to write a couple of sections here in the morning, then a couple more sections in the later afternoon/evening.

Hope that's OK. Best wishes, Paul.

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72 Comments on this Article show/hide all

mammyoko 13th Dec '17 1 of 72

Hi Paul - you're just getting into your stride at 50 - don't talk about slowing down! Would appreciate your comments on Cohort (LON:CHRT) interims if possible. Thanks

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fwyburd 13th Dec '17 2 of 72

Hi Paul,
It would be great to get your views on Best Of The Best (LON:BOTB) and Purplebricks (LON:PURP).

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MrContrarian 13th Dec '17 3 of 72

My morning smallcap tweet:

Avanti Communications (LON:AVN), Strat Aero (LON:AERO), React (LON:REAT), Parity (LON:PTY), Plant Impact (LON:PIM), Cambian (LON:CMBN), Safestyle UK (LON:SFE), Chapel Down (OFEX:CDGP)

Avanti Communications (AVN) Another debt restructuring. Proposes 13x dilution to reduce debt.
Strat Aero (AERO) Open offer at 0.035p to raise up to £510k. A 30% discount. No thanks.
React Group (REAT) guides FY pre-tax loss £0.475m (£0.4m previously expected), primarily due to a non-cash adjustment relating to an amortisation. Trading in the current FY has made an encouraging start.
Parity Group (PTY) exp FY operating profit on continuing operations expected to be slightly ahead of its original expectations. Guides U/L Operating Profit at least 10%.
Plant Impact (PIM) disaster. Bayer CropScience will not be able to conclude a new contractual arrangement until Q1 2018 at the earliest. It also "confirmed to the Group that, given its well-publicised challenges within the Brazilian market, it will not be able to meet its commitments within the Purchasing Plan, as it needs to further accelerate its destocking activities. PIM guides FY18 rev £6m. "In the absence of prior external capital investment, on its current cost run rate of £750-800k per month, the Company will require funding prior to April 2018. Given the reduction in cashflow from the lower revenue expectation for FY18 and to provide a reasonable buffer in FY19, the Group's funding requirement is likely to be around £7m." Company up for sale and is in talks with with certain parties. Formal sale process with the aim of announcing the outcome very early in 2018.
Cambian (CMBN) TV programme tonight will expose alleged "inadequate levels of both the care and education for children at Cambian facilities and of the training and support offered to our staff. "Following receipt of the Letter [on 10 Nov], Cambian fulfilled its obligation to inform its regulator, Ofsted, of its contents and launched an internal investigation into the issues raised...Cambian is reviewing its service provision, utilising its internal quality assurance function and relevant independent external advisors. The Board is committed to addressing any issues that are identified. The Board believes these events will have no material financial impact on the Group in 2017 and remains confident that these issues will be satisfactorily resolved." At least they have not denied the issues.
Safestyle UK (SFE) warns again. Poor Q4 sales, weather disruption and increased cost of sales acquisition "due to higher lead generation expense in a competitive landscape and a higher proportion being made on extended finance terms." Guides underlying pretax below current market expectations, at a level of least £15m.
Chapel Down Group (CDGP) placing & open offer at 50p at a nasty 37% discount. Trading - FY rev in line at £11.6m.

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fwyburd 13th Dec '17 4 of 72

And I hope you don't mind Paul but I've set up another survey on how Investors currently feel about the market.

Full post here and survey form here



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danielbird193 13th Dec '17 5 of 72

Would welcome any thoughts about Chapel Down (OFEX:CDGP) which has announced a £20 million placing and offer at a big discount to last night's closing price. Trading update is upbeat however and they are certainly investing for growth by planting new vines, building a new brewery and visitor centre in Ashford. (I hold after participating in the crowdfund on Seedrs).

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paraic84 13th Dec '17 6 of 72

In reply to post #252848

I second that. Re Best Of The Best (LON:BOTB) it looks like remote gaming duty is 15%. A 20% fall in profits in 2019 (as suggested in their RNS) would equate to a EPS of about 11p. They are also talking about share buybacks so it may be higher than this. Given the historic dividends I am happy to sit tight even though I regret buying at 320p now! There is a risk this share goes lower given investors may feel it now does not deserve a forward p/e of at least 20.

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clarea 13th Dec '17 7 of 72

Safestyle please Paul

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Warranstar 13th Dec '17 8 of 72

Idox (LON:IDOX) please following today's news.

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iwright7 13th Dec '17 9 of 72

In reply to post #252893

Sounds like Best Of The Best (LON:BOTB) EPS forward earnings have been significantly dented, if 2019 is 11p. A drop to a PER in the mid teens would give price of 150-180p +the share cancellation effect. Hmm!

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Andrew L 13th Dec '17 10 of 72

Would be interesting to see what you make of the interims from Purplebricks

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tic_tac_toe 13th Dec '17 11 of 72

In reply to post #252893

I bought a few today, £BOTB

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Glen Keedy 13th Dec '17 12 of 72

In reply to post #252863

Good survey. Nice and short. Quote from Paul in yesterday's report:

"Personally I'm not really looking to open any new long positions at the moment. "

Mind you, quote from Paul earlier at 4.46am this morning:

"tinkle tinkle !!!!!! ahaha!!!!!"

Today's report may have more of an afternoon bias.

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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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