Small Cap Value Report (Wed 25 Apr 2018) - BOO, W7L, CLG, BEG | Paul Scott

24th Apr '18 by Paul Scott

52 comments 18080 reads

Good evening/morning, it's Paul here.

There's no rambling introduction today, pondering life, the universe & everything!

Mello Derby

I'm getting into a frenzy, trying to prepare for Mello Derby. I think there might be a handful of tickets left, so if you can join us, here's the link.

The quality of the companies presenting is far higher than any other investor show. The reason being that David Stredder hand-picks companies that are known to be decent. Also, he refuses entry to the spivvy junior resource stocks which usually want to come along to investor shows. So the theme with Mello is very much quality, ahead of commercial considerations. Isn't that refreshing!

Someone said that a lot of the speakers are the same as in 2014. That's true to a certain extent, but we're not going to be saying the same things! Graham and I will be dragged on stage at 9am this Thursday & Friday, to do Small Cap Value Reports live. Whose idea was that?! Grrrrr! Still I'm sure we can have some fun, providing I'm supplied with enough coffee & bananas.

My main presentation will be a review of the last few years in small caps - things I've learned, interesting themes, opportunities & threats, etc. Hopefully that should be interesting too. Although at this stage I only have 2 pages of rough notes, so need to flesh that out into a proper talk very soon.

As I'll be preparing for Derby, and travelling there tomorrow, this report will have to be a bit shorter than usual.

A big thank you to those of you who kindly donated to Brian Basham's prostate charity London Marathon donations page. He emailed me today to say how much he appreciates our support. Also, I'm delighted that readers here chipped in a decent amount, so thank you from me too.

Boohoo.Com (LON:BOO)

Share price: 177.6p (up 15% at 08:26)
No. shares: 1,149.5m
Market cap: £2,041.5m

(at the time of writing, I hold a long position in this share)

Final results - for the year-ended 28 Feb 2018.

This is a leading online fashion group, currently with 4 fast-growing brands - BooHoo, PrettyLittleThing, Nasty Gal, and BooHooMan.

This share occupies a special place in my heart, as it was a…

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Damian Cannon

24th Apr '18

No rambling commentary Paul? In the style of R. Woodbine Parish from El Oro: https://www.investegate.co.uk/el-oro-ltd--elx-/rns/half-year-report/201803151145018557H/

I only come here for the anecdotes - you know that!

MiserableJacktPotato

Former SCVR favourites Boo release results in the morning :D or maybe xD

barnetpeter

Tern...lots were asking about this soaring stock yesterday.

I have been buying tern this year since 2p and also bought plenty in a recent primary bid share placing at 6.6p. Been selling quite a few and got 16.75p today for more than an 8 fold on my cheapest buy. Happy days. It closed above 18p tonight. Tern is a majority holder in a company called Device Authority (DA) which looks to have some excellent technology. Some think a huge bid for DA is on the way from the US. Tern is very volatile.....it previously rose from about 0.8 to 26p a couple of years ago...I think I cashed in at 15p.Then it fell all the way back.

Tern has little or no cash and will probably need to raise funds or maybe do a placing soon. I think it may hit 25p or even higher but just on momentum and I notice the big hitting bears are now taking an interest. The price is now well ahead of events in my view with mkt cap of approx. 35 million against 10 million in assets but of course that does not mean it won't double or treble again! DA might just be a life changer and the company has been very quiet in the face of this huge rise although pushing out news daily so will hold some of my now free stock long term but it may just fall away to oblivion too.

I have to laugh because I had a twitter battle today with Tom W on tern. I pointed out that share prophets has always got this one wrong. They were telling readers recently to sell out at about 1.88p and less. It happens of course; I was merely pointing out that they publicise when they get things right (which they do in fact...on the Chinese duds for instance) so should put hands up when they suggest selling the biggest winner in the Stock Market so far this year at its lows!

jonesj

I believe Boohoo.Com (LON:BOO) have an announcement scheduled.

I think the share price has fallen back to a level where the valuation is interesting, providing they are maintaining high growth.
Disclosure: No current holding, but have held previously.

xcity

I do hold Boohoo.Com (LON:BOO), and will be interested in the results, but I don't think I will care what they are. If surprisingly bad, the price will fall and I might buy more. Otherwise I will just stick. I'd only consider selling if something emerges that challenges what I think I know.

This doesn’t look good. Let’s hope it’s just a pop up....
https://mobile.twitter.com/UmarKamani/status/988866765294850048

Paul Scott

OK thanks, I'll definitely take a look at BooHoo results in the morning (in which I hold a long position)

I'm a bit worried about what impact the imminent GDPR rules might have on companies like BOO, which rely heavily on email offers to stimulate customer demand. Hence why currently I'm keeping my position size fairly modest in BOO, so that a say 30% drop on a profit warning wouldn't hurt me too much.

Fingers crossed!

Paul.

Mark Tughan

25th Apr '18

Morning!,

Can I suggest £CCY today? interims out SP down a little. I hold! Looking forward to Boohoo.Com (LON:BOO) 0 where I bought just recently, thinking I had a good entry point!

I too will be at Mello - looking forward to your sessions tomorrow Paul although I'm going to struggle to make the 9am one!

Effortless Cool

Paul,

Your view on Water Intelligence (LON:WATR) would be much appreciated. Q1 trading statement out this morning, with revenues up 40% and profits up 50%.

https://www.investegate.co.uk/water-intelligence--watr-/rns/q1-trading-update/201804250700110078M/

LeoInvestorUK

Boohoo.Com (LON:BOO)

Revenue: +97% (+92% constant currency) vs guidance +90% (next year's guidance 35-40%, medium term 25%+)
EBITDA margin: 9.8% vs guidance 9.25% to 9.75% (next year's guidance 9-10%, medium term 10%).

So that looks like a slight beat with a reasonable outlook. My concern is over diluted EPS of only +25% and whether there are one off factors this year which may point to a better performance next year. I'm looking into this although they did of course issue more shares and amortisation of acquired businesses is noted.

Edit: It looks like PLT was bought near the end of FY2017 and so the first significant amortisation was FY2018. Trademarks are amortised over 10 years, customer lists over 3, thus thus the relatively high charge. £4.5m is shown as amortised for PLT and NG, so I think you could add that back in which I make a 0.4p adjustment and about 40% "true" EPS growth (not stripping out share based payments or anything else that might repeat). So while the true EPS is the unadjusted 2.71p, the same performance next year would result in a genuine 40% growth. And in 2 years time you will get a one-off jump as the customer lists are fully amortised.

High growth seems largely dependant on PLT which in turn seems to be dependant on celebrity endorsements, which are a more fragile way of gaining business than I would prefer.

MrContrarian

My morning smallcap tweet: Mission statements don't make money.

Countrywide (LON:CWD), Franchise Brands (LON:FRAN), Water Intelligence (LON:WATR), Crawshaw (LON:CRAW)

Countrywide (CWD) Q1 rev down 10%. "The Group has moved swiftly to restore expertise in Sales and Lettings following the appointment of Paul Creffield as Group Operations Director...In Sales, we have seen an improvement in both the register of properties available for sale and in our market share of listings compared with Q4 2017. In Lettings, our share of listings is also ahead of Q4 2017." I'm short.
Franchise Brands (FRAN) Q1 trading marginally ahead of management's expectations. No of jobs completed by Metro Rod and Metro Plumb up 16%, although the average order size was slightly lower.
Water Intelligence (WATR) Q1 rev up 40%, pretax up 50%. "Comfortably in-line with our expectations."
Crawshaw Group (CRAW) FY rev up 1%. Pretax pre exceptional & write offs -£1.9m (-£1.4m). Recent 12 weeks: high street has remained challenging but factory shop format continues to perform well. "Our Mission: To use our expertise to source, prepare, produce and retail quality fresh meat products at a price and a service level that continues to delight our customers." You are just a butchers. What about delighting shareholders?

gus 1065

Posted for information rather than inviting comment, here’s a link to the latest Begbies Traynor (LON:BEG) “red flag” report on the state of small cap UK PLC.

https://www.investegate.co.uk/begbies-traynor--beg-/rns/latest-red-flag-alert-report-for-q1-2018/201804250700129982L/

Pretty downbeat assessment with various headwinds identified and a few icebergs on the horizon.

Gus.

Small Cap Value Report (Wed 25 Apr 2018) - BOO, W7L, CLG, BEG

Mello Derby

Boohoo.Com (LON:BOO)

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Paul Scott

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