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Sosandar – AGM statement offers no numbers but plenty of encouragement

By Nigel Somerville, the Deputy Sheriff of AIM | Wednesday 19 September 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.


AIM-listed online ladies clothing purveyor Sosandar (SOS) had its AGM today and offered a few nuggets of information which suggest that things are pretty much on track with management expectations. Since we already know that management is “very comfortable” with the forecast numbers offered by house broker Shore Capital (I would translate that as meaning easy to beat!) and we know those numbers (see HERE). So that looks pretty positive. Mind you, we were not offered actual numbers for summer trading as the Adam Reynolds computer keyboard struck again!

My reckoning is that had summer trading been spectacular we would have been told, so I think it is safe to assume the summer was more sedate than Q1 – as per the advice I was given (see HERE) over seasonality. But we are told that the momentum outlined in our Final Results Statement in July continued through the summer months so I would read that as meaning the summer was well up on last year, so no disaster. The lack of extended discounted promotional activity reported (ie no summer sales) is also encouraging, as are the comments about Autumn having begun well, and the performance of higher ticket items. So I reckon sales have been pretty good, if not spectacular, over the summer and Autumn is seeing things ratcheting northwards again.

Of course, balancing that end of the equation is how much is being spent on marketing and here we are told that focused customer acquisition across all channels have become increasingly efficient. So I reckon they are being careful with the cash-pile.

I note also that operational partner Clipper Logistics has moved to a seven day a week service which suggests that growing revenue is still very much on the cards.

So where does that leave me? Well, with no numbers to go on I still have 50p marked in as the next point at which to offload a few more shares - and with the stock back up to around 45p now I'm pretty confident. The company has made encouraging noises, but without hard numbers I’m not changing my target just yet. We are told that the company will be updating on H1 (to the end of this month) “in due course” which suggests to me that a trading statement should be forthcoming next month. I reckon we can judge how good it is by how early it comes out!

As to valuation, I’m not going to try to suggest the shares are cheap or even at fair value: clearly they are well ahead of that. Would I buy right now? Er…no – I’ll leave that to the institutions, if they care to.

My pie-in-the-sky numbers were, of course, way ahead of reality, although I note that Shore has forecast revenues of £9 million for the year to Mar 2020 and predicts profitability at that point. That is a year later than my utopian scenario, but I would have thought 40-odd p per share could easily be justified by then, and Shore already has a price target of 50p even now.

On the other hand, in 18 months one could imagine that if the company is still growing like the clappers then people might be prepared to pay over the odds for that growth. Indeed I saw on the bulletin boards one (apparent) player prepared to pay that sort of money now. This, I suspect, is why Sosandar’s shares have shown good strength even if they are ahead of events.

From memory, the ever Thirsty Paul Scott reckons these could run to £3 in perhaps 3 years and is known to be a bit of a retail expert as well as a sober and upstanding member of the community. I certainly hope he is right, and that is why I don’t want to sell out even though the stock appears to be expensive. My own view is that rather like ASOS, Sosandar - with good long-term delivery - could reach numbers which seem ridiculous to us now. Whether those numbers are justified is another matter (PE 75??) but it could happen.

So I’ll bide my time and hope 50p comes up sooner rather than later to sell another tranche, safe in the knowledge that I have already bagged substantial gains from earlier sales and thus the ride forward is essentially for free.


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