Trakm8 interims

Trakm8 released their interims this morning and the share price has currently taken a 30% hit. I'm not sure what investors were expecting, but in my view, it's the usual wild over-reaction by myopic investors looking for short term gains. Trakm8 has a fantastic opportunity to exploit in the telematics industry, and has clearly gone for that opportunity in a big way with a very large spend on engineering capacity, alongside sales and marketing resource. We'll be able to judge in the medium to long term. In the short term, although revenues continue to grow, profitability will suffer a little. I'm happy with that. As I said in a recent blog :-

http://michae1mouse.blogspot.co.uk/2016/11/still-on-trak-week-on-monday.html

"My view is that with a long term view, the company is hugely undervalued. I'm not particularly bothered whether or not they hit expectations this year, as long as they keep growing that order book."

I'm not going to do a forensic analysis of the results:-

http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B0P1RP10GBGBXAIMI.html

but as usual you should DYOR.

It's also worthwhile taking a look at the short video presentation by John Watkins:-

hTTp://www.piworld.co.uk/videos/2016/11/28/trakm8-trak-h1-results-presentation-september-2016

For me, the clear risk going forward is can they turn the increased engineering, sales and marketing spend into the proportionate eventual increases in revenues and profitability, and will their expansion into China and the US bear fruit?

However, in my previous blog I wrote this:-

"With a medium/long view on Trakm8, I'm looking for £10-£20. In the short term, at the current lowly valuation, they are possibly vulnerable to a bid at around £5. "

Personally, I think they'd have been remiss not to go for the opportunity in the telematics arena with their market leading solutions, and I see no reason to change the targets stated above, as things stand at the moment.

I am in the advantageous position in that I bought my holding in Trakm8 when the SP was in the teens, and I accept that some investors may have bought recently and are sitting on paper losses.

I bought my shares in 2011, and if I'd closed down my computer and not come back until now then I'd be very pleased with progress. Bully for me eh!!

Something to think about if you're currently sitting on paper losses. If you'd bought Avesco shares in 2007 then you'd have paid just over a £1 and then watched as they fell to around 20p. Not nice. However, assuming that you didn't sell then even if you didn't pick any more up from that time onwards you'd now have got yourself a 6.5 bagger, a £1.10 special dividend, and all their interim and final dividends.

I offer no advice with Trakm8, but I'm happy to stick around. If all else fails, think about their blue-chip clients and installed devices (recurring revenues) and think what a larger player might pay to enter this growing and lucrative market.

Another bad CALL?

I mention this company with some trepidation. Cloudcall formerly known as Synety. All my history with Cloudcall is contained in the following blog and links:-

http://michae1mouse.blogspot.co.uk/2015/09/open-doors-that-needed-far-bigger-push.html

The link above will give you a feel for why I invested in the first place at around 150p. Fortunately, as explained above, I only place small amounts of capital in my more speculative investments. It's just as well since they are more often than not my worst performers. Why wouldn't they be? Why do I bother with them? Answers on a postcard please.

From the link above, I wrote:-

"In my view the group still has it's work cut out to achieve cash break-even and an operating profit. That said, they are clearly getting there quite rapidly which means that even in the eventuality that they do need to raise more cash in the future then the scale of the cash raise should be minimal, and with a supportive shareholder hopefully not at a deeply discounted price."

The share price was in the low 90s at the time. Oops, cue another placing at 57.5p. You need a sense of humour when you're investing or should I say speculating in the case of Cloudcall.

Anyway, as you've guessed I've taken the sensible option and walked away.

Except that's a lie and I haven't done the sensible thing, and instead I've bought some more at prices around 55p.

Now I know what you're thinking. He's lost the plot with this one, and you might be right.

However, in my defence, the company is making progress (albeit far more slowly than originally hoped), and if they do reach break-even then it's game on since this company's revenues will largely be recurring revenues.

I like the ties with Bullhorn and I don't recall the Directors selling any shares, in fact quite the contrary, they have been constant buyers and have a lot of skin in the game.

I should emphasise that I have bought another modest amount for me, and except this speculation could go either way.

The only consolation (if it goes wrong) would be that at least I know the Directors would be sharing my pain. Only more acutely.

I'd suggest starting your research with the latest interim results if you're interested, but I will say again that this is not a conviction buy for me at this stage, although things can change depending on their progress.

AA - 10,000 car trial using black boxes

In today's Telegraph there is a small report in the business section that will be of significant interest to Trakm8 investors. The article is entitled

"AA using black boxes to fix customers' cars before a breakdown"

Now investors will know that Trakm8 are the suppliers of these black boxes.

I won't reproduce that whole article, but it states that the AA are currently running a trial of 10,000 cars fitted with "black boxes" which monitor their systems, sending early warnings of potential problems. This is sent to the AA's control centre as well as members via an app.

Apparently, the test found that almost one in five cars being monitored developed a problem that was likely to cause a breakdown if the system did not flag them, allowing them to be fixed early, reducing the number of roadside breakdowns and cutting the AA's workload.

There is also a hint that the AA will be rolling out the black boxes to both breakdown and insurance members (for a reduced premium).

Now investors will know that Trakm8's partnership with the AA has been established for a few years and that recently they announced the following:-

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/TRAK/12621392.html

However, this news is potentially a further game changer. Whilst Trakm8 currently serve the AA breakdown vehicles and no doubt some newly acquired fleets (via the AA). This trial suggests that the black boxes could be offered and rolled out to each and every AA customer i.e. Breakdown member, insurance member, fleet cars etc.

If successful, and it sounds like it's going extremely well, it won't stop with the AA either. New and existing Trakm8 customers won't want to be left behind.

Anyway, as a holder of Trakm8 shares, I feel quite excited!!

Please note that this is a personal blog and I strongly suggest that you DYOR. With a press article such as this one I have made several assumptions.

Still on trak a week on Monday?

I've found that it can be frustrating when you're a long term investor in micro-caps, so I've learnt to be very patient over the years. When I first bought Avesco it's market cap. was about £5m and very few investors wanted to know.

Frustrations include. Inertia in the share price for many months. Illiquidity issues. The share prices rise and fall by gut wrenching percentages at times. Incidentally, I've never used stop losses in illiquid micro-caps, I would have been stopped out of all of my eventual multi-baggers otherwise. The constant noise from braggarts, lunatics, chancers, and experts talking shares up or down to suit their own agendas. Just ignore them and follow your own research. Win or lose, you'll only have yourself to congratulate or blame in the end.

My favourite investing book is "One Up On Wall Street" by Peter Lynch. Whilst I wouldn't recommend it for improving your valuation skills, I found it fabulously funny in regards to what to avoid and look for in spotting potential multi-baggers. It certainly resonated with my experiences.

Moving on, I wanted to mention another of my favourite shares which is Trakm8. I've mentioned it many times before since I bought shares in 2011 for prices in the teens. The shares have gone on to multi-bag since and currently stand at about 172p.

The shares have risen close to 400p, but they're as illiquid as Avesco's shares and have indeed followed a similar roller coaster ride. Their fall from the SP highs was partly due to negative comments from a website, alongside liquidity issues. The negative noises are absolute tripe and Trakm8 (like Avesco) has an excellent management team that just gets on with the job. Just for the record, this same website were advising their readers to cash in profits on Avesco in October, as the SP price rose above £3. Oops. It illustrates the wider trait of share tipping services to try and attract punters by boasting that "We've made 180% on Avesco shares aren't we just f***ing wonderful" whilst ignoring (let's say) Stanley Gibbons where they lost investors 97%. Still I suppose they've got to make a living.  If they'd understood Avesco a little better then they'd have advised investors to hang on in there. Never mind. Incidentally, I will no longer refer to the website in question since it's really not worth the time, however it does irk me somewhat when certain individuals cast themselves as some sort of hero when they're more akin to a villain. Anyway, I'll let it go now. Most people usually sort the wheat from the chaff in the end.

Back to Trakm8. The interims will be released a week on Monday, and it's a wonderful little business. I've stated the investment case many times before, and here was my last offering back in April:-

http://michae1mouse.blogspot.co.uk/2016/04/long-term-investing-eventually-pays.html

Since then we've had the final results, and a trading statement:-

The share price came off a little as investors appeared to concentrate on this:-

"Half year profitability is expected to be less than the first half of last year, ...." and the negative impact of recent currency fluctuations.

As a long term investor, I'm encouraged more by this:-

"......a stronger second half anticipated fulfilling the growing orders received in the financial year to date."

and

"Group new orders booked have been received at a rate of 37% greater than the same period last year, of which 27% is organic growth. This continues the trend of strong growth of recent years."

Whilst the company stuck by their predictions for the full year, it is clear that investors are more cautious. This means that if there is bad news on full year expectations with the interims then it's priced in already.

My view is that with a long term view, the company is hugely undervalued. I'm not particularly bothered whether or not they hit expectations this year, as long as they keep growing that order book.

Of course, if they are still on track to hit expectations then the share price will rapidly climb back towards £4.

I'm sure that some investors thought my predictions about Avesco's value were a little ambitious. Of course, I'm happy to report they weren't.

With a medium/long view on Trakm8, I'm looking for £10-£20. In the short term, at the current lowly valuation, they are possibly vulnerable to a bid at around £5.

Monday week will be interesting.

P.S. I was gob-smacked yesterday. Not about the bid for Avesco, although that did take my breath away. It was what I have always assumed to be a traders urban myth. It's actually 100% true. My lips are sealed!!!!!!

Avesco - value realised after recommended offer

Regular readers of my blog will know that I've been a fan of AIM listed Avesco since 2009. I picked up the majority of shares in the company at prices between 20p-25p, and had been bleating on about how undervalued the company was throughout the following 6/7 years. Avesco has been a terrific progressive dividend payer including a special dividend of £1.10, and until yesterday the shares had increased around 10 fold in that period of time. Yesterday it became more than 20-fold after NEP launched a recommended bid at 650p per share.

My sincere thanks go to a fabulous management team and brilliant work force that have enabled this to happen. We shareholders merely piggyback their hard work and success, and I'm hugely grateful for all their efforts.

I have in the past hinted that a bid approach was highly likely, and indeed on October 1st of this year guesstimated what the shares could be worth:-

http://michae1mouse.blogspot.co.uk/2016/10/avesco-massive-upside-potential.html

"On last year's figures alone that gives fair value of £4.50-£6.00 for operating profits or £5.40-£7.20 working with trading profits."

http://michae1mouse.blogspot.co.uk/2015/01/playing-long-game.html

"Finally, Murray holds near 30% of the company and is 65 years old or thereabouts. When he eventually chooses to retire (of course he may decide to continue for some time yet), he might well wish to cash in his holding. If I was him, I'd be looking at far more than EBITDA for my holding. How does 3 or 4 times EBITDA sound?"

http://michae1mouse.blogspot.co.uk/2016/06/avesco-interims.html

"The margin of safety remains high here, and as mentioned before, the group is always vulnerable to a opportunistic bid."

Should you cash in your shares now or wait for the deal to complete? From the announcement I'd estimate that the chances of the deal going through are extremely high. However, the deal could collapse in unforeseen circumstances or alternatively it might attract a rival bid at an even higher price? On balance, investors will probably be swayed by how many shares they own. If you hold very few then you might be tempted to cash in, if you own a substantial number then 15p/20p per share extra is a lot of money, and you might be tempted to see it out.

I tend to look at it like this. The bid approach has given investors a true picture of Avesco's worth, if the deal fell through (although highly unlikely in my opinion) then you're still left holding a terrific company with plenty of cash, paying substantial dividends. It might even be worth £8+ in a year or two. You also have a chance that a rival bid emerges. Anyway, it looks pretty much a done deal to me and investors should make their own choice depending on individual circumstances.

Once again "Hats Off" to all the Avesco team.