Stockopedia StockSlam - April 2019

Tuesday, Jun 04 2019 by

Apologies but the date is not a misprint. Life has taken a front-seat since I had the pleasure of hosting our second StockSlam of the year! Nevertheless I know that many investors can't always make an event in central London and so I'm happy to provide this cleaned-up transcript of the event. As ever we had some excellent presenters and an engaged audience which made for an enjoyable evening. I hope that you find something educational or interesting from these brief notes of the event.

Stop press: I'm pleased to say that the next StockSlam will take place on July 9th! If you'd like to present, which I thoroughly recommend, please follow the instructions here:

Motorpoint (LON:MOTR)

Okay, here is Motorpoint. Some of you may know this as a car supermarket. Motorpoint floated back in May 2016. As is typical with IPOs it profit warned within the first year. The share price duly halved in the first six months. They blamed this on Brexit. Since that point the business has done well, with margins normalising and sales increasing. The share price did recover back to an all-time high back in June ‘18, but since then the price has drifted down by almost 30%, down to 189p today. This fall is despite an ongoing share buy-back. They’re buying over £10m of their shares and this is continuing. Clearly off-setting this is a fair level of selling pressure in the company. I’m not saying this is necessarily the best time to buy, but at some point the share price fall is going to stall and it’s going to go back up, if the business is doing well.

So what’s the attraction here? Well the ROCE is 80%, exceptionally high, and it has very good cash generation. The reason why the ROCE is high is because it is a very asset-light business and has a very high turnover of cars, which means there’s not a lot of working capital tied up in the stock. Now, what you will also notice is that the operating margin is very, very low at 2%. Ordinarily this would put me right off because that kind of margin means you’ve got a lot of operational gearing with a fixed cost. If your sales fall by a small amount, profits are going to fall by a much larger amount.…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.

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XP Power Limited is a United Kingdom-based developer and manufacturer of critical power control components for the electronics industry. The Company provides power solutions, including alternating current (AC)-direct current (DC) power supplies and DC-DC converters. The Company's segment include Europe, North America and Asia geographical. It designs-in power control solutions into the end products of blue chip original equipment manufacturers, with a focus on the industrial, healthcare and technology sectors. Its product categories include high efficiency/convection-cooled, chassis mount/open frame, configurable, external, encapsulated and printed circuit board (PCB) mount, DIN rail, baseplate-cooled, through hole mount, surface mount, light-emitting diode (LED) drivers and distributed power/hotswap. more »

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Motorpoint Group plc is an independent vehicle retailer in the United Kingdom. The Company's principal business is the sale of vehicles, of which are approximately two years old and which have covered over 15,000 miles. The Company sells vehicles from brands representing vehicle sales in the United Kingdom, with models from Ford, Vauxhall, Volkswagen, Nissan, Hyundai, Audi and BMW. The Company operates from over 10 retail sites across the United Kingdom. The Company has a national contact-center dealing with online enquiries. In addition to sales of vehicles, the Company operates, a business to business online auction platform for vehicles. The Company also offers ancillary products to customers, including customer finance packages, vehicle guarantees, insurance products and vehicle protection treatments. more »

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Naked Wines PLC, formerly Majestic Wine PLC, is a United Kingdom-based wine retailer. The Company is engaged in the retailing of wines, beers and spirits. The Company operates through four segments: Retail, Commercial, Naked Wines and Lay & Wheeler. The Retail segment is a customer based wine retailer, selling wine, beer and spirits from stores across the United Kingdom, and online, and also incorporates the Company's French business. The Commercial segment is a business-to-business wine retailer selling to pubs, restaurants and events. The Lay & Wheeler segment is a specialist in the wine market and also provides cellarage services to customers. The Naked Wines segment is a customer funded international online wine retailer. Its subsidiaries include Majestic Wine Warehouses Limited, Lay & Wheeler Limited, Les Celliers de Calais S.A.S., Majestic Wine Employee Share Ownership Trust Limited, Naked Wines International, Inc. and Vinotheque Holdings Limited. more »

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

9 Posts on this Thread show/hide all

bryans1311 4th Jun 1 of 9

Thanks Damian. Interesting comments regarding Keystone and IR35. Do you know if the speaker managed to get any clarity from management about this? Thanks!

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Damian Cannon 5th Jun 2 of 9

In reply to post #480751

No I haven't heard back I'm afraid. Hopefully they're a subscriber and will chip in!

Blog: Ambling Randomly
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drvodkaquickstep 5th Jun 3 of 9

Good work Damian !

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john652 5th Jun 4 of 9

Re Keystone Law (LON:KEYS)

I would have thought outside of ir35 as they have mutiple real and separate clients and keystone management do not direct the lawyers in their day to day jobs. As lawyers they would be well placed to argue the point! Same can’t be said for many other contractors so be careful with U.K. focused recruitment companies. 

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john652 5th Jun 5 of 9

Hi Damian,

Re Character (LON:CCT)

Why do you see the introduction of their own toys as a catalyst? I’d have thought these will be associated with no know existing character or brand and so hard to achieve any size unless some form of amazing toy not seen before or better than what they have (and why would that be) ? Also they only pay away 10% of sale (?) price so these new toys won’t be super high margin compared to existing?

I have held for years and the commentary is always about management pay and risk of loosing licenses but they always steadily do well and really know their onions.

Thanks john

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andrea34l 5th Jun 6 of 9

I hold Ashtead (LON:AHT) and consider it's one of the only real growth companies in the FTSE100. The share price is very tied to the Dow Jones sentiment, unfortunately, but trading updates have sounded very positive.

Character (LON:CCT) are on an undemanding rating, though the like-for-like sales excluding Proxy at 3.7% is fairly uninspiring, international trading being 'steady' is also not great, though perhaps they deserve the benefit of the doubt after the Toys R Us collapse. But perhaps the company is now only going to grow through bolt-ons and synergies. Is your view still positive after the interims?

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Damian Cannon 5th Jun 7 of 9

In reply to post #480931

Hi John,

Sorry the presenter didn't go into much detail about these new toy ranges. I take your point about them being relatively unknown and a tough sell. You're right about the board keeping the company on a profitable track though and their excessive pay doesn't seem to have harmed operations.

Cheers, Damian

Blog: Ambling Randomly
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Damian Cannon 5th Jun 8 of 9

In reply to post #480936

I agree that Ashtead (LON:AHT) is under-rated by the market given its track record. However it is an archetypal cyclic stock so it'll never be on a punchy rating (except when earnings have collapsed).

As for Character (LON:CCT) well I'm neither positive nor negative - although the presenter at the slam was pretty keen on them!

Blog: Ambling Randomly
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john652 6th Jun 9 of 9

Re Character (LON:CCT) Thanks Damien, I thought it was your stock.

Hi Andrea34, if you are interested in Character (LON:CCT) have a look at the ceo/cfo videos over the last couple of years, they are very positive & upbeat. A big tick is the relatively small damage and rebound from toysrus, they dealt with it well.

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