Small Cap Value Report (Wed 22 Aug 2018) - ALY, RBN, HEAD, PHD, SPO

Wednesday, Aug 22 2018 by

Good morning everyone!

There were a lot of RNS announcements to sort through this morning. Thanks for the suggestions, and keep them coming, as they help me figure out where to focus on.

My provisional list for today is as follows:



Laura Ashley Holdings (LON:ALY)

  • Share price: 5.25p (+21.5%)
  • No. of shares: 728 million
  • Market cap: £38 million

Final Results

Sale of Property in Singapore

Good news has been scarce for Laura Ashley shareholders. Today makes for a welcome change.

It's amazing how far a share can fall when it suffers is a loss of faith. Collapsing profits don't help either, of course.

For me, the most significant aspect of today's news is the disposal of the Singaporean property. This very strange asset has been an eyesore for existing and prospective investors such as myself (I owned ALY shares from 2014-2015).

When the property was purchased, back in June 2015, ALY's share price was 22p. Most of the value destruction since then has been related to weak trading, but some of it has been due to question marks over the company's move into property ownership.

It has been sold for SGD $54.5 million (£30.3 million), after being valued at SGD $56 million.

It was bought for SGD $66 million (£31.1 million based on exchange rates at the time), having been independently valued at $65 million.

Singapore commercial property prices (for office space) are down by just 4% since June 2015:


Yet the value of Laura Ashley's property has allegedly fallen by 14%, and it is selling it for 17% less than it paid for it.

Bad luck? I guess we have to conclude that it's just bad luck.

The infusion of £30 million from the sale will make a big difference to the balance sheet, assuming that shareholders vote the deal through (I estimate that 444 million shares are held by the Malaysian chairman's companies).

At June 2018, ALY had bank borrowings of £20.1 million associated with…

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

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Laura Ashley Holdings plc is engaged in designing and manufacturing products for home and fashion. The Company's segments include Retail and Non-Retail. The Retail segment includes sales through Laura Ashley's Managed Stores, Mail Order, e-Commerce and Hotel. The Non-Retail segment includes licensing, franchising and manufacturing. The Company's property portfolio in the United Kingdom includes approximately 190 stores. The Company's United Kingdom business includes the Home Accessories, Furniture, Decorating and Fashion categories. The Furniture product category includes upholstered and cabinet furniture, beds and mirrors. The Home Accessories product category includes lighting, gifts, bed linen, rugs, throws, cushions and children's accessories. The Decorating category includes fabric, curtains, wallpaper, paint and decorative accessories. The Fashion category includes adult fashion, fashion accessories and perfumery. The Company also holds interests in the Laura Ashley hotel. more »

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Robinson plc is a United Kingdom-based company engaged in the business of manufacturing plastic and paperboard packaging. The Company provides packaging solutions that specialize in injection, blow and stretch-blow molded plastic, and rigid paperboard. It serves the food, drink, toiletries, cosmetic and household markets. It operates through plastic and paperboard packaging segment. The Company has over five manufacturing facilities, which include Kirkby facility, Stanton Hill facility, Lodz facility, Chesterfield facility and Madrox facility. Its subsidiaries include Robinson (Overseas) Limited, Robinson Paperbox Packaging Limited, Robinson Plastic Packaging Limited, Robinson Plastic Packaging (Stanton Hill) Limited, Robinson Packaging Polska Sp. z o.o., Walton Mill (Chesterfield) Limited, Griffin Estates (Chesterfield) Limited, Robinson Industrial Properties Limited, Walton Estates (Chesterfield) Limited, Madrox Spolka Akcyjna and Walton Mill (Chesterfield) Limited. more »

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Headlam Group Plc is a United Kingdom-based company, which is engaged in the marketing, supply and distribution of a range of floorcovering products. The Company's operations are focused on providing customers, principally independent floorcovering retailers and contractors, with a range of floorcovering products supported by a next day delivery service. The Company operates through 56 operating segments in the United Kingdom and five operating segments in Continental Europe. Each operating segment is a trading operation aligned to the sales, marketing, supply and distribution of floorcovering products. The Company's activities and facilities are located throughout the United Kingdom, France, Switzerland and the Netherlands. Its business in France operates from approximately two distribution centers and over 20 service centers, and the businesses in Switzerland and the Netherlands each operate from a single distribution center. more »

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

33 Comments on this Article show/hide all

Beginner 22nd Aug '18 14 of 33

Regarding Robinson (LON:RBN) , the company has a chunk of land that was formerly its manufacturing site, on its books as an asset. This ground is in a not very desirable part of a not very desirable area of a not very desirable town (apologies to all Spireites!). It has been up for sale for around 18 months now, apparently without a sniff of interests. I think it can be largely discounted when considering the balance sheet.

(For both Robinson (LON:RBN) and Empresaria (LON:EMR) it is worth investors considering the very large spread).

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Edward John Canham 22nd Aug '18 15 of 33

In reply to post #392609

Robinson (LON:RBN)


The sale of surplus properties in Chesterfield has not progressed materially in the six-month period due to the uncertainties in the retail sector and over-supply of housing land. Current market conditions in this sector of the market are now relatively unattractive which is likely to result in any realisations being beyond the next 12 months."

Company seems to agree with you - very unusual to see the phrase "over-supply of housing land".

Another strange thing here is the debt is all bank overdraft - quite unusual as the company seems to be planning another £3m of capx in H2 - but they seem to be paying only @2% in interest - possibly something to do with the surplus land?


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Paul Scott 22nd Aug '18 16 of 33

Good morning!

Not wishing to pre-empt Graham's comments, but Laura Ashley Holdings (LON:ALY) looks potentially interesting. The bizarre decision to buy a freehold office block in Singapore seems to have been reversed. I like that - it de-gears the balance sheet, as previously there was a mortgage on the property, which created a somewhat lop-sided balance sheet.

My initial skim of today's results statement is quite positive - profits are down, but it's amazing that ALY is still profitable at all. On a recent store visit, the product struck me as outrageously expensive, and nothing special. But there again, I am more of a Primark man, when it comes to fashion, and decor. The one area where I will splash out, is bedding - so John Lewis, or M&S, for duvet sets. Cotton is less scratchy & not prone to bobbling, that you get with the vile polyester - a plague on the house of whoever invented that muck!

I'll do some more digging, but for now, I think ALY looks potentially interesting, at the current bombed out valuation. The brand is worth multiples of the market cap, in my view.

Regards, Paul.

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FREng 22nd Aug '18 17 of 33

TechMarket View comments on Proactis Holdings (LON:PHD) that "The company has the strategy, market reach and the portfolio to regain its momentum, although this will not happen overnight."

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Howard Marx 22nd Aug '18 18 of 33

In reply to post #392534

Proactis Holdings (LON:PHD) has approximately 1,000 customers

So with 120 upsell deals it looks as it 12% of existing customers bought more product, which is encouraging

Most encouraging is the huge increase in average deal size for new names, from £76K to £135K

My only concern is the Balance Sheet - the next acquisition will have to be Equity financed

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Collector 22nd Aug '18 19 of 33

I also think ALY is interesting, at 5p you get a lot of shares for very little cash and in say 10 years or so who's to say were they might be?
They are implying this company will be profitable and debt free after the office sale. (rare thing that)
It is a decent if not great brand and if someone good got hold of it....
The market crash was 10 years ago and people still feel that every day, I am scared this could be say 200 and
I look back in 10 years and saying I remember them at 5p.
I'm thinking its got to be worth a small punt, I've done worse things.

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nicobos 22nd Aug '18 20 of 33

Highly speculative loss making Company Appscatter (LON:APPS) raises £1m in new equity at 70p per share.

Current share price is c.40p per share.

Anyone know how this works!? and why institutions would pay such as premium. Does it make the shares somewhat of a 'bargain' as PIs are able to buy in the market cheaper than the big boys or is there something funny going on !?

Answers on a postcard...

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sharmvr 22nd Aug '18 21 of 33

Also looking forward to views on Headlam (LON:HEAD) and Laura Ashley Holdings (LON:ALY)
ALY does seem to have a lot of attractions - there is value in the brand and we could potentially be looking at 4m profit next year, if the disposal losses don't repeat and finance costs removed, which would put them on sub 8 multiple with a solid balance sheet.
Current trading looks OK with room for international expansion and if the franchise model takes off, then can be very lucrative for franchisor.

Separately, may I make a request for Epwin (LON:EPWN) who issued a trading update today. Looks very cheap with no obvious red flags. Further, given the number of residential new builds (at least in London), I agree with their medium term positive views. At 28m EBITDA, they are looking at 5xEV. Dividend covered by earnings, Op Cash and Free cash.
I hold Norcros (LON:NXR) and did a comparison and on metrics - think I prefer this given lower debt and cheaper.

Would welcome any views.

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garbetklb 22nd Aug '18 22 of 33

In reply to post #392674

Hi Sharmvr
Epwin (LON:EPWN) - I thought their main focus was replacement windows, not new build? New buildings have to have windows, but one can soldier on with old ones for another year......

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Graham Neary 22nd Aug '18 23 of 33

In reply to post #392529

Hi Jon

Thanks for the comment re: Headlam (LON:HEAD)

I would say they only deserve credit for the margin expansion delivered by the pre-existing business, which was 68 basis points. Not bad, that's an extra £2.3 million of gross profits to play with. A good achievement. G

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sharmvr 22nd Aug '18 24 of 33

In reply to post #392699

My understanding of their business was general repair and maintenance of buildings, and specifically the exterior facades of such buildings. Windows and doors being a big area.
Agree that they can go a while, but building managers make decisions in this regard and they typically have maintenance cycles, and since it is paid through residential service charge, price sensitivity is less of a concern (since payer doesn't negotiate price)
In public housing, there is potential work for cladding replacement off cycle courtesy of Grenfell and what I expect are more stringent health and safety, which could extend to more regular maintenance / replacement.
In private sector, as I say at least in London there are a lot of buildings that have been put up over the last 3-5 years, and might be due a facelift!
Quite new to the company but think there might be some promise there - will reserve judgement until I have done more research, but certainly think it is worthy of research

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simoan 22nd Aug '18 25 of 33

In reply to post #392604

Also not sure about the appointment of Keith Edelman ( Revolution Bars (LON:RBG) Chairman) as senior independant director.

Yes, I agree. It's a sell. You can never trust a Gooner!! :-)

Si, a lifelong Spurs fan

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daveinthelakes 22nd Aug '18 26 of 33

Hi Graham,

Re Laura Ashley Holdings (LON:ALY)

"That seems like good headway to me. But the company is promising to open two new stores and close only five stores over the coming year - wouldn't it be better for shareholders if the estate were to shrink much faster than this?"

Yes but it aint that easy if they are paying above market rents with lease expiry not in sight. They may be paying £x a year for a store in rent/rates/service charges but if it is losing 20% £x it is still cheaper to keep it trading. The only way to get rid of an over rented store other than a CVA is to pay a very big bung, known as a reverse premium, to an ingoing tenant if they can find one that fulfills the landlords financial criteria/user quality etc.

Interesting if Paul could establish their lease obligations?

I also think that whereas the brand being Old British, goes down well in Asia it does not appeal to the vast majority of UK consumers. So may pick up enough customers in a very large city or an up market ruralised town but probably nowhere else?

Their product being very expensive does not lend itself to online sales as much as say fast fashion does.


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Edward John Canham 22nd Aug '18 27 of 33

In reply to post #392724

Not quite what I had in mind Si - but hey - that might be a good reason as well.


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paraic84 22nd Aug '18 28 of 33

In reply to post #392674

A previous red flag for Epwin (LON:EPWN) was its relationship with Entu (UK) (LON:ENTU) (maybe read back past SCVR reports if you're not aware of the issue already). It's left a sour taste in my mouth not to be tempted by Epwin (LON:EPWN) for now.

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rmillaree 22nd Aug '18 29 of 33

In reply to post #392664

Appscatter (LON:APPS)

Hello nicobos

I have only had a quick look but I am pretty sure this is all related to the acquisition that was announced back in April when handily the share price was much higher. presumably some deferred consideration via share issue type transaction.

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sharmvr 22nd Aug '18 30 of 33

In reply to post #392749

Thanks Paraic - was not aware - appreciate the pointer, will take a look

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SundayTrader 23rd Aug '18 31 of 33

In reply to post #392644

Proactis Holdings (LON:PHD)

Could this be in value territory now?

I don't hold, and have felt negative about it previously - it didn't seem to be making progress, free cash flow seemed low. The reverse of Perfect Commerce into it is transformative - potentially for the better. Are the historic figures misleading? SP rates it a "sucker stock".

Putting it back on the watchlist.

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Howard Marx 23rd Aug '18 32 of 33

In reply to post #393029


Proactis Holdings (LON:PHD) does indeed have huge upside from here, in my view.

The StockRank will catapult upwards in October when the July18 numbers are released. Currently the Valuation rank is suppressed by the 2017 figures which were lossmaking due to £6m+ of 'non-recurring acquisition related expenses'.

As I mentioned above, the business continued it's operational momentum in the past 12 months:

"So with 120 upsell deals it looks as it 12% of existing customers bought more product, which is encouraging

Most encouraging is the huge increase in average deal size for new names, from £76K to £135K

My only concern is the Balance Sheet - the next acquisition will have to be Equity financed

Looking forwards, I'd expect business to do as well in an economic downturn as in the current economic climate - I'd guess it will prove to be contra-cyclical.

Either the shares get re-rated else the company will likely be acquired in my opinion - the company operates in a rapidly consolidating space.

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tightfist 23rd Aug '18 33 of 33

Three points regarding ALY.

First, the shrinkage in stores numbers was (I believe) largely to do with the acquisition of Homebase by Australian group Wesfarmers (a value-destructing head case if ever I saw one - and recently disposed of to ?) who ousted the ALY in-store implants. A real Loose-Loose?

The second is the brand's nowadays dependence on frequent "SALES". No patient woman in their right mind pays the sticker price and their sales revenue is now driven by Sales at presumably significantly depressed margins.

The third is their ineffectiveness at on-line Clicks & Mortar trading - and IT in general. My information is three years old but they were hopeless then on leadtime; maybe they have now massively improved?

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 Are LON:ALY's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

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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