Oh dear, what's happened to Cupid? On Friday the shares fell a massive 57% after the company released a statement about the appointment of auditors to investigate recent press speculation about the activities of the company's 'motivation team'.
I wrote about Cupid in August 2011, and although I never did purchase shares in the company I did leave them on my monitor just in case the share price fell back to enter my value based criteria:-
http://michae1mouse.blogspot.co.uk/2011/08/will-you-fall-in-love-with-cupids.html
I wrote the article when the shares were priced around the £2.50 mark. Now the shares are trading at about 50p, a quick glance at the recent finals would suggest that the shares are now a bargain basement price. The company has achieved outstanding growth since listing, and currently sit on a single figure p/e ratio with plenty of cash on the balance sheet and no debt.
Am I tempted to buy at these levels given the current situation?
Certainly the fundamenals are seductive, and I do wonder how damaging these allegations will be in the long run? What's the worst that can actually happen here? How many users will actually care that much about these allegations, particularly if their experiences have been positive?
I've no idea how much a year's subscription to a site like this would cost, so even if the company are found to have deceived/duped customers into signing up (which hasn't been proven yet) what sort of compensation is likely to be payable, and exactly how many lonely hearts are likely to want to come forward anyway? Of course, it's difficult to gauge the extent of any possible lasting damage and that's why the shorters are currently enjoying a field day with planting doubt in the minds of shareholders and potential investors.
My own feelings are that this may just turn out to be a very temporary blip for a rapidly expanding company that has a presence in 15 different countries. Certainly online dating appears to be a huge growth area. This could turn out to be a massive opportunity to buy shares whilst they are extremely cheap.
From a bear perspective though, one thing does worry me. From 2011 to present, the Director sells have far outweighed the Director buys, apart from a recent purchase from Bill Dobbie. If this is such a great growth story why have the Directors been cashing in so early on in its history? In fact Martin Higginson (a non-exec) sold his entire holding in 2011 (although I don't know if he is stilll a non-exec?).
I'm not going to guess what the final outcome from all this will be, nor am I going to buy or short sell the company, but I do have sympathy for current shareholders since this is one of those situations where at around £2, on all fundamentals, the company did look at least fair value until all the recent shenanigans.
I suppose it's now a trust thing for shareholders, and in any relationship there's got to be an element of trust if there is going to be any future at all!!
Sunday 24 March 2013
Saturday 16 March 2013
Remarkable turnaround in the fortunes of the hopeless cases portfolio
Those of you who regularly take a quick peek at my blog may remember that just for a bit of fun, back in August 2011, I picked eight well-known companies whose fortunes, and subsequently share prices, had taken a turn for the worse.
I decided to compare the portfolio of these eight companies to the performance of the FTSE-250 over an unspecified (yet to be decided) time period. In the last update in November 2012, the FTSE-250 had risen by around 21% whilst the 'hopeless' portfolio had declined by 14%.
However, largely due to the remarkable turnaround in the Thomas Cook share price, the performance of the 'hopeless' portfolio has now shot up to a 25.4% gain against a now 41% gain in the FTSE-250. Meaning that, although the FTSE-250 is still the leader by a considerable margin, the gap has narrowed.
Since November, Thomas Cook's shares have risen from 22.5p to yesterday's price of 115.5p, a massive 413% gain. If you timed your purchase well with this one then that's a fantastic return in less than five months. Even in August 2011 with the price at 43.55p, if you have kept your nerve and held on then that's a very healthy 165% return. Is there more to come? We shall see.
Another terrific performer is ITV which has risen from 55.85p to 131.2p (a 135% gain).
As reported in my last update, Game Group was the major casualty whilst Man. Group is still about 50% down on it's price at the time, despite it perking up from it's all time lows.
Aviva, C&W worldwide and Vodafone have all posted modest gains and C&W worldwide was bought out by Vodafone for a 10% gain.
I have decided to re-invest the gain from C&W worldwide into Aviva at it's current price of 326.2p. Why Aviva? Well given the recent rises in large/medium cap. shares it was difficult picking an obvious dog, but Aviva shares did take a recent hit with dispappointing results and a dividend cut.
I don't and haven't held shares in any of these eight companies, since I tend to concentrate on small and micro-caps, but well done to all those who invested in ITV and Thomas Cook, particularly if you caught them at their lows. Timing is crucial!
On a totally separate note, I notice that the ASOS share price currently stands at £31.84. It's a constant reminder about why I love micro-cap investment, and featured in my first blog post:-
http://michae1mouse.blogspot.co.uk/2011/02/magnificent-micro-caps.html
That £5000 would now be worth £1,028,000. Whilst ASOS is an exception in terms of its remarkable success story, there are fantastic gains to be made from micro-caps. Interestingly, I also wrote a blog about why I don't short stocks, outlining that they can continue on very high multiples of earnings for considerable lengths of time. ASOS is one such stock and currently stands (if ADVFN's figures are correct) on a p/e ratio of 255. Ummm..........
I decided to compare the portfolio of these eight companies to the performance of the FTSE-250 over an unspecified (yet to be decided) time period. In the last update in November 2012, the FTSE-250 had risen by around 21% whilst the 'hopeless' portfolio had declined by 14%.
However, largely due to the remarkable turnaround in the Thomas Cook share price, the performance of the 'hopeless' portfolio has now shot up to a 25.4% gain against a now 41% gain in the FTSE-250. Meaning that, although the FTSE-250 is still the leader by a considerable margin, the gap has narrowed.
Since November, Thomas Cook's shares have risen from 22.5p to yesterday's price of 115.5p, a massive 413% gain. If you timed your purchase well with this one then that's a fantastic return in less than five months. Even in August 2011 with the price at 43.55p, if you have kept your nerve and held on then that's a very healthy 165% return. Is there more to come? We shall see.
Another terrific performer is ITV which has risen from 55.85p to 131.2p (a 135% gain).
As reported in my last update, Game Group was the major casualty whilst Man. Group is still about 50% down on it's price at the time, despite it perking up from it's all time lows.
Aviva, C&W worldwide and Vodafone have all posted modest gains and C&W worldwide was bought out by Vodafone for a 10% gain.
I have decided to re-invest the gain from C&W worldwide into Aviva at it's current price of 326.2p. Why Aviva? Well given the recent rises in large/medium cap. shares it was difficult picking an obvious dog, but Aviva shares did take a recent hit with dispappointing results and a dividend cut.
I don't and haven't held shares in any of these eight companies, since I tend to concentrate on small and micro-caps, but well done to all those who invested in ITV and Thomas Cook, particularly if you caught them at their lows. Timing is crucial!
On a totally separate note, I notice that the ASOS share price currently stands at £31.84. It's a constant reminder about why I love micro-cap investment, and featured in my first blog post:-
http://michae1mouse.blogspot.co.uk/2011/02/magnificent-micro-caps.html
That £5000 would now be worth £1,028,000. Whilst ASOS is an exception in terms of its remarkable success story, there are fantastic gains to be made from micro-caps. Interestingly, I also wrote a blog about why I don't short stocks, outlining that they can continue on very high multiples of earnings for considerable lengths of time. ASOS is one such stock and currently stands (if ADVFN's figures are correct) on a p/e ratio of 255. Ummm..........
Thursday 14 March 2013
Avesco 1st quarter results
Avesco released their 1st quarter results this morning which held no surprises given their update in the January finals. Whilst results from the company are more informative viewed on a twelve month basis, I do like the fact that they report quarterly since it allows you to keep a careful eye on current trading and future projections.
I see nothing in the results or outlook that dissuades me from believing that this company is anything but a long term buy and hold. Management are focussed on cash generation, debt reduction and increasing dividends to shareholders whilst pursuing growth.
With the expected payment from Disney and the tangible NAV making the shares look cheap as a pure asset play, you then have to remind yourself that this is a growing company with unrecognised intangible assets. As the company states,
"The Avesco Group's businesses continue to be widely regarded as leaders in their fields".
I also note with interest that
"The Group's underlying trading since the start of the second quarter has shown encouraging signs, and, with our operations in China now trading profitably, we remain positive regarding the outlook for the year as a whole."
I do like the fact that operations in China have now turned profitable. Potentially a huge market for them to exploit.
The shares re-traced slightly today on slim volumes. No doubt short term traders booking profits, but I fully expect the shares to go far higher in the medium to long term.
As ever, no advice intended or given.
I see nothing in the results or outlook that dissuades me from believing that this company is anything but a long term buy and hold. Management are focussed on cash generation, debt reduction and increasing dividends to shareholders whilst pursuing growth.
With the expected payment from Disney and the tangible NAV making the shares look cheap as a pure asset play, you then have to remind yourself that this is a growing company with unrecognised intangible assets. As the company states,
"The Avesco Group's businesses continue to be widely regarded as leaders in their fields".
I also note with interest that
"The Group's underlying trading since the start of the second quarter has shown encouraging signs, and, with our operations in China now trading profitably, we remain positive regarding the outlook for the year as a whole."
I do like the fact that operations in China have now turned profitable. Potentially a huge market for them to exploit.
The shares re-traced slightly today on slim volumes. No doubt short term traders booking profits, but I fully expect the shares to go far higher in the medium to long term.
As ever, no advice intended or given.
Sunday 10 March 2013
It's finally over - Disney ordered to payout!!
It's been a terrific two weeks regarding news stories for three stocks that are in my portfolio.
Firstly, let's start with Avesco. On Friday Avesco announced that Disney have finally run out of lifelines and now they need to pay up. At long last. Disney really do come out of this saga badly. Quite ironic if you think about their history and the wonderful films they have produced with moral story lines that children have enjoyed for years. It appears that Disney are more the 'Wicked Witch' rather than 'Snow White'.
One thing perhaps that they have got right though is their slogan, because on behalf of all shareholders, "Thanks Disney, dreams really do come true!", and the company can now look forward to a massive £40m payout, the majority of which will be paid to shareholders.
At Friday's close Avesco's share price stood at 221.5p.
What's the company worth now though?
There are all sorts of measures on which we could reach a valuation, but let's keep it simple. When media companies are sold they are valued on a multiple of EBITDA. No ifs or buts that's basically it. Avesco is slightly peculiar in that it tends to do better in even years rather than odd because business booms during major events e.g. Olympics, World Cups etc. In the last two years EBITDA has been £20.3m and £27.1m respectively. For arguments sake let's take the mean of these two figures £23.7m. Conservatively, let's apply a valuation of 4 times EBITDA. This gives a valuation of £94.8m (about £3.65 per share). Avesco's current market cap. is £57.5m with net assets amounting to £38.6m, and this is a growing business which already pays a good dividend which is set to increase year on year.
That's all before the the Disney payout. Now £40m amounts to about £1.57 per share. How much will shareholders get? Impossible to say. Tax calculations will be complex, and it depends what Avesco define as the "majority" of the money. However, one thing is for sure, a large percentage of the current market cap. will be returned to shareholders in due course.
I've read some absolute drivel on the BBs about this prospective payout with some posters speculating about possible scenarios on the negative side of any payout. Here are some things to consider on the positive side:-
Disney will already have paid tax on the profits that they made on the show, so this immediately clouds the picture, I would also be surprised if there wasn't nearly three years of interest to add to the payout since the case was won in 2010. However, I know nothing about these matters and clearly neither does anybody else.
In conclusion, the eventual payout will be substantial. Make no mistake.
I built most of my stake in Avesco between 20p-30p and I 've been fortunate that this has turned out to be such a rewarding investment. I haven't sold a single share. What am I going to do now? Do you really need to ask given the above.
One final little caveat on the Disney case. Will Celador now pursue the William Morris agency?
http://www.imdb.com/name/nm1140125/news?year=2010
Surely not another payout further down the line?
Finally, if you wish to recieve the 3p final dividend from the finals then ex-dividend date is 15th March. The AGM is on the 14th March and the first quarter results on either the 13th or 14th. So plenty of news due this week.
First quarter results will undoubtedly show a loss given the trading statement given in the finals, but looking forward, Avesco indicated that business had picked up again at the turn of the year. 2014 should again provide a bumper year.
In other news, Datong issued a trading statement last week to indicate that trading was in line with expectations. This should should help consderably in negotiations to sell the business should they find more potential offerees. However, it certainly wouldn't be a disaster if they don't sell the company in the near furture since longer term I believe that prospects for the company are very encouraging. Even after the rise in it's share price, Datong remains considerably undervalued
Finally, Angle have released Parsortix into the research market. This is another major step forward. Using the terminology, Angle might be described as a 'blue sky' company. I would describe it as a speculative investment, but so far so good. Fingers crossed because success with Parsortix will bring huge rewards.
Firstly, let's start with Avesco. On Friday Avesco announced that Disney have finally run out of lifelines and now they need to pay up. At long last. Disney really do come out of this saga badly. Quite ironic if you think about their history and the wonderful films they have produced with moral story lines that children have enjoyed for years. It appears that Disney are more the 'Wicked Witch' rather than 'Snow White'.
One thing perhaps that they have got right though is their slogan, because on behalf of all shareholders, "Thanks Disney, dreams really do come true!", and the company can now look forward to a massive £40m payout, the majority of which will be paid to shareholders.
At Friday's close Avesco's share price stood at 221.5p.
What's the company worth now though?
There are all sorts of measures on which we could reach a valuation, but let's keep it simple. When media companies are sold they are valued on a multiple of EBITDA. No ifs or buts that's basically it. Avesco is slightly peculiar in that it tends to do better in even years rather than odd because business booms during major events e.g. Olympics, World Cups etc. In the last two years EBITDA has been £20.3m and £27.1m respectively. For arguments sake let's take the mean of these two figures £23.7m. Conservatively, let's apply a valuation of 4 times EBITDA. This gives a valuation of £94.8m (about £3.65 per share). Avesco's current market cap. is £57.5m with net assets amounting to £38.6m, and this is a growing business which already pays a good dividend which is set to increase year on year.
That's all before the the Disney payout. Now £40m amounts to about £1.57 per share. How much will shareholders get? Impossible to say. Tax calculations will be complex, and it depends what Avesco define as the "majority" of the money. However, one thing is for sure, a large percentage of the current market cap. will be returned to shareholders in due course.
I've read some absolute drivel on the BBs about this prospective payout with some posters speculating about possible scenarios on the negative side of any payout. Here are some things to consider on the positive side:-
Disney will already have paid tax on the profits that they made on the show, so this immediately clouds the picture, I would also be surprised if there wasn't nearly three years of interest to add to the payout since the case was won in 2010. However, I know nothing about these matters and clearly neither does anybody else.
In conclusion, the eventual payout will be substantial. Make no mistake.
I built most of my stake in Avesco between 20p-30p and I 've been fortunate that this has turned out to be such a rewarding investment. I haven't sold a single share. What am I going to do now? Do you really need to ask given the above.
One final little caveat on the Disney case. Will Celador now pursue the William Morris agency?
http://www.imdb.com/name/nm1140125/news?year=2010
Surely not another payout further down the line?
Finally, if you wish to recieve the 3p final dividend from the finals then ex-dividend date is 15th March. The AGM is on the 14th March and the first quarter results on either the 13th or 14th. So plenty of news due this week.
First quarter results will undoubtedly show a loss given the trading statement given in the finals, but looking forward, Avesco indicated that business had picked up again at the turn of the year. 2014 should again provide a bumper year.
In other news, Datong issued a trading statement last week to indicate that trading was in line with expectations. This should should help consderably in negotiations to sell the business should they find more potential offerees. However, it certainly wouldn't be a disaster if they don't sell the company in the near furture since longer term I believe that prospects for the company are very encouraging. Even after the rise in it's share price, Datong remains considerably undervalued
Finally, Angle have released Parsortix into the research market. This is another major step forward. Using the terminology, Angle might be described as a 'blue sky' company. I would describe it as a speculative investment, but so far so good. Fingers crossed because success with Parsortix will bring huge rewards.
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