Small Cap Value Report (Weds 21 July 2021) - VINO, PCIP, LGRS, TSTL, CRL

21st Jul '21 by Paul Scott

70 comments 9124 reads

Good morning, it's Paul & Roland here with the SCVR for Weds. Many thanks to Roland for stepping in to help, so that Jack can have a few days off.

Timing - TBC. Very busy again for company reports, so we'll get through as many as we can by mid-afternoon.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to cover trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty.

We stick to companies that have issued news on the day, with market caps up to about £700m. We avoid the smallest, and most speculative companies, and also avoid a few specialist sectors (e.g. natural resources, pharma/biotech).

A key assumption is that readers DYOR (do your own research) - don't blame us if you buy something that doesn't work out. Reader comments are welcomed - please be civil, rational, and include the company name/ticker.

Agenda -

Paul's Section:

Virgin Wines Uk (LON:VINO) - trading update for FY 06/2021, with revenues & EBITDA "marginally higher" than previously expected, following a strong finish to the year. Demand is still good. I'm warming to this share, but still want to wait and see how demand and growth settle down post-pandemic.

Pci- Pal (LON:PCIP) (I hold) - another positive trading update, with guidance given in early June now exceeded, for FY 06/2021. Still loss-making, but very strong organic growth augurs well for the future. Plenty of cash following recent placing.

Creightons (LON:CRL) - Results for FY 03/2021 look very good - boosted somewhat by one-off sanitiser sales in lockdown 1, although there were also negative hits from covid. Weighing up those offsetting points is a key point for investors to consider. Very nice balance sheet. Looks a decent company, at a reasonable price, I like it!

Roland's Section:

Loungers (LON:LGRS) - full-year results for the year to 18 April. These numbers were always likely to be poor, but the company appears well positioned to move forwards from the pandemic.

Tristel (LON:TSTL) - a modest upgrade to profit guidance appears to…

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OldSchool05

21st Jul '21

Many thanks Abtan,

Your analysis is really helpful to read - for those of us that do not have the time to go into this level of detail.

I was really impressed with the revenue growth y-o-y, but then disappointed to read it is only "in line" with forecasts for turnover and PAT.

Y/E 2021 = 185m revenue, of which 49.4m was delivered through P1 to P4 (26.7%).

Y/E 2022 = 193m forecast revenue, of which 63.1m has already been delivered in P1 to P4 (32.6%).

This suggests they will deliver lower revenues P5 - P12 in 2022 @ £130m, than the same period in Y/E 2021 @ £135m.

I'm wondering if this is credible or are they being cautious in today's update?

Tommy H

A coffee break thought

I appreciate that I skim read the SCVR when I get a chance, sometimes this is during the day like the last couple of days to clear my head of work and enjoy my coffee, and other times it it three days later after 10pm. But Paul, Jack and obviously today Rolland's your work, thoughts and points of observation are much appreciated!

Anyway after my posts the last couple of days regarding a "Sea of Red" and a "Stage 4 Portfolio" obviously today is the reverse, and almost but not quite a "Sea of Green" though the green is really only making up a bit though not all of the red. Or maybe just giving me a bit of positive reinforcement bias?

Another thank you for the thoughtful and honest replies. It is good to get a dose of think about what is really important and focus on that for a few days.

So tonight is look through the bookshelf and chose a few things, both read and unread to take on holiday, and start to get the kids to think about toys to take with them too.

Tommy.

ps. I still hold, though my mum (well me) sold Anglo Asian Mining (LON:AAZ)

Johnnycomelately

Hi Paul, I would love to know your thoughts on Revolution Beauty which was admitted to AIM on Monday 19 July 2021.

Past accounts for Revolution Beauty can be accessed here:-

https://find-and-update.compan...

find-and-update.company-information.service.gov.uk/company/09915831/filing-history

This needs the https:// put in front of the above address as it looks like it won't let me paste the full address on here.

Their full accounts only go back to 14 December 2015 and yet they’ve stated they’ve been trading since 2013.

They were called TAM Beauty (Distribution) Ltd before Revolution Beauty and before TAM they were called Freedom Beauty (London). I can’t find any actual full accounts for them under these two names.

Your thoughts would be appreciated if you have the time.

Many thanks.

alanjaywalker

It would be good to have a view on Fonix Mobile which seemed to hit a positive note in its Trading Update but has continued its downward price path.

davidjhill

Hi Paul - I also watched the webinar and share your thoughts. Until this update I viewed Sosandar (LON:SOS) positively but with some degree of scepticism, as indeed others were right to point out certain key areas as amber flags. A lack of consistency/transparency on growth metrics being the main concern. However, for me recent trading (and particularly how well the company is selling into selected 3rd party platforms like Next and John Lewis) the outlook has completely changed. It now strikes me that Sosandar (LON:SOS) could be a major player over the next few years and hopefully no longer need placings to achieve this. Risk/reward now looks heavily skewed to the upside.

doublelutz

Bloomsbury Publishing (LON:BMY) are always very cautious and then update as the year moves on. They are making acquisitions and I believe they will continue to grow to the extent that it is one of my larger half dozen holdings.

rmillaree

Northern Bear (LON:NTBR)
Grrrrrrrrrrrrrrr - what on earth are Northern Bear doing releasing year end results at 8.21 am? unless its a deadline day surely thats a complete no no? its all very bizzare - i am guesing share price reaction today is more to do with the timing of the news release than the actual figures contained therein - not very clever.

Northern Bear (LON:NTBR)
On the face of it pre tax profit of £1.2 mill excluding intangible w/offs is a fairly decent outcome compared to £2.00 milion last year. They have managed very well with the covid related issue they have. Dividend scrapped so as not to offend others - at least this means all the profits and more have gone to improving the balance sheet - net cash position at year end of £3.1 mill is nice albeit their balanmce sheet is still not the strongest - having said that i hahe been saying that for years and they now have current assets exceeding current liabilities with no long term loans - so not bad as long as their big debtor book mostly pay up as expected.

at £10 mil market cap for a company that can probably earn £2 mill profit in a decent year still seems cheap as chips. Even cheaper with todays reaction to results not being good - numbers seem fine so i have to put that down to poor timing of release.

I will continue to tough this one out.

MichaelFBS

Suspect that we are not alone but people tend not post their downs.

Personally I am happy with my holdings and am riding out the volatility but it is unpleasant!!

Regards

Michael.

Rare Bird

I agree (and hold). I did a deeper delve into £FNX because of the share price tale off recently but I found much to like. Structurally sound, good profit generation, competent sounding and financially committed management. I ended up topping op at about 128.
I interpreted this update as cautiously positive and find the drop counter intuitive (but then I find much about short term share price movement counter intuitive). Unless there are operational issues in the pipeline which have passed me by, I can only think Fonix Mobile (LON:FNX) is currently misunderstood by the market.

Paul Scott

Revolution Beauty is on my list of things to look at. Quite a few smart investors have told me that I will like it!

GloucesterBob

Its comforting to know that the last 3 weeks have not just been me suffering, where I have gone from 35% YTD down to 13% as of close yesterday.

When you read on Twitter that some people are down 3% on the week, I'm thinking I lost that most days, what am I doing wrong. I now think, I haven't lost 22% of the years profit, I'm still a healthy 13% up.

I would have found it soul destroying previously with the constant drip down every day, but my 3 years membership of Stocko has shown me (at last) that choose wisely, my own buying criteria is now so strict, there are only 3 shares on my list, actually 4 but cannot bring myself to buy a Kazakhstan cement company. Of my current 10 holding 6 are above a stock rank of 90, the rest are SCVR highlights and I do not want to sell any.

So thanks for Paul, Jack and Rolland and all the other contributors here on SCVR for sharing their experience. At times like this its comforting to know, we are not alone.

Boon

As a Sosandar (LON:SOS) holder, an interesting data point.

£NXT LABEL third-party brands (full price) sales up +64% YoY. Sosandar (LON:SOS) didn't break this out into its own performance in its trading statement. Suffice to say this hints that Sosandar (LON:SOS) is seeing good sales growth through NEXT marketplace.

The other interesting thing was that Next (LON:NXT) say total full price sales +20% YoY, but they really struggled in Adult Clothing (-6%). This pales massively in comparison to Sosandar (LON:SOS), where orders tripled (+200%) YoY, revenues up +256% YoY, hence the inference is that revenue per order is up too, which would imply they did more full price sales.

Its looking like the Sosandar (LON:SOS) brand and range is really hitting a sweet spot in the market, where they are selling volume and at full price.

Wish Sosandar (LON:SOS) would do a detailed trading statement like NEXT! So much clarity.

(I hold Sosandar)

Shein is definitely a worry.

Amongst the Insta and Tiktok crowd, many more Shein haul videos in the last few months compared to Boohoo (LON:BOO) or PrettyLittleThing.

Problem with Shein is that the quality is super variable. However, its so cheap that the allure is there amongst the teens and 20s.

I agree, its a case study on how not to do a trading update.

On Paypoint (LON:PAY) I will persevere this weekend to read through. Its got a very unique moat - the Paypoint One terminal in 26,000 stores. It cannot be easily replicated. If they can find the right way to unlock value, they will effectively collect high margin rent from convenience stores up and down the country.

On Norcros (LON:NXR) how much revenue do they get nowadays from South Africa?

Kevin Holloway

thanks Paul, I'm glad it's not just me struggling to make sense of it. They are an interesting company with a strong moat but they seem to be stuck in low gear

thanks for your thoughts. I agree they have a lot going on. Maybe they need to focus a bit more

dcon85

22nd Jul '21

I was looking at Norcros (LON:NXR) this weekend and asking that same question...

Revenue – UK 220.2 (68%)

Revenue – South Africa 104.0 (32%)

Revenue – Group 324.2 (100%)

Underlying operating profit – UK 26.9 (80%)

Underlying operating profit – South Africa 6.9 (20%)

Underlying operating profit – Group 33.8 (100%)

I do like the look of them but decided due to the SA situation to hold off, despite revs weighted more to UK and profits even more so as the margins appear to be better. I'm not a big news hound so it feels like another situation that would probably catch me off guard.

Philip Wigg

Really appreciate this extra comment on Next (LON:NXT) Paul, thanks!

Small Cap Value Report (Weds 21 July 2021) - VINO, PCIP, LGRS, TSTL, CRL

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Paul Scott

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