Small Cap Value Report (Wed 25 Sept 2019) - SOS, BOO, TMMG, UNG, HRN, NET, CAR, SDI, CARD

Wednesday, Sep 25 2019 by
60

Good morning, it's Paul here today.

Estimated completion time - probably about mid-afternoon. Update at 15:36 - as usual, it's taking longer then expected, so I'll keep going until early evening.

Update at 18:09 - today's report is now finished.



Sosandar (LON:SOS)

(I follow this company closely, as it's by far my largest holding in my SIPP. Obviously just skip this section if it doesn't interest you)

Digital ads - I wasn't able to get any photos of Sosandar's digital ads in selected tube stations in London (see Monday's SCVR). So I contacted the company's PR, to ask for some photos, and more info, see below.

Sosandar's digital ads are shown at selected tube stations in London, during commuter hours, morning & evening, on weekdays. I visited a couple of tube stations at around 3:30 pm, hence why their ads would not have been showing at that time.

Here are a couple of photos sent to me by the PR co at my request;


5d8a90b855666Optimized-SOS1.PNG


5d8a91111c665Optimized-image007.jpg


5d8a9175aa590Optimized-image006.jpg


TV advertisement - There's also a Sosandar TV ad, which is being trialled. Here's the link to that short video.

The background of Sosandar's founders was in fashion magazines. You can see that in the quality of the company's photography & video imagery. It looks like a proper brand.




On to Wednesday morning's trading updates & results statements....

Readers like us to comment here on BooHoo, even though it's now a mid-cap:


Boohoo (LON:BOO)

Share price: 266p (pre-market open)
No. shares: 1160.7m
Market cap: £3,087.5m

Interim results

Terrific figures today, from this multi-brand online fashion retailer.


5d8b0f9d600a6BOO_figs.PNG



Graham covered its ahead of expectations update here on 5 Sept 2019. As you would expect, with such a recent update, today's figures & outlook are consistent with it.

Here's today's outlook guidance;

Group revenue growth for the year to 29 February 2020 is expected to be 33% to 38%, with adjusted EBITDA margin for the year to remain at around 10%,…

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Sosandar PLC, formerly Orogen PLC, is a United Kingdom-based company that operates an online women’s wear platform. The Company’s clothing categories include dresses, jackets and coats, knitwear, shirts and blouses, tops, skirts, trousers, jeans, leggings, footwear, leather and suede, occasion wear, work wear, autumn trends, velvet and holiday shop. Its footwear products include Pewter Metallic Chelsea Boot, Red Leather Ankle Boot, Velvet Cylinder Heel Ankle Boot, Black Leather Stud Detail Ankle Boot, Black Suede Closed Toe Mule, Grey Velvet Court Shoe With Jeweled Brooch, Black Suede And Pewter Metallic Court Shoe, Black Leather Front Zip Ankle Boot, Leopard Print Leather Chelsea Boot, Steel Blue Leather Snake Print Ankle Boot And Black Suede Knee Boot. It also offers latest edit of day-to-night dresses, on-trend separates, luxe leather and outfit-topping shoes through its platform. more »

LSE Price
18.5p
Change
 
Mkt Cap (£m)
30.1
P/E (fwd)
n/a
Yield (fwd)
n/a

Boohoo Group PLC, formerly boohoo.com plc, is an online fashion retail group. The Company is based in the United Kingdom and has a presence in the United Kingdom, the United States, Europe and Australia, selling products to almost every country in the world. The Company owns the boohoo, boohooMAN, PrettyLittleThing, Nasty Gal, MissPap and Karen Millen and Coast brands. These brands design, source, market and sell clothing, shoes, accessories and beauty products targeted at 16-30 year old consumers in the United Kingdom and internationally. more »

LSE Price
276.7p
Change
2.1%
Mkt Cap (£m)
3,144
P/E (fwd)
44.6
Yield (fwd)
n/a

The Mission Group Plc, formerly The Mission Marketing Group Plc, is a United Kingdom-based marketing communications and advertising company. The Company's portfolio comprises integrated, multi-discipline, multi-sector agencies, specialists in specific marketing/communications activities and specialists in particular market sectors. The Company's segments include Branding, Advertising and Digital; Media; Events and Learning, and Public Relations. The mission includes a network of entrepreneurial marketing communications agencies in the United Kingdom, Europe, Asia and the United States. Its subsidiaries include April Six Ltd, which is engaged in marketing communications and specializes in the technology sector; Big Dog Agency Ltd, which is engaged in Marketing communications, Speed Communications Agency Ltd, which is engaged in public relations, and Bray Leino Ltd, which is engaged in advertising, media buying, digital marketing, events and training, among others. more »

LSE Price
85p
Change
 
Mkt Cap (£m)
72.5
P/E (fwd)
8.6
Yield (fwd)
2.8



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


48 Comments on this Article show/hide all

RichardK 25th Sep 29 of 48
2

Paul
Re Sosandar (LON:SOS) tube advertising. It is impotrant to remember that the vast majority of the population and the target market do not commute on the London underground.

Richard

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Desanj 25th Sep 30 of 48
7

hey Paul, I think it a wonderful idea to auction the afternoon at Claridges. Well done.....and good luck to ZANE

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Paul Scott 25th Sep 31 of 48
1

In reply to post #516531

RichardK,

Re Sosandar (LON:SOS) tube advertising. It is impotrant to remember that the vast majority of the population and the target market do not commute on the London underground

Yes, that's a valid, if rather obvious point!

SOS is targeting its marketing spend into areas which are already proven as working. There's a lot of online fashion expertise in & around the Manchester area, due to BooHoo, MissGuided and other online fashion companies working there. Hence SOS has been able to tap into that expertise, to identify that tube adverts work well, which is why they are being trialled by Sosandar, along with other new marketing (such as targeted TV ads in regions, not national TV).

Regards, Paul.

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Zipmanpeter 25th Sep 32 of 48
6

In reply to post #516531

True but from a Marketing perspective, if doesn't matter if only 0.000005% of the target audience walk past (or any tiny number to avoid discussion on this specific figure!).

What matters is: if they spend spend £10K on (London) tube adverts, do they get an incremental £50K of revenue from doing so. That will generate (simplifying again) at +/-50% gross margin , an incremental £25K gross profit less some (marketing) overhead to organize --> an extra $20K of profit.

They will also do the same for digital (national), the new regional TV advert (regional) etc, emails to bought address lists etc to reach the maximum people most efficiently. The Marketing art being to get the message and marketing right to reach and persuade at the lowest cost - used to be AIDA (awareness, interest, desire, action, with the ultimate action being a (re-)purchase!

Overall, I hope/expect £SOS are going to spend up to £2Mn this year on all forms of Marketing and generate revenues >£10Mn, using the money from the recent raise. As the revenue goes up, the spend should get more efficient eg £2Mn to generates >£18Mn in 2020 and after that stays at <10% of revenue whilst growing the business.

This is what will create a brand and scale to pull them out of the main pack to join other profitable and well known brands.

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sharw 25th Sep 34 of 48
1

Partly due to Ed's profit warning webinar ( www.youtube.com/watch?v=YayTZn...  ) when Coral Products (LON:CRU) issued a warning at 14 48 on Friday 12/1/18 I sold my entire holding. Pity I hadn't seen the webinar before the first warning on 27/1/17.


On 26th March this year we had PW no. 3: "... results for the year ending 30 April 2019 to be materially below both Management and Market Expectations".

Today we have number 4: "With four months of the current financial period completed, sales and profits are below management's expectations".

With net debt greater than MCap this is now in bargepole territory. Glad I got out when I did - thanks Ed.
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swanhunter 25th Sep 35 of 48
4

I though the SOS advertising very strong, and their target market is underserved with an increasing propensity to buy online. (I work for a sort of competitor and see our key stats).

It’s an execution play on their ability to deliver relevant product to that base and based on what I see they are on the right path.

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JohnEustace 25th Sep 36 of 48
1

In reply to post #516561

My experience was that Tube adverts work well - also ticket gates at mainline stations. TV worked well also but it's a short term thing - good boost while the ads run but you can get hooked on keeping them going.

I wasn't so keen on each SOS ad including a 25% off code - Fashion. That seems a bit needy to me?

The other issue with going to TV is that it lifts the customer expectations. You're saying you're one of the big grown up brands now, so you had better be ready to meet the customer service and quality levels that implies.

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Paul Scott 25th Sep 37 of 48

In reply to post #516336

Hi andrea34l,

Apologies, I didn't get round to looking at Ergomed (LON:ERGO)

On a very quick skim of the figures, it does look like a remarkable turnaround in profitability, from previous losses. It's not a company I've ever looked at before here in the SCVRs, and being a pharmaceutical sector (which is not a sector I normally look at), don't feel confident that I could write anything worthwhile about it.

The balance sheet looks OK, and the cashflow statement seems OK too - e.g. very little development spend being capitalised (only £276k). 

All in all, for subscribers that have some sector expertise, I think ERGO looks worthy of a closer look. Key questions might include: are these greatly increased profits sustainable? What's driving them? What can this company do that competitors can't?

Regards, Paul.

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Thornabian 25th Sep 38 of 48
4

Before IFRS 16 companies were selling and leasing back properties to inflate profits in the current year - also to meet executive bonus targets amongst other things.

IFRS16 requires the company to recognize the Right of use Asset as well as the RoU (PV) liability of the lease. This was the treatment for finance leases before the new standard too - it just applies to all leases now. This is the other reason they changed it as companies used to incorrect classify them.

The net effect on the balance sheet of the RoU asset and liability should provide a more true view.

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Edward Croft 25th Sep 39 of 48
2

In reply to post #516576

No problem @sharw glad it's helped.

Maybe next summer we'll update the profit warning research again - we do an internship program and it helps with data gathering.  It was a big project !

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Gromley 25th Sep 40 of 48
5

In reply to post #516626

Ed,

I think a refresh on the Profit Warning Survival Guide would be an excellent addition. However I would really like to see it done in a different "market phase" so perhaps you could consider the timing against the state of the market.

At the time you published the PWSG I had just completed a similar analysis (mine was probably less robust, but covered a much longer period) which at face value gave almost diametrically opposed conclusions.

I assumed that my results were flawed, but when I tried to drill down I discovered  that my results appeared to be unduly influenced by big gains at the start of a bull market.

At the time I did not really have the data resources to test this further but it would be useful hypothesis to follow up on.



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InvestorJohn 25th Sep 41 of 48
4

Thanks Paul for all your effort today top job!

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Gromley 25th Sep 43 of 48
1

In reply to post #516646

Awesome thanks Taff,

That looks like a fascinating paper - can you explain to my kids why I won't be taking them out at the weekend? ;-)

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Taff6 25th Sep 44 of 48

I’m afraid You’re on your own with that one
However I’m sure you’ll be out the weekend!

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fwyburd 26th Sep 46 of 48
3

Great report yesterday Paul, excellent coverage, thank you.
cheers
Francis

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Paul Scott 26th Sep 47 of 48
3

In reply to post #516691

Thanks Francis (and InvestorJohn above).

We're all human, so it's nice to get some positive feedback.

Equally, negative feedback just makes me want to down tools & not bother doing any more writing. Maybe the couple of idiots who like to give thumbs downs most days, might like to think about that?

Best wishes, Paul.

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Paul Scott 26th Sep 48 of 48

Update on Brady (LON:BRY) today - this sounds like it's finished - existing equity worth little to nothing, probably, in my opinion.

Why would anyone want to put £15m of fresh equity into this crock?  If you've got shares in Brady, I would sell on the opening bell tomorrow, for anything you can get.


The Company also then confirmed that it was advancing a number of financing options to provide increased working capital to meet the Group's liquidity requirements in the required timeframe, whilst also advancing financing options to underpin a wider strategic product plan described in the Company's interim results for the period ended 30 June 2019.
The Board now confirms that the Company is advancing funding initiatives to provide the Company with access to approximately GBP1.5 million to meet the working capital requirements of the Group prior to 30 November 2019 to support existing operations.
In addition, the Company estimates that its forward-looking strategic product plan, intended to enhance the Group's execution fundamentals and expand the Group's market reach, would throughout the course of its full multi-year implementation require up to a maximum of GBP15 million of capital, from internal or external sources, to implement and the Company also intends to continue to pursue financing options to underpin this strategy.


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 Are LON:SOS'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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