Addition to the virtual trading portfolio

Rightmove released their first half trading results this morning. The highlights include a 20% hike in revenues, underlying operating margins of 74%, underlying earnings up 24% and a 18% dividend hike. Great results, but on all fundamental values the shares look expensive. On last years figures they currently trade on a p/e above 30 with a market cap. approaching £2.3bn and the dividend yield is not much more than 1%.

I couldn't justify paying this price for my own long term portfolio, although I greatly regret not buying them in the depths of the financial crisis when they were less than a fiver. This is surely a Warren Buffet stock. The company boasts an invisible moat, a virtual monopoly in the UK. What's the first website you'd visit if you're looking to buy a property? It's got to be Rightmove.

The company's model ensures outstanding gross margins, it generates copious amounts of cash and has a history of hiking the dividend payment each year. In fact the dividend was held even between 2009-2010.

So whilst I'm not a real buyer (I don't believe that it will multibag in the near future from here), I'm going to add it to the virtual trading portfolio believing that it can surpass the previous highs of this year. As I write the price is £22.96.

Virtual portfolio                 Price paid                      Current  price               Price sold

Vesuvius                            £4.57                             £4.66
Vodafone                           £2.07                             £2.04
Morrison                            £1.93                             £1.73
Rightmove                         £22.96                           £22.96


I don't think it's likely that there will be an opportunity to buy the shares and add them to my real portfolio at the bargain basement price which arose in 2009, but should the opportunity ever present itself when the shares once again look cheap then I'll more than likely snap them up, despite preferring to concentrate my efforts on the small/micro cap sector.

Virtual trading portfolio update

Some of you may remember that I started a virtual trading portfolio in early June. This was just for a bit of fun, but I thought I'd revisit it this morning to see how it's going so far. This is what I said back in June:-

"On a separate note, my virtual trade in Vesuvius is pretty much flat so far, although I notice that Directors are still keen buyers with a further purchase reported on Friday, and a small tick up of around 3% in the share price.

I am adding Vodafone and Morrison to my virtual trading portfolio. Vodafone is yielding over 5% and is off it's recent highs as investors "park" there special dividends elsewhere. My buying price for Vodafone is 207p. Morrison's I mentioned in my blog 31 May. Just to emphasise that these are all virtual trades, and I'm doing this just for a bit of fun. Of course I will continue to report on my actual holdings and purchases at regular intervals as usual.

Virtual portfolio                 Price paid                      Current  price               Price sold

Vesuvius                            £4.57                             £4.58
Vodafone                           £2.07                             £2.07
Morrison                            £1.93                             £1.93"

Well what's happened since? Not a lot really. The current state of play is given below:-

Virtual portfolio                 Price paid                      Current  price               Price sold

Vesuvius                            £4.57                             £4.59
Vodafone                           £2.07                             £2.02
Morrison                            £1.93                             £1.72

As you can see, both my virtual trades in vod and vsvs are pretty flat and mrw is down. Hopefully today's news from mrw about the appointment of Andy Higginson may provide a fillip for the share price.

As a measure of my success, I am going to assume that I have invested £1000 in each initially. My budget will be £10,000 to start with, and I am going to set a 3 month time limit as my maximum holding period for each share I purchase.

Those of you who read the blog on a regular basis will know that this is not my actual investing style. I try to find small/micro cap companies that I perceive to be undervalued and then hold for the long term. The virtual portfolio requires a totally different mindset, and I'll need to be a little more reactive to news stories and sentiment with my future trades.

Snoozebox - trading statement

Snoozebox is a small company with interesting prospects over the longer term, and the company issued a positive trading statement this morning.

Essentially the company supplies portable hotel accommodation to the events sector. The model sounds interesting, and there is clear demand for their services.

I expect the share price to rise slightly on today's news.

However, it's not one that interests me. Firstly, at a market cap. (yesterday) of around £17m, but with adjusted EBITDA losses expected to come in at £1.6m in the first half of the year, the company still looks expensive.

They have recently raised £11m to fund the construction of their next generation of hotel room stock and hospitality units which is necessary for their growth, but I'd be very surprised if they didn't need further funding rounds in future. This company is capital intensive and needs to generate large amounts of cash to be self-funding. I don't see them being able to generate sufficient cash in the near future given today's statement regarding a negative adjusted EBITDA for the first six months of this year.

It's always good to read between the lines of a trading statement as well. Note the following from this morning:-

"the Company has made demonstrable progress in the development of its event programme and is creating a platform for growth and profitability."

In other words growth and profitability are someway off at the moment, and if in any doubt then:-

"I believe the progress made in the underlying operating model, combined with the launch of the Next Generation Portable Hotel in the autumn of this year, provides the platform on which to transform the performance of the business in 2015 and to scale it in 2016."

Longer term, and at a lower price, the company may become interesting, but at the current valuation, a loss making capital intensive company which is consuming cash and valued at over £17m is not for me.

This doesn't suggest I'm bearish either, but I always consider the number of companies out there that are valued similarly and are profitable, cash generative and arguably have better growth prospects.

Angle preliminary results

Angle is one of my more speculative holdings, and the company released their preliminary results this week alongside an evaluation of their Parsortix device by the CEP Group at the Cancer Research UK Manchester Institute.

In short Angle's success or failure hinges on the findings of Key Opinion Leaders finding a clear clinical utility for the Parsortix device. The advantages of the device compared with the competition in this field and the relative cost effectiveness are already well documented, so to my mind the key issue is summed up rather neatly in the following paragraph:-

"The pilot study now underway (by the CEP group) will evaluate the feasibility and potential clinical utility of routine use of the Parsortix system to provide CTC information for patients at presentation and throughout their treatment."

In other words if Key Opinion Leaders can identify clear positive benefits for cancer patients by using the harvesting capability of the Parsortix device then investors will have hit the jackpot and more importantly many more lives may be prolonged or saved from this pernicious disease (in all its forms) by the development of personalised medicine.

Currently, it does look promising. Ged Brady, Deputy and Genomics Leader within the Clinical & Experimental Pharmacology group at Cancer Research UK Manchester Institute commented:
"The evaluation phase of our work is now successfully complete and we see great promise in the application of the Parsortix technology for harvesting CTCs for molecular analysis to enable personalised cancer care. We are now undertaking pilot studies using the Parsortix system in both colorectal cancer and pancreatic cancer."

At year end Angle had £3.9m cash on its balance sheet, and therefore a fund raising looks unlikely in the immediate future.

FDA approval is pending, but the big price driver will be the continued success of this device with Key Opinion Leaders and a tie up with one of the majors in agreeing a corporate deal and/or distribution partner. Given rumours earlier this year about a possible approach for the company, and the fact that Angle is essentially a one trick pony (albeit a potentially extremely rewarding trick), I expect the company to be sold in due course at a significant premium to the current price.

Speculative yes, but the signs are promising and I remain cautiously optimistic.

Belgravium trading update

An excellent trading update from Belgravium this morning:-

http://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html?code=BVM&rbDate=released&preDate=Last3Months

Key bit states:-

"It was reported at the AGM that trading in the period had started slowly. Pleasingly trading picked up significantly in Q2 and as a consequence the results for the six months ended 30 June 2014 will show an increase in revenue and a significant improvement in profits compared to the equivalent period last year."

Trading is in line with expectations and second half weighted.

"The directors are encouraged by the level of enquiries and are confident that a good proportion of these can be converted to sales in the second half."

Broker forecasts:-

"Year Ending	Revenue (£m)	Pre-tax (£m)	EPS	P/E	PEG	EPS Grth.	Div	Yield"
31-Dec-14	10.20	0.70	0.66p	7.6	0.1	+65%	0.20p	4.0%
31-Dec-15	11.00	0.90	0.80p	6.3	0.3	+21%	0.25p	5.0%

This makes the shares look very cheap, particularly given current growth.

Appears to confirm my educated guess as to why the deal with Trakm8 fell at the first hurdle.  Belgravium are understandably looking for a premium price for the business, and Trakm8 management like to seek out bargain basement prices. Bodes well for both companies in the future.

Updates ACC, AVS and AVN

Following on from their interim results which were released this week, I notice that Michael Jackson has purchased another 500,000 shares at 2.9p (£14,500 worth) to add to his purchase in April of 1,280,000 at the higher price of 3.75p (£48,000 worth). Michael Jackson is the Non-Executive Chairman of Access Intelligence and now holds 10.36% of the company's issued share capital. You can see my previous blog for my thoughts on this week's interims.

I've also recently commented on Avesco who appear to be on track to beat market expectations for the full year. It's interesting to follow their Facebook page and Twitter feed where there appears to be a real leap in activity recently. This doesn't necessarily mean that business is booming compared to other years, but it does provide a timely reminder about the number of high profile events they are consistently involved in. Currently there is Golf's British Open and next week the Commonwealth Games. Yesterday they also announced this:-http://www.ct-group.com/news/ct-becomes-new-sponsor-eugames. Avesco is valued at approximately £20m and likes rewarding it's investors with chucky dividends.

Finally, Avanti Communications released a trading statement yesterday. It was a bit of a mixed bag, but given the highly speculative nature of an investment here, overall I remain encouraged by their progress. The key figures for me at this stage are that revenue is on track to meet market expectations at between $64m-$65m, and with a cash balance of $195m at year end they are well-financed. I am also encouraged that part of the shortfall in PBT is due to set up costs on large new projects, perhaps suggesting that revenue momentum is likely to continue. It shouldn't be forgotten that it's no mean feat getting two fully functional satellites into orbit, and in recent times their client list has become increasingly more impressive including the likes of Vodafone. Success certainly isn't assured just yet, and it's been a bumpy road but there are signs that the company is reaching a tipping point, and I certainly wouldn't write off the possibility of the company eventually becoming a takeover target.

Avanti is highly speculative as an investment, but whilst yesterday's trading statement caused an initial fall in the share price, there was an immediate bounce as longs honed in on the promising revenue momentum, current finances and the longer term opportunity. As a buy and hold investor you can ride out the fluctuations in share price movements over weeks, months and years if you believe in the company's long term prospects. Bears with short positions might be feeling a tad more nervous given Avanti's revenue momentum going forward and prospective cash generation.

Access Intelligence - interims

A solid set of interim results released today from Access Intelligence which look in line with market expectations.

It's still early days yet, but at this stage it's encouraging to see that recurring revenues are 79% of total revenues, up from 72% at the full year, contracted revenue not yet invoiced is up 22% to £6.7m from £5.5m in H1 2013, and total revenue yet to be recognised in the income statement is £9.8m up from £8.7m in H1 2013.

Cash balances are down by £1.13m over the year, but just £381,000 in the last six months.

The current trading statement is certainly the most positive that they have issued since I've been a shareholder where they state that:-

"The business pipeline continues to grow with a number of exciting opportunities on the horizon to deliver a combined product offering using the new platform."

and

"The consistent, year-on-year increases in contracted revenue not yet invoiced, our recurring revenue base and sustained investment in innovative product development, demonstrate the Group's long term stability and provide a solid foundation for continued growth."

Cash generation is good. Cash inflow from operating activities was £518,000 compared with £278,000 in H1 2013.
In the main body of the text it is clear that all divisions have performed well and prospects continue to improve.

The company is well under the radar of most investors.

The share price initially dipped on release of these results, but volumes were very light and a number of small buys quickly moved the share price back up.

I remain optimistic about Access Intelligence's future and potential growth prospects.

See previous update:-

http://michae1mouse.blogspot.co.uk/2014/04/access-intelligence-final-results.html

A holding in Avesco really does pay dividends!!

Avesco released their half year results in early June. What's not to like about this company? I've said it all before about why I believe Avesco offers terrific value, and I continue to hold all of my shares.

If you were a buyer when the shares were languishing between 20p-30p in 2009 then you'd already have had your money back 4 to 5 times over with the special dividend alone (£1.10). Add in the capital growth and regular dividend payments and you'll gather why I'm a fan. 

Even now though with the share price at £1.10 the company is undervalued. From the interim results TNAV is around £1.65 and I'd guess the prospective dividend yield is around 6%-7% given the 50% hike at the interim stage (from 1p to 1.5p) and the reduction in share capital from around 26m to 19m shares following the buyback from Taya.

Results at the half year exceeded management expectations and they expect to do the same for the full year given that results will include the World Cup, Ryder Cup, Commonwealth Games etc.

The restructuring that has been taking place throughout the group appears to have gone smoothly, and tellingly management expects this to produce more stable and less volatile trading results, not only in even years where they have the benefit of major sporting events, but also in the odd years which have traditionally been more challenging for the Group.

Avesco is a terrific little company that is cash generative and believes in rewarding its shareholders with generous payouts. It's still dirt cheap. What more is there to say!!

Talking of dividends I'd recommend reading this article from last week's Sunday Telegraph:-

http://www.telegraph.co.uk/finance/markets/10948379/Dividend-yield-is-better-guide-than-the-FTSE-100-at-7000.html

Trakm8 - Finals

Trakm8 released a great set of results on Monday. I believe that there is massive potential here, and below I have detailed some of the highlights for me:-

Firstly, this is a company achieving rapid growth organically and through acquisition in a area where a clear tipping point has been reached as companies clamour for Big Data. Revenues were up 94% at £9.19m (5 months contribution from Box Telematics) with recurring revenues up 111% at £4.5m. Like for like orders were up 46%.

This is profitable growth with good cash generation, and their recent acquisition was immediately earnings enhancing. Operating cash flow was £1.32m and adjusted EPS rose from 0.79p to 3.48p.

A major contract has been secured with Direct Line Insurance which is significant and potentially transformational for the company, and the outlook statement states that in the year to date revenues are well ahead of last year and trading is in line with expectations.

The narrative in the report is very positive with revenues from recently announced contracts to start really flowing through in the current financial year and beyond, providing a solid stream of recurring revenues now and in the future. Interestingly,  they launched a sales and applications engineering team out of their office in Prague this year. This operation has secured several customers and they expect it to be self-funding by the end of the next financial year, following initial start-up costs.

I am still very excited by Trakm8's development where they are achieving profitable growth, generating strong cash flows, excellent gross margins, and strongly increasing recurring revenues which make up more than 50% of total revenues.

Their financial model is very strong, and it will be interesting to see if they can identify any further value enhancing acquisitions in the near future. One intriguing snippet from their final report says:- "The market remains largely fragmented although consolidation is occurring, particularly driven by interest in the space from VCs."

Trakm8 may be a predator at the moment, but I wouldn't discount the possibility of them becoming the prey either, although given the opportunity that lies ahead I'd prefer to see the company transform itself into a multi-million pound cap. by itself. Certainly, the management appear to be doing a great job at the moment.

Trakm8 no longer interested in Belgravium Technologies

It would appear that Trakm8's potential bid approach for Belgravium Technologies is now dead in the water. Should investors in either company be disappointed (I hold both incidentally)? Not in my opinion. Although I have no knowledge of the initial negotiations, I strongly suspect that given  talks have been terminated in less than five days, it's a case of there having being little common ground on price. Clearly, the two proposed valuations were poles apart.

Trakm8 recently acquired Box Telematics for £4.25m where Box produced revenues of £8.4 million and profit before tax of £850,000, given that Belgravium produced almost identical revenues to Box with a profit before tax of £125,000, it seems unlikely that they would wish to pay much more than that for Belgravium. At yesterday's close Belgravium was valued at about £4.9m.

As a shareholder in both companies, I am comforted that Trakm8 like acquiring good businesses at bargain basement prices, and Belgravium believe that their company is considerably undervalued.

In both cases one or more Directors have a substantial shareholding in their respective companies which ensures that their interests are aligned with the interests of their shareholder base.

Both companies continue to be a long term hold for me.

Holding the predator and the prey - a win win scenario?

I don't have much time to post on my blog at present, but I hope to add more detail in the not too distant future on some recent announcements from companies I have invested in.

Trakm8 released their full year results this morning which look superb, and as anticipated the outlook is exciting. See below for my most recent posts:-

http://michae1mouse.blogspot.co.uk/2014/05/trakm8-telematics-direct-line-to-success.html

http://michae1mouse.blogspot.co.uk/2014/05/bull-markets-and-telematics.html

Trakm8 are looking like a very long term hold for me, despite the share price having already multi-bagged from my purchase prices when they were friendless and bobbing around in the teens.

The day got even more interesting when it emerged that they have made a tentative approach to purchase another company I hold shares in - Belgravium Technologies. See below for my most recent post:-

http://michae1mouse.blogspot.co.uk/2014/05/belgravium-technologies-and-avanti.html

A merger between these two companies looks pretty enticing given the synergies and cash generative nature of both.

This would be a first for me holding both predator and prey, and it looks exciting. I await developments with interest and will comment further when time permits.

I will also comment on Avesco's excellent interim results where the dividend has been hiked by 50%, the shares still trade below TNAV and they are on track to exceed market expectations.

I hope to add more details soon.