Small Cap Value Report (Mon 8 Nov 2021) - DX., DTY, CBOX, CARD

8th Nov '21 by Paul Scott

58 comments 9684 reads

Good morning, it's Paul & Jack here with the SCVR for Monday.

David and the team are back with another Mello Monday tonight, they're always worth checking out with some interesting management presentations this time around including Property Franchise (LON:TPFG) and Sosandar (LON:SOS) . You can find more detail here.

Agenda -

Paul's Section:

Cake Box Holdings (LON:CBOX) - impressive H1 results, with quite a rapid roll-out of new sites, funded & operated by franchisees. No supply chain problems. The valuation still looks reasonable, so I suspect this share could continue to do well.

Card Factory (LON:CARD) - the most encouraging update we've seen since the pandemic began. Store sales have now improved to almost reach pre-pandemic levels, driven by largest basket size, on still much reduced footfall. Net debt is still worryingly high though, but the situation overall does seem to be improving.

Jack's section:

DX Group (LON:DX.) - operational leverage, volume improvements, and market share gains have driven an increase in profits as the turnaround here looks to bear fruit. Conditions are currently positive- these could moderate and there are headwinds, but the company continues to invest for growth. There's been a substantial increase in the share price recently which makes me warier, but brokers retain quite aggressive price targets of 55p-57p.

Dignity (LON:DTY) - management has changed and the turnaround strategy focuses on reducing prices and increasing volumes, which looks to be the right move. There's more to be done, however, and the group continues to lose market share. The financial picture is also a concern. The group says it will 'have a lot more to say at the year end'.

Explanatory notes -

A quick reminder that we don’t recommend any stocks. We aim to review 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 are analysing the company fundamentals, not trying to predict market sentiment.

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…

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Zipmanpeter

8th Nov '21

Thanks - from your note, I seems I am up to speed on equity raise by £CARD : it is still out there as a need but with lessening pressure if they can get through Christmas in good order.

Re range - I recall their research always showed "Wide Range" to be the no 1 driver of consumer preference (in physical cards). and them having a big lead on the metric. With in house teams of designers and a lot of experience, I am sure they have football cards.

However, perhaps they should get into "collectible cards" (actually, not such a silly idea to drive footfall by parents to buy cards for their kids!).

A card of Joelinton putting one into the net could then be a naturally rare collector's item. :)

(I hold small and am tempted to punt more)

Gdawgeedawg

Gary Channon who runs Dignity (the chap who runs Phoenix) has said that the big pot of money sits there as cash in trust and that this is a problem. He intends to use this "float" in the same way that Buffet does with Berkshire Hathaway - by investing it instead of having it sit there as cash.

Which in my view is a brilliant business model - take money upfront for a service to be delivered later and in the meantime make that money work for you and compound it over and over.

Tanglands

umm, except they can’t actually get there hands on the money, legally, it sits in trust!

ken mitchell

Hostmore (LON:MORE) now down 20% since demerger. Wondering why? Not what I was expecting. Could be a bargain price or some investors know a significant negative I don’t?

gus 1065

Looks as though customers of Angling Direct (LON:ANG) might be getting access to tackle of a different sort today after a cyber attack over the weekend linked their online order book to a porn site. Management have put out an RNS saying it shouldn’t affect business but presumably it’s causing some harm both to reputation and the online order book while the problem is sorted out. Just checked the gallery on the Boohoo (LON:BOO) site and suspect the same thing has happened there too (this second part is meant in jest!).

Gus.

Guybrush

Could you possibly review or provide an update on small cap Frenkel Topping, Frenkel Topping (LON:FEN) in your SCVR reports? This stock comes up in Ben Hobsons "Fast growing Stock" Screens from his article today, and I just bought in before market close as it looks to be breaking into new highs. Thanks.

Quilleron

https://www.stockopedia.com/co...

Hi Ken.

Poor reception from the market to Hostmore (LON:MORE) and the residual Electra Private Equity (LON:ELTA)/Hotter business . Plenty of comment hereabouts as to whether they’re good or bad investments at these price levels which I see as a healthy sign. Does seem to be some confusion in interpreting the stand alone financials (suggesting in part it’s not been presented in a completely clear manner which is down to the various advisers). I suspect there’s also a fair bit of speculative hot money that pumped the price ahead of the demerger in the hope/expectation of a quick pop that clearly hasn't happened that’s now cutting its losses and moving on to the next trade. Personally, quite happy to sit tight and wait for the market to stabilise before adding/holding or cutting the current position.

peterthegreat

Dignity.

Yes you may well be right Tanglands. Some years ago I did some research on Dignity and I was alarmed by the company's huge liability to provide funerals set against the apparently low returns it was getting with the ring-fenced pre-paid funeral money held in the National Funeral Trust which said it was invested "carefully". I actually wrote to the manager of a fund I was invested in to raise these concerns. I'm not sure what the current situation is but I am sure the National Funeral Trust produces annual reports but I didn't find one when I just did a quick check on the internet. I wonder if they are managing to keep up with increases in the costs of the types of funerals which Dignity provides?

yiannos1

Hi ihalliwell,

Although I hold Smiths News , I believe that the announcement is completely wrong.

Silchester were always a shareholder , around 10%.

They have been selling recently and they are down to around 5% now which explains the pressure on the price.

Regards

Tortoise investor

At the Investor Meet the company confirmed there is a H2 weighting and suggested that performance would be 'much improved' compared to H1. I didn't really get that much else from it that I didn't already know. They suggested the slightly weaker margin is due to investment in international expansion and staffing.

Thanks gus for the helpful reply. It makes sense too. I’ve sold ELTA for now but will continue to hold £MORE. My mistake was adding to MORE far too soon!

JCPr

Hi Patrick L, I had the Argentex (LON:AGFX) IMC presentation on whilst reviewing a doc for the day job so may have missed something. The second half weighting was already obvious from the previous figures on Stocko. I used a ratio of 5:7 this morning as it matched the last two years figures and that's why I though they were probably on target for the analysts figures, but I think it was said in the presentation that it was about 45% in H1 because of how major holidays fall. I wish they'd break it down the way Next break down their figures.

I picked up that there were costs for extra headcount and new recruits to cover a wave of resignations. It takes a while for new sales staff to become productive.

I wasn't sure about the wave of resignations amongst senior staff despite the incentives. It could just be co-incidence that a number of senior staff leave just after the former co-CEO leaves and withdraws his capital.

Hmm interesting. So what's the incentive to invest it? Unless Gary Channon sees this as a way of getting capital into his other holdings...?

Stocks123456

Card Factory (LON:CARD) actually look cracking value now. PE 6 vs Moonpig 31. Robbie Burns liked Gattaca. Look at it now.

peter, spot on I am afraid. The money is ring fenced and I suspect, but don’t know, is carefully invested. That I believe will be the problem. I did some work for the national funeral trust, and the impression I got was that they could sort of see my point, but didn’t want to!! Corporate can kicking down the road. someone else’s problem!

hi, I haven’t seen or read what he may of said, but from what I know I would be very surprised if he can get his hands on the money, that would be a real scandal if he could. Be a bit like the old day’s when companies could use the assets in the company pension funds, and look where that got us!! people have paid now, for the guarantee of a funeral ,paid for,in x years time. Can’t see how their money could be used to enrich the shareholders, or not,!! In the intervening years. High risk doesn’t even get close to describing that.

GloucesterBob

This video is worth an hour of anyone's time, the guy looks familiar.

Hostmore (LON:MORE) gets a mention around 58 mins in, plus a whole host of SCVR favourites.

Rusty2

12th Nov '21

Yes Robbie Burns does like Gattaca (LON:GATC), he has made a lot of money in the past from it, recent trades went wrong but he bought some more at 153p, now it's 177p. You can't win them all.

His short on Card Factory (LON:CARD) was some time ago, think he did quite well on that one.

Card Factory (LON:CARD) is looking better than it was earlier this year.

Small Cap Value Report (Mon 8 Nov 2021) - DX., DTY, CBOX, CARD

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Paul Scott

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