Small Cap Value Report (Wed 3 Apr 2019) - placeholder

Wednesday, Apr 03 2019 by

Good evening/morning, it's Paul here, with the usual placeholder.

Before we start, I'd just like to thank a smashing group of Twitter investor friends, who held a barbeque at Bertie's place recently. I was told yesterday that they held a whip-around, and raised £130 for ZANE - the small but remarkable charity which I recently visited in Zimbabwe, on a fact-finding mission. What a lovely initiative, thank you!

Once I get my act together, I'll share some more of the amazing experiences in Zimbabwe a few weeks ago, as a guest of ZANE. It certainly was not a holiday. It was a privilege to witness what this amazing little charity does to deliver humanitarian aid to mainly destitute pensioners in Zimbabwe - many of whom served the Crown, the "forgotten legion" of Commonwealth soldiers of all backgrounds, & their widows, which Tom Benyon has campaigned for. I'm sure my visit only scratched the surface of things there, but it really was inspiring. These people really do deserve our support. I had no connection with Zimbabwe beforehand, but definitely feel a connection now that I have visited.

There is also the complicated & confused history to consider. As more than one person told me, "If you think you understand Zimbabwe, then you need to do more research!"

NB. I paid for my own flights, whilst everyone from the charity flew economy (ZANE's policy, but definitely not my policy for long haul flights!) from Jo'burg to London. "You bastard!" was jokingly mouthed to me, with broad smiles on both sides, by one of my great pals from ZANE, as I joined the business class boarding queue on the way home, for the 11 hour flight back to London.

Having seen some of its operations on the ground, and the lives being saved literally every day, for small amounts of money (e.g. $25 per month per person for essential medicines, or even small grants for food), I cannot emphasise enough how a little money will go a long way, if you can spare anything for ZANE, please do so with this link.

The best thing, is if you can commit to a regular amount. A monthly donation is amazingly valuable, as it allows ZANE to commit to helping someone, often for the rest of their life (it specialises in helping destitute pensioners). Everyone is means-tested.

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43 Comments on this Article show/hide all

Mrken 3rd Apr 24 of 43

Advice please
On IWeb dealing platform I sometimes get a response that they cannot deal (sell) automatically and that i can request a negotiated order.
What does this mean and will I get a poor price?


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mojomogoz 3rd Apr 25 of 43

In reply to post #465121

Hello zipman

Interesting comment re Photo-Me International (LON:PHTM) . I know nothing about this area but it occurs to me that European attitude to and use of laundrettes may be very different from UK. Most cities and towns in Europe (particularly in the South) have quite dense central living (something like NY if you are familiar with it where the bottom of each tower has a dense cluster of services). A lot of people in apartments that are relatively low cost with as a result relatively high disposal incomes even on low-ish wages so willing to use local services (think Spanish towns and how ordinary people will eat out frequently in a week).

So, a very simplified view above, but can PHTM reach a similar level of use per machine? View?

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slopsjon 3rd Apr 26 of 43

In reply to post #465191

This occurs with illiquid stock on any platform. When Market Makers don't have much stock they won't allow automated orders. The buy/sell has to go to the dealing desk for someone to handle the trade manually. You than get the market price. Sometimes the MM moves the price and then accepts the trade. So you may find the price goes up or down as a direct result of your trade. But sometimes they move it after your trade.

On iWeb you can set a limit using tradeplan instead of a Negotiated order.

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rwalford 3rd Apr 27 of 43

In reply to post #465191

Hello MrKen,
My experience (with Halifax Share Dealing and Equiniti) is that these messages come when (1) your order is above the Normal Market Size (i.e the standard trading bloc of shares that are traded) to such an extent their computers cannot find someone to buy this many shares in one go; or (2) it is a stock with very few market makers and none of those are very interested. One also gets these messages from time to time when buying.
It is usually the case that, if you phone your broker's dealing room to place the negotiated order, you will pay a higher commission than if it is an online order. As for the actual share price, the chances are if you get one of these messages that you are looking at a stock with a wide spread between the buy and sell price. You can set a limit when you speak to the dealer as to the level at which you are willing to deal.
I hope that this is of some use.

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Asagi 3rd Apr 28 of 43

Normal Market Size (i.e the standard trading bloc of shares that are traded)

this term has been renamed 'Exchange Market Size' now. It is actually the maximum number of shares that a market maker's quoted bid:offer spread must be good for in one trade. There's an apparently decent article on the subject here (I've not read it all)


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Zipmanpeter 3rd Apr 29 of 43

In reply to post #465211

Re Photo-Me International (LON:PHTM) and your post no 25 - I think they have found a laundry niche that will occur and endure in most countries to some extent (ie large wash loads esp with large items especially in places accessible to cars eg supermarket/petrol stations.

I am ex Marketing and think about consumer first . Who might this be and will the need last? Answer is I don't know but I can think of lots possibilities - households with small washing machines; households doing periodic deep cleans of duvets/curtains; small businesses with occasional laundry needs so no regular laundry bought in; crisis users when machine breaks; travellers; the minority without machines; people who do a weekly shop for whom doing the laundry at the same time is more convenient/less noise at home; people whose home water supply is weak or discoloured (issue I faced in Thailand even in a swish Bangkok flat). Need real data to back this up.

What I do know is that Photo-Me International (LON:PHTM) are installing them and the consumers are finding them - evidence is the average revenue Revolution /machine across multiple geographies.

Just my thoughts and as stated the company is currently reliant on its other divisions.

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mojomogoz 3rd Apr 30 of 43

In reply to post #465261

Thanks. I asked as plan to have a look at company generally

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jwebster 3rd Apr 31 of 43

Photo-Me International (LON:PHTM)
Yes, I recently submitted a passport renewal application on-line and the relevant government let me upload my photo, no need for a physical version. They had a on-line 'checker' programme which told me immediately whether the photo met passport requirements. Eventually other governments will move to this, although it will take some time due to the usual security concerns.

So Photo-me is dead eventually

The laundry business is a tough call. I have no idea but definitely their first trials seem to work, they look like the 'easyjet' of washing
Can they make £30 - £40m earnings from laundry? What about capex and lease liabilities? In Asia they already have lots of small independents which do this, cheaply, including ironing. Europe, maybe that's the play.
Also, where's the disruption? For example, new tech such as polymer beads or LG's steam approach.
Needs an angle

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Mrken 3rd Apr 32 of 43

Thankyou Slopsjon, Ricardo and Asagi for your good information.
After reading your replies I submitted a negotiated order a short while ago and am very pleased with the outcome. Thankyou again.

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coombe 3rd Apr 33 of 43

Photome :
Using Stockopedia's  research it seems that profit warnings often come in three's...or more.
Expanding in difficult trading conditions is, as Sir Humphrey would say, ' is a brave decision'.
I'm sitting on the sidelines....for several months.

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gus 1065 3rd Apr 34 of 43

In reply to post #465066

Hi tabhair.

Re M Winkworth (LON:WINK) , I agree today’s results and commentary were encouraging. Given its size it tends to fly under most people’s radar screen and its sector (estate agency) is out of vogue as well which has kept it on a pretty cheap valuation. It’s also very illiquid and tends to trade in very low EMS of about 1,000 shares with a very wide spread so it’s hard to get hold of to build up a decent holding (probably so quite tricky to sell). This said, they keep generating cash (especially from the rental management side) and trotting our generous dividends so for a patient accumulator I think they’re a decent buy and hold. Graham had a few Bon mots to say about them last time he covered the stock.


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JohnEustace 3rd Apr 35 of 43

Re Photo-Me International (LON:PHTM), I don’t know why people think that sending a photo from your phone is less secure. A picture taken on a mobile will likely have a time and GPS stamp and the file will record if the image has been edited.

I’ve noticed that the Photo Me booth in my local Asda is now labelled as a digital one. So I think it’s basically reproducing the mobile phone method of submission over a landline. You get a code to use on the passport application form that links to the photo. Why does anyone pay £6 to use this if they have a smartphone and someone to point it at them?

Them blaming Brexit seems to be clutching at straws - if anything they are getting more business from everyone that’s been applying for Irish or other EU passports. Perhaps we should have a prize for the most laughable use of Brexit as an excuse?

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Graham Ford 3rd Apr 36 of 43

Regarding Photo-Me International (LON:PHTM) laundries.

The old fashioned launderettes mostly died out presumably because the vast majority of people have access at home to a washing machine. (Showing my age - I expect it is now seen as a necessity whereas when I left home it was seen as more of a luxury item).

So, the big part of the market is presumably for items that won’t fit in the machine at home such as the duvets. I take these to the dry cleaners as they also do a laundry service using commercial size machines. Isn’t that what everyone does? I’m struggling to see what problem Photo-me are solving with their laundry service.

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Edward John Canham 3rd Apr 37 of 43

Photo-Me International (LON:PHTM)

Going XD tomorrow - the interim being paid of 3.71p is by itself a 4.46% yield. The PER will go go under 8 even allowing for today's mild profit warning.

It's basically a contrarian play - do you think their growth initiatives will outweigh the fall-off in Photo- booth income. Can't give you an answer but like a few here I can report there is a definite demand for their laundry product - duvets and other bulky items - they seem to have researched it, are confident with it and are going full-steam ahead. Yes it's low tech - but it doesn't have to be any other way - the high tech experiments from the company (bank machines etc) are actually far less interesting.

I have to admit, if I were them I'd cut the dividend - if the share price gives a 10% yield you're doing the company no favours by maintaining it - the market expects a cut. It is not supported by FCF.

One gnawing red flag - why did they raise @£24m of debt in the Y/E 2018 - I know it's only at 1.2% fixed, according to the notes to the accounts, but on the face of it, it's not required, but the only explanation seems to be they wanted to increase resources, which doesn't make sense.


No holding (did in the past)

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smatthews1 4th Apr 38 of 43

In reply to post #465121

Regarding your comments on the photo booth side of the business, what's your thoughts about any regulatory change from governments requiring more stringent requirements for passport photos using their latest facial recognition technology for eliminating fraudulent photos?

They have commented a few times in the past about certain countries adopting their technology, however I'm struggling to see how they are monitising this, considering the advancements in mobile phones.

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peterg 4th Apr 39 of 43

In reply to post #465311

Certainly a big part of the potential market for Photo-Me International (LON:PHTM) are large items. We have to drive miles to get large items washed (though I can't see their solution ever being common enough to change that round here!) But there is also a market from those who don't have access to WMs - they exist.

But the key certainly is that the laundrette type market is far, far smaller than it was 40 years ago. There's a market there, but it's never going to be be very big. Replacing their revenue from the ubiquitous but now disappearing photobooths with laundrettes seems like a very tall order.

Unless, of course they can see the solution becoming so common and cheap that it starts replacing home WMs. I can't see that.

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john652 4th Apr 40 of 43

In reply to post #465031

I’m going to reply to my own comment here, as I’m sure other lighthouse Lighthouse (LON:LGT) owners are interested in, and to quote:

“Fund manager Melwin Mehta told City A.M.: “It’s a popular stock with re- tail investors and there may be some who feel they are being screwed over.”
He added the deal would see Quilter given access to Lighthouse’s 7m affin- ity members “for free”.
Lighthouse chairman Richard Last, who will now defer his proposed de- parture from the firm until after the deal is completed, insisted it was an attractive proposal for shareholders.
Last said Lighthouse would benefit from joining the wider Quilter group and would be in a better position to grow.

Full article:

WEALTH manager Quilter has agreed to buy financial advice firm Lighthouse in a deal worth £46m, but shareholders said better offers may be on the horizon.
The deal would see Quilter, formerly Old Mutual Wealth, add Lighthouse’s 400 advisers to its network.
Lighthouse’s board has accepted the offerof33ppershare–a25percent premium to its closing price on Tues- day – and said the deal could be com- pleted in the second quarter.
The offer – from Quilter’s wholly- owned subsidiary Intrinsic – has so far gained support from investors repre- senting 44 per cent of the Lighthouse shares, the company said.
But the company’s fifth largest shareholder Cavendish Asset Manage- ment said the bid did not “adequately value” the growing business.
Fund manager Paul Mumford said the firm could attract better offers from larger firms such as Hargreaves Lansdown, Rathbones or Smith & Williamson.
“We fought off predatory bids in the past when the share price was down at about 3p,” Mumford said.
“This time, though, there must be plenty of other suitors interested in buying the company at a price that re- f lects the considerable growth poten- tial from its list of blue-chip clients, which is likely to grow.”
Lighthouse’s third largest share- holder MI Discretionary Unit Fund – which has a 13.4 per cent stake – also said the company was potentially more valuable.
Fund manager Melwin Mehta told City A.M.: “It’s a popular stock with re- tail investors and there may be some who feel they are being screwed over.”
He added the deal would see Quilter given access to Lighthouse’s 7m affin- ity members “for free”.
Lighthouse chairman Richard Last, who will now defer his proposed de- parture from the firm until after the deal is completed, insisted it was an attractive proposal for shareholders.
Last said Lighthouse would benefit from joining the wider Quilter group and would be in a better position to grow.

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Velo 5th Apr 41 of 43

In reply to post #465281

"...Using Stockopedia's  research it seems that profit warnings often come in three's...or more. ..."

Think you've misinterpreted the data there. The research reveals that is not the usual case.

The research facts reveals that by far the overwhelming majority of companies issue only the one profit warning. Two warnings are only issued by a smaller percentage than those issuing just the one.

And those that go on to issue three or more warnings are but a tiny fraction of all.

- I have the research figures somewhere (Stocko's own research + European company research data and US research; amazingly all in line with each other to the median average, whatever the country, or size of company) but too busy right now to go dig them out, but rest assured it's pure urban myth that profit warnings come in three's - they don't, or rather it's highly unlikely. Just the one is the most common.

Saying that, I've noticed this past year some issuing multiple warnings but they are still classed as 'deviants' to the decades of the median averages research data.

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herbie47 5th Apr 42 of 43

In reply to post #466221

Yes from Stockopedia report over a limited period (3.5 years): "It turned out that during this period, 64% of the companies only warned on profits once, while 36% warned more than once. 11% of the companies warned on profits either three or four times during the period."

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jonesj 5th Apr 43 of 43

Here's the data.     It does add up to 100% & allowing for rounding & some simple arithmetic, matches Herbie47's post.


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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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