Positive Write-Up28 May 2014 14:31
Snoozebox Holdings (LON:ZZZ)
I had a dabble on this share when it was originally floated by Panmure Gordon in May 2012 at 40p. It sounded a great idea - converting standard metal shipping containers into mobile accommodation units that could provide small, but good quality temporary hotel rooms at events such as festivals, sporting events, etc.
It was a good idea, but very badly executed. It quickly became apparent that things were not going well, so at the first sign of trouble I dumped my shares, for a modest profit. It rarely pays to fall in love with a story stock. Things go wrong, and implementing a new business plan nearly always takes far longer, and costs far more money, than originally planned.
New management has been brought in, and they have completely re-worked the business model. It has become apparent that the v1 accommodation units, whilst popular with customers, are not viable for short term installations. This is because they can take up to a week to set up, involving multiple contractors to do the various jobs required. Hence the cost of set-up, and the considerable down time when they are not generating any income, more than offsets the sales revenue for the few days when they are occupied, at a festival for example.
Therefore the new business model will involve the v1 units being placed in semi-permanent installations, e.g. building sites in remote locations, military, and some other places where Planning Permission has been granted to use them semi-permanently (e.g. Silverstone). This should generate enough cashflow to cover the central costs from 2015 onwards.
Newly designed v2 units are a big improvement, being self-contained, and only needing 1 day to set up. Combined with strong demand & much higher pricing being achieved, this should dramatically transform the economics of the business from 2015 onwards.
Special Offer: Invest like Buffett, Slater and Greenblatt. Click here for details »
A recent Placing raised £ 10m which is being used to finance the first batch of v2 units. Today's RNS from Snoozebox confirms that the order has been placed for manufacture of the new units. I'll stick my neck out, and say that I reckon ZZZ will work second time around, with these new v2 units. I had a conference call with the CEO a little while ago, and running through the figures with him, it seems clear that there is very strong demand for the product, and that the economics of the v2 units are compelling, especially when you compare the set up costs with the outgoing v1 units.
In effect, the v1 units proved that there is strong demand for the product, but were not viable in commercial terms due to the complexity & cost of installations. The v2 units have eradicated all those problems, and are very quick & cheap to instal. Therefore I'll stick my neck out here, in saying that I believe Snoozebox should become a viable business in 2015.
Bear in mind also that the last Placing came with War
Sign In
Follow the stocks
