Small Cap Value Report (Wed 8 May 2019) - EHG, VTU, DISH, ARB, REC

Wednesday, May 08 2019 by

Good morning! 

The final list:

Archaeology - a quick note regarding what I said yesterday about the "archaeologists" who inhabit financial regulatory bodies. The Financial Reporting Council has only today imposed sanctions on KPMG and one of its partners for work done on the Co-Op Bank's accounts.

So which year's accounts would these be? FY December 2009! Yet again, we see how slowly the wheels of justice turn.

I'd also like to point out that cases like the Co-Op, Autonomy and Quindell are all very high-profile. In the small-company world, dodgy accounts are much less likely to even be investigated. Tread carefully!

Elegant Hotels (LON:EHG)

  • Share price: 71.5p (+4%)
  • No. of shares: 89 million
  • Market cap: £63 million

Half-year Results Statement

Elegant Hotels Group plc ("Elegant Hotels", the "Companyor the "Group"), the owner and operator of seven upscale freehold hotels and a beachfront restaurant on the island of Barbados, today announces its unaudited results for the six months ended 31 March 2019.

Paul and I have covered this share from time to time. Click here for my review of its final results in January.

It has looked "cheap" for a while, with a very high ValueRank. It currently has a high overall StockRank:


On the other hand, it's a hotel group, so we shouldn't have very high expectations of its growth prospects. Like any property company, there are natural limits in terms of how quickly it can grow.

Today's numbers:

  • Revenue +3%.
  • Adjusted EBITDA up 7%, adjusted PBT up 5%, adjusted EPS up 27%.
  • "Implied NAV" of 156p based on a GBP:USD exchange range of 1.3 and January 2018 property valuations by CBRE.
  • "comfortable" with outlook against market expectation.

Occupancy is up but average daily rates are down. All the changes are small.

RevPar (revenue per available room) is up marginally. I…

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

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Elegant Hotels Group plc is a holding company. The principal activity of the Company and its subsidiaries is the ownership and operation of hotels and restaurants on the island of Barbados. It owns and operates six freehold beachfront hotels and a beachfront restaurant in Barbados. Its hotels include Colony Club, Tamarind, The House, Crystal Cove, Turtle Beach and Waves. It operates Daphne's restaurant, which is located on platinum West Coast in Paynes Bay, adjacent to The House and Tamarind in Barbados. Its Colony Club hotel is spread across six acres of tropical gardens with approximately 300 feet of beach frontage on the Caribbean Sea and lagoon style pools. Its Tamarind hotel is on the Platinum Coast. Its Crystal Cove hotel has three freshwater lagoon pools, two restaurants, two bars, two floodlit tennis courts and a fitness center. Its Turtle Beach property is on the south coast of Barbados. Its portfolio consists of over 550 rooms. more »

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Vertu Motors plc is an automotive retailer in the United Kingdom. The principal activity of the Company is the sale of new cars, motorcycles, and commercial vehicles and used vehicles, together with related aftersales services. The Company is engaged in the provision of management services to all subsidiary statutory entities. The Company operates a chain of franchised motor dealerships offering sale, servicing, parts and bodyshop facilities for new and used car and commercial vehicles. The Company also operates various franchise dealerships, such as Volvo, Volkswagen, Land Rover, Audi, Mercedes-Benz and Jaguar, and operates Honda dealerships in the United Kingdom. The Company operates approximately 125 franchised and over three non-franchised operations across England and Scotland. The Company's subsidiaries include Bristol Street First Investments Limited, Bristol Street Fourth Investments Limited, Vertu Motors (VMC) Limited and Grantham Motor Company Limited. more »

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BigDish Plc is a Jersey-based early-stage technology company that provides a yield management platform for use in the restaurant industry. The platform enables users to make restaurant bookings with discounts of up to 50 per cent. off restaurant food bills depending on the time of day in which the booking is made. It owns an online restaurant reservation platform and mobile application operating under the BigDish brand. Its Merchant App allows users to create and manage a weekly profile of offers. Its yield management platform consists of two components, such as mobile and to a lesser extent Website. Website components include the Merchant App, Web App and admin panel. The Merchant App functions as an interface for BigDish restaurant partners on which they can keep real-time track of their incoming BigDish bookings. Its geographical segments are Jersey, Hong Kong, Indonesia and the Philippines. Its subsidiaries include BigDish Limited, BigDish Inc. and PT BigDish Ventures Indonesia. more »

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

32 Comments on this Article show/hide all

RDHOWARTH 8th May 13 of 32

In reply to post #474466

I accept the point re concentration but would also argue the converse - scarcity. There are only so many half decent destinations on the planet. The market has been impacted by strength in £ which has held back returns and thus the discount to NAV. This is slightly illusionary as at say $1.5 the NAV would be lower in £ - say 130 but with REVPAR growing and therefore arguably a narrower discount...the company have had an indifferent time earnings wise and find themselves unable to capitalise on additional rooms they have introduced due to revapr weakness. This should return one way or another. Following the divi cut you still get a decent yield and down here I think you can just sit and wait, either the market will return for them and divi can rise again or sol melia or private equity will return. One way or another you can expect much closer to nav (130) in the next few years which will make a decent return irrespective of stock market levels.

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Bonitabeach 8th May 14 of 32

Financial Reporting Council


       A very pleased Andrew Walker

Andrew Walker



Andrew leads KPMG's Financial Sector team in Birmingham and specialises in providing audit and advisory services to listed Banks, Building Societies and other specialist mortgage and consumer finance lenders. Andrew also leads KPMG's Securitisation team in the UK. His other experience includes deal advisory work, due diligence, accounting advisory and regulatory projects.

Areas of expertise

Advisory,Audit,Deal Advisory,Due Diligence,Enterprise,Financial Services,Internal audit,Risk Management,Sustainability,Transactions

He was excluded fom the ICAEW for six years but is now firmly back in the fold. "Head of KPMG's Securitisation Team in the UK":  is this really the best that  KPMG have to offer their unfortunate clients? Every organisation the size of KPMG will have people who are incompetent - it is the reinstatement at the highest level of those shown to be so that offends.

It really is a lawless jungle out there and private investors are at the bottom of the food chain.


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jonno 8th May 15 of 32

In reply to post #474511

Hi Edinburgh Investor

ITV (LON:ITV) and £EGH are the only companies I continue to hold that are losing positions of about 25%. Robbie Burns would I think be appalled! Fortunately the rest of the portfolio has more than compensated.

The reason I continue to hold is that the investment metrics are (as you point out for £ITV) in my view attractive and as far as I can tell both companies are financially sound. In both cases I calculate that with dividends received over the last 3 or 4 years I am at break even or perhaps slightly ahead. Also as 'nicobox' comments ITV (LON:ITV) is a credible takeover target, as I would suggest is Elegant Hotels (LON:EHG).

I see significant value in ITV Studios given the current demand for content. ITV Studio companies are responsible for highly successful dramas such as Poldark, the Body Guard and Line of Duty.

Hopefully with patience value will out in the end. It is always difficult to avoid confirmation bias but one obvious downside is that the money tied up in what are currently losing positions could perhaps be more successfully employed. We shall see!

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andyi 8th May 16 of 32

Re Elegant Hotels (LON:EHG) I am distinctly unimpressed with the results. The occupancy rates strike me as showing a great real of room for improvement. I have been to Barbados quite a few times and am familiar with their hotels which are largely concentrated in the same part of the island which is not necessarily a good thing in the event of any local difficulties affecting the area. In my view their target clientele are relatively affluent and their price point are fairly high but their lack of progress in improving occupancy rates is an area where I would need to see signs of improvement before I would want to invest here.

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Justmo 8th May 17 of 32

In reply to post #474561

Line of Duty and The Bodyguard are BBC productions, not ITV (LON:ITV). ITV has gone downhill in terms of quality drama imo.

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JohnEustace 8th May 18 of 32

In reply to post #474576

The Bodyguard was shown in this country on the BBC but was actually made by ITV Studios.

They also own The Line of Duty production company.

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homosap 8th May 19 of 32

In reply to post #474551

Bonitabeach, Andrew Walker was fined but I think you will find it was Barry Tootell who was excluded.for 6 years.

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Calahan 8th May 20 of 32

In reply to post #474576

ITV launched a takeover of LOD's production company in 2017. The news of which can easily be found via any internet search provider, or just check World Productions Wiki page (note the owner and parent).

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Merlotman 8th May 21 of 32

In reply to post #474576

I thought Line of Duty and Bodyguard were made by World Productions which, since 2017 has been owned by ITV (LON:ITV) or did I misread this?
As a long term income investor I hold.

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jonno 8th May 22 of 32

In reply to post #474576

Hi Justmo

The Body Guard was made by World Productions as was the Line of Duty ITV Studios acquired a majority stake in World Productions in May 2017. Although in fairness the first three series of Line of Duty were produced prior to ITV Studios involvement. The BBC has recently commissioned a sixth series.

ITV Studios sold the Body Guard to Netflix.

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tomps3 8th May 23 of 32

ATTRAQT (LON:ATQT) have just announced the acquisition of Early Birds with conditional placing to raise £17.1m at 27p.

Early Birds adds AI capability to ATTRAQT (LON:ATQT) and moves them closer to their strategic goals. Here, Luke McKeever, CEO, outlines the rationale:

Link to the ATTRAQT (LON:ATQT) RNS with full details:

ATTRAQT (LON:ATQT) create an efficient, personalised, on-line shopping experience for many high profile brands, including ASOS, PrettyLittleThing to ScrewFix. 

 It sounds interesting. Luke McKeever is an impressive CEO, who's recently taken over the helm. Not profit making yet, but perhaps one to keep an eye on.

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Bonitabeach 8th May 24 of 32

In reply to post #474596


Thank you for the correction, I misread the report and my apologies to Andrew Walker, if any are due. The points raised by Graham remains valid though; offences are unlikely to be properly investigated, charges rarely brought; if found guilty does the punishment fit the crime?


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Steves cups 8th May 25 of 32

Hi all

This extremely off subject but I see Pelatro Pelatro (LON:PTRO) are presenting at Mello. I cannot attend but wonder if any attendees could post somewhere their impression of the CEO presentations.

Here's hoping


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Justmo 8th May 26 of 32

In reply to post #474616

Hi Jonno,

Like you say, acquired after 2017, the earlier ones were between WP and the BBC, and were screened on the BBC where they are getting the audience. ITV on the other hand needs the advertising where the drop in revenue was, so needs to screen quality content too. Where would you advertise if you had the choice?

Just in case anyone else comments, I realise you can't advertise on the BBC!

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JamesrWilson1989 8th May 27 of 32

In reply to post #474566

Hi Andy,

It's hard to judge metrics completely on their own and without any context: : Tourism is central to the Barbados economy and employs 14,000 persons directly with 12 percent of GDP attributed to the industry. Its hotel occupancy levels average 65% annually."

So actually, the hotel occupancy rate of 68% across the group, is above average compared to other hotels on the island.

This doesn't mean they shouldn't strive to achieve more, but also isn't a red flag.

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dahokolomoki 8th May 28 of 32

In reply to post #474676

Agreed, they can never get to metropolitan city occupancy rates, because of seasonality in the Barbados tourist season.

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dahokolomoki 8th May 29 of 32

In reply to post #474436

It's interesting that Elegant Hotels (LON:EHG) weighting is to H1, which means the full year out turn now for FY2019 should be quite certain, especially as they will have good visibility of revenue for H2 due to the forward booking nature of the business.

So looking very cheap on FY2019 metrics!

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simoan 8th May 30 of 32

In reply to post #474666

Just in case anyone else comments, I realise you can't advertise on the BBC!

That's not strictly true. The BBC are very self promotional, commonly advertising their own upcoming programs on what is meant to be a public service news website. ITV have complained about this activity in the past and FWIW I agree with them, it is not part of the BBC's remit and they are not supposed to be in "competition" with commercial broadcasters.

All the best, Si

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Graham Neary 8th May 31 of 32

In reply to post #474536

Hi FREng,

I believe the topic of patents at Strix (LON:KETL) is raised at some point in this 20-minute video:

I haven't come to a view on it yet.


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FREng 9th May 32 of 32

In reply to post #474706

Thanks, Graham. I watched the results video - the protection of IP is early on, from about 3:40. They protect IP even when patents expire, using copyright and (in the regulated market) safety testing of devices that don't use their controls and liaison with local regulators. I'm impressed.

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

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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