Small Cap Value Report (Wed 18 Apr 2018) - IGR, VNET, ANCR, SYS1, KOOV

Wednesday, Apr 18 2018 by

Good morning, it's Paul here!

I have limited time available today, due to preparing for the UK Investor Show this coming Saturday. 

I'll be on the main stage for half an hour, from 10:26 to 10:56, chairing a discussion on small caps with Nigel Wray, and Paul Jourdan of Amati (whose main fund has been a stellar performer).

Shortly after that, at 11:05 our own Ed Croft is doing a 35 minute session called "Data mining for stock market profits". I know Ed always puts in a great deal of preparation for his sessions, which are always lively & fascinating. So I'm looking forward to this.

Then from 12:00 to 12:40, it's my time to be interviewed, for a live "bearcast", with Tom Winnifrith. I'm not quite sure why I agreed to do this, and could well end up regretting it! Tom is under strict instructions not to be too obnoxious! Also, it would be nice if he actually lets me answer the questions this year, instead of using it as a platform to harangue me with his own views.

After that ordeal, I will probably be holding court in the Westminster Arms!

I'm looking forward to catching up with SCVR readers on the day - old friends, and hopefully some new ones too.

Then of course, next week, we have the long-awaited return of Mello Derby. The 2014 event was fantastic. This is a slightly smaller, and more exclusive investment show, run by serious investors, for investors, led by renowned small/micro cap investor, David Stredder.

I befriended David at an AGM in 2000, and have since watched him go from success to success, consistently making high portfolio returns. Like a lot of successful investors, he deserves to do well because he just works so hard at it - constantly researching companies, meeting management, etc. 

The community aspect of Mello is outstanding too - you couldn't meet a more friendly & supportive bunch of people. Many of us already know each other from online forums such as this, and Twitter of course. However, newcomers are also welcomed with open arms. So do come along if you can, and say hello to me & Graham.

IG Design (LON:IGR)

Share price: 417p (down 3.3% today, at 11:23)
No. shares: 63.88m
Market cap: £266.4m

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IG Design Group plc, formerly International Greetings plc, is engaged in the design, manufacture and distribution of gift packaging and greetings; stationery and creative play products, and design-led giftware. The Company's geographic segments include UK and Asia; Europe; USA, and Australia. The Company sells its products in over 150,000 stores across approximately 80 countries. It also offers a portfolio of licensed and customer bespoke products suitable for sale through multi channel distribution. The Company's products include crackers, pens and pencils, stickers, single cards and gift wrap. The Company offers its products under the brands A Star, B Stationery, Papercraft and Pepperpot. Its subsidiaries include Artwrap Pty Ltd, International Greetings UK Ltd, International Greetings USA, Inc, International Greetings Asia Ltd, The Huizhou Gift International Greetings Company Limited, Hoomark BV, Anchor International BV and Hoomark S.p.z.o.o. more »

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Vianet Group plc is a provider of real time monitoring systems, data management services, and actionable insights for the leisure and vending sectors. The Company's segments include Leisure Services, which includes design, product development, sale and rental of fluid monitoring equipment, data management and related services; Vending, which includes design product development, sale and rental of machine monitoring equipment, data management and related services; Technology, which includes the provision of data management and technology related services, and Fuel Solutions, which includes wet stock analysis and related services. Its Leisure division consists of the core beer monitoring business (including the United States), and gaming machine monitoring. Its subsidiaries include Brulines Trustee Company Limited, Vianet Americas Inc and Vianet Limited. more »

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Animalcare Group plc is a United Kingdom-based sales, marketing and product development company. The Company is principally engaged in the development, sale and distribution of licensed veterinary pharmaceuticals and identification products and services to companion animal veterinary markets. The Company develops and sells goods and services to veterinary professionals principally for use in companion animals, operating through the United Kingdom wholesalers and distribution and development partners in markets in Western Europe. The Company's product portfolio is divided into three product groups: pharmaceuticals (Licensed Veterinary Medicines); pet microchips (Companion Animal Identification), and consumable items (Animal Welfare Products). Animalcare Ltd is the Company's subsidiary. It has operations in the United Kingdom, Europe and Rest of World. more »

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

27 Comments on this Article show/hide all

ppdrs 18th Apr '18 8 of 27

IG Design (LON:IGR) trading update today looks extremely positive, albeit ‘meeting expectations’. This company continues to go from strength to strength, despite the rather mundane product! Any thoughts Paul or others have would be welcome!

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Gromley 18th Apr '18 9 of 27

In reply to post #354468

Vianet (LON:VNET)

I would agree trading "largely as anticipated" and profits "broadly in line" is indicative of a small miss vs expectations. A 6% fall though seems a little harsh, but perhaps the woolly words sew doubt.

"Profit" will be ahead of last years £3.32m, but as we're not told how much ahead that is not very useful, although later on profit growth is described as "good"

Incidentally I had to look up what that "profit" figure was - "Operating profit pre-amortisation of intangibles, share options and exceptional costs"  that doesn't seem an unreasonable metric to use and there is no indication given of any significant changes to the excluded items.

One thing I find puzzling is that they refer to "progress on increasing the proportion of recurring revenue as a percentage of new sales"  - last year they told us that recurring revenues were at 85% so a further increase to that should give pretty good earnings visibility.

But they also say :  "Smart Machines revenue stream transition from capital sales to recurring annuity suppresses short term financial performance" - which suggests to me that they may be reducing installation charges and recovering more over the lifetime of the contracts. Probably good for generating growth, so long as the customers prove to be sticky.

They caution as ever on "challenges faced in its [the Smart Zones division] customers' core market of UK pub retailing"

Overall then I would say there's not too much to get excited about from this announcement, in either direction.

There remains an element of "jam tomorrow", with the comments on medium to long term prospects being "exciting".

I retain a small holding her, but given that short term prospects are evidently not "exciting" I am in two minds whether to continue to hold.

BTW - I don't know where you get a PE Ratio of 33 from?  It is actually about 18x (possibly a little higher dependent on the size of the 'miss'). Dividend yield is a reasonable 4% - but bear in mind that the dividend has been held at 5.7p for the last 6 years.

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SundayTrader 18th Apr '18 10 of 27

In reply to post #354548

Vote for Vianet (LON:VNET) here too please. There are some signs of green shoots here, though the book value looks too high.

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Julianh 18th Apr '18 11 of 27

Two requests:
1. IG Design (LON:IGR) Two directors presented at the PI World Investor presentations yesterday. There is a link to the PI World video in post 3 above. Both were very impressive. They really seem to know what they are doing. And the business seems to go from strength to strength. It’s only an inline update for 2018 but my guess, based on their confidence, is that forecasts for 2019 will start to edge upwards.
2. GB (LON:GBG) pre-close trading update looks very impressive. If I read it right, cash balances have increased significantly even after acquisition payments. Your help in picking through the acquisitions and adjustments to get to some real performance measures would be appreciated.
Disclosure - I am long IG Design (LON:IGR)

Looking forward to reading whatever you find interesting!

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Paul Scott 18th Apr '18 12 of 27

Good morning!

Thanks for the comments. I very much like it when members post a summary of the key points from company results here in the comments section.

This is my list of things to report on today;

IG Design (LON:IGR) - trading update

Vianet (LON:VNET) - trading update

Animalcare (LON:ANCR) - looks like a profit warning

SysGroup (LON:SYS)1 - trading update.

Then I have to do more work this afternoon preparing for Saturday's investor show, so limited time available again today, I'm afraid.

Best wishes, Paul.

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rivaldo 18th Apr '18 13 of 27

For those who like highly profitable microcaps, there's 3 good news stories today.

(1) Petards (LON:PEG) issued a very confident AGM statement. Revenues are slightly ahead of expectations. Order books are high, and good visibility of revenues plus potential "major new projects" provide confidence going forward. Before today it was forecast to make 2p EPS this year, against a 26.75p share price. It also has £2m net cash against its £14.9m m/cap.

(2) Enteq (LON:NTQ) issued a year end trading update "significantly ahead of its expectations". Importantly, it has $15.5m net cash against an £18.2m m/cap. It's an oilfield services supplier, and is particularly benefiting from the shale oil rebound in the USA, but is expanding globally, is run extremely prudently and "is well positioned to take advantage of potential opportunities".

(3) RTC (LON:RTC) (£5m m/cap) issued a positive AGM update. It's trading well, is experiencing "strong demand" and "is confident of the trading prospects of the Company in the current financial year". It's currently forecast to make 10p EPS this year, rising to 11.7p EPS next year - with 3.85p and 4.24p dividends respectively - against a 56p share price.

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james parratt 18th Apr '18 14 of 27

In reply to post #354528

Thanks for looking into this FREng. I haven't contacted the Chairman yet but he was next on my list having not received anything back from the COO who definitely speaks english. Its worth a go!

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sharw 18th Apr '18 15 of 27

In reply to post #354528

One of the good features of is that they do not wipe everything when a company is delisted so I have just looked at GLS there. It appears to be a Jersey registered company so not with Companies House. I have sympathy with James in that it was delisted from suspension (due to nomad resignation) so no chance to get out.

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Chrisfarrell21 18th Apr '18 16 of 27

Could I just point out (aside from all the brilliant Stockopedia data etc.) how excellent the Stockopedia community is. I was an Animalcare (LON:ANCR) holder prior to the reverse takeover. But following the announcement of the terms of the deal, among other comments on it was this thread ( which produced some excellent comments in a short space of time, dissecting the essential effects of the deal, the essential elements being all bad.

And the Stocko community seems to have been proven largely correct so far. Following my own review, and from reading all the other comments, I sold a long time ago, missing out (!) on a 47% decline in the share price (from announcement of the deal, to today).

You guys are great.


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hayashi22 18th Apr '18 17 of 27

RTC looks attractive but looks to be too small for most funds. Getting a large position must be hard and selling stock in quantity must be tricky and no doubt with a big spread.

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MrContrarian 18th Apr '18 18 of 27

I'll be attending the UK Investment Show. There will be good speakers but the average company exhibiting is uninvestable for me. I have a look at their Stock Ranks and also last year's lot + one year performance in this article:

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rivaldo 18th Apr '18 19 of 27

In reply to post #354658

That applies to all micro-caps. No-one would necessarily recommend taking a "large" position in these types of companies, but spreading one's risk with a number of positions in such companies has usually been a highly profitable methodology for me for many years.

As it happens, Chelverton Asset Management do own 6.8% of RTC. David Stredder (davidosh/Carmensfella) also owns 740,000 RTC shares.

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andrea34l 18th Apr '18 20 of 27

In reply to post #354593

I thought the last results from RTC (LON:RTC) looked pretty disappointing - gross profit in both ATA and, particularly, Ganymede divisions were down and in GSS was up only about 5%; so improvements seem to be solely down to lower admin expenses, with margins looking pretty soft overall.

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bobo 18th Apr '18 21 of 27

ANCR before the reverse takeover, had an excellent chairman who did what he said he would do. The new guys have no experience of buying or integration of businesses, hence a lot of shareholder value just got destroyed. The basic business model is good, so I'll let it keep falling until the time is ripe

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JohnEustace 18th Apr '18 22 of 27

In reply to post #354733

The Animalcare (LON:ANCR) takeover won the Transaction of the Year award at the 2017 AIM awards.

(I also see the award for Best Use Of AIM in 2016 went to Conviviality.)

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Cisk 18th Apr '18 23 of 27

In reply to post #354793

John, looking back over AIM awardees they are a bit marmite - some have done exceptionally well and others have been complete dogs:

I remember attending one investor event at the Chesterfield hotel in Mayfair (in the days of the mining / oil stock boom), taking a pee next to the ceo of Providence Resources (LON:PVR) and his broker, both crowing about receiving an award if I remember correctly. That stock was a complete dog and reminded me not to invest in companies with flamboyant CEOs, Tony O’Reilly I think his name was.

Anyway, Animalcare (LON:ANCR), what an example of taking a wrecking ball to a great little company. They had a nice little niche doing pet drugs and messed it all up. I remember feeling annoyed at the time as I so wanted to keep the stock but just felt shafted by the management in them agreeing to the reverse takeover. It just seemed the company was being stolen in the cheap by the two incoming CEOs of Ecuphar.

At the time, Ramridge did an excellent analysis on the Animalcare (LON:ANCR) post. It just showed how bad the deal looked to be. And it came true!

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rickbav 18th Apr '18 24 of 27

Think you mean System1 (SYS1) rather than SysGroup (SYS) :)

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sharw 18th Apr '18 25 of 27

In reply to post #354818

rickbav - as this is your first post I think you should know that the standard £ followed by the epic code throws a wobbly if there is a numeric involved. Hence £ followed by sys1 has consistently diverted us to SysGroup (LON:SYS) today and £d4t4 doesn't work at all.

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Julianh 19th Apr '18 26 of 27

In reply to post #354643

You are spot on Chris
I did exactly the same. The various comments on Animalcare (LON:ANCR) prompted me to review and then sell a short time after the reverse takeover and thus saved me from a substantial loss. I add my thanks for this to Paul, Graham (whose write ups were material in my decision) and all in the Stocko community

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wildshot 19th Apr '18 27 of 27

In reply to post #354548

Hi Gromley, thanks for some great analysis of £:VNET (also thanks to Paul too).

I was in a rush yesterday morning (before catching a couple of trains) so took the P/E figure straight from ADVFN. Admittedly I didn't take the time to manually work out the accuracy of that number.

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 Are LON:IGR'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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