Small Cap Value Report (Wed 16 May 2018) - SOS, BOTB, LOOP, MOSB, CRST

Tuesday, May 15 2018 by

Good morning, it's Paul here.

To get you started today, I added some more sections to Tuesday's report in the evening - the full report is here. It covers updates from: Cenkos, Sprue Aegis, Gear4Music, Zytronic, Patisserie Valerie, Accrol, and Lookers.

Timing of these reports

I'd like to respond to a critical reader comment yesterday, which I think was a bit of a misunderstanding.

So this is just to clarify, re timing of these reports. We asked readers a while back whether they wanted a report out every day at a certain time (e.g. 1pm), or whether they were happy for me & Graham to take our time, and go into more detail. Much to my surprise, the reaction from readers was overwhelmingly that you are happy with us taking our time, and that people would rather see more detail & thought going into the articles, than us rushing to meet a deadline. So that's what we do.

People also need to bear in mind that (by far) my main living is from my own investment portfolio - capital gains, and dividends. So to a certain extent, these reports are a sideline, or a by-product of what I spend most of my time doing - researching individual companies, reading broker notes, etc.

There's a lot of background reading, fact checking & thought that goes into each report, each day. That takes time, and sometimes after a very intense 6 hours work from 7am, I'm mentally drained by lunchtime. So I tend to down tools, and have a long lunch, then resume working later in the afternoon, and often going right through into the evening. I finished yesterday's report after 10pm, for example.

As a reader pointed out in yesterday's comments, these reports are free to everyone, and are not part of the Stockopedia subscription. Therefore, whatever arrangements that Stockopedia & I have re remuneration, are nobody else's business really.

Sosandar (LON:SOS)

Share price: 16.5p (up 7.5% today, at 08:35)
No. shares: 106.8m
Market cap: £17.6m

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

Trading update

Sosandar is an online women's fashion brand - targeted at the under-served 35-55 year old demographic, who still want fashionable clothing. It's an early stage (hence loss-making)  company, having only started…

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Sosandar PLC, formerly Orogen PLC, is a United Kingdom-based company that operates an online women’s wear platform. The Company’s clothing categories include dresses, jackets and coats, knitwear, shirts and blouses, tops, skirts, trousers, jeans, leggings, footwear, leather and suede, occasion wear, work wear, autumn trends, velvet and holiday shop. Its footwear products include Pewter Metallic Chelsea Boot, Red Leather Ankle Boot, Velvet Cylinder Heel Ankle Boot, Black Leather Stud Detail Ankle Boot, Black Suede Closed Toe Mule, Grey Velvet Court Shoe With Jeweled Brooch, Black Suede And Pewter Metallic Court Shoe, Black Leather Front Zip Ankle Boot, Leopard Print Leather Chelsea Boot, Steel Blue Leather Snake Print Ankle Boot And Black Suede Knee Boot. It also offers latest edit of day-to-night dresses, on-trend separates, luxe leather and outfit-topping shoes through its platform. more »

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Best of the Best Plc runs car competitions. The Company displays luxury cars as competition prizes in rented retail space within airport terminals, at shopping centers and online. The Company is engaged in selling tickets to passing airport passengers, as well as from online customers through its Website. The Company operates from approximately eight United Kingdom and over two international airport sites, as well as approximately from three shopping centers. The Company operates from various airport sites located at Gatwick North, Gatwick South, Birmingham, Manchester Terminal 1, Edinburgh, Dublin's Terminal 2 and Westfield shopping center located in London's Shepherds Bush. The Company's Indian franchise trades under the BOTB brand from Hyderabad airport. The Company carries out its principal operations in the United Kingdom. The Company's subsidiary is Best of the Best ApS. more »

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LoopUp Group plc, formerly LoopUp Group Limited, is a software-as-a-service provider of remote meetings. The Company's product, LoopUp, is designed to eliminate frustrations associated with conference calls and deliver a remote meeting experience for mainstream business users. For hosts, the LoopUp meeting includes ability to create a meeting invite directly from Microsoft Outlook in over two clicks; a call start alert to their desktop and mobile/tablet devices as soon as their first invited guest joins the meeting; ability to identify who has the distracting background noise and mute their line, and ability to allow other guests to share their screen at the host's discretion. For guests, the LoopUp meeting includes clicking-to-join the meeting from a link in the invite, entering their name and phone number and LoopUp calls out to them. LoopUp plans include outlook integration, and one-click screen-sharing. Its data centers are located in London, Chicago, Hong Kong and Sydney. more »

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

76 Comments on this Article show/hide all

Friday31 16th May '18 57 of 76

Hi Paul

I agree with Lgarvey , however after the initial email with the report I check during the day to see if the report is complete, would it be possible for a second email to be sent when the report is actually complete for the day ?

Thanks for all your efforts , I also understand the time constraints.


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Graham Ford 16th May '18 58 of 76

I’m a little bit bemused by some of the comments about Sosandar (LON:SOS) , so I’m just going to play devil’s advocate a bit here.

The founders have a long history in fashion. True, but the vast majority on the publishing side. It’s a big step to think that because someone is good at writing/publishing/commentating/editing etc. about fashion that they have the right skills to create, design, source materials, manage inventory etc. E.g I wouldn’t expect a theatre critic to be able to write a good play necessarily.

The website says they do have some experience on the creative side. “During her tenure at Look, Alison designed successful clothing ranges for several of the UK's top retailers”. And for Julie “She diversified into producing successful Look branded clothing ranges with leading UK fashion retailers”. Has it been revealed just how extensive and successful these part time activities were? If this was so successful why weren’t these ‘top retailers’ etc. willing to pay the big bucks to secure Julie’s services in the longer term? Perhaps they were but she wanted to be her own boss. However, the credentials as fashion creators rather than critics may not be quite as good as some are saying. Going from critic and dabbling in the creative side to being full on creative day in day out may be much harder than many realise.

The claims about addressing an underserved niche are also interesting. Is there really an underserved niche here?

And there’s many more articles in a similar vein. The fashion conscious 30+ woman is being served to some extent quite well already. And if it turns out that Sosandar start to gain some traction will these incumbents not copy and retaliate? Or, will the other online only retailers not also enter this space if Sosandar starts to show significant, good margin sales?

Will other fashion journalists be jealous of their success, if they start to be successful, and write critical reviews? The industry has a reputation as being somewhat catty.

They have some exposure as some of the Loose Women have worn their designs on TV. But what happens when the Loose Women move on to the next fashion shop de jour?

Execution risk is high. Are they able to handle all the teething problems with managing returns and credit?

Being good at design is insufficient on its own to grow big in such a competitive market place.

Everyone is hoping that this is the next Boohoo or ASOS, and it may be. If it is, then there will still be good money to be had once they have established a track record, no need to leap into the unknown immediately, there’s time to wait for some more results. If they are not another Boohoo, taking a stake at this time could be an expensive mistake.

I wish everyone well who is taking a leap of faith on this one and hold already or are just about to be holders. I may be joining you later on! It’s going to be interesting to see how it plays out.

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cholertonandrew 16th May '18 59 of 76

In reply to post #364484

Hope it fitted! Andrew

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herbie47 16th May '18 60 of 76

In reply to post #364609

"Targetting such a narrow age group as 16-24 means that Boohoo.Com (LON:BOO) will in theory lose 9% of their customers each year."

Not really as they will be replaced by new 16 year olds each year. 

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Howard Marx 16th May '18 61 of 76

In reply to post #364644

Great sanity-check thread, Graham

All too easy to identify the Next Big Thing. Much harder to translate this into sustainable, defensible, fast growing profits.

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Howard Marx 16th May '18 62 of 76

In reply to post #364669

Who by defintion will not be established customers of Boohoo.Com (LON:BOO) !

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IGotPoesJacket 16th May '18 63 of 76

I too am very grateful for the reports whenever they appear, especially the ones that help me to learn what’s going on with a balance sheet and the “gotchas” to watch out for, like checking out liquidity. Paul’s analysis has helped me learn to be more suspicious - I saw a company called Mortice (LON:MORT) recently, before reading these regularly I would’ve piled in thinking I was clever at getting something so cheap, but I’ve learned to not be afraid go through the balance sheet, and there they were, lots of unexplained related party transactions, instant red flag for me.
Additionally when I find something I’m interested in, look at the StockReport then “Discuss” to see if there any SCVRs, even old ones, as they often give good hints at what to look for that’s good bad that are still relevant years later.
Thanks both for giving up your time to help idiots like me learn and grow into better investors

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john652 16th May '18 64 of 76

I love the report, whatever time of day, just please don't confuse me with the other guy! 85 red thumbs and counting.

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seadoc 16th May '18 65 of 76

In reply to post #364644


I would totally agree with you about Sosandar (LON:SOS) ... until I met Julie and Ali at UKIS. And the youthful FD clearly also knows where he is going but in conversations at the (large) stand about direction of business etc he might pass as their grandchild! I bought in on the results today. And we had a long chat over supper about the junior ISA, funded from grandparents on both sides and about to become Seadoc juniors for ever in a few weeks. We are going for thirds each in Sosandar (LON:SOS) OptiBiotix Health (LON:OPTI) and Falanx (LON:FLX) We agrees one of them may (will?) go bust, one will double in the next year and one will 10 bag in 5 but neither he nor I have any idea which is which. In many ways it is easier if you are investing for the next 50yrs!



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JohnEustace 16th May '18 66 of 76

In reply to post #364679

Boohoo.Com (LON:BOO) don't ban customers when they hit 25! Being canny operators I expect they will want to retain their customers. NastyGal is aimed at 16-30 year olds and that brand could be used in the UK, or the designs could be used under another brand name better suited to the UK. Boohoo man targets 13-30 year olds.

I do wonder if Sosandar (LON:SOS) might be better run as a brand under an ASOS or BooHoo umbrella so the founders can concentrate on the designs.

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herbie47 16th May '18 67 of 76

In reply to post #364679

Boohoo.Com (LON:BOO). Yes but the 17-23 year olds will be more established, so I don't see any difference.

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DaviStoVest 16th May '18 68 of 76

In reply to post #364484

Hi Paul,

But did you buy? And when does it get its first airing in public? ;-)

Regards, David.

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fwyburd 17th May '18 69 of 76

In reply to post #364724

Who said it was for him? Paul might have bought the dress for a friend...



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fwyburd 17th May '18 70 of 76

In reply to post #364484


Was this the dress?

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Graham Ford 17th May '18 71 of 76

In reply to post #364694

Shiver me timbers Seadoc! Good to hear from you again.

I missed UKIS this year. I saw OptiBiotix Health (LON:OPTI) three years ago and found what they had to say interesting, though perhaps my interest was somewhat slanted towards knowing what they might have for gut health (IBD etc). At that time I was uncertain whether they would be successful or not. From the recent numbers it looks like sales are still to take off. But I’m keeping an eye on it.

Falanx (LON:FLX) are new to me. The cyber security space is an interesting one. I hold BAE Systems (LON:BA.) , partly as the sole surviving stock from a previous escapade with a Dividend Dogs of the FTSE strategy that went nowhere but more now because of their activities in cyber security. Not sure that this is optimal as sentiment is probably more influenced by government arms contracts but their cyber arm could one day dominate or be spun off to release value.

Good luck with your three shares!

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Bouvier 17th May '18 72 of 76

Took a quick look at the Sosandar (LON:SOS) website.
Standout feature for me was that there is free delivery AND free returns on orders over £75. Not surprising that the average order value is £94 and return rate is 44%. Shoppers are not stupid.

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seadoc 17th May '18 73 of 76

In reply to post #364794


And greetings to you my hearty! I have today spent Seadoc junior's inheritance and I join you in wishing him fair winds and a prosperous investing journey.


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Fangorn 20th May '18 74 of 76

"Imagine if a Corbyn Government had to defend against a collapse in sterling, by hiking base rates to say 5%, or more? The impact on the housing market would be devastating, as mortgages became unaffordable."

I hope things are not THAT bad as I recall interest rates of 10%,12% and 15% - and mortgages,whilst costly, were not unaffordable..Eye wateringly high , yes.
If they're unaffordable at 5% then we really are in trouble
If we had a Corbyn govt Venezuela-esque oblivion would ensue so interest rates would be irrelevant - I;d be more concerned about getting basic utilities such as water,sewerage and, of course, also food.

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timarr 21st May '18 75 of 76

In reply to post #365689

I hope things are not THAT bad as I recall interest rates of 10%,12% and 15% - and mortgages,whilst costly, were not unaffordable..Eye wateringly high , yes

If you borrow at 10% interest rates then affordability is based on your mortgage payments at that rate and a bit above.  If rates doubled, as they did at the end of the 80's, you got a house price crash, lots of repossession and a recession. I went through it, it was very, very painful.

Now you're borrowing at 3 or 4%, so 8% mortgage rates (roughly 5% base rates) would be very difficult for most people.

The rise in UK house prices over the last 20 years almost exactly mirrors the fall in base rates so if that reverses it would be reasonable to expect house prices to fall.  Generally people won't sell for less than they could previously have got, so they simply don't move unless they're unable to make repayments and get repossessed. 

Of course, if you're 30 or under and can't afford to buy a house then a house price crash is exactly what you want. If this sterling collapse scenario starts being seriously promoted as plausible it's yet another reason for a generation already weighed down by student loans to vote Labour. 


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Fangorn 21st May '18 76 of 76

In reply to post #365869

Hi Timarr,

"House price crash, lots of repossession and a recession. I went through it, it was very, very painful"

As did I. Remember it well - especially the day Interest rates went from 10% to 12%,to 15% back to 12% in one day as we crashed out of the ERM!

Plenty of tightening of belts.

"Now you're borrowing at 3 or 4%, so 8% mortgage rates (roughly 5% base rates) would be very difficult for most people"

They shouldn't be though in big scheme of things UNLESS people have over leveraged.Which they clearly have due to eyewateringly high property prices.

Th rise in House prices mirrors the surge in demand as a result of Population growth as well - UK population risen 5 million odd since 2005!

Quite extraordinary.

"Generally people won't sell for less than they could previously have got, so they simply don't move unless they're unable to make repayments and get repossessed. "

Agreed. I fear there is another property crash coming. Too much leverage.
Bond markets over leveraged. Car leasing bubble, and National Debt is at the point of no return I fear.

"Of course, if you're 30 or under and can't afford to buy a house then a house price crash is exactly what you want"

Wouldn;t know. Mid 40's now ;)

"If this sterling collapse scenario starts being seriously promoted as plausible it's yet another reason for a generation already weighed down by student loans to vote Labour"

Suspect it will be a debt crisis myself...too much leverage across the board,both private and government.

if they vote for Corbyn,Abbott, and Co then they invite their own destruction.

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 Are LON:SOS'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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