Small Cap Value Report (Wed 23 Feb 2022) - BELL, MADE, CBOX, NET, TED

23rd Feb '22 by Jack Brumby

63 comments 10121 reads

Good morning, it's Paul & Jack here with you for Wednesday's SCVR.

Agenda -

Paul's section:

Belluscura (LON:BELL) - negligible revenues, and heavy losses are reported for 2021. It’s little more than a startup, yet is valued at £120m. Looks very high risk to me, but it has enough cash from the IPO to have a stab at becoming commercially viable - which would need a 40-fold increase in revenues just to reach breakeven!

Made.com (LON:MADE) - this online furniture retailer has lost two thirds of its value since floating in 2021. Is it a bargain yet? The abrupt departure of its CEO suggests to me that there could be more bad news. It’s an interesting business though, and at some stage could be worth considering.

Cake Box Holdings (LON:CBOX) - the share price continues collapsing. I give it the once over - is it a bargain yet? Possibly, but can we trust management if the auditors don’t? Also, all the major shareholders are dumping stock in the market, so where will the buyers come from?

Seraphine (LON:BUMP) - a disastrous profit warning, shares down 60% today. It’s still profitable, but beset by operational problems & cost increases that should have been better controlled & forecasted. New CFO joins shortly. I’m worried about the balance sheet - cash is tight, and inventories excessive, so too risky for now. Longer term, could be a good recovery though.

Jack's section:

Netcall (LON:NET) - double digit organic growth and good annual contract value figures provide confidence of meeting expectations heading into H2. The shares are less expensive than when we last looked in October but still not cheap by any means, so continued organic revenue growth is key. Quite a wide spread on the shares, 763bps.

Ted Baker (LON:TED) - group sales +35% year-on-year but remain down 28.6% on pre-Covid levels. Omicron has clearly had an impact, which is unfortunate. Ecommerce sales are broadly flat on pre-Covid levels and I would have been hoping for more here. There are some positive signs but I still think the level of execution risk is high, so I continue to wait for further signs of progress.

Explanatory notes -

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davidjhill

23rd Feb '22

Correct Made.com (LON:MADE) numbers are to FY22 and last note was 21st Feb post CEO departure and reiterates numbers for FY22 of £10.1m PBT with YE23 at £17.7m (ebitda £30.6m & £43.7m respectively)

I must admit I am scratching my head a bit at the valuation. With £100m of net cash we are talking a 1 year forward PE of around 10 now (if you adjust for that). For a business expecting to grow at 30%+ that seems pessimistically valued.

Clearly the market just doesn't believe the story - I can only think the narrative is something along the lines of lower discretionary consumer spend. A CEO leaving is also never ideal - in this case I believe it is genuine but Liberum seem to think the new CEO is highly qualified and 100% in sync with the set strategy having been around since 2019. I presume they have spoken with mgmt on the topic before writing that.

They are spending £20m on Germany this year which I suspect is key to growth. As long as the marketing spend generates the modelled returns though then should be fine.

Like you I looked at the TRustPilot scores and also the reviews. Score looks good to me. Most negative reviews appear to relate to orders impacted by the supply chain problems late last year. There is a lag of around 12-14 weeks so the timelines marry up. More recent reviews allude to estimated delivery times of 8 weeks being fulfilled in just a few days so it looks like they are managing expectations whilst fulfilling early.

I wouldn't like to hazard a guess on whether it goes up or down from here mind - the general mood is so bleak that even in-line results seem to result in a flurry of sells so they can't afford any guidance reduction really.

jamesalastair

lol

BnB

Re Cake Box Holdings (LON:CBOX)

Three big sales at lunchtime today totalling over £5m, almost a tenth of the market cap. After that price rose on moderate volume to end the day up 3%. Not sure what to make of that.

rmillaree

Made.com (LON:MADE)

I think at present the market is in general factoring in worst case scenario and then some - its probably a fact that some will struggle to either regain past glories (Boohoo/Joules have those doubts) or make the progress the market has expected (Victorian Plumb and Made have encountered issued). I always think once you have lost profits at retail you have to work twice as hard to get back to where you were. Just look at superdy their cunning plan to restore part of their former glories looks like it might be 5 years plus.

I was hoping to see a clearer picture ref them delivering but i certainly wasnt expecting the price to go below 100p never mind down to 72p . I used to be a falling knives sucker but i trend to try and hold off now when shareprice is in clear unabated downward trend - hmmmmmm certainly tempting.

Many thanks for the link. I remember your article on Character.

Just to be clear i aint Maynard Patton or anyone who is even close to the standard of writing articles - the text i quoted on the prior post what what that person was saying on that sight not what i was saying.

The Phoenix

I to like Polar Capital Holdings (LON:POLR): but they are heavily into tech and health care and can't see any major recovery in the share price until interest rates rises stop and inflation flattens off as both of these factors are negative for the two asset classes mentioned.

At some point i think they will be swallowed up by a bigger player on the watch list but would want to see the chart start to trend sideways for a bit before getting involved.

Any view on Crest Nicholson Holdings (LON:CRST): Doug has been touted previously as a possible private equity target.

well trend is certainly your friend and particularly in this market downward trends are exacerbated. I didn't expect it to fall this far either. I like the concept so I hope they can continue to execute and eventually succeed though.

£BMY up 13.96% on what looks like 125,000 volume. What gives ??

Epsilon

Crest Nicholson Holdings (LON:CRST) has shown minimal growth in Shareholder Equity in the past four years - barely 2.5% p.a. Add in the historic 4.5% dividend yield gives a 7% tangible surplus (zero share issuance). There must be better investments out there.

Aargh Aitch

Ted Baker (LON:TED) Is a business I looked at tangentially whilst doing my personal "Diligence" prior to buying £MUL. It involved a wet Sunday afternoon going through the online stores of perceived Mulberry rivals, my conclusions- other than that "Handbag driven" retaillers appeared to be able to ask a lot for their product considering that their industry only exists because womens clothes traditionally don't have pockets- was that Ted Baker's business is based on looking and sounding like a high st that is cheaper version of Paul Smith and maybe Paul Costelloe.

I don't see them as a good buy right now: the P/E is too high for me to commit to considering that they are not selling Veblen goods and so don't have the pricing power that Mulberry (LON:MUL) or Burberry (LON:BRBY) have.

abtan

Made.com (LON:MADE) (I hold)

Hi David

I personally have reduced the last announced £107m cash balance by £40m to account for the "excess" payables that will undoubtedly be on the balance sheet and should hopefully unwind during 2022 as suppliers get paid quicker.

If one compares the Accounts Payable balance at end of FY20 vs H1 FY21 this doesn't seem to be an unreasonable estimate.

There's still plenty of cash on the balance sheet of course so there's no solvency risk that I can see.

---

FWIW I am personally forecasting £0m-£11m EBITDA for 2022, which factors in:

high fulfilment expenses;
a range of gross margins (49%-52%) - see below for recent GM%'s;
and I've just noticed that my lower EBITDA expectations are even with me forecasting higher revenues than those shown in the Stock Report (£559m vs £530m).

If it does achieve £30.7m EBITDA in 2022 as per a broker's forecasts (Liberum is it?) I'm not quite sure how they would manage it.

I fear that guidance downgrade even more now, but surely the share price can't fall further? Surely...

intuitive6191

Thank you for the clarification. I will also take this opportunity to correct the ticker in my last post.
It should of course read CBOX not CAKE.

JohnEustace

Bloomsbury Publishing (LON:BMY) is a pleasant surprise as I hold but I don't know either. Unless someone wants to mop up shares with a £4 buy limit?

Bouden54

I wouldn't read too much into today's move. Bloomsbury Publishing (LON:BMY) seems to bounce from 390p to 350p and back again without rhyme or reason - it's merely back to where it was a couple of weeks ago. Great company though and will continue to hold.

yellowdog

I agree with all those comments - it's a worry.

It's the directors buying over £1m of shares in the last few weeks that has piqued my interest.

jonno

You may well be right, but I wouldn't bet against a bid. It. It is a well managed cash generative company with some great assets and bullet proof balance sheet. I hold a reasonable amount and would be unhappy for it be acquired unless there was a sizeable premium.

However as you say it is likely no more than the gyrations of the market.

Tommy H

24th Feb '22

Hi Edmonda

I am currently sat out of Begbies Traynor (LON:BEG) I had held for a long time, watching it go up and down, and last month I took the choice to step back for a little while.

I really like the company, it has done solid for me, but I am not prepared to fight the market on this, so whilst I am not a "chartist" apologies if there is a better phrase, I am following my sell if down >10%.

I am watching for it to basically form a base and will reenter, meanwhile I have to manage the burning feeling in my pocket and the desire to do something rather than the right thing of doing nothing.

Tommy

rosco2016

16th Apr '22

Belluscura (LON:BELL) is not a startup. It is much more than that: it has an FDA-approved product that works, a clearly defined market and is lead by an experienced team. Yes, it is a risky investment at this stage, but it is not a classic startup. Startups often have one so-called 'killer' product that doesn't actually work, that nobody wants and are often led by a charismatic individual or team who manage to convince investors that they are going to rule the world with the next big thing. I experienced this first-hand working in a software development team for one of the first unicorns (billion dollar valuation startups) in the UK that went bust after wasting well over $150 million of investors' money.

Boon

20th Jul '22

Yet.... women like to talk about clothes. And share tips. Especially when one becomes a new mother, one goes and seeks out advice from friends and family and colleagues?

Small Cap Value Report (Wed 23 Feb 2022) - BELL, MADE, CBOX, NET, TED

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Jack Brumby

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