Small Cap Value Report (Wed 8 August 2018) - SHRE, TTG, IDP, SCS, STCK

Wednesday, Aug 08 2018 by

Morning folks!

A couple of interesting RNS announcements to cover today.

In the US last night, we had further entertainment from Elon Musk at Tesla ($TSLA), who tweeted: "Am considering taking Tesla private at $420. Funding secured."

It looked like it was probably a joke to me (and to others), but Musk went on to write a blog post on Tesla's website about it. From a legal point of view, it can be expensive to joke about these things.

Tesla's share price increased by 11% to close at $380 last night, not far off its all-time highs. Stormy weather in Shortville.

Today we have:

  • Share (LON:SHRE) - interim results. I'm conducting an interview with the company shortly.
  • TT electronics (LON:TTG) - half-year report
  • Innovaderma (LON:IDP) - appointment of CEO. Roots haircare brand to be ranged in Tesco.
  • SCS (LON:SCS) - trading in line with expectations
  • Stock Spirits (LON:STCK) - H1 results

Share (LON:SHRE)

  • Share price: 26p (unch.)
  • No. of shares: 144 million
  • Market cap: £37 million

Half year results

This is a stockbroker many of you will be familiar with as clients. It trades as The Share Centre.

I've just finished an interview with Richard Stone (CEO) and Mike Birkett (CFO).

My impression of the company hasn't changed. It seems to be providing clients with a very nice service, and is one of the safer brokers.

Beaufort clients will be keen to study their new service provider, as Share won the transfer of 15,000 Beaufort accounts in what must have been a competitive process.

Combining the Beaufort transfer with two other agreements, Share will soon be welcoming 38,000 new customers for a total of £1.5 billion in new assets under administration (AuM).

AuM is making serious headway. From £4.3 billion a year ago, it now stands at £5 billion and that is with the additional £1.5 billion still to arrive. This should translate to significantly greater revenues.

The Share Centre is not the cheapest out there when it comes to execution-only dealing, but it does have an excellent net promoter score (better than all other execution-only…

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All my own views. I am not regulated by the FSA. No advice.

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Share plc is a United Kingdom-based company, which is engaged in stockbroking related activities. The Company's principal business includes its subsidiary, The Share Centre Limited, which is engaged in retail stock broking. It is also engaged in fund administration business through its subsidiary, ShareFunds Limited. It operates in two segments: The Share Centre, which provides stock broking and custodian services to retail investors, and Sharefunds, which operates a fund administration service. The Sharefunds segment provides a range of administration services to the authorized funds. Its subsidiaries include The Share Centre (Administration services) Limited, which is engaged in providing administration services; Share Nominees Limited, and Sharesecure Limited. The Share Centre Limited provides services to personal investors on a self-select basis, including account types, such as share accounts, self-invested personal pension and individual savings account. more »

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TT Electronics plc is a provider of engineered electronics applications for performance-critical applications. The Company works with customers in the industrial, medical, aerospace and defense, and transportation sectors. The Company’s designed and manufactured products include sensors, power management devices and connectivity solutions. more »

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InnovaDerma PLC is a holding company. The Company develops a range of male and female at-home and clinically proven treatments for hair loss, hair care, self-tanning and skin rejuvenation. It operates through hair and beauty division. Its products include Leimov Personal Hair Laser Starter Kit, Leimov Hair Treatment Pack, Leimov Bio Cleansing Shampoo, Leimov Thickening Conditioner, Leimov Scalp Therapy Day Treatment, Leimov Scalp Serum Night Treatment, Leimov Deep Cleansing Scalp and Body, Leimov Hair Treatment Pack for Her, Leimov Personal Hair Laser Starter Kit for Her, Leimov Vitality Shampoo, Leimov Follicle Boost Therapy, Leimov BioPlex Scalp Serum, Leimov Scalp and Body Exfoliating Spa, Leimo Instant Hair Introductory Pack, Leimo Instant Hair Regular Pack, Leimo Instant Hair Building Fiber, Skinny Tan-Ab Shader, Skinny Tan-Dermabrasion Pre-tan Primer, and Tan and Glow. It operates in the United Kingdom, the United States, Australia, New Zealand, the Philippines and South Africa. more »

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

44 Comments on this Article show/hide all

Graham Neary 8th Aug '18 25 of 44

In reply to post #389094

Hi Jonno, TT electronics (LON:TTG) is in there now. All the best. G

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Graham Neary 8th Aug '18 26 of 44

In reply to post #389154

Hi. re: Share (LON:SHRE), broker forecasts are for it to generate positive adjusted net income during the current financial year (ending December) and for this to make further improvement in FY 2019. Obviously it depends on the adjustments involved and actual performance relative to expectations in terms of whether we get a reported profit or not. We'll have to wait and see. G

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bohvtg88 8th Aug '18 27 of 44

In reply to post #389199

Re Hill & Smith Hill & Smith Holdings (LON:HILS) - I've held for a few years and had a similarly positive opinion. Aways found their updates transparent and open. A few alarm bells started ringing (a bit too quietly) in May though when that update blamed project delays/a weather impacted start to the year (though they said things had improved since mid march). So i was surprised 1) I couldn't find either issue mentioned in the FY results from March when all was v positive and 2) although they were confident in May of improved orders/meeting FY expecs, things seem to have actually got worse.. All feels v 'un-hill and smith like' to me..

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AlanJenkins2 8th Aug '18 28 of 44

Opinions seem to be polarized as to whether the Tesla bid is genuine.What's your best guess,Graham ? :-]

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RichardK 8th Aug '18 29 of 44

In reply to post #389244

In a release this morning in association with the Beaufort administration, The Share Centre said that larger clients and frequent traders might be able to pay £24 per quarter and then be charged £7.50 for every trade. Not entirely transparent, and I am much happier with Jarvis's lower fees and better transparency.

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jonthetourist 8th Aug '18 30 of 44

In reply to post #389234

May be worth mentioning that Share Centre discount their fees to anyone with a shareholding, including those who have the flat-rate £7.50 dealing commission.

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rhomboid1 8th Aug '18 31 of 44

Re SCS (LON:SCS) cash pile...£24.9m is customer deposits as per their excellent presentation ;

I’ve held before & rate it highly but it doesn’t feel terribly defensive if the wider economy weakens

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LeoInvestorUK 8th Aug '18 32 of 44

Share (LON:SHRE) - Headline dealing costs are crazy high, but for £24/quarter extra deals are a fixed £7.50 online (£20 telephone). According to the letter of their T&C's, this can be further reduced to £5.25 for if you own 500 shares in them (which is only £125 worth). For frequent dealing on a medium-large account this is right up there with the cheapest. They also provide superior access to shareholder perks and other shareholder rights. Finally, in my opinion, there is less risk in dealing with a quoted company, or at least a better chance you will get to hear about problems before they become critical.

Caveats: I am not currently a shareholder or a customer. £SHR 's pricing structure seems pretty silly to me. AJ Bell are cheaper still for large accounts and will be quoted soon. Hargreaves Lansdown (LON:HL.) provide good value for both small, medium and large accounts, plus provide access to shareholder perks.

Blog: LeoInvestorUK
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andyi 8th Aug '18 33 of 44

Graham Re SCS (LON:SCS) any views on the potential impact of the House of Fraser store closures on SCS? It was not mentioned in the RNS.

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labbey1 8th Aug '18 34 of 44

In reply to post #389219

I was thinking the same thing today. Numis has a target of 500 a share (cut from 520p). Singer however say results were disappointing which might account for some or most of the fall...their target is 395p

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Gromley 8th Aug '18 35 of 44

In reply to post #389219

Hello CK, very good to see you here.

Just a little 'protocol' tip here, Graham and Paul normally only comment on companies in this column when there is news / announcements.

As luck would have it though, Clipper Logistics (LON:CLG) announced their results a few days ago and Graham covered it at the time here

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DJCP 8th Aug '18 36 of 44

In reply to post #389279

Seems the Tesla/Musk tweet wasn't off-the-cuff, but I'd have thought the way it was done may come under scrutiny (i.e. no official announcement?)

Quick guestimate - at a $60b valuation, the 10% price news rise ($6b) and 10% of stock shorted, meaning that shorters took a $600m hit ? ... But maybe I'm getting confused ;o)
The board had "met several times over the last week" to discuss going private, the statement said.
Tesla stock is currently more than 2,000 percent higher than its IPO price of $17. That means a $1,000 investment in the company then would be worth $22,327

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sharmvr 8th Aug '18 37 of 44

In reply to post #389324

Don't think it is a breach unless proven inaccurate. Tesla have said that musk Twitter is an official source for company information on Tesla.

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Kevin_T 8th Aug '18 38 of 44

I have been a happy customer of Share Centre for many years. Provided you take out the Frequent Dealing Option, and have a holding in them, online dealing cost comes to £5.25 per transaction (unsure the discount still applies if you now take a holding). During couple of peak times (when Brexit referendum result was announced for example), their website functioned whilst a major stockbroker's crashed. They seem to put extra staff when anticipated demand was going to be high. More importantly the ISA Annual charge is capped at £60 per annum, whilst the percentage rate charged by some would cost a lot more for a reasonable size holding. If you transfer to them they also pay up to £300 of your costs.

Kind regards.

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gus 1065 8th Aug '18 39 of 44

View from arch Tesla bear Simon Cawkwell/Evil Knievel in his morning blog.

“I’ve been here before. Back in 1990, Polly Peck’s Asil Nadir, clearly all too well informed that the scam was coming to an end, declared that he would arrange a buy-out. The trouble was that no bankers could be identified who shared his optimism. The share price kept slip-sliding away until, eventually, it could no longer be propped up. Thereafter it imploded, and suspension followed a few hours later.

I suspect that Elon Musk is in the same position with Tesla (NASDAQ:TSLA). Yesterday’s shenanigans as the great con artist tweeted out his intention to take TSLA private at $420 a share (or $82 billion all told) obviously hit the shorts pretty hard. But gravity being what it is and the improbability of bankers putting up the necessary for a company marching to insolvency surely means that the only way is down. TSLA has been trading this morning before the opening at $376.

If these bankers are as ready as Musk claims they’ll write puts. And then they may not be….”

No position held, but in reference to DJCP’s post above, I’d suggest that while Tesla shares might be “priced” at something like $380 a pop, I’m not sure they’re necessarily “worth” that. Time will tell ....


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Clitheroekid 8th Aug '18 40 of 44

In reply to post #389319

Thanks Gromley, I'd obviously missed that update, and protocol tip duly noted!

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jonthetourist 8th Aug '18 41 of 44

In reply to post #389359

I will second the "good to see you here" sentiments CK. Lots of refugees from TMF here.


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Graham Neary 8th Aug '18 42 of 44

In reply to post #389319

Thanks Gromley! G

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Graham Neary 8th Aug '18 43 of 44

In reply to post #389309

Hi andy, re: SCS (LON:SCS) no special insight into the HoF issue but it looks like SCS HoF concessions are a small part of the overall business and are doing badly, so it might be ok if they were shut down. G

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Graham Neary 8th Aug '18 44 of 44

In reply to post #389279

We don't have proof of "funding secured" yet :) G

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 Are LON:SHRE's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »


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