Small Cap Value Report (Wed 22 May 2019) - W7L, VTC, VLE, PETS

Wednesday, May 22 2019 by
57

Good morning, it's Paul here!


Pre-7 am comments

As I'm up early today, let's have a quick look at yesterday's stragglers.

I can't motivate myself to look at Nexus Infrastructure (LON:NEXS) in more detail, so have instead looked at a couple of more interesting announcements from yesterday;


Warpaint London

Share price: 102.5p
No. shares: 76.7m
Market cap: £78.6m

AGM statement

This company sells cosmetics.

Issued at 10:59am - not good. I understand the logic for announcing at this time - i.e. issue the update at the same time as it's being spoken at the AGM. However, for me the golden rule is to always put out trading updates at 7 am, when the market is closed. This enables everyone to digest the announcement at relative leisure, and gives a level playing field. Whereas an intra-day trading update gives a timing advantage to day-traders & city people who are glued to a screen all day, and hence can react (if needs be) first.

Trading update - sounds reasonably reassuring;

"I am pleased to report that the outlook for the Company remains in line with that reported at the time of the release of our annual results for the year ended 31 December 2018 on 10 April 2019.
"Whilst trading conditions remain challenging in the UK, we continue to see encouraging international sales growth, in particular in the EU and the US.
"The Group has a sound financial footing and we are actively implementing our strategy for growth.  We look forward to the remainder of the year with cautious optimism."

Why are trading conditions challenging in the UK? Consumer demand is fine, providing companies have a decent online sales strategy, as well as selling via physical retailers. My worry is that there might be something wrong with Warpaint's products?

As you can see, broker consensus forecasts have been reduced over the last year, so something's obviously wrong;

5ce4dc924cacfW7L_brokers.PNG


Looking at the share price chart below, you can see there must have been a profit warning last Oct/Nov, and the shares have not recovered from that;

5ce4dd1da9645W7L_chart3.PNG


I reported here on the 29 Oct 2018 profit warning in a fair bit of detail.

Valuation

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Warpaint London PLC is a United Kingdom-based company engaged in color cosmetics business. The Company sells color cosmetics in the United Kingdom and overseas, principally under the W7 brand. The Company operates through two divisions: close-out and own-brand. The own-brand division consists primarily of the Company's flagship brand, W7. The W7 brand contains over 500 items, which are sold into high street retailers and independent beauty shops across the United Kingdom, Europe, Australia and the United States. The W7 brand focuses on the 16-30 age range. more »

LSE Price
54.5p
Change
4.8%
Mkt Cap (£m)
41.8
P/E (fwd)
5.7
Yield (fwd)
9.8

Vitec Group PLC is a United Kingdom-based provider of image capture and content creation solutions. The Company operates in three divisions: Imaging Solutions, Production Solutions and Creative Solutions. The Company designs, manufactures and distributes high performance products and solutions including camera supports, camera mounted electronic accessories, robotic camera systems, prompters, light emitting diode (LED) lights, mobile power, monitors and bags. The company operates in three divisions imaging solutions, production solutions and creative solutions. It provides small high definition (HD) monitors, Teradek transmitters, tripods, Anton/Bauer batteries, JOBY GorillaPods and audio capturing products. more »

LSE Price
1305p
Change
2.0%
Mkt Cap (£m)
591.2
P/E (fwd)
13.4
Yield (fwd)
3.1

Volvere plc is a holding company. The Company identifies and invests in undervalued and distressed businesses and securities, as well as businesses that are complementary to existing group companies. It operates through Food Manufacturing segment. Its food manufacturing segment consists of the Company's subsidiary, Shire Foods Limited (Shire), which is engaged in manufacturing frozen pies, pasties and other pastry products for retailers and food service customers. more »

LSE Price
1140p
Change
 
Mkt Cap (£m)
20.9
P/E (fwd)
n/a
Yield (fwd)
n/a



  Is LON:W7L fundamentally strong or weak? Find out More »


27 Comments on this Article show/hide all

Lord Gnome 22nd May 1 of 27
2

Good Morning Paul, et al,
Annuals from PETS out this morning and they read rather well to my untrained eye. I would welcome your verdict.

* Performance ahead of expectations. New pet care strategy delivering strong results.
* FY19 performance ahead of expectations: Retail returned to profit growth faster than anticipated
* Pet market growth remains solid and we are taking share in all key areas, both online and offline
* Retail business performing strongly, with like-for-like(#) (LFL) growth of 5.1%

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Paul Scott 22nd May 2 of 27
4

In reply to post #477706

Sounds interesting, I'll take a look at Pets at Home (LON:PETS) next. Thanks for flagging. I can't look at everything in an hour, so it's handy if readers flag up things that look particularly interesting (e.g. earnings beats)

P.

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MrContrarian 22nd May 3 of 27
9

My morning smallcap tweet: Dull day

£C21, Zinc Media (LON:ZIN), Westminster (LON:WSG)

21st Century Technology (C21) -year contract renewal with Arriva UK Bus. No £££.
Zinc Media Group (ZIN) wins new commissions worth over £5m. Comprises two returning series and a new repeatable series. No period given but says "provides a solid start to the 2019/20 financial year".
Westminster Group (WSG) extends its onerous £2.245m convertible to 30 June 2020. Hopes to pay it sooner as it's now flexible. 15% PA and conversion price cranking down from 15p to 10p in 2020.

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FREng 22nd May 4 of 27
4

Paul

Thanks for the views on Volvere (LON:VLE) which to me looks increasingly like a company that has no reason to be listed.

I agree that it would be good to get feedback from users of £W7L products, from SCVR readers (and their friends and partners) of any gender, not just from wives!

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fwyburd 22nd May 5 of 27
1

Good morning Paul,

Re: VLE
I can't see anything in their RNS that differs very much from what they presented in March at an investor presentation (my write up is here). They just seem to be taking their time to both make an acquisition and continue share buybacks. 

cheers

Francis


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gus 1065 22nd May 6 of 27
6

Morning Paul.

Thanks for the write up on Pets at Home (LON:PETS) . A decent enough business still slightly under the cosh from being “private equitied” (i.e. taken private, sliced and diced, leveraged to the hilt then tarted up for re-listing at an inflated valuation) twice in its recent past. There was a good dissection of this and a couple of other case studies (Debenhams and Bonmarche) by Orangetree a while ago at this link that covered Pets at Home (LON:PETS) problems.

https://www.stockopedia.com/content/what-retail-investors-need-to-know-about-private-equity-177510/

Seems to be finally getting on top of its debt pile and hopefully better prospects than some of the others discussed in the thread.

Gus.

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spantick 22nd May 7 of 27
4

I take Pauls point about VLE and the food sector, however management did state that they see growth in producing more vegie products.
Look at Gregs big leap in profits all down to their 'vegie sausage roll' !

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 Are LON:W7L'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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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