Small Cap Value Report (Wed 6 Feb 2019) - RDW, BDEV, GRI, STR, OTMP

Wednesday, Feb 06 2019 by

Good morning/afternoon, it's Paul here. I'm working the afternoon shift today, so this article will gradually update. Please refresh this page later.


I like to keep track of what housebuilding companies are saying about their market conditions, as this affects so many other areas of the economy. Today we have 3 of them reporting;

Redrow (LON:RDW) - Interim results - record profits of £185m, up 5% vs last year's H1.

Current trading sounds (perhaps surprisingly) good;

The market during the run up to the festive period and the first two weeks of 2019 was subdued by macroeconomic and political uncertainty. However, sales over the last three weeks have bounced-back with reservations running at similar levels to last year's strong market activity.

Barratt Developments (LON:BDEV) - Interim results - profit before tax up 19.1% to £408m.

Current trading sounds fine too;

'Whilst we continue to monitor market conditions closely, current trading is in line with our expectations and we are confident of delivering a good financial and operational performance in FY19."

Grainger (LON:GRI) - Trading update - this is a residential property landlord, rather than a housebuilder. 

Everything sounds fine here too;

"It has been a good start to the financial year....
We achieved a 3.4% like-for-like rental growth on our PRS portfolio for the first four months of the year, which demonstrates the depth of customer demand, the quality of our offering, and the resilience of the sector...
We remain confident on the outlook for the year ahead.

Overall then in terms of the new build property, and residential rental markets, things sound to be ticking along just fine. This underpins my belief that the consumer is far more solid than many commentators seem to think. It also makes me increasingly annoyed at those in the media (and on twitter) who seem to want to talk the UK down at every opportunity.

Average incomes are rising nicely, and above inflation, and we have full employment. The daily scare stories about Brexit are becoming increasingly discredited - both sides have already made clear that they will prioritise the flow of goods at the borders, and won't allow trade to grind to a halt.

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Stride Gaming plc is an online gaming operator in both the Bingo-led and social gaming market. The Company's segments include real money gaming and social gaming. The real money gaming segment focuses on bingo-led online operation, using its purchased software to provide online bingo and related gaming activities to players. The real money gaming segment operates in regulated markets, principally the United Kingdom. The social gaming segment provides players with entertaining applications and games internationally. The Company has over 143 brands. Its online bingo brands include Kitty Bingo, Lucky Pants Bingo, Bingo Extra, Jackpot Cafe, Jackpot Liner and King Jackpot. Its online casino and slots brands include Spin, Magical Vegas, Big Top Casino and Slots Bonanza. In addition, the Company is engaged in development of Panda Slots application, a multi-technology platform for the creation of mobile social slot games customized on a player level. more »

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OnTheMarket plc is a United Kingdom-based holding company that provides online property portal services to businesses in the estate and lettings agency industry. The Company operates the United Kingdom online residential property portal, The Company's portal allows agents to display their properties to an audience of property seekers. Its online platform offers a search service and lists of homes for sale or to rent. The Company's portal offers saved search and property alert facilities to property seekers by creating a MyOnTheMarket account. Its portal provides an access to tools that enables manual property uploading, editing of property details and branch details. The Company serves home developers, online agent companies, commercials and property advertisers. The Company's subsidiary include Agents' Mutual Limited and On The Market (Europe) Limited. more »

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

29 Comments on this Article show/hide all

LongValue 6th Feb 10 of 29

In reply to post #444528

At the Growth and Innovation Forum held in January 2017, I briefly met Peter Harrison, the CEO of Bioventix (LON:BVXP). Three things struck me. Firstly, it was very dependent on its relationship with Siemens. Secondly, the development of new products involved long lead times. And thirdly, he gave me the strong impression that the company had annuity-like qualities and investors should be looking at a yield of around 4%. For some reason, the market seems to be valuing the company on the basis of it being a go-go biotech stock. Maybe the market is right or maybe it has got the wrong end of the stick.

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AlanJenkins2 6th Feb 11 of 29

In reply to post #444518


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jonno 6th Feb 12 of 29

In reply to post #444563

Regarding Bioventix (LON:BVXP) I have also noticed the recent share price increase. I hold and admit to the temptation to top slice, but have resisted. As to the reasons for the increase I have no idea. On a simplistic basis prices go when there are more buyers than sellers, although volumes have been low even for Bioventix (LON:BVXP). It may be that the Siemens test for troponin has started to gain traction?

Run ones winners so the old adage goes and is the way to make money in the stock market, although there are never any guarantees..

As Lord Lee has said when you are in something good stick with it. I can't image that Leon Boros is thinking of selling down his holding? I would rather hold Bioventix (LON:BVXP) with its surety of earnings on a PE of around 30 falling to 26 on current estimates that other great but more glamorous stocks such as Fevertree Drinks (LON:FEVR) on a PE of 50 falling to 44 or thereabouts, but everyone to their own.

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stepone 6th Feb 13 of 29

Forecasts for Bioventix (LON:BVXP) have been updated since I last looked - though the turnover forecasts for 2019 and 2020 are both suspiciously round numbers (9.0 and 10.0!). Makes me suspect that there is still little visibility around Troponin revenue. PE ratio remains in the 30s though, and EPS growth is no longer at these levels. Still think it's a great company, and as mentioned above, has annuity-like properties that I like.

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Collector 6th Feb 14 of 29

In reply to post #444563

I noticed some quite heavy buying of BVXP (I hold) at a round 31to 32 by the Buffettology fund
in late January.
If there are keen buyers and not many sellers, shares go up, regardless of value.

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Zarathustra 6th Feb 15 of 29

The Buffettology fund is a huge holder in Bioventix (LON:BVXP) (in fact the largest), and it's not hard to see why. On the face of it it ticks just about every box of a typical Buffet investing strategy.

It's a pretty niche product/service with huge margins and predictable earnings stream. The return on equity is huge and a large percent of sales falls straight into cash.

The question is whether they can keep growing free cash flow at 20%+ per annum. If they can then the current valuation looks cheap if anything.

I've been holding for around 3 years.

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sharw 6th Feb 16 of 29

In reply to post #444518

With regard to Redrow (LON:RDW) returning money via redeemable shares I don't think it is quite so clear cut.

I think it depends on how it is set up - possibly whether redemption is compulsory or not. In the case of Rolls-Royce Holdings (LON:RR.) redemption is not compulsory, the C shares carry a nominal dividend rate and the website clearly states it is a capital gain for tax purposes:

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dpshares 6th Feb 17 of 29

Some IMO strange earlier posts on BVXP.

i) If one is unhappy with the high valuation of a holding, why not sell? If a share being uncomfortably overvalued is not a time to sell, then one has to wonder when that time might be. Or to reduce expose/risk, sell part of the holding.

ii) BVXP trades at a high-rating for at least two reasons:
a) A proven track-record of growing revenue, profit and outstanding cashflow with high margins and recurring royalty payments.
b) If one considers possible future profits in terms of mathematical expectation, ie in terms of the future probability of success multiplied by profit such success would bring, then my opinion is that the valuation is warranted.

iii) One of the earlier points that " the development of new products involved long lead times" is precisely the thing that contributes to the company's competitive moat.

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Effortless Cool 6th Feb 18 of 29

"Slightly below expectations"

I think you have to go back to AO World (LON:AO.) in 2015 to find a company admitting to a result "slightly below expectations".

The only surprise, given AO's record, is that it was not well below expectations.

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Howard Adams 6th Feb 19 of 29


With reference to the Bioventix (LON:BVXP) discussions.

Just in case those interested have not seen it, this ShareSoc Vid from the Piworld site provides a detailed explanation of Bioventix (LON:BVXP) s business model.

I hold Bioventix (LON:BVXP). Currently one of my top five holdings (2.5% of my invested portfolio, but I'm only 35% invested at present).


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Howard Adams 6th Feb 20 of 29

In reply to post #444513

Hi Ramridge

Thanks for the acknowledgement on Frontier Developments (LON:FDEV) posting.

I realised I forgot to provide the link to the Piworld vid for those interested.


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jonthetourist 6th Feb 21 of 29

Hi Paul

A bit of anecdotal on the new house market. Our village in far-from-skint Gloucestershire has a new development of 35 homes under construction at present. 4 months ago they opened the show home, and the sales chart showed three already sold.

One of those is now occupied but the other sales fell through and have not been replaced. About ten houses are now complete or close, and the guys on site are worried about being laid off if they don't get some sales soon. So not all sweetness and light.



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kenobi 6th Feb 22 of 29

I wouldn't touch otm with a barge pole, too many unknowns for me, however you make an interesting point that someone might look at it and say, well, that's a punt, that could be interesting. What if for example purple bricks bought it and then charged low subscriptions, or even free subs, with advertising around your property to fund it ?
That would be a way of establishing themselves a platform, and mean that at some point they might be able to negotiate better deals with rightmove and zoopla for their own listings ? Don't know it's the kind of strategic thing they that sort of company do sometimes to make a splash, could they fund it with paper ? Perhaps in a strong stock market. Perhaps they've missed their chance ?

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CHIVAAR GAMI 6th Feb 23 of 29

Stride Gaming (LON:STR)

I find the section on related party transactions, a little concerning

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doug2500 6th Feb 24 of 29

In reply to post #444623

Bioventix (LON:BVXP) Since I started it I'll have a go at replying. I hope nobody minds the general chat. This is not a disagreement by the way, just my point of view. dpshares points are valid.

1 trading in and out does not suit me.
2 I buy the business not the share and try to ignore mr. market most of the time
3 Tomorrow might be the day siemens buys the company
4 Blockbusting results might be round the corner
5 IME price alone is a bad trigger for selling, especially small caps
6 I believe in running winners, and am happy to accept some volatility / risk
7 I think it might be overvalued in today's climate and susceptible to a correction, but not uncomfortably so. Yet.
8 I already have some spare cash. I would then have to decide what to do with more if I sold. What would be a better home if I haven't got one for my existing cash?
9 I agree it's an exceptionally good company

So the next question would be 'why bother commenting on price then'. All the above points, and being a long term holder, doesn't (IMO) mean I shouldn't be interested at all in the price reaching an all time high, and being happy to comment / discuss it.

This doesn't mean I'll never sell / topslice but I'm not there yet.


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Snoo 6th Feb 25 of 29

In reply to post #444668

The traffic stats surprised me a little: OTM are getting in relative terms quite a lot of hits but their users are spending much less time on the site than Rightmove.

My gut says it needs some more money otherwise it will end up fizzling out. We seem to have gone from a situation where agents paid, then it went down to free listings in order to chase growth, now it has become cheaper than free: agents are getting paid in equity to list.

Not really sure it can answer the question: why would a user use your site over Zoopla/Rightmove?
They seem to be gambling that neither of those sites technology actually generate any value for the user (they are simply where buyers are looking), so building a similar one but part-owned by agents allows them to not only dodge the massive fees but also take an equity stake in a prospective killer.

All very well, but from an investment point of view there is a danger of it not making any money (same with BurplePricks).

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Lgarvey 6th Feb 26 of 29

I have also just moved house and found mine on £OMTP . A couple of the Estate agents here (West Wales) are not on Rightmove. Just on the market.


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purpleski 6th Feb 27 of 29

All the comments/thoughts on Bioventix (LON:BVXP) are really interesting.  I am heavily long with BVXP representing 21% or my portfolio and 16% of my wife’s. I have bought regularity over the past 3 years 3 months and have seen an increase of 108% on my total investment. I have received back 11.9% of my initial investment in dividends.

I try to ignore the price and look at the company, what it is worth and more importantly what it will be worth five or ten years from now. It strikes me that:

  • A forward PE of 26 is not that demanding (maybe I am mad) for this particular company. In fact I am surprised it is not higher. 
  • Peter Harrison/BVXP seem to always under promise and over deliver.  There is little hyperbole. 
  • They are continually developing/researching new products and the products (IMO) will only see increased demand as the need for quicker and more accurate tests grow.  Both equate to cost savings for the health system
  • Mr Harrison graduated in 1980.  Assuming that he was not a child prodidgy that would make him in early 60’s (my apologies Mr Harrison if you were a child prodigy).  Now he may love his job/company and carry on into his 80’s.  But that, the latter not the former, would not be the norm.  So a sale at some point in the next five to ten years must be on the cards.

As much more astute investor (Leon Boros) said, I don’t think this is misquoting him, BVXP is the best company on UK market.  I think it was Paul chatting to Leon Boros that put me on to Bioventix (LON:BVXP) in 2015.

Obviously I hope that it doesn’t suffer too much of a draw down from these levels but I am happy to site out any that do occur, in the belief that the stock will substantially out perform most stocks on the market over the next five years plus.

Best wishes 


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samanddee 6th Feb 28 of 29

Some great insights into LON:BVXP consistent performer found it tough to sell a good portion. What else is Mr Boros into at the moment as BVXP has been great, moat, niche, possible future sell like Avesco, once products are used integral to Siemens. I guess Siemens might be a fit one day or the workers.

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herbie47 6th Feb 29 of 29

In reply to post #444818

Have a look on his profile for his Twitter account, seems to be into Arcontech (LON:ARC).

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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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