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Sosandar - looking good

By Nigel Somerville | Friday 24 August 2018

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

At the risk of upsetting retail-guru Thirsty Paul Scott who thinks it is bad for the share price if any expert other than he pontificates, I thought it was time to mention once again my hot tip of AIM-listed Sosandar (SOS) from the UK Investor Show earlier this year. Having offered favourable mention at 12.5p I tipped it at 13p, cashed in a slice at 27p and the shares closed last night at about 35p. It is all good news!

Hotstockrockets has also been following Sosandar and top-sliced at around 35p. Judging by the share price reaction, it was a superb call – if, perhaps, slightly self-fulfilling. The stock dropped down as low as 27p but has since picked up again and last night put in a new closing high. Only just, mind, but it was a new high. That tells me that there is still buying interest and perhaps the early-birds have finished taking some profits. So I expect the shares to continue a little higher; with a target of 40p to sell more shares (in the absence of news), I’m watching closely.

The most recent numbers – FY to March – showed that the company has got off to a great start and the trading update for Q1 was stunning, with sales up 73% quarter-on-quarter. It might be a little bit simplistic, but that works out at 20% a month which would offer 900% growth in monthly sales at the end of the year. It is simplistic, of course, because we can’t predict the growth rate going forward and I’m not enough of an expert to know whether we are still just in the foothills of the company’s growth (in which case we might expect the growth to continue or even accelerate) or whether the growth will start to plateau. And, of course, it is a young company: things can go wrong.

The next milestone should be the end of Q2 (to September) and the interims, but we learn this morning that the AGM is to be held on 19 September and I would be amazed if there was no trading update of some sort offered on the day. The lead up to that will, I sense, help the shares rise a bit more as the market anticipates news – that 40p mark does not look far off. But right now we are in a bit of a black hole as far as numbers from the company are concerned – although I do note that accompanying the FY numbers we saw an upgrade to the Nomad/Broker. Now would be a very good time for a broker note!

My back-of-an-envelope maths is that I can justify 40-45p a share, but if current (last-reported) growth continues I would expect to see 80p or even £1 in the fullness of time. But that depends on the company continuing to deliver in spades (which it has done so far) and the stock market not falling off a cliff. For now, we are left guessing.

In the longer term my feeling is that Sosandar is onto a winner. It feels a bit like the early days of ASOS and we know what happened there. Unfortunately, my incredible skills at trading that share saw me double my money from 5p to 10p. I thought I was Warren Buffett….for a few hours. And then the shares motored higher and higher to peak at something like £70. I don’t want to repeat history!

Sosandar is, of course, not ASOS. But I do think the potential is there for a further massive and sustained rise in the share price. Balancing that out with wanting to cash in profits while they are there (and not risk them frittering away) is tricky, which is why I still intend to sell some more shares in Sosandar at 40p if we get there before the company offers more news.

I’ve sold about a quarter of my shares thus far and I shall be looking to do the same again at 40p. At that point I’ll have had back more cash than I put in – a nice milestone – and the remaining holding will still be worth comfortably more than my original investment. If the company offers good news at the AGM then I’ll still enjoy it, safe in the knowledge that I’ve already got my money back if there is a bit of disappointment on the day. For now then, a very strong hold with fingers on the sell button (for a slice) at 40p.

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