Small Cap Value Report (Wed 22 Nov 2017) - BOTB, CAMB, SCS, VANL, CRL, QUIZ, GFIN

Tuesday, Nov 21 2017 by

Good morning! It's Paul here. This should be a busy & interesting day, with lots of RNSs to report on, then the Budget from Philip Hammond around lunchtime. (12:20, according to the ITV listings)

Please note that I added lots more to yesterday's report, which now covers results or trading updates from;

Accrol, Empresaria, SRT Marine Systems (CEO interview), FocusRite, Severfield, XL Media, Jaywing, AO World.

All attention will be on the Budget today, which I think will be televised just after PMQs in Parliament. My broker reckons that some investors are worried that the Chancellor might tamper with AIM IHT relief - which he thinks has caused some selling in AIM shares recently. Let's hope that's not the case.  EDIT - phew! All good.

Charity Investor Lunch - TOMORROW!

Stop press! Renowned small caps investor, David Stredder (aka Carmensfella) has just been on the phone, to alert me that there are a small number of spare places for a charity lunch in London tomorrow. David has organised this lunch to celebrate our own Ed Page-Croft's phenomenal achievement earlier this year, when he cycled from London to Paris in 24 hours.

So the aim of the lunch is for investors to meet up & chat about shares, over a nice lunch on a moored boat on the Thames. Between each course there will be some interesting speakers, including Clarke Carlisle, the footballer who has been very open about his battle with depression & addiction, and speaks very movingly about mental health issues.

On the shares front, I think David wants me, Leon Boros, and Lord Lee, to host tables of other investors. It should be great fun, with lots of interesting chats with other investors, plus the aim is for us to raise as much money as we can for the featured charities (minimum suggested donation £100 per person).

So if people would like to come along, please contact either David Stredder or Ed Page-Croft, using either a message through Stockopedia's messaging system, or David's Mello website has details on how to contact him.

Sorry it's such late notice, but a few places unexpectedly arose at the last minute. So I thought it would be good to throw it over to SCVR readers, just in case anyone is around tomorrow in London & fancies joining us.

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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 »

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Cambria Automobiles plc is a motor dealer, which is engaged in the sale and servicing of motor vehicles. The Company is engaged in the provision of car vehicle sales, vehicle servicing and related services. It is a retailer of new and used cars, commercial vehicles and motorbikes. It operates on a dealership-by-dealership basis. It operates from approximately 30 sites with a total of over 50 dealer franchises. It operates dealerships across England, from the North West through the Midlands, down to Kent in the Southeast and across Exeter in the South West, trading under local brand names, such as Dees, Doves, Grange, Invicta, Motorparks and Pure Triumph. Its brand portfolio comprises Abarth, Alfa Romeo, Aston Martin, Dacia, Ford, Fiat, Honda, Jaguar, Jeep, Land Rover, Mazda, Nissan, Renault, Seat, Triumph, Vauxhall and Volvo. It also provides ancillary services. It offers finance and insurance for the execution of the transaction along with service plans to maintain the vehicle. more »

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Pendragon PLC is an automotive online retailer. The Company's principal market activities are the retailing of used and new vehicles and the service and repair of vehicles (aftersales). Its segments are Stratstone, which consists of its vehicles, truck and commercial vans brand, including the sale of new and used motor cars, motorbikes, trucks and vans, together with associated aftersales activities; Evans Halshaw, which consists of its volume brand, including the sale of new and used motor vehicles and commercial vans; US Motor Group, which consists of its retail operations in California in the United States, including the sale of new and used motor cars; Pinewood, which consists of its activities as a dealer management systems provider; Leasing, which consists of its contract hire and leasing activities; Quickco, which consists of its wholesale parts distribution businesses, and Central, which represents its head office function and includes all central activities. more »

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

29 Comments on this Article show/hide all

BIACS 22nd Nov '17 10 of 29

If you get a chance to add one more then any thoughts on latest figures today from Triad Triad (LON:TRD) would be appreciated. Thanks!

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ls2g08 22nd Nov '17 11 of 29

In reply to post #243918

Triad (LON:TRD)

It doesn't look like Paul will have time to comment on this,

My thoughts were that it looked a positive update, the plan to switch to higher margin business seems to be executing well. I think the troubles they allude to over the period caused the sell off from the last earnings report.

They seem to be continuing to win government contracts but seem to have a very concentrated customer base. I think the key for this stock to re rate will be to see growth in customer numbers in the higher margin business outside their traditional customer base.

They look to have a bulletproof balance sheet with a very small number of intangibles listed and a decent cash position (20% of market cap). Love to here others opinion on this!

Oh also does anyone knows if the overhang of that large shareholder who went bust and was a forced seller has cleared yet?

Disclosure - I hold.

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Hedgecutter 22nd Nov '17 12 of 29

In reply to post #243893

Yes Dave, I noted the improving results for Creightons (LON:CRL), but, as I try to avoid companies with net debt and negative cash flow, I was somewhat concerned with the following:

"Working capital and loans
Net cash on hand (cash and cash equivalents less short term borrowings and loans) is a net borrowing of £246,000 (2016: £43,000). The main reason for the decrease in net cash on hand is the higher working capital requirement to support the sales growth during the period."

That may have been the reason for the drop in the SP this morning, so I would be interested in Paul's thoughts on this.

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billytk 22nd Nov '17 13 of 29

Morning Paul,

"Also the supercar competition is very well structured, and very enjoyable to play - I participate most weeks, and really enjoy it. Last week I was only about 8 pixels away from the winning co-ordinates"

The marketing campaign must be really effective to keep someone playing that says they don't want the hassle of owning a car again

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runthejoules 22nd Nov '17 14 of 29

Are any other readers holders of Versarien (LON:VRS) ? No RNS today but I have been doing very well out of it and am worried the SP has run up out of control. It's blue sky ultra-thin graphene plus existing heat-sinks business and fancied expert opinion as it's all a bit hyper-positive on ADVFN. Sold 10% at about 88% profit. Am sure it will do well long-term but scared of getting impaled on a short-term spike.

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Ramridge 22nd Nov '17 15 of 29

Re. Best Of The Best (LON:BOTB) Can someone please explain the following.
Reading Paul's commentary I can see a lot of attraction in buying these shares for the reasons he states.
However looking at the share price chart, the sp has been on a downward slide since june this year, and as at last night it was at the lowest over a 12-month period.
The share price today is currently up around 3% , which is hardly an endorsement of solid growth to come.

Why does the market not believe in this share?

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Ramridge 22nd Nov '17 16 of 29

In reply to post #243968

Re. Versarien (LON:VRS) Yes I have held VRS for about a month, This morning I sold my entire holding for a total gain of 45%.
The graphene story has kept this share rising almost on a daily basis.
The reason for selling is twofold. Results are due next week and as a committed Minervini follower, I am selling ahead of the news and cashing in good gains. Secondly, a glance at the sp chart (near vertical climb) suggests a pullback is due very shortly.  No doubt I may be leaving money on the table.

I am ready to buy back next week after the RNS announcement, if the situation is still attractive.

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herbie47 22nd Nov '17 17 of 29

In reply to post #243973

Well the spread may put investors off. The EPS forecasts are not very inspiring -5% and +5% for the next 2 years.

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runthejoules 22nd Nov '17 18 of 29

In reply to post #243973

Ramridge, sounds sensible, just got a fill/kill in for half my holding with HL right now. At a profit of 106% in about a month I just had to. Will do the same as you and buy back after results or on any significant pullback. May well regret it if there's a t/o but this way you can say 'at least I was half right!' And sticking to investment rules is the way to improved performance over the long run. Remove the choice architecture that gets you into trouble. I am near enough my year-end target to remove risk/greed/dreaming. EDIT: Someone doesn't like this post, sorry if it's o/t, but if you don't like my selling I hope you bought my shares!

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jonthetourist 22nd Nov '17 19 of 29

Re Car dealerships and property assets.

I wonder if anyone can offer any insight on this, but I imagine the property assets are pretty inflexible for any purpose other than car dealerships. So if the market crashes, or goes online, or into supermarkets or whatever, the value of the properties resides in the land, minus the the cost of demolition. Not like a warehouse, where you just find another tenant.

Just musing, no position.


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Zipmanpeter 22nd Nov '17 20 of 29

Re Best Of The Best (LON:BOTB), as a holder I was a bit disappointed but perhaps not surprised by the neutral and very short (!!) update that trading 'has been solid'.

BOTB having finally seen the light in the last 2 years and i) focused on online vs airport sales and ii) upped marketing spend I had hoped a more aggressive growth path would ensue. I think the potential for this business is great, especially internationally.

However, in my view (25yrs FMCG Marketing) the extra marketing money has not been spent well. Rather than go on dull but profitable expansion of social media/affinity marketing/paid for PR closely targetting car buffs it has been spend on expensive UK TV advertising featuring helicopters dropping cars. Arguably creative execution is weak with a lack of cut through on what is already an a poor brand name (even Best of the Best would be better than BOTB) and using in house actors. This is the sort of thing that 20-something brand managers want to do but get counselled out of by grey beard Marketing Directors.

I wish I had had the wit and the drive to set up as profitable a lifestyle business as the owner has with Best Of The Best (LON:BOTB). He seems a nice guy and I think he will treat shareholders fairly. However, I am increasingly coming to the view that this is a great lifestyle business for the owner and his family/friends but will never gear up or sell out to a big buyer as Paul suggests and give me the return I want as an investor. I am not even sure if the business were not on AIM whether it would now list. Maybe it should go private again.

The owner obviously loves what he does; why therefore should he change what he does !!
Reluctantly therefore, I am going to hope for a spike in the shares and sell out.

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LeoInvestorUK 22nd Nov '17 21 of 29

In reply to post #243983

Re. Versarien (LON:VRS):

There have been almost vertical ~100% spikes in both Seeing Machines (LON:SEE) and Wey Education (LON:WEY) recently. In these cases there wasn't a clean relationship with announcements and the best strategy would have been to buy back once they'd given back ~50% of the gain. I happened to sell some of both at their recent peaks but was/am too cautious to buy back in having lost all my gains this way in the past. These kind of extreme movements worry me as they remind me of the dot-com bubble.

Blog: LeoInvestorUK
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herbie47 22nd Nov '17 22 of 29

In reply to post #243998

Which company are you on about?

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runthejoules 22nd Nov '17 23 of 29

In reply to post #244028

Versarien (LON:VRS) Herbie. Yep I was in Seeing Machines (LON:SEE) and Wey Education (LON:WEY) too and should have sold the spikes. I am now buying the dips which is the next best thing. I don't think it's anything like as bad as the .com bubble as these are very small caps which have spiked before, and now the internet is actually able to do what it only promised in 2001. More competition though. Keeping positions small to make it easier to sell & holding hedges in £RMD and Begbies Traynor (LON:BEG). Bitcoin crash, as Paul says, is a real danger. If China sneezes...

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LeoInvestorUK 22nd Nov '17 24 of 29

In reply to post #244003

Re Re Car dealerships and property assets.

My belief / hope is that car dealership sites are brownfield and therefore very easy to get residential planning permission for. While very few are prime sites (there used to be some on Park Lane which is super-prime again at the moment), anecdotally half are in established residential areas and most of the rest could be used for residential even if this isn't necessarily currently the most valuable use of the land.

There is a risk that if greenfield restrictions are lifted (either in today's budget, or gradually later) then the value of these brownfield sites could reduce.

I was disappointed by Marshalls booking a loss against book value for their recent disposals.

Blog: LeoInvestorUK
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Luthrin 22nd Nov '17 25 of 29

From the Treasury/HMRC (contains small print not announced in the Budget speech):

Autumn Budget 2017: overview of tax legislation and rates (OOTLAR)

There's no mention of legislation or even a consultation on BPR relief for IHT. However, HMRC has today published a research report into IHT reliefs as part of the Autumn Budget (authored in May 2017) which could be an early indicator that the Treasury has its sights set on the reliefs, or equally it might be that they have made some preliminary investigations and don't consider action worthwhile at present (the tone of the document suggests the latter):

Research into the influence of IHT reliefs and exemptions

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prem14 22nd Nov '17 26 of 29

Hello Paul
Did you get the list of large shareholders in BOTB from stockopedia? Just curious.

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Scoobydoit 22nd Nov '17 27 of 29

Hi Paul,

I'm interested on your take on the GFIN results.
I sold out today for the following reasons
Results to 30/6 it's now 22 Nov, that's quite a delay.
No real guidance on current trading, just "excellent foundations" and 3m / 3.6m views on Elite Series 1 and 2.
They're 5 months into the next financial year and haven't given a view on revenue
The state will create long term stakeholder value so I can only assume there will be some sort of short term pain.

Would be interested in your interpretation.


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jesseowens 22nd Nov '17 28 of 29

Thanks for another excellent report Paul

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hayashi22 23rd Nov '17 29 of 29

Don't think large shareholders is available here. It would be a useful addition. You can get some background on shareholders from looking at the relevant news.

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


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