War Paint London (LON-W7L)

5th Mar '21 by Terry Dickens

8 comments 666 reads

WAR PAINT (LON-W7L) I do not hold..................yet.

Has anyone looked at War Paint (love that name)? It has a Market Cap of 70 Million and a Stock Rank of 84 HF, the current price is 94p

It is selling personal & household products & services. that's makeup. You can buy its products in Boots and now in Tesco's

What I find interesting is it has a very low PEG of 0.2 and the Broker Analysis has a price target is 250p, which's is 170% over its current price.

It would be very interesting to hear what you guys think.

Keek safe everyone.

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About the Author

Terry Dickens

Premium Member

I am 70 years old and I am the Chairmen and major shareholder in a Mechanical and Electrical contracting business based in Tanzania East Africa. I spend 3 months a year in the UK and 9 months in Tanzania. I have always been interested in the stock market and started buying shares in the 1970s. But started trading seriously since 2007. I only trade the UK market and mainly spread bet with IG Index for the last 8 years. more »

8 comments

MiserableJacktPotato

5th Mar '21

I hold.

Dividend looks decent at this price point too, they've already paid 2.8p (some of that was to catch up on the missed full year payment for 2020), shouldn't be too challenging to put in at least another 0.5-0.7p for the full year, then 3p+ next year.

I'm looking to see what they can do with the brand(s) with the likes of Boohoo and ASOS setting up marketplaces. Good potential growth there. Also they looking to see if they can get any meaningful traction in the US post Covid.

They've proved in the past they're not scared to try and grow both organically and through acquisition and the external consultants they've hired to boost sales did a good job getting them into Tesco.

A few bear points - they were highly rated, but the market punished them heavily for mis-setting expectations a couple of years back. They had just bought the gifting company (Retra from the top of my head) and didn't really understand the business model from what I could tell. When Retra had a load of Christmas orders come through they said "we're ahead of expectations" but they didn't realise that there wouldn't be follow on orders and they had to roll back to a "profit warning" which was actually just the original expectations. I think they learnt a lot of lessons with that and are now much more cautious in their approach to setting expectations.

Another thing to say is, they don't really have any brand strength or a moat as far as I can tell. They're just a well run business making good margin and looking to grow but there's nothing to stop competitors. That doesn't make it a bad business in its own right though and I (being a 40 something middle class man, why would I) don't know of any negative feelings towards the brands they have - they're no "Max Factor" but I don't hear / read of them being rubbish which is important no matter the price point. If you're garbage you don't sell. A quick look at Amazon seemed to suggest the products are well received with average reviews over 4 stars from my limited sampling.

Some of the recent Value measures (ROE, ROA etc) have been disappointing. Probably to do with acquisitions and Covid, plus they sell in the low margin segment of the market. Hopefully they can get their margins up.

Lastly, I think momentum shares have had their fun in the sun and I hold these as a value play, alongside others like MACF, CRL. I don't expect them to "shoot the lights out" but I don't see any good reason why they can't increase top line by 10%+ and bottom by more than that for the next few years. Their current CAGR for revenue is 24% so I don't think I'm being too optimistic. Just a steady compounder.

Metatron

5th Mar '21

I am put off Warpaint by the excessive excutive pay salaries and that it pays for its imported goods from China in $ but hedges it by using expensive forex options

Terry Dickens

6th Mar '21

Thanks, guys that very helpful.

But do you think that the Broker Rating is realistic?

Berksbee

14th Apr '21

I own LON:W7L which I bought in mid Feb 2020 - I did so as a new Stocko Member and on the basis that their score was excellent - 95+ at the time and - it wasn't a mine in a foreign country..... so not very scientific but I wanted to created a portfolio to check out if my subscription (plus a bit of judgement form me) was worth it. The answer overall btw is yes definitely. However W7L has been a low conviction investment - possibly because, like others, I don't understand the market. I had said to myself that I would bail at plus 20% - after todays leap that target has been blown away and I am now pondering holding. Anyone know why? Apologies for the lack of insights but the message is you are not alone.

Berksbee

19th Apr '21

Hi Terry,

Glanced at your very interesting profile. You have my respect for making a business in Tanzania - I held shares in Acacia, a story you no doubt know, would be most interested in your take on it.

Thanks

Metatron

19th Apr '21

i am also put off by the CEO pay but have noted that in Israel spending in beauty products has boomed since the easing of lockdown

drobs

14th Sep '21

Results due out next week. Share price has had a great run and nearly hit my own target of 250p but has fallen back since. I suspect this will sell on news but I like the company and they seem to have addressed the issues in earlier years. Based on the trading statement in July, where revenues were 19% > 2019 and 64% > 2020, that should be around 22m.

Ecommerce - In H1 2020 online sales were £0.15 million, they stated that ""E-commerce sales of W7 products across all markets for the first five months of the year were approximately three times the level in the same period in 2020 and we anticipate further significant growth, albeit from a modest base." That will be around 0.5m

It is also obvious looking at the income report that there is a high degree of seasonality here.

2019: 18.9m H1; 30.3m H2

2020: 13.5m H1; 26.8m H2

If growth is maintained for H2 2021, we should see H2 revenues of around 36m, giving a FY figure of around 58m. That is in contrast to the forecast figure on stockreport of 45.2m, which gives an EPS of 5.3p per share. If we see my own estimations come to pass, that will be EPS of 6.7p and puts W7L on a current P/E of around 32.

So my reading of the price action lately has been - the forecasts are low and people are expecting upward revision to guidance. However, nothing is promised re: H2. I'm buoyed and confident in the expansion plans and think the consensus of 45m will be beaten. If we post close to 22m, that is a fantastic start. The key is not only the H1 figures but forward guidance - thank you Cap'n obvious.....

Obviously please sanity check my figures - they are based on the interim figures from 2019,2020 and the last trading update. Corrections welcome.

drobs

22nd Sep '21

Interims just out. Well revenues were below my projections at 18.4m.

Adjusted EBITDA for the half year to 30 June 2021 was £2.1 million (30 June 2020: £0.4 million, 30 June 2019: £2.1 million). So effectively a repeat of pre-covid.

The statutory interim basic and diluted profit per share was 0.18p in H1 2021 (1.68p loss in H1 2020, 0.22p loss in H1 2019).

The adjusted interim earnings per share before exceptional items and amortisation costs was 1.80p in H1 2021 (0.16p in H1 2020, 1.37p in H1 2019).

Net cash flow generated from operating activities was £2.8 million compared to £2.3 million in H1 2020 (£1.3 million H1 2019). The Group's cash balance increased by £2.9 million to £6.7 million as at 30 June 2021 (30 June 2020: £3.8 million, 30 June 2019: £3.7 million).

The board is pleased to have declared an interim dividend of 2.5p per share which will be paid on 26 November 2021 to shareholders on the register at 12 November 2021. The shares will go ex-dividend on 11 November 2021.

TL;DR - company is now profitable, balance sheet looks good as does cashflow. The results read well - what are others' views?

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War Paint London (LON-W7L)

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Terry Dickens

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