Small Cap Value Report (Wed 20 June 2018) - BOTB, HSS, FOOT, RDL, SFR, THAL

Wednesday, Jun 20 2018 by
63

Good morning!

Today, we have a couple of very welcome guest comments from Paul.

It looks surprisingly quiet on the RNS front, in relation to stocks in my universe.

Stories on the radar so far include:


Mello meeting: a quick plug for the next Mello meeting in Beckenham. It's on Monday (25th June) and will feature Sosandar (LON:SOS). All you have to pay for is your own drinks and dinner, and e-mail David in advance to say that you're going. Here's the link!




Best Of The Best (LON:BOTB)

  • Share price: 295p (+7%)
  • No. of shares: 10.1 million
  • Market cap: £30 million

Final Results

(This section is written by Paul, who owns shares in BOTB.)

Results look as expected. What's interesting is that the company (which runs a weekly competition to win supercars & other prizes) is to exit all its remaining airport sites, and become an online-only business. I think this might trigger a re-rating of the shares at some point. The decline in the airport locations (which have become too expensive to operate) has masked good online growth. Today it reports 23% underlying online growth, which is now 84% of total revenues, and set to become 100% of revenues when the 3 remaining sites are closed.R

I think the company is gradually learning which marketing expenditure works best, and this comment (below) today gives me hope that growth might accelerate. Given that each additional sale is virtually pure profit, then this process of increased growth from increased marketing could become a virtuous circle. That's what makes the shares so interesting, in my view;

All our online marketing investment is carefully tracked and constantly fine-tuned to ensure we are optimising the returns.  As…

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Disclaimer:  

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

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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 »

LSE Price
223.55p
Change
-6.9%
Mkt Cap (£m)
24.2
P/E (fwd)
n/a
Yield (fwd)
n/a

HSS Hire Group plc provides tool and equipment hire and related services in the United Kingdom and Ireland through a network of over 300 locations across the nation. The Company's business focuses on supplying equipment and services to the fit-out, maintain and operate sectors of the market, with its businesses also supplying construction contractors. Its segments include HSS Core, which is engaged in the provision of tool and equipment hire and related services, and HSS Specialist segment, which is engaged in the provision of generator, climate control, powered access and cleaning hire equipment and the provision of cleaning maintenance services, under specialist brands. Its businesses include HSS hire, HSS One Call, HSS Training, ABird Power Solutions, Apex Power Solutions, Reintec cleaning equipment services and TecServ equipment maintenance. It caters to the customer base ranging from retailers and airports to facilities management companies and infrastructure developers. more »

LSE Price
32.1p
Change
-6.4%
Mkt Cap (£m)
58.4
P/E (fwd)
11.2
Yield (fwd)
n/a

Ranger Direct Lending Fund Plc is a closed-ended investment company. The Company's investment objective is to seek to provide shareholders with an attractive return, principally in the form of quarterly income distributions, by acquiring a portfolio of debt obligations (such as loans, invoice receivables and asset financing arrangements) that have been originated or issued by direct lending platforms. Its portfolio includes various sectors, such as consumer loans, business letter of credit, multi-family real estate loans, single-family real estate loans, platform debt, commercial real estate loans, mixed-use real estate loans, business loans, factoring and equipment loans. The Company's subsidiary is Ranger Direct Lending Fund Trust. Ranger Alternative Management II, LP serves as an investment manager to the Company. more »

LSE Price
774p
Change
-1.3%
Mkt Cap (£m)
126.4
P/E (fwd)
n/a
Yield (fwd)
n/a



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


49 Comments on this Article show/hide all

Howard Adams 20th Jun 30 of 49
1

In reply to post #376694

Hi Graham

I've had a look at Duke Royalty (LON:DUKE) recent presentation. http://www.dukeroyalty.com/~/media/Files/D/Duke/documents/investor-presentation-may-2018.pdf?pdfdata=1

It seems to be interesting. On my initial quite quick look it has some echoes of an early stage of Burford Capital (LON:BUR).

But, I could not quite grasp what their business model offers differently to other sources of business finance. In short, I could not distill from the presentation what their USP is.

If you have a moment, I would interested to hear from you what you are spotting in them that attracts you?

Regards
Howard

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andrewjames 20th Jun 31 of 49

In reply to post #376584

Specifically on Telford Homes (LON:TEF) it may comfort you to learn that when a shareholder at last year’s AGM raised the question of moving to the main market from AIM, qualifying for IGT relief was a key reason given by the company for remaining on AIM. I would espect the others you mention to qualify as well, but I have not specifically checked.

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tomps3 20th Jun 32 of 49

EU Supply (LON:EUSP) just posted the investor presentation given last week by CEO. Quite interesting, I think. Although a real microcap c.£10m MC.

http://www.piworld.co.uk/2018/06/20/eu-supply-eusp-investor-presentation-june-2018/

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Graham N 20th Jun 33 of 49
1

In reply to post #376694

Hi Francis, I do appreciate you flagging up Duke Royalty (LON:DUKE). Unfortunately I haven't got enough hours available to study it today. I'll bear in mind that you've requested it for future reference. Thanks! - G

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Graham N 20th Jun 34 of 49

In reply to post #376619

Hi Dave, I've not studied Inspired Energy before so not sure I have anything sensible to add on that one. Seems like its in a growing space (energy consultancy). Would you be able to summarise the investment thesis at all? I am particularly interested to know if they have a competitive advantage that is sustainable, or is it more that they are riding the wave in energy consulting at the moment?

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Graham N 20th Jun 35 of 49

In reply to post #376524

Hi tony, sorry about that. G

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JohnEustace 20th Jun 36 of 49

In reply to post #376694

Francis,
Thanks for flagging (or flogging) Duke Royalty (LON:DUKE) again. I'm intrigued and I'll open a starter position in it I think.
I assumed from the name that they would be into resources, but in fact that's a sector they avoid entirely.
Bringing a new business model to the UK could well be rewarding. It strikes me as a potential reliable earner that should be less cyclical - a tuck away in the SIPP type of investment.

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daveinthelakes 20th Jun 37 of 49
1

Graham,

I repled to your post 34 and it indicates that there is a reply at the bottom thereof  but it has not appeared here so I reprint below-

Hi Graham,

Well they don't have a monopoly or a moat so I do not see them as a very long term investment over many years. However they have 85% client retention, organic growth via selling additional services to clients and acquire related small companies at prices which tend to be immediately accretive partly from cash flow and share issuance but they have also taken on more debt. Net debt of around £15M does not look unreasonable bearing in mind the rapid growth.

They placed £9M with institutions in 2017 to fund some of the acquisitions and current holders include Miton 15.4%, Living Bridge 11.7%, Cannacord 8.6% and Slater 5.5%.

Not surprisingly with 9 acquisitions since listing on AIM all that goodwill has created a negative NTAV and as mentioned I don't see a long term hold here. The confidence I have for the current year is based on the order book which at £39M is 37% up on 2017. I expect this to be reflected in the profits for H1 and FY18.

I see the share price has moved up 5.4% during the day.

Dave

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Chris123 20th Jun 38 of 49
3

Best Of The Best (LON:BOTB) is a stock I would potentially be interested in, but echoing Paul's point about liquidity I simply couldn't bring myself to buy something with a £30m market cap and 15% free float. And buying back shares apparently!

I think they need to open it up more if they're serious about the listing.

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Graham N 20th Jun 39 of 49
1

Thanks Dave, that is very clear. I have studied Yu (LON:YU.) which is in the same space (it’s a supplier, not an advisor). Might be worth keeping an eye on both of them. Cheers - G

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runthejoules 20th Jun 40 of 49
1

Re Inspired Energy (LON:INSE) I bought it and held for a small profit of about 12% over 3 months while Yu (LON:YU.) doubled. Ballocks to that.

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Paul Scott 20th Jun 41 of 49

In reply to post #376799

Hi Chris,

Best Of The Best (LON:BOTB) is a stock I would potentially be interested in, but echoing Paul's point about liquidity I simply couldn't bring myself to buy something with a £30m market cap and 15% free float. And buying back shares apparently!

I think they need to open it up more if they're serious about the listing.

I love the dividends from BOTB!

Every time I get a massive cash divi, I email Will & thank him for it. Basic good manners :-)

It's just good manners! 

Management do actually appreciate that kind of email.

Cheers, Paul.

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Paul Scott 20th Jun 42 of 49

In reply to post #376799

The special divis on Best Of The Best (LON:BOTB) are fab :-D

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john652 21st Jun 43 of 49

Hi Paul,

Peter G (post 27) makes an interesting point, do you know how Best Of The Best (LON:BOTB) game play algorithms work? On the website you can chose from 180 cars with a weekly winner. if 999 people choose a Ferrari and 1 chooses a Ford Focus and the Focus person wins, do they pocket the difference, and of course vise-versa and therefore potentially take a loss. Do they scale increase the winners based on the number of sales or in this just one winner regardless of ticket sales, hence pure profit after a certain level? thanks John

BOTB website
Entrants can choose from the 180+ cars in the Dream Car competition line-up. At the end of each Dream Car competition, one car is won. This is determined by matching the winning coordinates from the Spot the Ball game (as chosen by our panel of expert judges) to all the entries.

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Paul Scott 21st Jun This post has been moderated
2
Paul Scott 21st Jun This post has been moderated
2
Paul Scott 21st Jun 46 of 49

In reply to post #376899

I have a second hand Mercedes 200 - it's quite nippy actually, 0-60 in 7.5 seconds, maximum speed 145 mph, I got caught by the rozzers unfortunately, doing flat-out, maybe 120+ mph.

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Paul Scott 21st Jun 47 of 49
1

Aston Martin DB7 - I out-ran the rozzers! V12 6 iitre - say no more!

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rambutan2 21st Jun 48 of 49

In reply to post #376889

john652,

Each week there is just one car won, regardless of ticket sales. Some weeks it is a more expensive vehicle, some weeks a hot hatch. Truly random.

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john652 21st Jun 49 of 49
1

Hi peterg,

I agree, BOTB model does not seem very honest if one winner and that’s it. I think I will email them for some ckarity here. I have posted your response below as Stocko seems to be hiding replies and not putting them in the main thread:

Reply to rambutan2:
Fine, but if they want to stay in business they need to be seen to be relating the winnings to the income. If they expand online they can't just keep the payout on the same basis and pocket the difference. They might get away with it for a while, but the market would catch on in the end and they would end up with a reputation of being rip off merchants, or regulated. So if they significantly increase revenue from online punters they have to increase their outgoings too.

Peter

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About Graham N

Graham N

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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