Synety - A very promising speculative stock?

Synety, a UK software and telco company specialising in the provision of cloud based telephone call-control systems looks a very interesting speculative investment, and relatively recently I added this company to my current portfolio of shares, although I might add that it was a fairly modest purchase.

On many levels the company doesn't meet my usual criteria, not least because at the interim stage of this year the company made an operating loss of £1.3m and revenues were just shy of £200,000. At first glance, not exactly mouth watering I'll admit.

So why did I buy shares in this outfit? Well firstly, on the day of the interim results, I noticed that they had also raised £2.1m in a placing with institutional investors for the following reasons:-

"The net proceeds of the Placing will be used to expand the Company's UK sales force and customer services team, expand and strengthen the technology platform with disaster recovery features and provide general working capital for the Company to capitalise on its first-mover advantage and land grab a market niche where the Directors believe there is limited competition and significant potential."

The placing was at 150p per share, and the sentence highlighted in bold and subsequent developments enticed me to invest at about these same levels.

The trading update in September was very encouraging where they said that there had been a 30% increase in recurring revenue in 2 months, and growth is expected to continue at a faster pace.

Simon Cleaver the Executive Chairman said, "In the 6 months since we provided a trading update at the time of the Company's 2012 preliminary results statement, we have begun to see a much clearer, and very exciting picture emerging of market demand and potential for CloudCall."

The key performance indicators in the two months from June 2013 to August 2013 do look very impressive indeed, and annualised recurring revenue is now running at close to £500,000.

Cleaver finishes the update with the following:-

"There is every indication, as I have reported before, that we have a product offering that is capable of extensive rollout. Consequently, we have considerable confidence in both the short and longer term prospects for the Company."

To back up his confidence in the company, Cleaver and two other Directors have been recent buyers of the shares.

The company appears to have hit a very rich vein of growth, and if they are successful with their "land grab" opportunity then this could be a stellar performer.

With a market cap. of just £11m, whilst it doesn't look immediately cheap on fundamentals, in the context of it's growth potential and when compared to the valuations of many "trendy" tech companies at the moment, the current share price of 180p may well prove to be somewhat of a snip. We shall see.

As ever, no advice intended or given.

Ultrasis - Beating the blues?

Ultrasis, a provider of interactive health care services, also features in this weekend's FT. Investors who bought shares early this year when the share price hovered just above 0.2p will be sitting on very healthy paper profits indeed.

http://www.ft.com/cms/s/0/3c83aa18-4323-11e3-9d3c-00144feabdc0.html?siteedition=uk#axzz2jV2hHMc1

It's not a company I'm familiar with, and a quick look through it's financials doesn't inspire me to buy shares in the company. From what I can see revenues and profits have steadily fallen over the past five years, and indeed the company was loss making in 2011 and 2012.

Whilst they have recently won a new, possibly lucrative contract, the financial details of the contract have not been disclosed.

Losses at the interim stage of 2013 have continued and the balance sheet doesn't look very strong.

What would also concern me is that they appear to have just acquired a £0.5m revenue company with a pre-tax profit of just £91,000 for nearly £5m. Ultrasis itself is currently valued at £18.5m.

I might be missing something here, and "Beating the Blues" might be a massive booster to revenue and earnings in the future, but with revenue of just £480,000 at the interim stage, there's an awful lot of expectation already priced in.

As ever, no advice intended or given.

Netplay - worth a flutter?

Netplay, an interactive gaming company looks interesting. This week's FT features a small article regarding it's recent acquisition of Vernon's.

http://www.ft.com/cms/s/0/3c83aa18-4323-11e3-9d3c-00144feabdc0.html?siteedition=uk#axzz2jV2hHMc1

Netplay used to feature on my monitor, but it's not one that I followed very closely and I don't own any shares.

However, I've just cast my eyes over the company again, and it does appear to have been progressing well, and certainly has potential.

The shares have fallen below 5p in the not too distant past (2011) and in fact traded just below 12p as recently as early this year, I suspect that they may have much further to run though with a medium/long term view.

Broker forecasts are for 1.53p in the year ending Dec 2013 and 1.83p in 2014 giving forward EPS of 14 and 12 respectively. However, I would expect these to be upgraded given that the Vernons acquisition is immediately earnings enhancing. A recent trading statement (pre Vernons) confirmed that trading continued to be strong and that they were confident of meeting market expectations.

What I like about this company is that it is strongly cash generative and appears to be growing at a very healthy rate, and as far as I can see it doesn't have any debt. In fact it currently boasts £15m in cash on it's balance sheet which is nearly a quarter of its current market cap.

The strong cash generation will enable the company to continue with a progressive dividend policy whilst at the same time pick up strategic acquisitions to help further it's growth.

It appears to a be a company that doesn't immediately look cheap, but on closer inspection and with continued growth momentum, it may well prove to be a very profitable medium to long term prospect.

As ever, no advice intended or given.

Bid rumours and Director purchases - Angle and Regenersis

Note to self. Never try and predict what might happen with company share prices from one week to the next. One of my recent blogs entitled "Angle - next week's biggest riser?" has turned out to be a bit of a damp squib.

http://michae1mouse.blogspot.co.uk/2013/10/angle-next-weeks-biggest-riser.html

Whilst I didn't attend yesterday's AGM, bulletin board posters that did attend have reported that the Directors have scotched rumours of any imminent MBO or bid approach. However, progress does appear to be on track with their Parsortix device which could hopefully propel the company into a multi-million pound market cap. in the medium to long term. Fingers crossed, excepting that this is a speculative investment.

I'll refrain from further comment on the Times bid speculation because ultimately I would be extremely pleased if Angle can successfully go it alone. Certainly it would be more lucrative for shareholders in the longer term.

However, before I leave the bid rumour topic alone completely, I'll just say this. In April this year, Verizon Wireless denied any interest in making a joint bid for Vodafone with AT&T, despite press rumours. In essence they were right to deny the rumours, but of course whilst the press didn't get it quite right, in less than a year Vodafone's stake in Verizon has been spun out of the company and back to Verizon and now AT&T are purportedly exploring a possible bid over the rest of Vodafone.

No smoke without fire? Who knows? Anyway, I'll move on. Needless to say I still hold all my shares in Angle.

I found this morning's post by paulypilot a very interesting read where he relates his experience of using too much gearing. A sobering read which is refreshingly honest.

http://www.stockopedia.com/content/small-cap-value-report-1-nov-puri-esch-78727/

As I've mentioned I never use spread bets, but if I had ever entertained the thought then Paul's article would certainly put  me off.

He also makes a good point about Director's buying and selling shares in their own companies. I wrote a blog describing my thoughts on this topic in 2011:-

http://michae1mouse.blogspot.co.uk/2011/03/put-your-money-where-your-mouth-is.html

A company where Director's have consistently been purchasing shares in recent months is Regenersis. I have looked at the company several times , but haven't bought the shares. Firstly I prefer to buy very small and micro-cap companies (although not always), but secondly I favour a balance sheet backed by tangible assets. Whilst Regenersis has £39m in net assets, there is £40m of goodwill on the balance sheet.

However, the Directors are clearly bullish and they appear to have good reason to be. From their recent report to end of June 2013, operating profit more than doubled to GBP7.1 million (2012: GBP2.1 million), and operating cash flow more than doubled to GBP9.9 million (2012: GBP4.9 million). Adjusted EPS increased by 21% to 16.80p (2012: 13.85p) and basic EPS increased by 216% to 10.53p (2012: 3.33p).

The short, medium and long term outlook statement is very bullish,

"In June 2011, we set out a strategy to target double digit rates of growth in revenue and profits for the following 2-3 years. We have achieved that. Having invested well, we now believe the opportunity exists to continue to grow annually at double digit rates of growth for the foreseeable future."

Last year the dividend was increased 127% to 2.5p (1.1p in 2012).

The historic p/e ratio (2013) is around 25 and the dividend yield about 1%.

Broker forecasts for 2014 come in at 18.37p (although this is adjusted EPS) giving a forward P/E of 14.

Overall, it's probably fairly valued at this price in my opinion, but it may be of interest for some should the share price take a dip.

As ever, no advice intended or given.