Well we've reached the end of December, and still no word on Disney's intentions. The question is, will they try and pursue a further appeal against paying Celador $324m ($60m is Avesco's share).
Disney have managed to drag this out for several years, but it's difficult to see how they could possibly get this overturned now. Even if they launch a further appeal, is it likely that another court and/or panel of judges will overturn the decision of the original judge and jury and now the ninth court of appeals? It doesn't seem likely to me.
Come on Disney, it's time to pay up.
If Disney do capitulate then Avesco is a doubler in 2013. Avesco have aleady announced that results will be ahead of market expectations, which in itself would more than justify the current share price. If Disney pay up then it's worth a further £1.40ish per share to AVS shareholders. As I've mentioned many times before Avesco is a growing, profitable and cash generative company. I'd expect the share price to move above £3. We'll see.
Talking of doublers in 2013, I notice that there is a thread on the ADVFN bulletin board for suggestions of shares that may increase 100% during 2013. I could nominate Avesco of course, but instead I am going for ANGLE.
Amongst my share purchases this year, I've made two very speculative additions to my portfolio. One I've already mentioned in a previous blog - Avanti Communications and now Angle.
Angle was a red hot stock earlier this year. Great excitement surrounded its Parsortix product when the company released several news stories to the market about its success in capturing circulating tumour cells (CTCs) in various forms of spiked and patient blood. The share price shot up above 90p at one stage as investors speculated about the possible returns from a product that could be launched to a research market worth £250m per annum and the later launch of a clinical product to a market estimated to be worth £6 billion per annum.
Angle also had two other products of note - Geometrics (Computer graphics) and Novocellus (IVF) both of which had/have the potential to generate significant revenues and profits.
So why has the share price capitulated to its current 27p?
Well one reason appears to be that Novocellus has effectively been shelved for the forseeable future, and secondly (possibly) that a Parsortix device was scheduled to be delivered to the research market a month or so earlier than it has been.
Stocks, such as Angle, are in my experience highly volatile and the share price is highly sensitive (more than most) to perceived good and bad news. Hardly surprising since this type of stock is impossible to value on fundamentals. It has a reasonable balance sheet, but burns cash and won't make profits for some time yet.
So why I have bought stock. Quite frankly I've taken a punt.
My only justification is that with a Parsortix device now with their research partners, if successful then it's potential is massive. Without being too dismissive, my impression was that Geometrics and Novocellus were very much secondary to their investment in Parsortix, and the original rise in the share price all centred around this product.
Clearly Angle isn't for widows and orphans since if it all goes pear-shaped with the Parsortix device then (imo) Geometrics by itself won't prop up the share price. However, success with Parsortix will see a multi-bagger.
One other caveat is that Angle will undoubtedly have to raise more cash at some point (unless they make a Geometrics trade sale which they mentioned in the final results - although I have no idea how much that would raise?), but hopefully any placing will be above the current share price of 27p.
Anyway, Angle is my speculative doubler for 2013 and if the Parsortix device does what they hope it can do, it will be a feel good factor from so many perspectives.
A very belated Merry Christmas and a Happy New Year.
Saturday 29 December 2012
Saturday 8 December 2012
Appeal falls on deaf ears....
Great news from Avesco this week. Firstly they announced that results would come in ahead of market expectations for the year ending September 2012, and secondly the ninth court of appeals rejected Disney's appeal against Celador and upheld the verdict and payout. This amounts to over £1.40 per share to Avesco shareholders.
Disney do have the right to a further appeal, but the payout now looks almost certain in my view. Where would Disney go from here, and what would they hope to achieve? They lost the jury trial and were originally denied an appeal by the presiding judge. They took their case to the ninth court who have acted quickly in rejecting Disney's appeal. Both appeals were rejected unequivocally. Interestingly the ninth court of appeals indicated that they would reach their decision within 12 months but came back within 2 months. That clearly suggests the decision was relatively easy and in effect can't leave Disney with much hope, if any.
Avesco's shares shot up on the news to above £2 but have since pulled back a little. I expect them to go far higher. Broker forecasts were for EPS in the mid teens, and Avesco have beaten market expectations. Let's assume EPS of around 17p. That puts the shares on a modest rating of around 11 times earnings for a rapidly growing company (albeit on a two year cycle). Fairly modest in itself. Strip out the Disney payment and the P/E ratio falls to about 3. Net tangible asset value is £1.52. In my opinion the shares are worth north of £3 at this stage. The long term outlook is very favourable.
On a separate note, I am also a holder of Interior Services Group. They released an encouraging trading statement on Friday, despite the challenging economic conditions. They pay a very good dividend, and again I view the shares as a long term hold for income and capital gains.
However, I'll leave you with Avesco and one of the many reasons why I'm such a fan of this company. Look at this 3-D projection show by Creative Technology US:-
http://www.youtube.com/watch?v=i7Eqx7oQ0rA
Fantastic.
Disney do have the right to a further appeal, but the payout now looks almost certain in my view. Where would Disney go from here, and what would they hope to achieve? They lost the jury trial and were originally denied an appeal by the presiding judge. They took their case to the ninth court who have acted quickly in rejecting Disney's appeal. Both appeals were rejected unequivocally. Interestingly the ninth court of appeals indicated that they would reach their decision within 12 months but came back within 2 months. That clearly suggests the decision was relatively easy and in effect can't leave Disney with much hope, if any.
Avesco's shares shot up on the news to above £2 but have since pulled back a little. I expect them to go far higher. Broker forecasts were for EPS in the mid teens, and Avesco have beaten market expectations. Let's assume EPS of around 17p. That puts the shares on a modest rating of around 11 times earnings for a rapidly growing company (albeit on a two year cycle). Fairly modest in itself. Strip out the Disney payment and the P/E ratio falls to about 3. Net tangible asset value is £1.52. In my opinion the shares are worth north of £3 at this stage. The long term outlook is very favourable.
On a separate note, I am also a holder of Interior Services Group. They released an encouraging trading statement on Friday, despite the challenging economic conditions. They pay a very good dividend, and again I view the shares as a long term hold for income and capital gains.
However, I'll leave you with Avesco and one of the many reasons why I'm such a fan of this company. Look at this 3-D projection show by Creative Technology US:-
http://www.youtube.com/watch?v=i7Eqx7oQ0rA
Fantastic.
Sunday 11 November 2012
Trading statements and cashing in a 50% profit
It's been a fairly eventful week, with two of the companies I hold shares in issuing trading statements.
Unfortunately neither statement was particularly pleasing, although it could be argued that neither was disasterous either.
However, I have subsequently sold one of my holdings and retained the other.
The holding I have sold are my shares in Indigovision.
During 2012 the company has been extremely bullish about its prospects, and as I have previously written, when Indigovision increases sales whilst maintaining margins the effect on the bottom line is quite dramatic.
When they issued their final results in September, the tenor of the report gave the impression that 2012/2013 was set to be a year with good growth prospects. In fact having achieved double digit growth in the second half of the year, it mentioned that double digit growth had continued into the new year. I quote " A good start has been made in the current year. Double digit sales growth has continued into the first seven weeks of the current year, and the rate of order intake is equally encouraging."
Barely a few weeks later revenue growth has been reported at 6% and order intake at 10% (just about double digits), more concerning is the fall in margins and the increase in operating expenses.
It begs the question, what exactly has happened in a few brief weeks?
Let's be generous and just say that the trading statement wasn't quite what I was expecting.
I was also a little puzzled by the following:- "As ever, the visibility of future orders remains short.....". Well that's obvious.
But then we have:-
"Given the outstanding performance achieved in last year's first half, we expect benefits to operating performance to be skewed towards the second half of the current year."
So let me get this right. Forward visibility is limited (to say the least), but they expect benefits to operating performance to be skewed towards the second half. How on earth do they have any idea what the second half will look like?
To be honest that line looks like gobbledygook to me. What's the first half of last year got to do with the second half of this year? Perhaps it's just me!!
Anyway, unfortunately I was out on Thursday, pretty confident that the statement would be good, if not great. I was more than a little surprised to see a 65p decline in the SP when I returned home.
My worry is that over the past year or two, there has been more time spent on a power struggle than on improving the performance of the business, and now I'm totally unsure about the prospects here. The picture is very opaque in my view.
I think the company is probably reasonably priced, but for me, the issue of forward visiblity will always be a worry and hence I sold my holding on Friday.
I have no complaints. With the special dividend and some capital growth, I have banked a 50%+ profit in just under a year. As ever, I'll keep them on the monitor, but for the moment I'll invest elsewhere.
Earlier in the week Densitron also gave out a trading statement. The bear points are that they will miss market expectations for the year (delayed orders which will now fall into 2013)and there is ongoing litigation (although they hope to settle out of court). The share price dipped by around 10%.
On a positive note, the possibilty that they would undershoot market expectations, and their intention to resolve the dispute about a lease out of court were flagged up in the interim results and not too much of surprise.
Furthermore, operating profits for the year will still be ahead of 2011 which puts the company on a forward p/e of less than 7. The order book is strong and 10% ahead of the same period last year, with prospects for 2013 looking encouraging.
It appears that the bad news is already in the price. Clearly the uncertainty around the lease dispute is a risk, but a swift and not to painful resolution would see the company back on track and, in my opinion, undervalued on future prospects.
The current dividend is around 7%. I hope this can at least be held, but again I expect that the outcome of the litigation may influence their decision on this year's payment (0.2p was already distributed at the interims).
Unfortunately neither statement was particularly pleasing, although it could be argued that neither was disasterous either.
However, I have subsequently sold one of my holdings and retained the other.
The holding I have sold are my shares in Indigovision.
During 2012 the company has been extremely bullish about its prospects, and as I have previously written, when Indigovision increases sales whilst maintaining margins the effect on the bottom line is quite dramatic.
When they issued their final results in September, the tenor of the report gave the impression that 2012/2013 was set to be a year with good growth prospects. In fact having achieved double digit growth in the second half of the year, it mentioned that double digit growth had continued into the new year. I quote " A good start has been made in the current year. Double digit sales growth has continued into the first seven weeks of the current year, and the rate of order intake is equally encouraging."
Barely a few weeks later revenue growth has been reported at 6% and order intake at 10% (just about double digits), more concerning is the fall in margins and the increase in operating expenses.
It begs the question, what exactly has happened in a few brief weeks?
Let's be generous and just say that the trading statement wasn't quite what I was expecting.
I was also a little puzzled by the following:- "As ever, the visibility of future orders remains short.....". Well that's obvious.
But then we have:-
"Given the outstanding performance achieved in last year's first half, we expect benefits to operating performance to be skewed towards the second half of the current year."
So let me get this right. Forward visibility is limited (to say the least), but they expect benefits to operating performance to be skewed towards the second half. How on earth do they have any idea what the second half will look like?
To be honest that line looks like gobbledygook to me. What's the first half of last year got to do with the second half of this year? Perhaps it's just me!!
Anyway, unfortunately I was out on Thursday, pretty confident that the statement would be good, if not great. I was more than a little surprised to see a 65p decline in the SP when I returned home.
My worry is that over the past year or two, there has been more time spent on a power struggle than on improving the performance of the business, and now I'm totally unsure about the prospects here. The picture is very opaque in my view.
I think the company is probably reasonably priced, but for me, the issue of forward visiblity will always be a worry and hence I sold my holding on Friday.
I have no complaints. With the special dividend and some capital growth, I have banked a 50%+ profit in just under a year. As ever, I'll keep them on the monitor, but for the moment I'll invest elsewhere.
Earlier in the week Densitron also gave out a trading statement. The bear points are that they will miss market expectations for the year (delayed orders which will now fall into 2013)and there is ongoing litigation (although they hope to settle out of court). The share price dipped by around 10%.
On a positive note, the possibilty that they would undershoot market expectations, and their intention to resolve the dispute about a lease out of court were flagged up in the interim results and not too much of surprise.
Furthermore, operating profits for the year will still be ahead of 2011 which puts the company on a forward p/e of less than 7. The order book is strong and 10% ahead of the same period last year, with prospects for 2013 looking encouraging.
It appears that the bad news is already in the price. Clearly the uncertainty around the lease dispute is a risk, but a swift and not to painful resolution would see the company back on track and, in my opinion, undervalued on future prospects.
The current dividend is around 7%. I hope this can at least be held, but again I expect that the outcome of the litigation may influence their decision on this year's payment (0.2p was already distributed at the interims).
Sunday 4 November 2012
The very little research, but are these really hopeless cases? portfolio vs. FTSE250 - update
It's been a very quiet week for the micro/small caps that I have an interest in, and as such I don't really have anything new to add.
However, some of you may remember that, as a bit of fun in September 2011, I started to look at companies that had or were having a bit of a torrid time either from a trading or a share price point of view.
Out of interest, I started to compare the SP performance of these companies to the performance of the FTSE-250.
I was going to provide updates on a monthly basis, but unfortunately other commitments don't allow me to post as regularly as I might wish to.
Since September 2011, you might be interested to know that the FTSE-250 has risen by a very creditable 20.9% from 10,021.39 to 12,120.83, but how have the selected companies performed. Which have been the stars (if any) and which have crashed to earth with a bang?
Well the biggest casualty was Game Group. In fact it was Game over (I wonder how many times the press used that one?). One of the many high street casualties in recent years unfortunately, and an investment here would have cost you dear.
The next biggest loser (at the moment) is Man Group, falling from a price of 206.1p to 84.5p, a whopping 59% drop. Incidentally, I did mention Man Group in last week's blog for those interested. Thomas Cook is next with a drop from 43.55p to 22.5p (a 48.3% drop).
Three of the other shares have fared better. In order of price gains Cable and Wireless Comms has increased by 16.2%, Aviva and Vodafone by 6.2% and 3.3% respectively.
Cable and Wireless Worldwide succumbed to a bid from Vodafone (ironically), and if memory serves me correctly Vodafone paid 38p per share, meaning you would have bowed out with a reasonable 10% profit.
Finally, the biggest star so far is ITV, rising from 55.85p to its current 89.5p, a very healthy 60.3%.
Overall, the portfolio is down by 14%, and hence the FTSE-250 is the clear leader by some considerable way at this particular juncture.
As I stated at the time, I didn't and don't have any holdings in the companies mentioned and haven't carried out any research, I just thought it might be an interesting study for a year or two.
Are there any lessons to be learnt?
Probably not, but to state the obvious, it's essential to thoroughly research companies you invest in before taking the plunge, and investing at the right price is crucial i.e. What price are you prepared to pay for a company?
Cable and Wireless Worldwide was a classic example. Whilst a 10% gain is a decent profit in less than a year, at one point the shares slipped to about 14p (again from memory?) and if you'd bought them then you'd have made a killing, in fact a 171% profit in a very short period of time.
I hope to re-visit these companies again in a year's time.
However, some of you may remember that, as a bit of fun in September 2011, I started to look at companies that had or were having a bit of a torrid time either from a trading or a share price point of view.
Out of interest, I started to compare the SP performance of these companies to the performance of the FTSE-250.
I was going to provide updates on a monthly basis, but unfortunately other commitments don't allow me to post as regularly as I might wish to.
Since September 2011, you might be interested to know that the FTSE-250 has risen by a very creditable 20.9% from 10,021.39 to 12,120.83, but how have the selected companies performed. Which have been the stars (if any) and which have crashed to earth with a bang?
Well the biggest casualty was Game Group. In fact it was Game over (I wonder how many times the press used that one?). One of the many high street casualties in recent years unfortunately, and an investment here would have cost you dear.
The next biggest loser (at the moment) is Man Group, falling from a price of 206.1p to 84.5p, a whopping 59% drop. Incidentally, I did mention Man Group in last week's blog for those interested. Thomas Cook is next with a drop from 43.55p to 22.5p (a 48.3% drop).
Three of the other shares have fared better. In order of price gains Cable and Wireless Comms has increased by 16.2%, Aviva and Vodafone by 6.2% and 3.3% respectively.
Cable and Wireless Worldwide succumbed to a bid from Vodafone (ironically), and if memory serves me correctly Vodafone paid 38p per share, meaning you would have bowed out with a reasonable 10% profit.
Finally, the biggest star so far is ITV, rising from 55.85p to its current 89.5p, a very healthy 60.3%.
Overall, the portfolio is down by 14%, and hence the FTSE-250 is the clear leader by some considerable way at this particular juncture.
As I stated at the time, I didn't and don't have any holdings in the companies mentioned and haven't carried out any research, I just thought it might be an interesting study for a year or two.
Are there any lessons to be learnt?
Probably not, but to state the obvious, it's essential to thoroughly research companies you invest in before taking the plunge, and investing at the right price is crucial i.e. What price are you prepared to pay for a company?
Cable and Wireless Worldwide was a classic example. Whilst a 10% gain is a decent profit in less than a year, at one point the shares slipped to about 14p (again from memory?) and if you'd bought them then you'd have made a killing, in fact a 171% profit in a very short period of time.
I hope to re-visit these companies again in a year's time.
Sunday 28 October 2012
Takeover rumours
When I first started dabbling in the stock market, like many investors I tended to concentrate on larger companies that were generally household names. However, I soon moved away from these companies towards the smaller types of organisations I invest in today. There are many reasons why I quickly moved away from investing in big caps, but the main one would be because small caps are often overlooked and under-researched whereas the larger companies are analysed to death by hundreds of professionals. It therefore seems likely that there is more chance of spotting a bargain amongst the small-caps.
However, that doesn't mean that there aren't bargains to be had even in the FTSE-100.
I am always interested when I hear takeover talk mentioned in the papers and elsewhere, and keep a watchful eye on potential targets.
Back in 2002, there was a lot of talk in the press about Safeway supermarkets being vunerable to a takeover, and having cast an eye over the fundamentals, I decided that the shares did look cheap. I waited a while for the rumours to die down before buying a small stake. The share price drifted for a few weeks/months before Morrisons eventually made their successul bid, and I was able to bag a 20% profit.
So where are the rumours that just won't go away at the moment?
Well amongst the larger caps, Man Group seems to be popular, and further interest has been aroused by Odey Asset Management recently taking a near 5% stake in the group. I've no idea whether or not a potential bidder may appear, but certainly the rumours have lingered for some time. I haven't researched the fundamentals, but I am aware that the shares have fallen considerably from their peak, that the company has been struggling to hold onto it's investors and that its AHL fund continues to underperform. On the plus side it appears to offer a double digit dividend which, if it can be held, is not to be sniffed at. Break-up value is touted to be around the 50p-75p mark.
An investment in Man Group would look very tempting if the share price were to drop to within this range.
Another large company where takeover talks have often arisen is Sainburys. In truth, this looks a safe company in which to 'park' your money, offering a very healthy dividend yield, slow but steady growth in earnings and with substantial property assets on it's balance sheet.
In 2007 the Qatari backed Delta Two fund held talks over a 600p per share offer for the group, but backed off because of the credit crunch. However, during the summer, rumours about renewed interest surfaced once again.
My instinct tells me that either one or both of these giants will eventually fall prey to a takeover bid, and although you're probably not going to achieve a multi-bagger with either one, traders with a short/medium term horizon may make a healthy profit.
I don't own shares in either company, but I will keep them on my watch list, although I do tend to stick to my small caps these days.
My recommended investment books:-
http://astore.amazon.co.uk/httpmichae1mb-21
However, that doesn't mean that there aren't bargains to be had even in the FTSE-100.
I am always interested when I hear takeover talk mentioned in the papers and elsewhere, and keep a watchful eye on potential targets.
Back in 2002, there was a lot of talk in the press about Safeway supermarkets being vunerable to a takeover, and having cast an eye over the fundamentals, I decided that the shares did look cheap. I waited a while for the rumours to die down before buying a small stake. The share price drifted for a few weeks/months before Morrisons eventually made their successul bid, and I was able to bag a 20% profit.
So where are the rumours that just won't go away at the moment?
Well amongst the larger caps, Man Group seems to be popular, and further interest has been aroused by Odey Asset Management recently taking a near 5% stake in the group. I've no idea whether or not a potential bidder may appear, but certainly the rumours have lingered for some time. I haven't researched the fundamentals, but I am aware that the shares have fallen considerably from their peak, that the company has been struggling to hold onto it's investors and that its AHL fund continues to underperform. On the plus side it appears to offer a double digit dividend which, if it can be held, is not to be sniffed at. Break-up value is touted to be around the 50p-75p mark.
An investment in Man Group would look very tempting if the share price were to drop to within this range.
Another large company where takeover talks have often arisen is Sainburys. In truth, this looks a safe company in which to 'park' your money, offering a very healthy dividend yield, slow but steady growth in earnings and with substantial property assets on it's balance sheet.
In 2007 the Qatari backed Delta Two fund held talks over a 600p per share offer for the group, but backed off because of the credit crunch. However, during the summer, rumours about renewed interest surfaced once again.
My instinct tells me that either one or both of these giants will eventually fall prey to a takeover bid, and although you're probably not going to achieve a multi-bagger with either one, traders with a short/medium term horizon may make a healthy profit.
I don't own shares in either company, but I will keep them on my watch list, although I do tend to stick to my small caps these days.
My recommended investment books:-
http://astore.amazon.co.uk/httpmichae1mb-21
Saturday 27 October 2012
Well worth a read!!
I have decided to add a link to my blog pages which list my favourite investing books. It may be of interest to some of you. Personally I have read some of the books more than once, and they have proved invaluable to me in helping form my investing strategy. The link is given below:-
http://astore.amazon.co.uk/httpmichae1mb-21
My particular favourites are 'The Intelligent Investor' and 'Security Analysis' by Ben Graham and 'One up on Wall Street' by Peter Lynch. For the serious investor, Graham is a must read in my opinion.
http://astore.amazon.co.uk/httpmichae1mb-21
My particular favourites are 'The Intelligent Investor' and 'Security Analysis' by Ben Graham and 'One up on Wall Street' by Peter Lynch. For the serious investor, Graham is a must read in my opinion.
Updates - Indigovision, Avesco and Interior Services Group
A quick update on three shares I hold, and have mentioned recently.
ISG kicked off the week with encouraging news about £100m worth of contract wins in the UK and overseas.
David Lawther, ISG Chief Executive, said:
"We continue to see robust demand for our services from our blue-chip customer base, both in the UK and overseas."
Clients include Heathrow airport and Marks and Spencer.
http://www.isgplc.com/home/default.asp
The shares went ex-dividend this week and have dipped a little, but with good news about economic growth in the UK also announced this week, I am optimistic about future prospects here.
River and Mercantile Asset Management picked up an additional 200,000 shares on Friday to increase their holding to above 5%.
Richard Murray, Avesco's Chairman, continued to increase his holding in the group picking up another 20,000 shares at 159p and 160p. Over the last month or so he has topped up his holding by spending around £125,000. He owns over 20% of the company.
It's worth taking a peek at Creative Technology's facebook page for a glimpse of Avesco's recent contract wins:-
http://www.facebook.com/creativetechnologygroup?sk=wall
Notably there is a Brazilian project mentioned which is important given that Brazil will be hosting the next football World Cup and Olympic games.
No news on the Disney case yet, although this is an interesting article:-
http://www.dailybusinessreview.com/PubArticleDBR.jsp?id=1350208605438&9th_Circuit_airs_arguments_over_game_show_Millionaire_profits&slreturn=20120927041916
It hints that Disney's appeal may not be successful.
However, I'm happy to hold these whatever the outcome. This is a growing company that will be throwing off cash in the future. Avesco has performed exceptionally well despite the less than conducive economic conditions.
Finally, Indigovision's former Chief Executive looks to have finally thrown in the towel and has sold his entire holding. Clearly he no longer harbours ambitions about regaining control of the company, which allows management the opportunity to concentrate on moving the business to the next stage without unwelcome distractions.
ISG kicked off the week with encouraging news about £100m worth of contract wins in the UK and overseas.
David Lawther, ISG Chief Executive, said:
"We continue to see robust demand for our services from our blue-chip customer base, both in the UK and overseas."
Clients include Heathrow airport and Marks and Spencer.
http://www.isgplc.com/home/default.asp
The shares went ex-dividend this week and have dipped a little, but with good news about economic growth in the UK also announced this week, I am optimistic about future prospects here.
River and Mercantile Asset Management picked up an additional 200,000 shares on Friday to increase their holding to above 5%.
Richard Murray, Avesco's Chairman, continued to increase his holding in the group picking up another 20,000 shares at 159p and 160p. Over the last month or so he has topped up his holding by spending around £125,000. He owns over 20% of the company.
It's worth taking a peek at Creative Technology's facebook page for a glimpse of Avesco's recent contract wins:-
http://www.facebook.com/creativetechnologygroup?sk=wall
Notably there is a Brazilian project mentioned which is important given that Brazil will be hosting the next football World Cup and Olympic games.
No news on the Disney case yet, although this is an interesting article:-
http://www.dailybusinessreview.com/PubArticleDBR.jsp?id=1350208605438&9th_Circuit_airs_arguments_over_game_show_Millionaire_profits&slreturn=20120927041916
It hints that Disney's appeal may not be successful.
However, I'm happy to hold these whatever the outcome. This is a growing company that will be throwing off cash in the future. Avesco has performed exceptionally well despite the less than conducive economic conditions.
Finally, Indigovision's former Chief Executive looks to have finally thrown in the towel and has sold his entire holding. Clearly he no longer harbours ambitions about regaining control of the company, which allows management the opportunity to concentrate on moving the business to the next stage without unwelcome distractions.
Sunday 21 October 2012
Trakm8 revving up?
In September 2011, I mentioned that I had purchased shares in an outfit called Trakm8.
It's a real tiddler, but I think it has excellent potential.
For almost a year the share price changed very little, and hovered around a mid-price of about 13p. However, recently there have been signs of life, and Friday's mid closing price is 19.5p.
In my opinion this is a great little company. Growth in revenues over the past two years have been 22% and 25% respectively, and in a recent trading statement, it appears that the first few weeks of the new financial year have been encouraging and growth has continued.
The company is profitable, cashflow positive, has a robust balance sheet, healthy margins, and a high percentage of it's revenues are recurring.
Since issuing their results in July, they have announced a major contract award with Motorola Solutions. They have released technology updates and a product launch ("ecoN can enable the vehicle operator to reduce fleet fuel consumption by up to 20%. This product has already undergone extensive fleet trials and the savings have been proven." - sounds like a winner with today's sky high fuel prices). The Directors' have made share purchases to the tune of £140,000 (4.2% of the company) at a 21% premium (17p) to the prevailing offer price at the time. Finally they bought back 2% of the issued share capital.
At today's price the company is still only valued at about £3.7m, shares are thinly traded and illiquid, but with a medium to long term horizon I have high hopes and am very encouraged by all of the noises coming out of the company.
I like the management who draw relatively modest salaries but have a lot of 'skin in the game'.
As with all growth companies it's the potential future earnings to keep an eye on, and it's probably not worth guessing this year's EPS figure. However, if they continue with their double digit revenue growth then it's not too difficult to see them earning between £500,000 and £1m profit in the not too distant future which equates to EPS of between 2.6p-5.2p. Apply a modest 12 times earnings and the share price would be between 31p-62p (although proven growth companies often trade on a far higher multiple).
It is a company at an early stage of development and all the usual caveats apply, but so far so good!
It's a real tiddler, but I think it has excellent potential.
For almost a year the share price changed very little, and hovered around a mid-price of about 13p. However, recently there have been signs of life, and Friday's mid closing price is 19.5p.
In my opinion this is a great little company. Growth in revenues over the past two years have been 22% and 25% respectively, and in a recent trading statement, it appears that the first few weeks of the new financial year have been encouraging and growth has continued.
The company is profitable, cashflow positive, has a robust balance sheet, healthy margins, and a high percentage of it's revenues are recurring.
Since issuing their results in July, they have announced a major contract award with Motorola Solutions. They have released technology updates and a product launch ("ecoN can enable the vehicle operator to reduce fleet fuel consumption by up to 20%. This product has already undergone extensive fleet trials and the savings have been proven." - sounds like a winner with today's sky high fuel prices). The Directors' have made share purchases to the tune of £140,000 (4.2% of the company) at a 21% premium (17p) to the prevailing offer price at the time. Finally they bought back 2% of the issued share capital.
At today's price the company is still only valued at about £3.7m, shares are thinly traded and illiquid, but with a medium to long term horizon I have high hopes and am very encouraged by all of the noises coming out of the company.
I like the management who draw relatively modest salaries but have a lot of 'skin in the game'.
As with all growth companies it's the potential future earnings to keep an eye on, and it's probably not worth guessing this year's EPS figure. However, if they continue with their double digit revenue growth then it's not too difficult to see them earning between £500,000 and £1m profit in the not too distant future which equates to EPS of between 2.6p-5.2p. Apply a modest 12 times earnings and the share price would be between 31p-62p (although proven growth companies often trade on a far higher multiple).
It is a company at an early stage of development and all the usual caveats apply, but so far so good!
Saturday 13 October 2012
A bear raid on Avanti
I've always thought that shorting shares (for PIs) is a very risky practice, particularly since it involves spreadbetting (from my understanding) where gains and losses can be very substantial indeed.
However, it hasn't stopped one well-known bear raider, and a few others from shorting Avanti shares following their recent results. Their arguments can be read on the Avanti thread on ADVFN.
As I have already stated in two previous posts, Avanti is a speculative punt for me, but I continue to hold and may add on any further price weakness.
Whilst revenues were well below the level that they had indicated only a month or so earlier, I'm prepared to take their explanation at face value where they say that they have decided to adopt a more conservative approach to aspects of their accounting in preparation for their listing on the main exchange.
Herein probably lies a conundrum for the shorters. They have centred their arguments around Avanti's accounts, and inferred a lack of transparency. However, I'd question why the company would expose itself to the more rigorous scrutiny of the main exchange, if they were trying to keep their accounting practices under wraps. Surely they would have just stuck with AIM and reported the £17.5m in revenues? Furthermore, seven Directors have just picked up another £166,000 worth of shares between them to add to their existing holdings. Either all seven are insane and happy to throw good money after bad or they believe in the future of the company.
With all speculative companies, one of my main worries would be cash and the possibilty that they burn through it too quickly and have to tap shareholders for extra funds. However, Avanti seem to have enough for the forseeable future, and I am reassured by the following statement:-
"The Company also continues to evaluate options for additional satellites, but only if they can be prudently debt financed without recourse to shareholders".
Which clearly suggests they wish to preserve shareholder value.
Futhermore, the bears have conveniently ignored the very positive steps forward that Avanti have made and are achieving. Two fully operational satellites and a further fully financed satellite currently being built. Capacity on the satellites is selling well and on target (£11m per month).
It's also worth noting that the current market value of the company is not substantially above its tangible NAV.
For now I'll assume that Avanti's biggest mistake was not informing investors beforehand of the change in accounting practice. That said, if they had released this news without the positive news about progress, then the shares would probably have fallen further, so in retrospect it was probably the right move to wait.
As I've already said, I wouldn't bet the house on Avanti, but I am still optimistic that over the next few years the company could generate an excellent return.
Good luck to the shorters if they can make some money from a very risky approach, but I'll stick with my long game and avoid all the unnecessary stress. Touch wood it's served me well so far.
However, it hasn't stopped one well-known bear raider, and a few others from shorting Avanti shares following their recent results. Their arguments can be read on the Avanti thread on ADVFN.
As I have already stated in two previous posts, Avanti is a speculative punt for me, but I continue to hold and may add on any further price weakness.
Whilst revenues were well below the level that they had indicated only a month or so earlier, I'm prepared to take their explanation at face value where they say that they have decided to adopt a more conservative approach to aspects of their accounting in preparation for their listing on the main exchange.
Herein probably lies a conundrum for the shorters. They have centred their arguments around Avanti's accounts, and inferred a lack of transparency. However, I'd question why the company would expose itself to the more rigorous scrutiny of the main exchange, if they were trying to keep their accounting practices under wraps. Surely they would have just stuck with AIM and reported the £17.5m in revenues? Furthermore, seven Directors have just picked up another £166,000 worth of shares between them to add to their existing holdings. Either all seven are insane and happy to throw good money after bad or they believe in the future of the company.
With all speculative companies, one of my main worries would be cash and the possibilty that they burn through it too quickly and have to tap shareholders for extra funds. However, Avanti seem to have enough for the forseeable future, and I am reassured by the following statement:-
"The Company also continues to evaluate options for additional satellites, but only if they can be prudently debt financed without recourse to shareholders".
Which clearly suggests they wish to preserve shareholder value.
Futhermore, the bears have conveniently ignored the very positive steps forward that Avanti have made and are achieving. Two fully operational satellites and a further fully financed satellite currently being built. Capacity on the satellites is selling well and on target (£11m per month).
It's also worth noting that the current market value of the company is not substantially above its tangible NAV.
For now I'll assume that Avanti's biggest mistake was not informing investors beforehand of the change in accounting practice. That said, if they had released this news without the positive news about progress, then the shares would probably have fallen further, so in retrospect it was probably the right move to wait.
As I've already said, I wouldn't bet the house on Avanti, but I am still optimistic that over the next few years the company could generate an excellent return.
Good luck to the shorters if they can make some money from a very risky approach, but I'll stick with my long game and avoid all the unnecessary stress. Touch wood it's served me well so far.
Wednesday 10 October 2012
Avanti results and Disney appeal
I took a brief look at Avanti's results before popping out for the day, and revenues aside, the tone of the report looked upbeat. When I came home to see the drop in the share price, I assumed that both satellites must have fallen to earth later in the day, and that they hadn't been paying the insurance premiums.
Fortunately no such event had occurred, and I took the time to read the report more thoroughly. As I said in my weekend post, this is a speculative punt with a view to the long term. Can't see any reason to change my mind. I'll continue holding, and may add a few if the price dips again. Clearly the Directors still feel confident since the tone of the report is very positive, and five of them have been topping up their holdings at around the £3 mark.
On a separate issue, Disney and Celador were back in court again today. You can see a brief report on the day by following the link below:-
http://www.hollywoodreporter.com/thr-esq/disney-urges-court-appeal-overturn-377909
It would be fantastic for the court to uphold the original verdict, but since Avesco's SP doesn't contain any premium for the possible payout, in my opinion, it's all to gain and nothing to lose.
Avesco is a growing company that will be throwing off cash to its shareholders over the next few years. I think it's undervalued without any payout. Full year figures should be good, and the noises coming out of the company are encouraging. Richard Murray has been a recent purchaser of shares on two separate occasions.
Worth noting that if the Court of Appeal does uphold the verdict then I would expect the SP to double overnight. Although, I'm unclear whether further appeals are possible.
Fortunately no such event had occurred, and I took the time to read the report more thoroughly. As I said in my weekend post, this is a speculative punt with a view to the long term. Can't see any reason to change my mind. I'll continue holding, and may add a few if the price dips again. Clearly the Directors still feel confident since the tone of the report is very positive, and five of them have been topping up their holdings at around the £3 mark.
On a separate issue, Disney and Celador were back in court again today. You can see a brief report on the day by following the link below:-
http://www.hollywoodreporter.com/thr-esq/disney-urges-court-appeal-overturn-377909
It would be fantastic for the court to uphold the original verdict, but since Avesco's SP doesn't contain any premium for the possible payout, in my opinion, it's all to gain and nothing to lose.
Avesco is a growing company that will be throwing off cash to its shareholders over the next few years. I think it's undervalued without any payout. Full year figures should be good, and the noises coming out of the company are encouraging. Richard Murray has been a recent purchaser of shares on two separate occasions.
Worth noting that if the Court of Appeal does uphold the verdict then I would expect the SP to double overnight. Although, I'm unclear whether further appeals are possible.
Sunday 7 October 2012
Speculate to accumulate?
Earlier this year I made what I would consider to be a
highly speculative purchase of shares in a company called Avanti
Communications. Avanti had been on my radar for some considerable time, but
given the stage of its development in early 2011, a price of £7+ was certainly
more than I was prepared to pay. The company’s shares were subsequently the
target of a well-known “shorter”, and the price fell rapidly over the year to a
low of around £2.40 if memory serves me correctly.
However, I kept the company on my monitor and decided to
take the plunge around April 2012, buying shares at around £2.60. Since that
time the shares have recovered to the current price of £3.44.
I could never classify my purchase of Avanti as an investment,
more a speculative punt, but I am becoming more confident that this could be a
multi-bagger in the making.
Firstly, the trigger for my purchase of Avanti shares came
when in February this year they announced the fundraising for their third
satellite HYLAS 3, alongside a positive trading update and a statement stating
that “in the current climate (the company)
does not intend to pursue further equity raisings for satellites in addition to
HYLAS 3” and “Subject to suitable market conditions the Company intends to seek
a premium listing on the Official List of the London Stock Exchange in 2013”.
Directors have been regular purchasers of company shares; trading
updates have been encouraging and recently the launch of HYLAS 2 went smoothly.
Given the costs associated with building and launching satellites and all the inherent
risks, I’d imagine that barriers to entering their chosen market are high.
If things do continue to go well for Avanti then shareholders
should be richly rewarded with capital growth and hopefully dividends in the
longer term. However, on the flip side there are probably a thousand and one
things that could still upset the applecart, hence until there are visible significant
revenues, cash flow and profits it remains highly speculative. Brokers quote
anything from £6-£20 a share as possible in the medium term (which probably
tells you everything you need to know i.e. just pick any number out the air?).
Results will be released this Wednesday with an update on
HYLAS 2, and it will be interesting to see the numbers and the capacity being filled
on both HYLAS 1 and 2.
It’s not a company I’d bet the house on, but nevertheless
you wouldn’t need to since if it is ultimately successful, even a fairly modest
stake could quickly become more significant.
Saturday 6 October 2012
Interior Services Group
“An international construction services
company delivering fit out, construction and a range of specialist services”,.
I was attracted to the company by a
hefty dividend, low P/E ratio and Director purchases despite the company
clearly competing against a lack lustre UK economy, competitive pressures and
the inevitability of squeezed margins.
As ever, I wasn’t expecting a quick
turnaround on this investment, but longer term it looks a good bet.
Whilst it was disappointing that they
reduced dividend payments in the current year, the yield is still over 6%, and
management are committed to a progressive dividend policy. The company is still
heavily reliant on the UK, but overseas operations are growing rapidly and
there is plenty of cash on the balance sheet. Hopefully, the UK is seeing some
green shoots of recovery.
The 2012 outlook statement was
encouraging without being overly optimistic.
I bought shares at around £1.35, and
did see them fall back to just over £1 at one point, however, they have
recovered since and I am now slightly in profit.
Having seen what happened at Zetar
yesterday I’m intrigued, whilst I’m pleased with the rapid share price
recovery, I see no particular driver for it at present. Yes, in the long term I
believe that the company will prosper and the share price improve considerably
from here, but I wonder why there has been a sudden interest at this juncture.
Interior Services have talked about
acquisitions to fuel further growth, but like Zetar will they become the prey.
If share price action is anything to go by then, given the similarities, the
answer is possibly yes.
Friday 5 October 2012
Sweet profit at Zetar
Well you don't expect that kind of RNS after hours on a Friday evening, but I'll take it!!!
It appears that a German company called Zertus have made a cash offer of £2.97 for the entire issued share capital of Zetar.
As you may remember, I bought shares in Zetar in July 2011 (see blog dated Monday 25th July 2011) for around £2.20.
If you read the post then you will see that, longer term, I believe that they are probably worth between £4-£4.50.
However, I'm not going to turn my nose up at a 33% profit in just over a year. Where to put my profits next is the question that will occupy me now, although there are still plenty of small cap bargains.
I suppose that the offer wasn't a surprise really, and in my July post, I did say the following:-
It appears that a German company called Zertus have made a cash offer of £2.97 for the entire issued share capital of Zetar.
As you may remember, I bought shares in Zetar in July 2011 (see blog dated Monday 25th July 2011) for around £2.20.
If you read the post then you will see that, longer term, I believe that they are probably worth between £4-£4.50.
However, I'm not going to turn my nose up at a 33% profit in just over a year. Where to put my profits next is the question that will occupy me now, although there are still plenty of small cap bargains.
I suppose that the offer wasn't a surprise really, and in my July post, I did say the following:-
"There has been
plenty of consolidation in this sector in recent times (think Cadbury’s and
Uniq). In fact whilst Zetar are looking towards organic growth, they are keeping
an eye out for small bolt on acquisitions, although will they inevitably become
a target themselves?"
Plenty of small cap companies are still hugely undervalued, the predators know this and are sniffing around.
Saturday 29 September 2012
Get to know the companies you invest in, and keep them on your monitor-Indigovision
Regular readers of my blog will remember that some time ago
I sold the remainder of my holding in Indigovision to bank an overall profit of
750%. You can read the previous posts which detailed my reasoning, but in
summary their trading statements indicated that growth and margins were faltering,
and I predicted that the share price would fall back below £2 which it subsequently
did.
However, I also wrote that I would keep the company on my
monitor and that it was vulnerable to an opportunistic bid approach.
Late afternoon on Friday 25 Nov 2011, Indigovision suddenly released
one of the most bullish trading statements I’d ever seen from this company.
Knowing the company well, and the implications that an improvement in margins,
and a reduction in operating costs would have on the bottom line, I bought shares
for around £2.70.
I had no idea about the drama that was to subsequently unfold,
but the opportunistic bid did appear from the most unlikely source i.e. the now
ousted Chief Executive, and although the final bid (rumoured to be around £4)
was rejected, the company appears to have regained momentum.
Final results released on Thursday (27/9/12) are encouraging
with a resumption of double digit growth in the second half which has carried
over into the current trading year. Most pleasingly they have hiked the
dividend by 33% year on year, and proposed a special dividend of 70p per share.
Fantastic. I always interpret these moves as a positive sign. They don’t need
the cash to fuel growth, and investors get the opportunity to reinvest or spend
their money however they like.
For those investors who know this company well, the
implications for operating profits from double digit top line growth are
exciting, and I’ll be holding tightly for the foreseeable future.
If growth doesn’t retain its current momentum then don’t be
surprised to see Vellacott return with another offer. Overall, the balance of
probabilities is favourable for further share price rises, and meanwhile I’ll
gratefully accept the dividend and special dividend payments.
Finally, over the past year or so, I have been accumulating
shares in other small/micro-cap companies whilst there is still a sale on. More to follow
in later blogs.
Saturday 15 September 2012
Avesco's Murray puts his money where his mouth is
Very pleasing set of third quarter numbers from Avesco. Given that the company is only valued at around tangible NAV but is highly cash generative, profitable, paying dividends, possibly due a windfall of up to £1.40ish per share and has been recording double digit growth into severe economic headwinds over the past few years, it's hardly surprising that Richard Murray has just spent a further £77,000 on shares.
My argument would be that at the current share price, you're just paying for the company's assets and getting the business and any possible windfall for free.
The company is extremely cheap on any number of measures. From the third quarter report, the following statement from Murray says, "we believe that the outlook for the Group has never been better.", and he's just put his money where his mouth is. That's good enough for me.
Furthermore, how much would a potential acquisitor have to pay for this company?
Certainly a hell of a lot more than the 1.5 times EBITDA it's currently valued at. Given the market that they operate in and prospective growth (particularly as world economic conditions begin to improve), all things considered, I wouldn't want to part with my holding for anything less than £4+. Still very much a long term hold for me.
My argument would be that at the current share price, you're just paying for the company's assets and getting the business and any possible windfall for free.
The company is extremely cheap on any number of measures. From the third quarter report, the following statement from Murray says, "we believe that the outlook for the Group has never been better.", and he's just put his money where his mouth is. That's good enough for me.
Furthermore, how much would a potential acquisitor have to pay for this company?
Certainly a hell of a lot more than the 1.5 times EBITDA it's currently valued at. Given the market that they operate in and prospective growth (particularly as world economic conditions begin to improve), all things considered, I wouldn't want to part with my holding for anything less than £4+. Still very much a long term hold for me.
Wednesday 8 August 2012
Growth and dividends through turbulent times
“Personally
I think that the London Stock Market is about to enter one of the longest bull
runs in living memory” is the bold statement I made in my last post. Of course
I have no idea really, and I’ve never met anyone who can accurately predict the
future gyrations of the Stock Market, although it won’t stop many of the so
called experts having a go.
One
consideration to ponder though is where else are you going to put your money
for the next few years to get a decent return? Savings account, property, gold…..?
None of these appeal to me.
At the same
time, there are a number of companies that have prospered despite the economic
turmoil, and pay a very decent dividend yield. It’s food for thought.
Let’s take
one of my favourites – Avesco. It’s a company that is sensitive to economic
conditions, but despite a less than ideal world economy (note the
understatement), growth has been impressive. 2012 always promised to be a good
year for Avesco because of the London Olympics, Diamond Jubilee and European
Championships. In their recent interims they appear to be on track in achieving
an impressive set of figures, and underlying growth bodes extremely well for
the future.
Without
going through all the details, the key features of the report (for me) include an
improvement in margins over the 3 months from Jan- March. During this period
last year, margins were 34% (2011) and now they are 37.5%. The 8% increase in
revenues over this same period coupled with the margin improvement has had a
dramatic effect on the bottom line taking them from a loss of £186,000 in 2011 to
a profit of £1.6m. The sixth month improvement is equally impressive, and the
even year effect hasn’t even kicked in yet. Analysts’ predictions of an EPS
around the mid-teens look very conservative to me.
As a long
term holder what also caught my eye in the report was the following statement,
“We have come a long way over the last few years and these results reflect that progress. In the past we have placed greater weight on organic growth and building a truly international business in order to create long-term value.
With our international platform now more developed, the Board believes that the future emphasis should be turned towards increased profitability and free cash flow.
The Group's operations are inherently cash generative and, after the major capital expenditure programme in 2012, we believe that we can continue to develop the business with a reduced level of investment. With improved profitability, combined with more modest capital expenditure requirements, Avesco is expected to generate surplus cash, which should enable funds to be used for debt reduction or to be returned to shareholders.
We believe that the successful execution of this strategy will optimise the financial performance of the operating business and enhance shareholder value.”
Avesco have
re-introduced healthy final and interim dividend payments, and it looks like
these are set to continue and increase.
The outlook
statement is extremely encouraging.
When the
world economy does fully recover, and it will eventually, a shareholding in Avesco
appears even more enticing.
N.B. Also not
forgetting that Avesco have net tangible assets of £1.46 per share, and may
receive a pay-out from Disney of £1.40 per share (Disney’s appeal is due in the
ninth court of appeals this summer).
Thursday 26 July 2012
Investing opportunity of a lifetime
Gloom, doom, disaster and despair. Will the eurozone ever recover? Personally I think that the London Stock Market is about to enter one of the longest bull runs in living memory......... More to follow.............
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