Small Cap Value Report (Wed 19 Sep 2018) - SOS, SIS, IDP, KETL, UCG, SEE

19th Sep '18 by Graham Neary

60 comments 13925 reads

Good morning!

Plenty to digest today.

Final list:

Sosandar (LON:SOS)
Science in Sport (LON:SIS)
Innovaderma (LON:IDP)
Strix (LON:KETL)
United Carpets (LON:UCG)
Seeing Machines (LON:SEE)

Sosandar (LON:SOS)

Share price: 42p (+5%)
No. of shares: 107 million
Market cap: £45 million

AGM Statement

This popular share is being watched and commented upon by plenty of analysts and investors. Today's statement is worth recording for the archives:

I am pleased to confirm that the momentum outlined in our Final Results Statement in July continued through the summer months, with significant progress across KPIs and without the need for extended discounted promotional activity. Autumn has begun well with further expansion of the product range and strong trading across all product categories.

Trading is in line with expectations. The company is happy with the PR impact it's making from celebrity promotions and is now getting a 7-day service from its partner Clipper Logistics (LON:CLG).

My view: there are no numbers given so nothing concrete to analyse. We just have the reassurance that KPIs (conversion rate, number of orders, etc.) are making "significant progress".

Sales are forecast this year (ending March 2019) at £3.9 million. In July, Paul suggested a range of £4 million - £5 million was realistic.

It's too early-stage for me, but I wish it well.

Science in Sport (LON:SIS)

Share price: 70p (+0.4%)
No. of shares: 68 million
Market cap: £47 million

Half-year Report

I've collected more than my fair share of useless knowledge about this sports nutrition business over the years.

The idea is that the company would turn profitable or at least breakeven at some point, and I would be able to nip in and buy the shares when they finally offered a lower-risk investment opportunity.

Today's H1 report wants to be that breakthrough point, but I don't know if I'm convinced.

H1 highlights (and lowlights):

revenues +20% to £10 million.
operating loss increases to £1.6 million (adjusted EBITDA).
excluding USA/Italy/Australia, instead focusing on what SIS calls its "core business", EBITDA…

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daveinthelakes

19th Sep '18

Re Strix (LON:KETL)

I appreciate they upgrade their IP but does anyone know when their basic patents expire as presumably this may open the floodgates?

phoenixnight

Hi

I attended the Sosandar (LON:SOS) AGM in Wilmslow today. This is only the second AGM I have attended, so please don't expect any great insight.

There were maybe 20 people in attendance, which I think is more than they were expecting. A handful of them had been invested from the start and were clearly very positive about the company, the clothes and (very importantly) the qualities of Ali & Julie.

They are trying to build a strong lifestyle brand, aimed predominantly at the 35+ female. This isn't the fast fashion of wear-it-once-and-throw-it-away; the clothes have a real premium feel to them (similar to Boden I would say). Whereas a consumer might brow out of the Boohoo (LON:BOO) brand once they hit a certain age, the lifetime value of a Sosandar (LON:SOS) is much greater. They want to retain and keep them coming back for years to come by providing fashionable designs and value for money. Based on the evidence of the clothes in the office today they seem to be achieving this. Their range has increased from 74 lines at launch to 489 lines now. Shoes comprise 6% of sales. As the order quantities placed to suppliers have increased, so the margin should improve. They quoted lots of numbers about improvement in metrics on social media, web hits etc. You'd expect this from an early stage e-commerce business starting from a low base, so one has to bear that in mind, but still the growth percentages sounded very encouraging. They also said that there direct mail campaigns had been very successful at both generating brand awareness and garnering orders.

There is a lot more I could write but I don't want to bore you, plus Paul Scott has already written extensively and in far more eloquent terms than I about Sosandar (LON:SOS). On the subject of Paul I was asked a couple of times by management about how I came to be invested. "Have you heard of Paul Scott?" was my reply. On each occasion a broad smile spread across their face at the mention of his name. Without wishing to embarass you, you are clearly highly respected and loved Mr S not just by members of the Stockopedia community but also by those in the outside world, so a personal thanks for highlighting this company. I came away feeling extremely positive, and will now tuck my shareholding into my online bottom drawer.

One final thing if you're interested. Sosandar (LON:SOS) use the services of Clipper Logistics (LON:CLG) for distribution, and were full of praise for the service they provide. Sosandar (LON:SOS) also use the common Magenta platform for retail, and are thus confident that it will be more than capable of absorbing the prdicted high growth.

Regards

Paul

herbie47

Games Workshop (LON:GAW) To be fair that was an AGM statement.

mrosbiston

Sosandar (LON:SOS)
thanks for the report - good stuff.

On the Key Metrics - one thing they look at is social media followings.

FB - 37k (31 Mar'18) to 54K (as of today)
Instagram - 8.7K (31-Mar'18) to 16K (as of today)

I like how the influencers, celebs etc are all pretty much in the target market. It would be good if they could improve their trust pilot rating - but i imagine most users are more engaged on social media than through trust pilot - so perhaps its immaterial.

Edward John Canham

Graham

" experience is what you get when you don't get what you want." - hadn't heard this before, but so true, so true...........

Phil

cholertonandrew

Re Sosandar, thanks that’s a really helpful write-up. Did they say anything about to what extent Clipper can absorb further Sosandar growth or at what point Sosandar might start thinking about building their own logistics infrastructure?

Thanks
Andrew

langley59

Just tried to buy Sosandar (LON:SOS) on IG Index, only orders to close existing positions being accepted. I presume this signifies no liquidity in the name?

Re Sosandar, I think the spread betting firms (certainly Spreadex) have limits to what percentage of a stock they will hold so IG may have reached that threshold. I know Spreadex are maxed out on it.

Regards
Andrew

I guess Paul has bought them all!

I got the impression that Clipper Logistics (LON:CLG) were more than capable of absorbing further growth. There is now a dedicated team at Clipper Logistics (LON:CLG) dealing with their account - it was just one person part-time when they started. Although Sosandar (LON:SOS) is currently UK focused with a large enough demographic to mine, they do ship internationally. At some point further down the line this will be a market they will target, and I guess they will put a lot of thought into which international area they expand into first. Clipper Logistics (LON:CLG) is capable of handling the whole logistics supply chain, both domestically and internationally, and the KFC debacle earlier this year (when they changed their logistics company & ran out of chicken) highlights the importance of this. I got the impression that Clipper Logistics (LON:CLG) weren't the cheapest on the market but that they set a very high standard, and it's one less thing to worry about going wrong - so no plans to bring logistics in-house.

Cheers

Paul

Hi mrosbiton

You're spot on with your analysis of the importance of social media. They gave examples of some celebrities being spotted in their clothes, or posting online via Instagram, and the clothes selling out within an hour, with customers then joining a waiting list until they came back in stock.

The world has moved on, and I'm not sure I fully understand it anymore. Aren't policemen looking younger too?

Thanks, that’s really helpful, appreciate it.

Regards
Andrew

DaviStoVest

I noticed that this post on Beeks Financial Cloud (LON:BKS) seems to be getting heavily voted down. I'd really appreciate an explanation of what horrendous breach of Stocko etiquette it is that barnetpeter has somehow perpetrated to earn all these thumbs down.

From my own point of view, as a (small but happy) holder of Beeks Financial Cloud (LON:BKS), it's a stock well worthy of discussion. I'm very keen to think and talk about whether I should just continue to passively hold or if I should be (at the very least) taking profit on this dramatic rise.

What, exactly, did barnetpeter get so stupendously wrong???

INVESTOR53

I imagine it's because barnetpeter referred to the stock being 'tipped' here. Stockopedia is emphatically not a share-tipping site. Writers like Graham & Paul analyse company reports in depth and share their considerable experience with us, but the responsibility for making a judgement on whether or not to buy/sell is entirely that of the reader.

Fair enough. I guess, from the PI point of view, there's a somewhat fine line between 'tipping' a share and posting a positive assessment based on expert analysis.

But that positive expert assessment helped me decide to buy into Beeks Financial Cloud (LON:BKS) ... and it's risen 70% in the three weeks since I bought my holding and still seems to have strong momentum.

I do get the point that Graham and Paul are certainly not 'tipsters'.

DJCP

@phoenixnight #50 re Sosandar (LON:SOS)
"I got the impression that Clipper Logistics (LON:CLG) weren't the cheapest on the market but that they set a very high standard, and it's one less thing to worry about going wrong - so no plans to bring logistics in-house."

Definitely the best idea unless you're a massive company. Even Amazon still use external delivery companies for most of their items. As Sosandar (LON:SOS) grow they can get better terms/discounts at each annual(?) contract renewal.

As an example, a year or so ago, it was cheaper to send a box of items to Amazon's warehouse (via UPS through Amazon at £4.60/15KG box - try getting that rate ! ), pay Amazon monthly storage, pay Amazon to pick, package and post the item (and provide after sales support - although the quality is debatable ! lol), than it was to for me to post the item !

On the subject of clothing retailers, one bug-bear I have is with their names.
Sosandar - Not informative
Boohoo - Upset child ?
Nasty Gal - 'Nasty' ? ... Why not call it Sick Gear ? (please no !)
ASOS (As Seen On Screen) - Makes sense a bit, and not limited to clothing.
Pretty Little Thing - This one seems positive, but most probably not to those buying/wearing (just their parents! lol)
I suppose it's always been like that (Burtons etc.), just that I'm older and grumpier now :o)

dahokolomoki

Cambridge Cognition Holdings (LON:COG) is an enigma to me. I understand that they are doing cutting edge technology, in a niche area. They have good regular newsflow of new contracts, but very vague on the numbers. When they do publish numbers so far, it has been lacklustre to say the least.

It has all the warning signs of a blue sky share that doesn't really have a future, yet it has enough traction with the industry it is targeting, by the breadth of sales it has done so far.

Any thoughts from anyone on the commercial model, of £COG?

timarr

20th Sep '18

An interesting and probably unique (on the LSE) company which I seem to have held forever.

RE: Randall & Quilter Investment Holdings (LON:RQIH)

Ditto. I don't hold much, because I've always struggled to understand the business, but it's been a cash cow, has generated a decent capital return and seems to be fairly uncorrelated with the broader economy. I also like the commentary describing Brexit as an opportunity rather than a problem, and showing how they're preparing.

As for Turnarounds, from Stocko:

In the Stockopedia taxonomy of stock market winners, Turnarounds are the stocks that are both attractively valued and have strengthening price and earnings momentum.

gsbmba99

Cambridge Cognition Holdings (LON:COG) seems like an interesting company with interesting technology. The science in this area seems to be developing rapidly. There are a number of companies that offer testing for neurological biomarkers (beta amyloid, tau etc.) in cerebro spinal fluid and there are a number that are seeking to develop similar testing for blood. Theoretically, a minimally invasive, relatively inexpensive, blood test might offer increased competition.

I know COG say that their tablet tests, for instance, can identify Alzheimer's patients years in advance because the finger movements give it away. I guess the question is will it be relevant if a blood test can measure the underlying neurlogical biomarkers 10-20 years in advance being able to identify the outward signs of a neurlogical disorder. If you want to learn more, you can listen to a quarterly conference call or watch an investor presentation for Quanterix who offer neurological biomarker testing on a research only basis (at the moment).

In response to my own post from yesterday I just spoke to IG Index about Sosandar (LON:SOS) and they told me that the share is not liquid enough to offer for leveraged trading.

Small Cap Value Report (Wed 19 Sep 2018) - SOS, SIS, IDP, KETL, UCG, SEE

Sosandar (LON:SOS)

Science in Sport (LON:SIS)

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Graham Neary

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