Small Cap Value Report (Wed 7 Jun 2017) - FREE, SHOE, SRT | Paul Scott

7th Jun '17 by Paul Scott

32 comments 14522 reads

Good morning! It's Paul here.

Ed's charity bike ride

The boss here at Stockopedia, Ed, has signed up for a remarkable charity challenge, which is happening this Friday. Ed is attempting to cycle from London to Paris - in 24 hours - that's 300km. He's not even a keen cyclist, although has been putting in some serious training. It's a mind-blowing challenge, and would probably kill most of us just attempting it. Therefore this project clearly warrants our full support.

The charity concerned is raising money to find a cure for a disease called Duchenne. Friends of Ed's have a son with this condition. The explanation on Ed's charity fundraising page is very moving - one can only imagine what this child's parents (and others) have gone through, watching helplessly as their young child's health deteriorates.

As I haven't done a charity fundraiser myself for some time now, I'm feeling rather guilty. Hopefully SCVR readers will swing behind Ed, and donate generously. After all, Ed has paid me a fee for 4 years now to write these reports, which are free to read (not part of the subscription). So supporting this amazing charity challenge would be a nice way to give something back, to a very worthy cause. And most of us have done very well in this bull market!

So, good luck Ed! I hope he emerges in one piece from something so physically gruelling. I very much hope he doesn't injure himself, so fingers & toes crossed.

Here's the online donation page link again.

On to the markets. It's General Election day tomorrow, 8 June 2017, so I'm almost wondering whether it's worth reporting on individual companies today! - will anyone bother reading my article on a day like today?!

We're seeing quite a few erratic price movements, and profit-taking in small cap stocks which have done very well in this bull run. I'm wondering how many of the sellers are intending to buy back on Friday, if the election result looks positive for the markets? (i.e. a workable Tory majority, which the markets perceive as equating to stability & generally more business-friendly policies)

These violent price moves in some small caps are a timely reminder that you can incur a hefty percentage loss very quickly, when there's a rush for the exit. A lot of small…

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JohnEustace

7th Jun '17

I can relate to the psychological difficulty in buying back a share that you recently sold. It's something that has cost me quite a few opportunities over the years.
The way I am trying to deal with this is to borrow from Terry Smith's concept of an investable universe. So when I sell I ask myself is this a share I would be prepared to buy again, or is it one to stay away from. If it's a potential buy again, it goes in my "investable universe" portfolio which I review when I next have some cash to invest. Often the shares in there are better than my latest bright idea.

Techno Trousers

It's a stock I've held before, but don't currently hold.

What was your reason for selling Paul, as you have commented positively previously and again here, and I have not noticed any particular reason why anyone would sell so far, unless I have missed something!?

I too am a holder, and a user of FreeAgent software and have a similar opinion as you. I love the product, far better than other small business accounting software I have used, with its simplicity and impressive levels of integration being the deciding factors for me. Having direct integration to the company bank account, HMRC and so on makes life much much simpler, and when they develop the integration for personal Y/E tax returns (already there, but still a bit rudimentary) then it will be the icing on the cake.

As a holder, I hopefully will be for some time to come, as I do not see this as a share to trade.

TT

Ajay_Gajree

Off subject, I have been following Ian Casell on Twitter of Microcapsules club, I believe Paul must have mentioned it on Twitter at some point :)

Can someone point me in the direction of a UK platform that you can trade UE micro caps on?

I know you can't trade them in your ISA, and my ISA provider only seems to allow Nasdaq etc and with a foreclosure risk.

Ideally I would like to open UK based dollar account to trade us Microcapsules and I am struggling to know where to look!

Paul Scott

Hi TT,

I'm struggling to remember why I sold my FreeAgent Holdings (LON:FREE) shares.
I think it was general nervousness about holding shares in a loss-making company, and worries about whether the market cap could go much higher in the short term.
Also worries about competition under-cutting on price.

Overall though, on reviewing the numbers today, I'm toying with the idea of going back in at some point. Let's see how the GE pans out first though!

Regards, Paul.

rambutan2

Intercede (IGP) released prelims today. A world leader in its area of government grade identity management software, but sales still to really break out. Lots to like - IP, gross margins, very sticky, big company partnerships - but may be seen as a sucker stock by some? It's certainly in a growth sector so may be of interest...

Howard Adams

Hi any Boohoo.Com (LON:BOO) holders

You might like to read this article

http://uk.businessinsider.com/fast-fashion-is-getting-faster-2017-5?utm_content=buffera2eeb&utm_medium=social&utm_source=linkedin.com&utm_campaign=buffer&r=UK&IR=T

Regards
Howard

Edward Croft

Thanks Paul for the kind write up and everyone for the support. It's incredibly motivating to have so many in the community backing me ! I will post some pics on twitter on Friday / Saturday.

the0ni0nking

IIRC doesn't IFRS require you to capitaslise development spend subject to meeting the required criteria? We used to report under IFRS and moved to FRS following an acquistion - the year after acquistion the newly owning UK company required us to write off all the capitalised amounts but the ultimate parent who reported under IFRS required us to write them back on again. This was despite a change in auditor - I guess the view is that if you've justified that you meet the criteria to one set of auditors, the next set are unlikely to change their view however much you try - & we did try a little to get them to agree if only to stop the lunacy of writing it off for reporting in one jurisdiction and not doing this for the ultimate parent a/cs in another!

kenobi

Thanks Howard, interesting, although, the final paragraph,
"Lastly, these online retailers use Zara's tactic of keeping production close to the headquarters and in key customer markets. According to the report, Inditex, the parent company of Zara, sources 60% of its products in Europe. Boohoo similarly sources over 50% of its products from the UK. "
Can it really be true that boohoo sources over 50% of it's products from the UK? seems unlikely, perhaps Paul will know more ??

K

seadoc

Paul,

SRT Marine Systems (LON:SRT) The proverbial question is "Where are the customers yachts?" If they are still in the builder's yard or on sea trials then 14 months would be the norm. But: can the buyer get the mortgage on his yacht to stump up the cash and take delivery? Of course (and not obvious from AR) they may sell mainly to commercial fleets, but these are also struggling. I do see AR shows that nearly half business is in middle east, including biggest customer and that second biggest is in Belgium, well known as a leading maritime nation (at least it does border the sea!)

I cannot fault your conclusion: "For me though, based on what we currently know, I'd say risk:reward doesn't look particularly brilliant." which sums it up well.

Seadoc

I spoke to the Boohoo.Com (LON:BOO) FD on their stand at last years Investors Show and he told me that most of their product is sourced in the UK, much of it produced in the East Midlands.
He pointed to a picture of a signature piece that included a lot of hand sown decorations as an example of a high labour content item that would be sourced abroad - he didn't say from which countries but I suspect more likely to be Bangladesh or Vietnam than China. But I do believe that the simpler fast turn round items are from the UK.

Johnny2509

2 interesting RNS issued by Boohoo in the past half hour.

Small Cap Value Report (Wed 7 Jun 2017) - FREE, SHOE, SRT

Ed's charity bike ride

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Paul Scott

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