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

20th Jun '18 by Graham Neary

49 comments 13544 reads

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:

Best Of The Best (LON:BOTB) - final results
HSS Hire (LON:HSS) - refinancing
Footasylum (LON:FOOT) - comment on yesterday's dire announcement
Ranger Direct Lending Fund (LON:RDL) - AGM yesterday
Severfield (LON:SFR) - results for FY18.
Thalassa Holdings (LON:THAL) - share buy-backs/earnings preview

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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Trident

20th Jun '18

Possibly an old question, but grateful for any thoughts. Where you invest in dividend reinvestment plan (DRIP) which is not in a tax wrapper, such as an ISA, what is the tax status of the reinvested dividend?

My assumption is that the dividend should be declared for income tax purposes, and that tax will be due notwithstanding that the funds have been reinvested.

Sanjiv Shah

biacs thanks for this summary - will take a look

JohnEustace

That's my understanding, but remember there is still a £2,000 dividend allowance to use up before tax is due.
https://www.gov.uk/tax-on-dividends

daveinthelakes

Graham,

As it is a quiet day perhaps you could look at Inspired Energy (LON:INSE) who issued an in line but very positve TU today in advance of the AGM.

As I have said many times before they are not a Utilitywise but appear to get tarred with the same brush being on a forward pe of 11.4 for the current year despite having excellent CAGR growth rates by most metrics.

They do have a large 5 year LTIP but the shares have all been issued to the EBT and going forward are included in the current share count calculations.

Dave

SundayTrader

Second request on ?AXS, though I am not sure that analysis of the historic accounts helps much. Difficulty I have is figuring out the impact on profit of the current capacity increases. But any company that can sell more than it is making has to be interesting. I hold.

mmarkkj777

Hi Paul,

A good review of the Footasylum (LON:FOOT) situation. I bought this morning and the shares are just hovering at my stop-loss level (and I'm not going to move it down).

Retail seems to be very sensitive at the moment, especially anything with a street outlet content.

Not really my field, but that lack of confidence is like an anchor.

Maybe I should just buy Amazon as a buy and hold and forget the sector.

barnetpeter

Good comments on FOOT...thank you. Went short on this yesterday as it seems dire to me. Down another 8 per cent today despite plenty of small trades. What if the eps is just 3p or so next year? Talk about a late bull market mugging......

Thanks for the response. Yes, I recall there is a dividend allowance, albeit lowered recently.

Regard

Very true..I wonder if it will trigger my stop, then start to go back up to add insult ...:-).

I'm now going to eat my lunch of humble pie, and see what is happens this afternoon.

But, as I said in my other thread, I feel for the investors who were long on this before the announcement.

iain1234

Tend to agree. Being in airports was incredible good marketing and by moving out they are loosing their USP (some online sales may even have arisen from punters within the airport itself) Its now not going to take much for a competitor to move into their space, as there are no barriers to entry other than a good marketing strategy.

investorschampion

The Investors Champion AIMearch tool here https://aimsearch.investorschampion.com/ can provide an answer for a small fee. You need to distinguish between property builders and property investors. There is also the matter of joint ventures and passive investments on balance sheets which could bring 'excepted assets' into the equation...and other factors as well.
The Investor's Champion AIMsearch tool helps identify the IHT qualifying statuis of all AIM companies

peterg

Given that each additional sale is virtually pure profit, then this process of increased growth from increased marketing could become a virtuous circle.

I would have thought that the prizes - expensive cars - were a large part of their costs. If they keep increasing sales without matching the prizes I would have thought that would have a negative impact on perceptions and would be a dangerous path to take. So I'm not sure I agree with that statement.

Peter

Graham Neary

Hi Phil, I've included Severfield (LON:SFR) in the report. It's not for me but hopefully I've given it a fair look! Thanks as always for the request. G

fwyburd

Hi Graham

Apologies for flogging this particular horse (I requested it last week) but if you were minded to look at Duke Royalty (LON:DUKE) on this quiet day, I'd value your expert opinion.
cheers
Francis

Howard Adams

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

andrewjames

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.

TamzinPiworld

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/

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

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?

Hi tony, sorry about that. G

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

Best Of The Best (LON:BOTB)

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Graham Neary

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