Today's updates and a share purchase

7Digital announced the launch of new services this morning and a further contract win:-

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/12597876.html

The launch of the new services through Mariposa Holdings Group are with two of the largest telecommunications companies in South America: Oi and Algar Telecom.

The company states that:-

"The provision of this kind of mobile music service is key to the Company's growth, and these launches also mark a significant expansion in 7digital's South American business."

Furthermore, 7Digital has also announced that it has signed an agreement with digital multimedia streaming platform Playster, to expand their music streaming service into 15 additional territories.

I hold shares in 7Digital. Currently the company is loss making and cash burn has been quite high, however they appear to be gaining considerable traction and their business model looks promising where they are creating a recurring revenue stream with the associated improvement in gross margins (currently 64%). In their interim report they said:-

"The Company has significant deals at various stages in the contract process, with 63 new prospects as well as existing customers who are looking to expand current services or extend into further territories."
 
The shares were up 4% on the news.

Netcall released a positive sounding trading update today:-

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/12598146.html

They state that:-

"We have had a positive start to the year with the total value of sales orders considerably ahead of this time last year. "

"Our significant levels of recurring revenue combined with a strong order inflow and a continuously expanding product suite give the Board confidence in achieving a successful outcome for the full year."

 

I don't hold shares in Netcall, but I mention it because Michael Jackson is Chairman of the company.

By the way "Billie Jean is not his lover,  She's just a girl who claims that he is the one, But the kid is not his son". Sorry couldn't resist.

 

This Michael Jackson is also Executive Chairman of Access Intelligence, a company in which I do hold shares.

 

I am hopeful that Access Intelligence's fortunes will follow a similar path to Netcall. Netcall is profitable with a high percentage of recurring revenues, it has a very sound balance sheet with no debt and plenty of cash. It is also highly cash generative. It is predicted to pay dividends of 3p in 2016 which equates to a yield of 5.6%. The market cap. is around £74m after a small rise in the share price this morning.

 

In a separate announcement, I further note that it has "secured a five-year SaaS contract worth GBP400,000 to provide its Liberty Customer Experience Manager solution to a Local Authority".

 

Netcall's P/E ratio is currently high at around 29 on a fully diluted basis falling to 24 next year.

 

N.B. After doing more research on Netcall, I have made a small purchase. This is a profitable company with a strong balance sheet, excellent cash flows and gross margins at a mouth-watering 91%. Recurring revenues currently make up 62% and are likely to increase going forward. Whilst the p/e ratios look high, I can envisage that they will fall quite quickly and the company will prove to have been very good value. I like their enhanced dividend policy which equates to 4% this year (ex-div on 10th Dec) and set to rise. The share price is well below it's early year highs of over 70p.