Saturday, July 14, 2012

Snoozebox (ZZZ) - speculative share idea

I usually focus on value type investments, but every now & again something more speculative crops up which fires up my interest.

Snoozebox with the imaginative ticker ZZZ, is a recently Listed (1 May 2012) small cap. The Placing price (it raised £11m after expenses on Listing) was 40p, and the shares have since risen nicely to about 54.5p. With 51,295,000 shares in issue, the mkt cap is £28m.

The concept is really clever in my view. Snoozebox creates temporary hotel accommodation from standard size shipping containers. Check out their website here;

Moreover, they have patents pending on the concept of using standard shipping containers for accommodation. The big advantages are that they are easily stacked, transported using standard trucks, can be sent anywhere in the world easily, etc. They're also cheap, robust & long-lasting.

The product is in demand, and working, so it's now simply a roll-out. Each unit (a small, en-suite hotel room in one quarter of a shipping container) costs about £27k to fit out, but can then be rented out for £200+ per night at events. 

The rooms look stylish, and have wifi, a safe, an en-suite wet room, power & light of course, keycard doors, etc. Services are provided by Snoozebox using mother units with their own generators, and storage tanks. They do NOT need connecting up to any mains services, so can genuinely be supplied anywhere.

Sales have had an impressive start, with Snoozebox already securing these events: Queens Diamond Jubilee (256+ rooms at Windsor Home Park), Isle of Man TT race, 80 rooms at Download Festival, 160 rooms at Hop Farm Festival, 144 rooms at Goodwood Festival of Speed, 240 rooms for Silverstone Grand Prix, 320 rooms for London Olympics, etc.

So it's clearly working! The beauty of the roll-out is that they can add more rooms quickly & easily, and finance them on leases. So I doubt there will be the need for further shareholder dilution.

Management are experienced leisure sector people, quite old at 60, so maybe their last throw of the dice? The one question mark is over the CEO, Robert Breare, who is being sued by the administrator & liquidator of a company he was formerly CEO.

The house broker Panmure Gordon is forecasting £3.8m EBITDA for 2013, which would surely attract a very high multiple due to the growth potential? So I can see potentially big speculative upside here. Although the shares already price-in a good amount of optimism.

As usual this is not any kind of recommendation, just a report of something I find interesting. I hold a very small number of shares in ZZZ. As always, do your own research! This share is by its nature more speculative than most.

Please post any comments below, I would be interested in your views.


  1. What are the barriers to entry here? Branding of these units seems minimal - indeed are they provided white label for the event organisers to brand? Surely if the concept looks like it has potential, existing operators like Accor who have (a) expertise (b) contacts (c) economies of scale (d) lower cost of capital will move in and take over the provision of this sort of thing. I guess it's quite capital intensive, which is hardly ideal for a start up.

  2. Hi SirL,
    I suppose the Patent applications are the barrier to entry.
    If ZZZ's Patents succeed, then they are sitting on a goldmine, as they could just licence the idea to others. If not, then others could copy the idea.
    It seems obvious from the impressive contract wins to date that ZZZ have a great product, which is in demand. Remember there's a fair bit of support behind it too - i.e. needing the staff to set up the temporary hotels, man them, organise the utilities, etc.

    It's not often you come across a genuinely brilliant new idea, but this seems exactly that to me!
    Cheers, Paul.

  3. Hi Paul,

    I looked at these, as I liked the story.

    But couldn't work out any value.

    Admisson doc says IPO cash will be used to expand to 400 rooms. So £200 a night * 400 = £80k. Assume fair value is PSR of 1 (not sure), so looking for £28m of sales = 350 nights. Cannot see 400 rooms being full for that amount of year. True, we can adjust room-rate figures etc but not in the obvious value ballpark for me.

    Also, note 6 page 39/40 of admission doc looked odd. Seemed the insiders lent £3m to company for a month and enjoyed a 100% gain as the notes were converted into shares. May have misinterpreted that, though.

    As you say, history of CEO is not 100%.


  4. Hi Mayn,

    Good comments. I agree Snoozebox is difficult to value.
    My view is that it could well look pricey in the short-term, but long-term this could be the start of something big - i.e. they have a great product that's in demand (just look at all the events they have already appeared at), and it's then a roll-out - i.e. new units could probably be financed on leases, so not necessarily any need for further fund-raising, possibly?
    So it could expand to thousands rather than hundreds of units, and international too.
    No idea whether that will happen, but it's a good upside case.

    I think your comment on the loan note conversion looks right. I also thought that seemed odd when I read the IPO document, plus of course the bad smell around the CEO - being sued by liquidators of a previous company he was involved with - is a big question mark.

    Cheers, Paul.