Small Cap Value Report (Wed 30 June 2021) - PDG, WYN, CAR, STU, SAGA, CBOX, SAA

30th Jun '21 by Jack Brumby

51 comments 11487 reads

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

Agenda -

Paul's section:

Studio Retail (LON:STU) (I hold) - impressive results for FY 03/2021, and encouraging outlook comments. Seems strikingly cheap on a PER of only 6.6 - scope for a re-rating? I think so

Saga (LON:SAGA) (I hold) - tender offer for old bonds is over-subscribed, and scaled back to the £100m maximum. Finances now look much more secure.

Cake Box Holdings (LON:CBOX) - strong results, despite the pandemic. Looks a smashing business, and the big rise in share price seems fully justified.

M&c Saatchi (LON:SAA) - late 2020 accounts finally published. Strong H1 2021 trading is more important. Good news re reduced potential dilution. Could be worth a fresh look, by readers, but it's not for me.

Jack's section:

Pendragon (LON:PDG) - Pendragon confirms its peers' comments. Trading is strong for car retailers right now. These shares are often cheap due to their low margins but it's possible that the industry-wide rerating has further to run. Potential H2 supply disruption is flagged as a possible concern, however.

Wynnstay (LON:WYN) - record underlying profit before tax for this prudently managed supplier to the UK agricultural industry. Low margins and slow growth in the past might put some off, and the shares are not the bargain they were six or so months ago, but Wynnstay has a solid expansion strategy, strong finances, and a good dividend track record.

Carclo (LON:CAR) - turnaround situation that has rerated aggressively. Results probably not as bad as initial market reaction suggests (this has been a tough year for most operators) and there is potential upside from here - but there are also material risks to consider as well.

Timing - today's report is now finished.

Disclaimer -

A friendly reminder that we don’t recommend any stocks. We aim to cover notable trading updates & results of the day and offer our opinions on them as possible candidates for further research if they pique your interest. We tend to stick to companies that have news out on the day, and market caps up to about £700m. We avoid the smallest, blue sky type companies, and a few specialist sectors (e.g. resources, pharma/biotech).

A central assumption is that readers then DYOR (do your…

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Poker111

30th Jun '21

Paul - I watched the Studio Retail (LON:STU) presentation and was impressed. They seem very confident of achieving the £1bn sales target and have a clear strategy to get there. I note your comment about the sales on credit. It works for them though , as apart from the financial services profit, they point out that the average cash customer spends £300 every 2 years (if I recall correctly), whereas the average credit customer spends £1,000. This demonstrates that the availability of payment plans drives sales volume and retail profit too. Receiving a monthly statement increases customer stickiness by driving traffic back to the site. Whilst making a payment, they may shop again, creating a virtuous circle for the business.

Breakout Trader

Looking at Studio Retail (LON:STU)

I don't normally 'zoom out' this far, but the monthly chart would suggest 320p is a key level to break. My buy zone would be 320p +5% (Personal opinion, not advice).

Ideally we get some consolidation first, just below that level.

barnakles

Interesting points re the debt Studio Retail (LON:STU) carry to finance operations, I want to research their credit risk managment strategies to understand this more. I am very encouraged by both their:

Website traffic profile - 10m visits per month, putting them around the top 200 sites nationally and 5,000 globally (according to SimilarWeb)
Excellent TrustPilot review scores - 4.3/5

The reviews compare very favourably with say Tandem (LON:TND), who's D2C sites have atrocious reviews and by the sounds of it, a very poor customer service due to product quality issues.

I bought a small opening position today in Studio Retail (LON:STU) on the strength of their website stats and customer reviews. I definitely want to dig into the debt/credit risk issue as well as the Frasers shareholding / intent. Another risk of their business model is competition from Klarna, AfterPay and similar 'Buy now, Pay Later' operators that have proliferated online in recent times.

Antehelion

this should be a request for the stocko team to resolve in the software imo, it shouldn't be a problem each user has to constantly think about.

would be easy for the app to know what tickers were mentioned through a reply-to chain and show these at the side for example...

prior art for this is everywhere you look,

every forum system over the last 20 years has shown a subject header on each post in a chain.

emails that you respond to retain the subject line and add a re: prefix.

this implementation of a messaging system just hasn't tried very hard to show how messages link as yet, but there are many widely used ways of solving this.

if you ever find yourself asking every user to do something very application specific every time the want to contribute, you can guarantee your design is flawed.

RichardK

Re Wynnstay (LON:WYN) I see that following the update, house broker Shore Capital has upgraded its full year profit forecast by 15.7% to £9.6mln, and its 2022 estimate by 14.9% to £10mln.

Analyst Akhil Patel said: "We continue to remain positive on the group’s long-term prospects in a dynamic market and as such expect the business to expand going forward both organically and acquisitively to deliver shareholder value creation."

I hold and bought some more at this morning;s opening.

Richard

Snowbum

suggest you start a separate discussion thread for £BMN

Also worthy of note is their recent Data Insights hire, Gareth Powell. Highly endorsed, sounds like the real deal. He was head of data/analytics at TalkTalk and a certain N Brown - for 17 years. Concurs with their strategy of driving growth and innovation through the efficient use of data.

Jack Brumby

Hey turbo, sounds like a good idea - the best way of communicating with the team regarding this kind of software request is actually to use the green support button at the bottom right of the screen (on desktop). Unless of course that is how you did it back on the 22nd of April in which case it will already be in the system.

From there, colleagues tag these requests so we can gauge cumulative demand and the dev team can then discuss them in a more methodical fashion. Posting about it in the SCVR comments means it might get lost in amongst all the stock market chatter.

I'd recommend other users in this thread to follow suit as that's the best way of 'voting' for a certain feature.

Best,

Jack

Sure thing sharw & Mr Jinks, we'll look to include a sentence in the disclaimer for this.

ACounsell

Yes I know that is more appropriate for a resource stock and I did think that there was a separate discussion thread for mining and miners. However I do find that Stockopedia has a bit of a weakness when trying to track down a specific topic not covered under the main menus. Any suggestions or am I missing a general search function on the site?

dodge1664

STU: reviews on TrustPilot may be good, but its a different story on reviews.io (1.5/5) and reviewcentre(1.4/5). Were the negative reviews on TrustPiloted removed?

https://www.reviewcentre.com/r...

https://www.reviews.io/company...

Bad reviews seem to be normal for budget retailers though. Customers pay a lower price, but good luck if anything goes wrong or you want to return an item.

Inever

Don't forget the debt is securitised on the relevant receivables so the lender has no recourse to other assets should the receivables turn bad.

sharw

Thanks Jack

jules2k6

Hi ACouncell, on the old site there is a discussion tab you can use to see any chat about the company from its stock report page. Unfortunately for Bushveld Minerals (LON:BMN) the last comments were in 2018.

Breakconvention

2nd Jul '21

There's talk this morning on the LSE board of a potential partnership agreement between BOO & GAP, relating to the store closure announcement from GAP - https://news.sky.com/story/gap...

Rusty2

30th Sep '21

There still is a discussion tab on the new site but it does not pick up everything. This is a problem if it is just discussed within say the SCVR. The search could be improved on here. Here is one that is not in the discussion tab: https://www.stockopedia.com/ar...

Harry Hindsight

Is that an attempt at the 'three mountain top'. Fails a third time then the tarot readers say 'not now sonny'.

I write and read professional reports and once you get through all the guff and disclaimers etc can usually dump 90% of it so be careful with the 'bumf'.

GrahamScott

7th Oct '21

re £wyn a farmer friend of mine has just ordered his fertiliser for next crop and prices have increased 50%. Assuming Wynnstay work on fixed margin uplift then we should see an increase in turnover and profit for next quarter

Small Cap Value Report (Wed 30 June 2021) - PDG, WYN, CAR, STU, SAGA, CBOX, SAA

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Jack Brumby

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