Intelligent choices?

Access Intelligence plc is one of my long term holds, and I last mentioned the company in July 2014

http://michae1mouse.blogspot.co.uk/2014/07/access-intelligence-interims.html

The company released their final results at the end of April, and I am hopeful that the next year or two may prove to be transformational for the company. Firstly, turnover was up a modest 2% on last year at around £8.5m. Encouragingly recurring revenue was up 8% at £6.6m making up 77% of sales and providing a solid financial footing for the company going forward. The company reported a small operating loss of £21,000, and cash on the balance sheet stood at just over £1.1m, although most recently the company disposed of Willow Starcom to K3 Business Technology for a total consideration of £1.75m which significantly increases their cash reserves.

Access Intelligence is cash generative, but over recent years has been investing heavily (around £4m per annum) in new product development. This is where it is getting interesting because whilst they "believe that during 2015 the Group will benefit from the significant investment made in new product development in previous years.", this exceptional level of investment to redevelop their integrated software platform will come to an end in 2015.

Hopefully, in 2015 and beyond, Access Intelligence will move swiftly into a profitable, cash generative, growth company which will be able to return generous dividends to shareholders. My very rough calculations suggest that if they cut development spend even by £1m from £4m to £3m per annum, and revenues increased modestly, if you add back around £800,000 for impairment of intangibles then adjusted EPS would come somewhere between 0.6p-0.8p. A p/e ratio of 12 then gives an SP somewhere between 7p-10p, against a current share price of  just over 3p. In reality I would expect development spend to fall more significantly and revenues to increase more robustly.

Further points of interest are that Access Intelligence has gross margins of 72%, and recent reports suggest that a possible acquisition of Cision UK and Vocus UK is likely, making the growth story even more compelling.

There was a small tick up in the share price on Friday and whilst share sales have left the share price unmoved in recent weeks, a small number of buys quickly moved the price upwards.

On a separate note a company called Intelligent Energy caught my eye in the FT Weekend. Intelligent Energy is a hydrogen fuel cell company and relatively new listing. Sadly, since the IPO the share price has made an inauspicious start falling from £3 to 77p in less than 12 months. It is clearly a company that is burning through cash at a rate of knots and will require more fundraisings to further it's development. However, the technology does look exciting and it boasts a very creditable client list. I have given the final results a cursory look, and management appear confident of meeting full year expectations, with this bit piquing my interest:-

"DP&G division - our objective is to build a
             portfolio of customers generating high quality,
             long-term, recurring revenues and free cashflow,
             creating substantial demand for Intelligent
             Energy's proprietary fuel cell technology to
             address some of the most important challenges
             facing global growth
                o    Excellent progress has been made toward
                      finalising the landmark, long term power
                      management transaction with GTL
                o    The proposed agreement is to provide economic,
                      efficient and clean power to over 26,000
                      telecom towers
                o    In April 2015, an interim agreement on
                      c.26,000 towers started to recognise c.
                      GBP10m revenue per month ahead of completing
                      this long-term transaction
                o    The GTL contracts are expected to be free
                      cashflow positive to IE from completion
                      with cashflows then projected to increase
                      substantially over time as the margins
                      in this business expand"

They describe this as a proposed landmark £1.2BN revenue transaction. The market cap. currently stands at £145m (ADVFN figures - not checked).

For me, the share price looks due for a bounce this week given that the chart suggests it has reached  a temporary nadir at least, the technology looks exciting and the FT has suggested that the company could be taken over by a big carmaker. If I was a trader then I'd take a punt on Monday, it could recover some lost ground quite rapidly.