It's a little while since I last posted, and market turbulence is still evident. That said, whilst I'd be very nervous holding stocks on p/e ratios of 50+ or loss making, low revenue companies on multi-million pound market caps. of say £30m+, it does appear that the rout in micro-caps (under £10m market caps.) may be close to an end? Or is that just wishful thinking on my part? We'll see.
Common sense does dictate that when a company's market cap. falls below a certain level, assuming it's reasonably well funded (i.e. not going bust) then it's unlikely to fall as heavily as the over-priced multi-million pound companies briefly referred to above. However, this is the stock market and short term you can find that almost anything is possible! If you're not familiar with the quote about "voting" and "weighing" machines then it's worth looking up.
Anyway, I'm going to list a number of small and micro-caps that I'm currently invested in and that you might want to investigate yourselves. Most have been mentioned before in my blogs or twitter or the bulletin boards. I am not recommending that you buy or sell any of these companies of course, and I am currently sitting on paper profits in some of these companies and losses in others. All I'm going to do is list bear and bull points for each stock, and if one or more companies pique your interest then you might wish to do some extensive research.
Will these stocks turn out to be Christmas presents or Christmas Turkeys? I can't say for sure, although of course I'm hopeful that they'll all prosper. At this point I should emphasise that I'm looking at their performance with a minimum 5 year outlook, and I'll review their performance at regular intervals. From my past record of serious investing from the early 2000's then I'd hope that in 5 - 10 years time then 3/4 will have more than 10 bagged. I'm listing 12 companies in order of market cap. (smallest to largest) alongside their current share prices (please note these are not the share prices I purchased at). In all my time investing only one company has ever gone bust on me, although that might be tempting fate! I sincerely hope not. Anyway, here goes:-
Mediazest (MDZ) - current sp 0.075p, market cap. £0.96m. Tiny company that's never made a full year profit and always appears on the brink of a cash call. Latest interims show a maiden profit and increasing recurring revenues. Has it turned a corner?
Aeorema Communications (AEO) - current sp 32.5p, market cap. £2.94m. Always looked a good value share, but growth has never been sustained. There's a new management team. Excellent start. Balance sheet still provides considerable comfort. If they deliver sustained growth then it's off to the races.
Stilo International (STL) - current sp 2.75p market cap. £3.13m. For many years it's been a bit of a plodder. Suddenly growth kicked in, and then disappeared this year when two major contracts came to the end of their lifetime. Can't believe this is the third cheapest company on my list? Fabulous balance sheet and progressive dividend policy even in this dip year. Can they resume growth from 2019 onwards and get back on track? Certainly the product list is expanding. Impressive client list.
Immedia (IME) - current sp 26.5p market cap. £3.86m. History has seen IME win big contracts and lose others in equal measure. Recent acquisition failed to have an immediate impact. Client retention is much improved, and the acquisition is beginning to bear fruit. Encouraging interims. Is growth about to take off?
Spaceandpeople (SAL) - current sp 21p market cap. £4.1m. This was a rising star that fell from grace with a large bump. In 2017, it looked like it had got it's mojo back and they reinstated a dividend. Disappointing again this year unfortunately, but certainly not a write-off with management confident that this year is a temporary blip and they can indeed restore former glories. We'll certainly find out in due course.
Trakm8 (TRAK) - current sp 21p market cap. £7.3m. Another rising star that came unstuck. Well documented on my blog and elsewhere. Ambitious plans that unravelled through slower than anticipated growth. Fabulous client base though and second half of this year will be far better than the first six months. Recurring revenues are building very nicely. A white knight has appeared in the form of a company called Microlise in the same telematics space. They bought a 20% stake in Trakm8 at a 22% premium to the depressed sp. Huge opportunities for Trakm8 if they can execute this time around. If not then Microlise might just snap them up anyway?
One Media IP Group (OMIP) - current sp 5.5p, market cap. £7.46m. Shift in music consumption caused a temporary halt to their growth. Inflection point has been reached and growth restored. Nicely profitable and cash generative business. A recent cash raise came out of the blue as the company was joined by industry heavyweights and an ambitious plan for much accelerated growth. The cash raise is to fund acquisitions in the music rights space. Big gamble? Spectacular if it pays off.
7digital (7DIG) - current sp 2.3p, market cap. £9.2m. Big promises but disappointing so far. Has had a habit of pulling defeat from the jaws of victory. Up until now it's been a big cash guzzler and diluted shareholders. Major acquisition should now be fully integrated? Cost savings will be £5m per annum? Gross margins should be 70%+ , and profitability just around the corner in a potentially exciting space. Market doesn't currently believe the promises, but if 7digital proves them wrong then expect a multi-bagger in double quick time.
Crimson Tide (TIDE) - current sp. 2.2p, market cap. £10.06m. Hasn't really put a foot wrong in recent times, but excellent progress is being temporarily masked by investment for growth. Market sentiment has currently depressed the share price, but TIDE is growing impressively with huge gross margins (80%+) and a great balance sheet. One of those companies that is currently overlooked, but will set the market alight when investors twig about future growth prospects?
Biome Technologies (BIOM) - current sp. 545p, market cap. £12.88m. A stock market favourite in it's early days. A loss making "story" stock that was valued far too highly with little to show in terms of revenue. Share price collapsed to around 80p at one time. It was friendless. Now beginning to fire on all cylinders. Two businesses in one company. RF business is profitable and in demand, Bioplastics is currently loss making but in the right place at the right time. Recent reports suggest Bioplastics revenues could see very significant growth in the medium to long term. Very exciting space, excellent balance sheet with plenty of cash. Mouth watering potential with a still modest market cap.
Scientific Digital Imaging - current sp 37.75p, market cap. £31.6m. Not a micro-cap, but was when I bought in. Like TIDE it hasn't put a foot wrong in recent times. Growing organically and through acquisition. Buy and build can be risky, but so far so good. Another JDG?
PCF Group - current sp. 36p, market cap. £77m. Certainly not a micro-cap, but a very promising company. PCF has endured it's hardships in the past, but has now transformed itself and investors should be handsomely rewarded. Don't listen to my blathering, but read PCF's finals released earlier this week. One year ahead of schedule with impressive growth and modestly valued.
That's it. They are not tips, but you may wish to have a more detailed look at one or two of the companies listed. As I said earlier, I'd be disappointed if there aren't at least 3/4 potential 10 baggers in there (with a long term time frame e.g. 5+ years). Which ones will they be though, I have no idea? Of course it could be all of them or none of them since (as they say) past performance is not a guide to future performance, or something like that anyway?
May I be the first to wish you all a ……...No it's still far too early!
ATB.
Saturday 8 December 2018
Tuesday 20 November 2018
I'll always play the long game!
In my last blog post I wrote a little bit about my stock picking journey and how an early investment in Trakm8 was life changing, and how Avesco put the icing on the cake. It's not meant as a boastful post, but I'm hoping it provides comfort to some novices as we currently endure a bear market in the small cap. sector.
I should re-iterate that bear markets are opportunities. "Be greedy when others are fearful". In Trakm8's case we might actually live the phenomenal share price appreciation again and then some more?
I previously mentioned that I started to invest seriously in the 2000's. What do I mean by that? Well to summarise, if you can't read a balance sheet, don't know what a p/e ratio is or TNAV or dividend yield etc then you should probably stick your money in a tracker fund. I'm not patronising, but you do need to (at least) find out about the basic financial measures to avoid many of the pitfalls. I also advise, as I did before, to read extensively about the "Great Investors" and their investing ideas. I did all those things before getting heavily involved in stock picking.
Anyway I digress. Why did I become a long term investor rather than a trader? Personal experience basically. Before my success with Trakm8 and Avesco, in 2002 I had invested in a company called Ashtead and a shipping company called Clarkson.
Starting with Ashtead. I bought my first tranche of shares in Ashtead for about 34p. At the time, I remember thinking that they were easily supported by NAV. Slightly naively perhaps, I hadn't taken into consideration their huge debt pile. I'm a little more clued up these days hopefully! Ashtead got into trouble and the share price fell to around 2p. "Oh dear, how sad for me" are words I didn't use at the time, my language was a little more colourful I seem to remember.
Anyway, I just held on and hoped for the best. Disaster was averted, and slowly but surely the share price began to rise. I bought more at 15p to average down, and let out a sigh of relief when I sold for a small 7% profit. Phew! Dodged a bullet there?
Have a look at the chart from 2002 to now. It's certainly not been a straight line journey, they never are, but even in today's market the share price stands at £17.12. My first purchase would have been a 50 bagger, and my second purchase a 115 bagger. Oops! Hang on, did I mention they also restored a dividend payment? They've paid out £1.39 in dividends since 2002. In fact last year's dividend alone would have given me nearly half my money back without selling a single share.
Clarkson is a slightly different story, but a similar theme. I bought Clarkson in 2002 for £2 a share. It was debt free and paid a 7% dividend yield. Pretty safe stuff I thought. I then watched the share price drop to £1.30 or so. Let's just fast forward shall we. I eventually sold mine for a handsome 74% profit. Not so handsome sadly! Today's share price is £23.65. The dividends paid out since 2002 amount to £7.30. So that would have been 3.65 times my money back in dividends alone, and a 12-bagger.
Now don't get me wrong, not everything you buy will become a multi-bagger and if you're a speculator i.e. having a punt on early stage oil or mining companies or low/non-revenue multi-million pound "story" stocks then prepare for lots of disappointment or even total wipeout. However, if you grasp "value" investing or GARP stocks or preferably companies exhibiting both characteristics then the chances are that in a portfolio of 10-15 companies (at least) 2 or more should prove to be multi-multi baggers in the long term, and eventually you won't really care what happens to the ones that don't. I might add that in the past 18 years, only one company has ever gone bust on me and that was a speculation.
I don't do advice or share tips, but this current market will throw up some absolutely fantastic buying opportunities if you've got the cash and if you're fully invested already then maybe switch off your monitor and do something else for a while.
ATB.
I should re-iterate that bear markets are opportunities. "Be greedy when others are fearful". In Trakm8's case we might actually live the phenomenal share price appreciation again and then some more?
I previously mentioned that I started to invest seriously in the 2000's. What do I mean by that? Well to summarise, if you can't read a balance sheet, don't know what a p/e ratio is or TNAV or dividend yield etc then you should probably stick your money in a tracker fund. I'm not patronising, but you do need to (at least) find out about the basic financial measures to avoid many of the pitfalls. I also advise, as I did before, to read extensively about the "Great Investors" and their investing ideas. I did all those things before getting heavily involved in stock picking.
Anyway I digress. Why did I become a long term investor rather than a trader? Personal experience basically. Before my success with Trakm8 and Avesco, in 2002 I had invested in a company called Ashtead and a shipping company called Clarkson.
Starting with Ashtead. I bought my first tranche of shares in Ashtead for about 34p. At the time, I remember thinking that they were easily supported by NAV. Slightly naively perhaps, I hadn't taken into consideration their huge debt pile. I'm a little more clued up these days hopefully! Ashtead got into trouble and the share price fell to around 2p. "Oh dear, how sad for me" are words I didn't use at the time, my language was a little more colourful I seem to remember.
Anyway, I just held on and hoped for the best. Disaster was averted, and slowly but surely the share price began to rise. I bought more at 15p to average down, and let out a sigh of relief when I sold for a small 7% profit. Phew! Dodged a bullet there?
Have a look at the chart from 2002 to now. It's certainly not been a straight line journey, they never are, but even in today's market the share price stands at £17.12. My first purchase would have been a 50 bagger, and my second purchase a 115 bagger. Oops! Hang on, did I mention they also restored a dividend payment? They've paid out £1.39 in dividends since 2002. In fact last year's dividend alone would have given me nearly half my money back without selling a single share.
Clarkson is a slightly different story, but a similar theme. I bought Clarkson in 2002 for £2 a share. It was debt free and paid a 7% dividend yield. Pretty safe stuff I thought. I then watched the share price drop to £1.30 or so. Let's just fast forward shall we. I eventually sold mine for a handsome 74% profit. Not so handsome sadly! Today's share price is £23.65. The dividends paid out since 2002 amount to £7.30. So that would have been 3.65 times my money back in dividends alone, and a 12-bagger.
Now don't get me wrong, not everything you buy will become a multi-bagger and if you're a speculator i.e. having a punt on early stage oil or mining companies or low/non-revenue multi-million pound "story" stocks then prepare for lots of disappointment or even total wipeout. However, if you grasp "value" investing or GARP stocks or preferably companies exhibiting both characteristics then the chances are that in a portfolio of 10-15 companies (at least) 2 or more should prove to be multi-multi baggers in the long term, and eventually you won't really care what happens to the ones that don't. I might add that in the past 18 years, only one company has ever gone bust on me and that was a speculation.
I don't do advice or share tips, but this current market will throw up some absolutely fantastic buying opportunities if you've got the cash and if you're fully invested already then maybe switch off your monitor and do something else for a while.
ATB.
Saturday 17 November 2018
Market madness and setting personal goals!
Investing in illiquid small caps is not for the faint hearted. I should know since it's where I concentrate all my efforts. Yesterday I experienced the worst one day share price collapse in a company I hold (if memory serves me correctly) since I started investing seriously in the early 2000's. The company in question is Trakm8. I'll address yesterday's debacle later.
Of course these things work both ways. Yesterday largely reflects the panic and irrational behaviour of a current bear market in micro-caps pushing their share prices well below fair value. Bull markets do just the opposite with the exact same companies.
With all the above in mind, whilst I'm constantly banging on about being a long term investor, it's vitally important to keep personal goals in mind and act accordingly.
I bought all my shares in Trakm8 back in 2011 when the share price was even lower than it is now i.e. it was in the teens. Here's my blog post from that time:-
http://michae1mouse.blogspot.com/2011/09/your-m8-my-m8-trackm8.html
Trakm8 was one of my largest investments. It ticked so many of my personal investing criteria for a micro-cap.
Fast forward to Spring 2015 and Trakm8's share price had risen above £1, and I took a gamble. Trakm8's results were improving, trading statements were excellent and the share price had real momentum. I quit the day job with a (hopeful) £2 plus price target in mind which would make my dream of full time investing possible. In early October of the same year (2015), as the share price rose above my £2 target, I attempted to sell half my holding. I managed to sell a good portion, but given the huge illiquidity of the shares, I didn't sell all that I wanted to. As luck would have it, share price momentum continued and I actually sold the rest of that 50% for well over £3.
My two sales gave me a 12 bagger and a 20 bagger respectively. This translated into more than 6 times my original investment with the remaining 50% to hold for "free".
I hope this doesn't sound like bragging because it's not, I'm just trying to state the importance of having personal goals when making buy or sell decisions.
Trakm8 changed my life and I'll always be grateful to the management team that had done so well up until that point in their development. For regular readers, I hope this also goes some way to explain why in the past I've defended them so vociferously (and clearly I still hold 50% of my original investment).
My personal experience in the micro-cap sector has taught me to pick 10-15 such companies that you believe have significant potential. Carefully consider their financial situation and prospects before investing and buy them as cheaply as possible. Hold tightly unless the story changes or you've reached a personal goal. One or two of these success stories will change your life. There are other successful strategies of course, but buy and hold works for me. Never forget with all the best research in the world then you'll still need a bit of luck, but "the more you practice the luckier you'll get".
Hot on the heels of Trakm8 came another success story. Avesco. What I don't think I've mentioned about my investment here is that before I started the thread below, I'd bought a small maiden purchase at around 80p, which I thought was very reasonable at the time.
https://uk.advfn.com/cmn/fbb/thread.php3?id=20681152
How I laughed as the price plunged to as low as 20p. I kept thinking maybe I was missing something, but the shares seemed ludicrously cheap. That's when I bought the bulk of my holding. In 2016, Avesco was bought out for £6.50 and along the way investors enjoyed generous dividends that included a bumper £1.10 payout after winning damages against Disney.
http://michae1mouse.blogspot.com/2016/11/avesco-value-realised-after-recommended.html
This brings me back to yesterday's interims and trading statement from Trakm8.
The interims and trading statement were extremely disappointing there is no denying it, but a near 70% drop in the share price is just plain silly.
As a long term investor, what you need to decide is where will they be in 5 years or more?
I see a company that's still making good progress (albeit slower than hoped) but had a bit of bad luck in regaining momentum. It's recurring revenues make up 58% of total revenues which in 2018 are likely to be around £22m or so. Lexis Nexis and EE are two major contract wins recently announced and join the AA, Scottish Power, Direct Line, Marmalade, E.ON etc in employing Trakm8's cutting edge technology. Reading yesterday's report again, I still believe the company has excellent medium and long term prospects.
I don't give advice, but I'll be holding my shares now until the end game which I'm hopeful will conclude in a few years time in a similar manner to Avesco i.e. huge capital appreciation, dividends when appropriate and an eventual buyout at a premium.
ATB to regular readers, and if you're relatively new to investing then don't be depressed by the current sell off in micro-caps, it's an opportunity and not a negative.
As ever, AIMHO and please do your own research.
Of course these things work both ways. Yesterday largely reflects the panic and irrational behaviour of a current bear market in micro-caps pushing their share prices well below fair value. Bull markets do just the opposite with the exact same companies.
With all the above in mind, whilst I'm constantly banging on about being a long term investor, it's vitally important to keep personal goals in mind and act accordingly.
I bought all my shares in Trakm8 back in 2011 when the share price was even lower than it is now i.e. it was in the teens. Here's my blog post from that time:-
http://michae1mouse.blogspot.com/2011/09/your-m8-my-m8-trackm8.html
Trakm8 was one of my largest investments. It ticked so many of my personal investing criteria for a micro-cap.
Fast forward to Spring 2015 and Trakm8's share price had risen above £1, and I took a gamble. Trakm8's results were improving, trading statements were excellent and the share price had real momentum. I quit the day job with a (hopeful) £2 plus price target in mind which would make my dream of full time investing possible. In early October of the same year (2015), as the share price rose above my £2 target, I attempted to sell half my holding. I managed to sell a good portion, but given the huge illiquidity of the shares, I didn't sell all that I wanted to. As luck would have it, share price momentum continued and I actually sold the rest of that 50% for well over £3.
My two sales gave me a 12 bagger and a 20 bagger respectively. This translated into more than 6 times my original investment with the remaining 50% to hold for "free".
I hope this doesn't sound like bragging because it's not, I'm just trying to state the importance of having personal goals when making buy or sell decisions.
Trakm8 changed my life and I'll always be grateful to the management team that had done so well up until that point in their development. For regular readers, I hope this also goes some way to explain why in the past I've defended them so vociferously (and clearly I still hold 50% of my original investment).
My personal experience in the micro-cap sector has taught me to pick 10-15 such companies that you believe have significant potential. Carefully consider their financial situation and prospects before investing and buy them as cheaply as possible. Hold tightly unless the story changes or you've reached a personal goal. One or two of these success stories will change your life. There are other successful strategies of course, but buy and hold works for me. Never forget with all the best research in the world then you'll still need a bit of luck, but "the more you practice the luckier you'll get".
Hot on the heels of Trakm8 came another success story. Avesco. What I don't think I've mentioned about my investment here is that before I started the thread below, I'd bought a small maiden purchase at around 80p, which I thought was very reasonable at the time.
https://uk.advfn.com/cmn/fbb/thread.php3?id=20681152
How I laughed as the price plunged to as low as 20p. I kept thinking maybe I was missing something, but the shares seemed ludicrously cheap. That's when I bought the bulk of my holding. In 2016, Avesco was bought out for £6.50 and along the way investors enjoyed generous dividends that included a bumper £1.10 payout after winning damages against Disney.
http://michae1mouse.blogspot.com/2016/11/avesco-value-realised-after-recommended.html
This brings me back to yesterday's interims and trading statement from Trakm8.
The interims and trading statement were extremely disappointing there is no denying it, but a near 70% drop in the share price is just plain silly.
As a long term investor, what you need to decide is where will they be in 5 years or more?
I see a company that's still making good progress (albeit slower than hoped) but had a bit of bad luck in regaining momentum. It's recurring revenues make up 58% of total revenues which in 2018 are likely to be around £22m or so. Lexis Nexis and EE are two major contract wins recently announced and join the AA, Scottish Power, Direct Line, Marmalade, E.ON etc in employing Trakm8's cutting edge technology. Reading yesterday's report again, I still believe the company has excellent medium and long term prospects.
I don't give advice, but I'll be holding my shares now until the end game which I'm hopeful will conclude in a few years time in a similar manner to Avesco i.e. huge capital appreciation, dividends when appropriate and an eventual buyout at a premium.
ATB to regular readers, and if you're relatively new to investing then don't be depressed by the current sell off in micro-caps, it's an opportunity and not a negative.
As ever, AIMHO and please do your own research.
Wednesday 7 November 2018
How much longer can AEO be ignored?
AEO (Aeorema Communications) released their full year results this morning:-
https://londonstockexchange.com/exchange/news/market-news/market-news-detail/AEO/13857561.html
I've written about this company before. Here is my last blog post from around the same time last year:-
http://michae1mouse.blogspot.com/2017/11/update-aeo-no-brainer-now-surely.html
Since that time the share price has largely remained unchanged, but the company is making excellent progress. Undervalued/unloved stocks can be ignored for very long periods, but in my experience it's always worth the wait in the end.
In my last blog post, I said AEO was undervalued. Following today's results I'd suggest it's even cheaper.
This morning they recorded a 16% leap in revenues to £4.8m (2017:£4.16m) and a profit before exceptional items of £289,650, a year-on-year increase of 17% (2017: £248,368).
They maintained a strong cash position with £1,436,314 in the bank, and have proposed a final dividend payment of 0.75p (2017: 0.5p), up 50% on last year.
Taking the profit (post tax) before the exceptional items gives EPS of around 2.6p, and hence a p/e ratio of just over 10.
The exceptional items were in relation to the departure of its two founders, Peter Litten and Gary Fitzpatrick, from the board of directors.
The new management team are more focussed on growth than Litten and Fitzpatrick, and although they intend to keep paying dividends when possible, they will "use the cash reserves to invest in new talent capable of driving the business forward organically, as well as exploring new acquisition opportunities which can help the Group increase in scale and drive increased revenues and profits."
They've certainly made an excellent start whilst maintaining a very healthy balance sheet boasting cash of £1.4m and remaining virtually debt free.
The growth story moving forward is looking very promising indeed. The average growth in revenue from their top five clients this financial year was 29% and although some of their larger individual projects continue to be repeated every two to three years, they have added some new annual large-scale conferences to their calendar and continue to seek out repeating six figure revenue generating events to support their growth plan. They are especially pleased to report that their pitch to win ratio has increased by approximately 40%.
Their outlook statement reads very positively:-
"Looking forward to the financial year ended 30 June 2019 and beyond the outlook is very positive. The strength of the new team has led to an excellent series of new business gains since the year end with both existing and new clients. These gains include a major new client in the technology sector and a new global brand within the media sector. The Group continues to win new film production projects and the appointment of Julian Staveley as Experiential Director is also proving successful, with the Group recently winning a roadshow event for a global electronics company."
Everything points to a company achieving excellent growth with a solid balance sheet, a forward p/e ratio in single digits and a respectable 2.7% dividend yield. At a market cap. of just £2.4m it's an opportunity to pick up a value company with very good growth prospects. Surely, AEO can't be ignored for much longer?
I am a shareholder of AEO, and no advice is offered or given in this blog.
https://londonstockexchange.com/exchange/news/market-news/market-news-detail/AEO/13857561.html
I've written about this company before. Here is my last blog post from around the same time last year:-
http://michae1mouse.blogspot.com/2017/11/update-aeo-no-brainer-now-surely.html
Since that time the share price has largely remained unchanged, but the company is making excellent progress. Undervalued/unloved stocks can be ignored for very long periods, but in my experience it's always worth the wait in the end.
In my last blog post, I said AEO was undervalued. Following today's results I'd suggest it's even cheaper.
This morning they recorded a 16% leap in revenues to £4.8m (2017:£4.16m) and a profit before exceptional items of £289,650, a year-on-year increase of 17% (2017: £248,368).
They maintained a strong cash position with £1,436,314 in the bank, and have proposed a final dividend payment of 0.75p (2017: 0.5p), up 50% on last year.
Taking the profit (post tax) before the exceptional items gives EPS of around 2.6p, and hence a p/e ratio of just over 10.
The exceptional items were in relation to the departure of its two founders, Peter Litten and Gary Fitzpatrick, from the board of directors.
The new management team are more focussed on growth than Litten and Fitzpatrick, and although they intend to keep paying dividends when possible, they will "use the cash reserves to invest in new talent capable of driving the business forward organically, as well as exploring new acquisition opportunities which can help the Group increase in scale and drive increased revenues and profits."
They've certainly made an excellent start whilst maintaining a very healthy balance sheet boasting cash of £1.4m and remaining virtually debt free.
The growth story moving forward is looking very promising indeed. The average growth in revenue from their top five clients this financial year was 29% and although some of their larger individual projects continue to be repeated every two to three years, they have added some new annual large-scale conferences to their calendar and continue to seek out repeating six figure revenue generating events to support their growth plan. They are especially pleased to report that their pitch to win ratio has increased by approximately 40%.
Their outlook statement reads very positively:-
"Looking forward to the financial year ended 30 June 2019 and beyond the outlook is very positive. The strength of the new team has led to an excellent series of new business gains since the year end with both existing and new clients. These gains include a major new client in the technology sector and a new global brand within the media sector. The Group continues to win new film production projects and the appointment of Julian Staveley as Experiential Director is also proving successful, with the Group recently winning a roadshow event for a global electronics company."
Everything points to a company achieving excellent growth with a solid balance sheet, a forward p/e ratio in single digits and a respectable 2.7% dividend yield. At a market cap. of just £2.4m it's an opportunity to pick up a value company with very good growth prospects. Surely, AEO can't be ignored for much longer?
I am a shareholder of AEO, and no advice is offered or given in this blog.
Monday 5 November 2018
Zesty interims!
Mediazest released their interim results this morning rather earlier than I'd anticipated (in 2017 it was mid December). I'm impressed, pleased and will continue to hold my existing shares in the company. I last commented on Mediazest in September:-
http://michae1mouse.blogspot.com/2018/09/zesty-and-promising-or-just-lemon.html
This mornings interims were very much in-line with the encouraging trading update and the key metrics are as follows:-
Revenue up 36% at £1.819m, EBITDA at a healthy £156,000 (they recorded a loss in 2017) and a maiden profit of £90,000 (they made a loss of £149,000 in 2017 at this juncture).
As mentioned in my previous blog post, the cash position is the worry for Mediazest, and on the face of it cash of £12,000 recorded at period end is insufficient. However, this is because of a late payment of EUR130,000, the bulk of which has now been received and cash is therefore healthier than the headline figure.
Gross margins have improved by 3 percentage points to a healthy 51% largely driven by their pursuit of recurring revenues which currently stand at around £700,000. They hope by year end these will increase to around £800,000 and cover 50% of costs on an annual basis.
Whilst we're all aware of uncertainty in the UK retail market, Mediazest are having considerable success overseas and :-
"the Group is developing, currently, several roll out / substantial deployment opportunities which would enable the Company to show further progress both in the current and future reporting periods." Their client list remains very impressive, and as far as I'm aware, this is their best half-year performance to date? Given all the above and a lowly market cap of around £1.4m, I don't see any reason not to stick with the shares I already own and see how things develop in the future.
http://michae1mouse.blogspot.com/2018/09/zesty-and-promising-or-just-lemon.html
This mornings interims were very much in-line with the encouraging trading update and the key metrics are as follows:-
Revenue up 36% at £1.819m, EBITDA at a healthy £156,000 (they recorded a loss in 2017) and a maiden profit of £90,000 (they made a loss of £149,000 in 2017 at this juncture).
As mentioned in my previous blog post, the cash position is the worry for Mediazest, and on the face of it cash of £12,000 recorded at period end is insufficient. However, this is because of a late payment of EUR130,000, the bulk of which has now been received and cash is therefore healthier than the headline figure.
Gross margins have improved by 3 percentage points to a healthy 51% largely driven by their pursuit of recurring revenues which currently stand at around £700,000. They hope by year end these will increase to around £800,000 and cover 50% of costs on an annual basis.
Whilst we're all aware of uncertainty in the UK retail market, Mediazest are having considerable success overseas and :-
"the Group is developing, currently, several roll out / substantial deployment opportunities which would enable the Company to show further progress both in the current and future reporting periods." Their client list remains very impressive, and as far as I'm aware, this is their best half-year performance to date? Given all the above and a lowly market cap of around £1.4m, I don't see any reason not to stick with the shares I already own and see how things develop in the future.
Thursday 1 November 2018
Jam delivered and currently stuck in a jam!
There were very few RNS announcements in October from companies that I'm interested in, but November has started with a terrific trading update from Biome Technologies:-
https://londonstockexchange.com/exchange/news/market-news/market-news-detail/BIOM/13850420.html
This was a Q3 update to 30 September. It reads very well indeed.
Firstly, overall revenues are £7m for the first 9 months of 2018 which is a 56% improvement on last year. Significantly, this 9 month revenue figure is already well ahead of the full year figure from 2017 which came in at £6.2m.
As mentioned in my previous blog post, it's the RF division that's outperforming at the moment with £5.5m of the £7m revenues generated coming from the exceptional demand for fibre optic furnaces in 2018. The remainder of 2018 also looks strong for this division, and the outlook for 2019 sounds optimistic with orders "reasonably strong" at this stage.
The Bioplastics division is the laggard at this juncture, but I believe that this division has huge potential given the publicity regarding the environmental damage being caused by conventional plastics.
Whilst the revenues generated in 2018 by the bioplastics division are marginally down on last year at £1.5m (1.7m in 2017), 2019 could see a significant uplift in revenues. Most of the revenues from this division are currently "for the commercialised outer packaging and non-woven filter mesh for the US coffee pod market." It's worth noting that "a contract for the supply of material for the rigid ring material in this coffee market sector has been signed recently and commercial revenues are expected to commence in Q1 2019 following the completion of final validations."
Even more significantly, there are two projects underway, one in the US and one in Europe, that could lead to substantial revenues in 2019 and 2020 with "further new customer relationships (are)underway within this division which should lead to exciting projects emerging in 2019."
I'm still very excited by the prospects here, and it's a long term hold for me. The shares rose sharply this morning, but they are extremely illiquid and have since fallen back a little from profit taking (the shares are up around 4% as I write).
At the opposite end of the scale, 7digital's share price has been falling sharply in recent weeks. There is or has been a relatively large seller in the market recently which explains some of the decline:-
https://londonstockexchange.com/exchange/news/market-news/market-news-detail/7DIG/13826986.html
A major issue is that many investors are probably sitting on their hands waiting for some positive news from the company. Whilst they work towards cashflow and profitability, they have burnt through cash very quickly and recently needed an additional £1.5m loan from three shareholders for working capital as the company completes it's restructuring.
https://londonstockexchange.com/exchange/news/market-news/market-news-detail/7DIG/13843278.html
Promises of cashflow positivity and profitability accompanied by one or two large client contracts is needed from 7digital. So far it's been too many promises without the delivery, and we need under-promising and over delivering from now on.
I remain hopeful that 7digital can achieve their goals, and of course if they do then the share price will recover and move sharply higher. Ever hopeful, but it's never comfortable until you see the evidence of success rather than just jam tomorrow.
One thing that's worth noting is that Biome Technologies was very much a "jam tomorrow" company and many investors will have left the party never to return. That's a pity because it looks like the party may well be just starting? Biome's jam is being delivered now, let's hope 7digital does exactly the same. At the moment 7digital appears stuck in a jam.
Finally and very briefly, PCF have today announced the completion of an earnings enhancing acquisition following an encouraging trading update in late October. I hold.
As ever DYOR, no advice offered or given.
https://londonstockexchange.com/exchange/news/market-news/market-news-detail/BIOM/13850420.html
This was a Q3 update to 30 September. It reads very well indeed.
Firstly, overall revenues are £7m for the first 9 months of 2018 which is a 56% improvement on last year. Significantly, this 9 month revenue figure is already well ahead of the full year figure from 2017 which came in at £6.2m.
As mentioned in my previous blog post, it's the RF division that's outperforming at the moment with £5.5m of the £7m revenues generated coming from the exceptional demand for fibre optic furnaces in 2018. The remainder of 2018 also looks strong for this division, and the outlook for 2019 sounds optimistic with orders "reasonably strong" at this stage.
The Bioplastics division is the laggard at this juncture, but I believe that this division has huge potential given the publicity regarding the environmental damage being caused by conventional plastics.
Whilst the revenues generated in 2018 by the bioplastics division are marginally down on last year at £1.5m (1.7m in 2017), 2019 could see a significant uplift in revenues. Most of the revenues from this division are currently "for the commercialised outer packaging and non-woven filter mesh for the US coffee pod market." It's worth noting that "a contract for the supply of material for the rigid ring material in this coffee market sector has been signed recently and commercial revenues are expected to commence in Q1 2019 following the completion of final validations."
Even more significantly, there are two projects underway, one in the US and one in Europe, that could lead to substantial revenues in 2019 and 2020 with "further new customer relationships (are)underway within this division which should lead to exciting projects emerging in 2019."
I'm still very excited by the prospects here, and it's a long term hold for me. The shares rose sharply this morning, but they are extremely illiquid and have since fallen back a little from profit taking (the shares are up around 4% as I write).
At the opposite end of the scale, 7digital's share price has been falling sharply in recent weeks. There is or has been a relatively large seller in the market recently which explains some of the decline:-
https://londonstockexchange.com/exchange/news/market-news/market-news-detail/7DIG/13826986.html
A major issue is that many investors are probably sitting on their hands waiting for some positive news from the company. Whilst they work towards cashflow and profitability, they have burnt through cash very quickly and recently needed an additional £1.5m loan from three shareholders for working capital as the company completes it's restructuring.
https://londonstockexchange.com/exchange/news/market-news/market-news-detail/7DIG/13843278.html
Promises of cashflow positivity and profitability accompanied by one or two large client contracts is needed from 7digital. So far it's been too many promises without the delivery, and we need under-promising and over delivering from now on.
I remain hopeful that 7digital can achieve their goals, and of course if they do then the share price will recover and move sharply higher. Ever hopeful, but it's never comfortable until you see the evidence of success rather than just jam tomorrow.
One thing that's worth noting is that Biome Technologies was very much a "jam tomorrow" company and many investors will have left the party never to return. That's a pity because it looks like the party may well be just starting? Biome's jam is being delivered now, let's hope 7digital does exactly the same. At the moment 7digital appears stuck in a jam.
Finally and very briefly, PCF have today announced the completion of an earnings enhancing acquisition following an encouraging trading update in late October. I hold.
As ever DYOR, no advice offered or given.
Tuesday 23 October 2018
Fond memories - not really!
A brief blog post from me today. It's a company whose shares I don't hold, but have in the dim and distant past. Talking of dim, I remember taking a loss of 27% back in 2004. More positively and looking at the current share price that could have been a lucky escape? We'll see in the fullness of time.
The company in question is Coral products. If memory serves me correctly, I vaguely remember them producing CD casings? Do you remember CD's? Yep, that's why the share price went into freefall I think? Like most investors my memory becomes a little hazy when recalling the duff investments. Anyway, that was then and this is now. Perhaps Coral products is about to rise from the ashes? If they don't go under it's surprising how many companies rebuild and prosper. They can be the most lucrative purchases if you catch them near to their recovery path.
Anyway CRU released an encouraging trading update today and the shares are up 5% as I type.
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/CRU/13838153.html
Firstly, I should point out that they're still a specialist in the design, manufacture and supply of injection moulded plastic products. So what are the all important figures?
The market cap is just over £8m, and the results to the end of April 2018 showed a loss of £370,000 on revenues around £23.5m, although the underlying operating profit was £879,000 with earnings per share of 0.84p. Net assets came in at £13.2m, but just over £7m of that is goodwill and intangibles.
The company does generate cash, but had just £471,000 in cash on the balance sheet against approximately £6m debt back in April. Gross margins are ok at around 35%.
In summary, it's not one that interests me too much at the present since I always compare the financial metrics, market cap and prospects against company shares I already hold, and at the moment I'd tend to add more to some existing holdings rather than add CRU.
However, others may beg to differ or wish to do far more research than I have.
Incidentally, on the subject of plastics, if you haven't read my post on Biome Technologies then you may wish to do so by clicking the link below:-
http://michae1mouse.blogspot.com/2018/09/buy-one-get-one-free-bogof.html
I hold.
twitter: @michae1mouse
The company in question is Coral products. If memory serves me correctly, I vaguely remember them producing CD casings? Do you remember CD's? Yep, that's why the share price went into freefall I think? Like most investors my memory becomes a little hazy when recalling the duff investments. Anyway, that was then and this is now. Perhaps Coral products is about to rise from the ashes? If they don't go under it's surprising how many companies rebuild and prosper. They can be the most lucrative purchases if you catch them near to their recovery path.
Anyway CRU released an encouraging trading update today and the shares are up 5% as I type.
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/CRU/13838153.html
Firstly, I should point out that they're still a specialist in the design, manufacture and supply of injection moulded plastic products. So what are the all important figures?
The market cap is just over £8m, and the results to the end of April 2018 showed a loss of £370,000 on revenues around £23.5m, although the underlying operating profit was £879,000 with earnings per share of 0.84p. Net assets came in at £13.2m, but just over £7m of that is goodwill and intangibles.
The company does generate cash, but had just £471,000 in cash on the balance sheet against approximately £6m debt back in April. Gross margins are ok at around 35%.
In summary, it's not one that interests me too much at the present since I always compare the financial metrics, market cap and prospects against company shares I already hold, and at the moment I'd tend to add more to some existing holdings rather than add CRU.
However, others may beg to differ or wish to do far more research than I have.
Incidentally, on the subject of plastics, if you haven't read my post on Biome Technologies then you may wish to do so by clicking the link below:-
http://michae1mouse.blogspot.com/2018/09/buy-one-get-one-free-bogof.html
I hold.
twitter: @michae1mouse
Monday 22 October 2018
One I hold and one I don't!
First of all, a very quick mention of a company I hold.
PCF group released a trading statement this morning which has been well received since trading is in-line with market expectations. The growth metrics are looking very good, and as I write the shares are up almost 6%. Here's their statement:-
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/PCF/13836455.html
A recent earnings enhancing acquisition should also aid growth prospects going forward:-
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/PCF/13819226.html
A very neat summary of where they are at the moment and what they hope to achieve can be found in the Midas article below:-
https://www.thisismoney.co.uk/money/investing/article-6146579/MIDAS-SHARE-TIPS-invest-PCF-Group-bank-thats-horsebox-expert.html
I'll be holding for the long term because I like the growth prospects, particularly as they continue to improve operational gearing and I'm always happy with a progressive dividend policy. Although the dividend is modest at the moment, for long term holders this income source can become quite substantial over time.
One I don't hold is Croma Security Solutions (CSSG) who released their final results this morning.
I've managed to contrive to miss out on buying into this company on two separate occasions now, in the mid teens and then early twenties. That's the share price I'm referring to btw and not my age. The share price is over £1 now. Never mind! :-(
They released a great set of figures this morning with a 59% increase in revenues to £35.1m (2017: £22.1m), a significant rise in EBITDA to £2.5m (2017: £0.80m), a massive increase in pre-tax profits to £1.98m and earnings per share to 9.89p (2017: 0.36m and 2.13p respectively) and paid and proposed dividends up to 1.6p (2017: 0.5p).
An outstanding performance all round.
The share price has risen a very modest 1% as I write, chiefly I suspect due to the fact that this stellar performance won't be repeated next year:-
https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B5MJV178GBGBXASX1.html
"In the current financial year, we can expect to replicate some but not all of the project income we received in FY 2018 due to some large exceptional projects that are unlikely to be repeated. However, there has been a substantial increase in contracted income and this together with the expectation of some further project work make the Board confident of achieving a good result for the year, consistent with the underlying growth in the business. "
It's a great little business which is supported by a very solid balance sheet which boasts £2.2m in cash (up from £770,000 the previous year) and has next to zero debt. The current market cap. is a very modest £15m or thereabouts. In summary, many of the qualities that attract me to micro-caps.
CSSG is back on my watchlist, although even in my most optimistic mood I can't see the share price slipping back to the teens or twenties. Sadly, I can't envisage me revisiting my teens or twenties either except by way of a mid-life crisis?
I will be monitoring any opportunities very carefully though.
As ever, this is just a personal blog and isn't an attempt to provide buy, sell or hold advice.
twitter: @michae1mouse
PCF group released a trading statement this morning which has been well received since trading is in-line with market expectations. The growth metrics are looking very good, and as I write the shares are up almost 6%. Here's their statement:-
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/PCF/13836455.html
A recent earnings enhancing acquisition should also aid growth prospects going forward:-
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/PCF/13819226.html
A very neat summary of where they are at the moment and what they hope to achieve can be found in the Midas article below:-
https://www.thisismoney.co.uk/money/investing/article-6146579/MIDAS-SHARE-TIPS-invest-PCF-Group-bank-thats-horsebox-expert.html
I'll be holding for the long term because I like the growth prospects, particularly as they continue to improve operational gearing and I'm always happy with a progressive dividend policy. Although the dividend is modest at the moment, for long term holders this income source can become quite substantial over time.
One I don't hold is Croma Security Solutions (CSSG) who released their final results this morning.
I've managed to contrive to miss out on buying into this company on two separate occasions now, in the mid teens and then early twenties. That's the share price I'm referring to btw and not my age. The share price is over £1 now. Never mind! :-(
They released a great set of figures this morning with a 59% increase in revenues to £35.1m (2017: £22.1m), a significant rise in EBITDA to £2.5m (2017: £0.80m), a massive increase in pre-tax profits to £1.98m and earnings per share to 9.89p (2017: 0.36m and 2.13p respectively) and paid and proposed dividends up to 1.6p (2017: 0.5p).
An outstanding performance all round.
The share price has risen a very modest 1% as I write, chiefly I suspect due to the fact that this stellar performance won't be repeated next year:-
https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B5MJV178GBGBXASX1.html
"In the current financial year, we can expect to replicate some but not all of the project income we received in FY 2018 due to some large exceptional projects that are unlikely to be repeated. However, there has been a substantial increase in contracted income and this together with the expectation of some further project work make the Board confident of achieving a good result for the year, consistent with the underlying growth in the business. "
It's a great little business which is supported by a very solid balance sheet which boasts £2.2m in cash (up from £770,000 the previous year) and has next to zero debt. The current market cap. is a very modest £15m or thereabouts. In summary, many of the qualities that attract me to micro-caps.
CSSG is back on my watchlist, although even in my most optimistic mood I can't see the share price slipping back to the teens or twenties. Sadly, I can't envisage me revisiting my teens or twenties either except by way of a mid-life crisis?
I will be monitoring any opportunities very carefully though.
As ever, this is just a personal blog and isn't an attempt to provide buy, sell or hold advice.
twitter: @michae1mouse
Saturday 20 October 2018
7digital - A journey from cash burn to cash generation?
I've mentioned a company called 7digital before. It's a company I hold shares in. Here's the company website to find out more about what they do:-
http://about.7digital.com/services
A quick look at the share price graph will indicate what a great performer it's been for me so far. Apologies for the sarcasm. It's been a company that has consistently pulled off great defeats from the very jaws of almost certain victory. So why am I still here? Well, it may have lost some short term battles (certainly in terms of share price performance), but I'm still hopeful they'll eventually win the war.
I like their business model and I believe that the services they provide and their vision for the near future could bear fruit.
In April 2017, 7digital acquired a company called 24-7 Entertainment which provided them with considerable scale, and left them as last man standing in Europe in their field. In fact they claim to be the world leader with their PaaS offering.
However, the acquisition has come at a cost in terms of consolidating it with 7digital's existing offering and cash burn has been high. Certainly far higher than I had anticipated. In December of last year (2017) they raised around £8.5m by way of a capital raising and open offer for working capital and consolidation costs. Just over six months later they've burnt through most of this, and have taken a further loan from two existing shareholders to see them through to cash flow positive and profitability.
Not great reading so far, and indeed a delay to publishing full year accounts for the year ending 2017 in the summer months did not help sentiment, although that turned out to be much ado about nothing in the end and results showed good progress.
Back to the question. Why am I still here?
I'm hoping that 7digital are now very close to the end of needing further financing. Indications have been that by the end of this month they should be close to completing the consolidation. Once consolidation is complete, they anticipate annual cost savings of £5m a year. With gross margins around the 70% mark, recurring revenues and huge cost savings, 7digital should easily move into profit and be cash flow positive in 2019 with revenues around £20m+. At a modest market cap. of around £12.5m, and with high operational gearing then it's easy to envisage a massive uplift in the share price.
In my view, the next few weeks will be pivotal in establishing 7digital's long term credibility and I'd expect some investors to wait on the sidelines since it's been less than a smooth ride so far. However, are good things just around the corner?
I hope so, and shall wait to hear of further developments. If 7digital does turn cash positive and profitable in 2019 without the need for much more funding and serious dilution then the shares will multi-bag without question. Of course, it is an IF at the moment.
As ever, the shares are illiquid and can move quickly either way. I'm not a tipping service, these are just my personal thoughts and not advice so DYOR thoroughly.
twitter: @michae1mouse
http://about.7digital.com/services
A quick look at the share price graph will indicate what a great performer it's been for me so far. Apologies for the sarcasm. It's been a company that has consistently pulled off great defeats from the very jaws of almost certain victory. So why am I still here? Well, it may have lost some short term battles (certainly in terms of share price performance), but I'm still hopeful they'll eventually win the war.
I like their business model and I believe that the services they provide and their vision for the near future could bear fruit.
In April 2017, 7digital acquired a company called 24-7 Entertainment which provided them with considerable scale, and left them as last man standing in Europe in their field. In fact they claim to be the world leader with their PaaS offering.
However, the acquisition has come at a cost in terms of consolidating it with 7digital's existing offering and cash burn has been high. Certainly far higher than I had anticipated. In December of last year (2017) they raised around £8.5m by way of a capital raising and open offer for working capital and consolidation costs. Just over six months later they've burnt through most of this, and have taken a further loan from two existing shareholders to see them through to cash flow positive and profitability.
Not great reading so far, and indeed a delay to publishing full year accounts for the year ending 2017 in the summer months did not help sentiment, although that turned out to be much ado about nothing in the end and results showed good progress.
Back to the question. Why am I still here?
I'm hoping that 7digital are now very close to the end of needing further financing. Indications have been that by the end of this month they should be close to completing the consolidation. Once consolidation is complete, they anticipate annual cost savings of £5m a year. With gross margins around the 70% mark, recurring revenues and huge cost savings, 7digital should easily move into profit and be cash flow positive in 2019 with revenues around £20m+. At a modest market cap. of around £12.5m, and with high operational gearing then it's easy to envisage a massive uplift in the share price.
In my view, the next few weeks will be pivotal in establishing 7digital's long term credibility and I'd expect some investors to wait on the sidelines since it's been less than a smooth ride so far. However, are good things just around the corner?
I hope so, and shall wait to hear of further developments. If 7digital does turn cash positive and profitable in 2019 without the need for much more funding and serious dilution then the shares will multi-bag without question. Of course, it is an IF at the moment.
As ever, the shares are illiquid and can move quickly either way. I'm not a tipping service, these are just my personal thoughts and not advice so DYOR thoroughly.
twitter: @michae1mouse
Thursday 11 October 2018
Is this a bear market or a market correction?
Wow it's a bit choppy out there at the moment!
Nasty share price falls across the board today. The big question is are we going through a market correction before the bull chases ahead again? Or is this a bear market? There's a clear distinction.
Market corrections are usually sharp and short. Short term pain is normally short-lived before share prices recover and more often than not move sharply ahead again. Bear markets are more painful, and often endure for between 1-2 years.
So which is it? Nobody knows yet. We'll have to wait and see.
If it's a bear market then I'd suggest that you carefully look at the company shares you own and ask yourself the following questions:-
Does the company make a profit?
Does the company have positive cashflow?
Is the company debt free?
Is the company's P/E ratio a sensible one? (Anything above 25 is quite racy)
Does the company pay a dividend which is well covered?
Is the market cap. no more than three times the TNAV?
If the answer to (let's say) two of those questions is yes then you might want to just see the bear out? Your company is unlikely to go bust because it's got a safety net (a margin of safety). A healthy dividend yield, solid earnings in relation to share price, a strong balance sheet etc. should eventually attract buyers and stop the shares going into freefall.
However, if the answer to all those questions is no then you may want to consider cashing in your profits or losses. You're holding a highly speculative company which carries no safety net, and consequently the share prices will fall more significantly than most. Momentum plays work both ways. Value becomes king! Raising cash in bear markets can be very difficult, and by implication if you've answered no to all the above then your company will very probably need either loans or a fund raise. Banks are not so keen to lend, and institutions want their pound of flesh and will only offer cash at huge discounts to prevailing share prices. Some speculative companies will inevitably go bust.
At this stage nobody can say for sure if this is a correction or a bear market, but it's a good time to assess just how financially secure the companies you've invested in are.
As ever, I don't give sell or buy recommendations. Please do your own research carefully.
twitter: @michae1mouse
Nasty share price falls across the board today. The big question is are we going through a market correction before the bull chases ahead again? Or is this a bear market? There's a clear distinction.
Market corrections are usually sharp and short. Short term pain is normally short-lived before share prices recover and more often than not move sharply ahead again. Bear markets are more painful, and often endure for between 1-2 years.
So which is it? Nobody knows yet. We'll have to wait and see.
If it's a bear market then I'd suggest that you carefully look at the company shares you own and ask yourself the following questions:-
Does the company make a profit?
Does the company have positive cashflow?
Is the company debt free?
Is the company's P/E ratio a sensible one? (Anything above 25 is quite racy)
Does the company pay a dividend which is well covered?
Is the market cap. no more than three times the TNAV?
If the answer to (let's say) two of those questions is yes then you might want to just see the bear out? Your company is unlikely to go bust because it's got a safety net (a margin of safety). A healthy dividend yield, solid earnings in relation to share price, a strong balance sheet etc. should eventually attract buyers and stop the shares going into freefall.
However, if the answer to all those questions is no then you may want to consider cashing in your profits or losses. You're holding a highly speculative company which carries no safety net, and consequently the share prices will fall more significantly than most. Momentum plays work both ways. Value becomes king! Raising cash in bear markets can be very difficult, and by implication if you've answered no to all the above then your company will very probably need either loans or a fund raise. Banks are not so keen to lend, and institutions want their pound of flesh and will only offer cash at huge discounts to prevailing share prices. Some speculative companies will inevitably go bust.
At this stage nobody can say for sure if this is a correction or a bear market, but it's a good time to assess just how financially secure the companies you've invested in are.
As ever, I don't give sell or buy recommendations. Please do your own research carefully.
twitter: @michae1mouse
Tuesday 9 October 2018
There's no nonsense like bulletin board nonsense!
Don't you just love the total tripe that is often posted on bulletin boards. It's very entertaining, but should generally be disregarded apart from sensible financial commentary or the odd useful link.
If you read my blog on a regular basis then you'll know I'm not a fan of "story" stocks that have climbed to multi-million dollar valuations on the back of vast riches to come next year or perhaps the year after that or is it the year after that? Jam tomorrow companies. Let me say at this point I've occasionally invested in one or two in the past, but they rarely, if ever, turn out well. Why? Mainly because the figures just don't add up. Even if a company was the best thing since sliced bread, it doesn't make it a great investment if you pay too much for it. Let the financials be your guide to how much you should expect to pay. Read some books by the great investors such as Graham, Buffett, Lynch etc if you haven't already.
One story stock I'm not a fan of is OptiBiotix which I've written blog posts about before. Here's why I think it's a poor investment at it's current lofty market cap. My blog is written in response to an bulletin board avatar who said the following:-
https://uk.advfn.com/cmn/fbb/thread.php3?id=35291865
"Has it really gone up on hot air or numerous agreements across the world which will go straight to the bottom line. Strong fundamentals. Last time you spouted your saviour rubbish we didn’t have this pharma deal in place and the price shot up to £1.30. They’ll be injecting up to $50m. Pretty big investment for hot air don’t you think?.
Great opportunity to buy many stocks during this time of volatility."
My response:-
Your post is factually incorrect. Firstly, you have no evidence that these agreements will generate significant revenues which will go straight to the bottom line. Last reported interim revenues were £80,000 about the same as the previous year. Yet when you look through the RNS statements there were "agreements" between May 2017 and May 2018 into the double digits. If these were significant revenue generators then at least three or four should have ramped up revenues for the six months ending May 2018? Even just one would surely have improved revenues?
Something doesn't stack up does it? As I said this morning these agreements should be RNS Reach since they clearly mean diddly squat in terms of generating revenues. If the six months ending November 2018 still shows poor results then you'll know for sure that nothing significant is coming anytime soon.
Secondly, Opti doesn't have strong fundamentals. If you strip out intangibles and it's SBTX investment (which incidentally is pretty worthless since nobody would make an offer at it's current market cap. ) then tangible net asset value is about £2m and that's after a £1.5m fund raise at 62p at the end of May. Full year revenues last year were short of £200,000 and interims this year were £80,000. Needless to say that Opti is loss making and burning cash. Opti is valued at around £70m. It's laughable. Those fundamentals might support a £4m market cap at best.
The share price movements are immaterial unless you're a trader. If you're a LTBH investor then it's the end game you're looking at. Opti's share price is now below 80p again, so what's your £1.30 point?
A pharma "injecting up to $50m". Really? Point me to the RNS please. Besides even if this were true (please provide evidence) then it could fail the first hurdle. In fact, if it fails any hurdle then that's going to have a huge detrimental effect on the validity of Opti's claims for this Science. Everything they have tried to promote may then be regarded as "quackery"? I bet the bulls haven't even considered that eventuality. Pharma is a dangerous route to tread.
"Great opportunity to buy many stocks during this time of volatility."
On that we can agree, sadly Opti isn't one of them.
As ever dyor, these are just my thoughts and views and do not constitute buy or sell advice.
twitter: @michae1mouse
If you read my blog on a regular basis then you'll know I'm not a fan of "story" stocks that have climbed to multi-million dollar valuations on the back of vast riches to come next year or perhaps the year after that or is it the year after that? Jam tomorrow companies. Let me say at this point I've occasionally invested in one or two in the past, but they rarely, if ever, turn out well. Why? Mainly because the figures just don't add up. Even if a company was the best thing since sliced bread, it doesn't make it a great investment if you pay too much for it. Let the financials be your guide to how much you should expect to pay. Read some books by the great investors such as Graham, Buffett, Lynch etc if you haven't already.
One story stock I'm not a fan of is OptiBiotix which I've written blog posts about before. Here's why I think it's a poor investment at it's current lofty market cap. My blog is written in response to an bulletin board avatar who said the following:-
https://uk.advfn.com/cmn/fbb/thread.php3?id=35291865
"Has it really gone up on hot air or numerous agreements across the world which will go straight to the bottom line. Strong fundamentals. Last time you spouted your saviour rubbish we didn’t have this pharma deal in place and the price shot up to £1.30. They’ll be injecting up to $50m. Pretty big investment for hot air don’t you think?.
Great opportunity to buy many stocks during this time of volatility."
My response:-
Your post is factually incorrect. Firstly, you have no evidence that these agreements will generate significant revenues which will go straight to the bottom line. Last reported interim revenues were £80,000 about the same as the previous year. Yet when you look through the RNS statements there were "agreements" between May 2017 and May 2018 into the double digits. If these were significant revenue generators then at least three or four should have ramped up revenues for the six months ending May 2018? Even just one would surely have improved revenues?
Something doesn't stack up does it? As I said this morning these agreements should be RNS Reach since they clearly mean diddly squat in terms of generating revenues. If the six months ending November 2018 still shows poor results then you'll know for sure that nothing significant is coming anytime soon.
Secondly, Opti doesn't have strong fundamentals. If you strip out intangibles and it's SBTX investment (which incidentally is pretty worthless since nobody would make an offer at it's current market cap. ) then tangible net asset value is about £2m and that's after a £1.5m fund raise at 62p at the end of May. Full year revenues last year were short of £200,000 and interims this year were £80,000. Needless to say that Opti is loss making and burning cash. Opti is valued at around £70m. It's laughable. Those fundamentals might support a £4m market cap at best.
The share price movements are immaterial unless you're a trader. If you're a LTBH investor then it's the end game you're looking at. Opti's share price is now below 80p again, so what's your £1.30 point?
A pharma "injecting up to $50m". Really? Point me to the RNS please. Besides even if this were true (please provide evidence) then it could fail the first hurdle. In fact, if it fails any hurdle then that's going to have a huge detrimental effect on the validity of Opti's claims for this Science. Everything they have tried to promote may then be regarded as "quackery"? I bet the bulls haven't even considered that eventuality. Pharma is a dangerous route to tread.
"Great opportunity to buy many stocks during this time of volatility."
On that we can agree, sadly Opti isn't one of them.
As ever dyor, these are just my thoughts and views and do not constitute buy or sell advice.
twitter: @michae1mouse
Sunday 7 October 2018
King Canute won't stop the Tide!
I do love a micro-cap company with a great growth story to tell, particularly where there is relatively little risk to your capital in the long term.
Here's a company that fits the criteria called Crimson Tide (Tide) and below you'll find a link to it's website:-
http://crimsontide.co.uk//company-description/
I'm a fan of this company and my investment is currently showing a 37% gain. It's another long term hold for me since it's best days are yet to come.
As you'd expect if you read my blog on a regular basis, TIDE is a profitable, cash generative company with an excellent balance sheet. It's market cap. stands at slightly below £13m.
It has a healthy £782,000 in cash on the balance sheet with zero debt. It's gross margins are a mouth watering 86%.
Crimson Tide released their interim results at the end of September showing revenue growth of 8%, but profit down to around £4000. At first glance it doesn't look impressive, but delve further into the company's history and you'll see a terrific growth story unfolding. The temporary dip in profits is purely down to a planned investment in sales and marketing, and a measured and sensible approach to global expansion.
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/TIDE/13807975.html
Barrie Whipp, Executive Chairman said the following:-
Here's a company that fits the criteria called Crimson Tide (Tide) and below you'll find a link to it's website:-
http://crimsontide.co.uk//company-description/
I'm a fan of this company and my investment is currently showing a 37% gain. It's another long term hold for me since it's best days are yet to come.
As you'd expect if you read my blog on a regular basis, TIDE is a profitable, cash generative company with an excellent balance sheet. It's market cap. stands at slightly below £13m.
It has a healthy £782,000 in cash on the balance sheet with zero debt. It's gross margins are a mouth watering 86%.
Crimson Tide released their interim results at the end of September showing revenue growth of 8%, but profit down to around £4000. At first glance it doesn't look impressive, but delve further into the company's history and you'll see a terrific growth story unfolding. The temporary dip in profits is purely down to a planned investment in sales and marketing, and a measured and sensible approach to global expansion.
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/TIDE/13807975.html
Barrie Whipp, Executive Chairman said the following:-
"Our pipeline has grown significantly and have seen additional demand from Europe and the Middle East as well as in the UK & Ireland. The Board estimates that, considering increased investment in Sales & Marketing, like for like profit would have increased by approximately 50%. We are working on a much wider range of exciting opportunities and have developed mpro5's IOT capabilities. mpro5 is now publicly downloadable from app stores for demonstration purposes and for smaller businesses. We are extremely well placed to take advantage of the opportunities generated from our marketing activities and the Board is excited to accelerate our growth to the next level. "
If you want a company to grow strongly and succeed then they need to invest and TIDE's management have seen the opportunity and are to determined to capitalise on it. This is a very telling sentence from the interim report:-
"We currently have over 100 identified opportunities with potential clients, five times more than typical levels before these investments were made."
Whilst not obviously cheap at the moment, once growth kicks in from investments then with such juicy gross margins and a strong balance sheet I expect the share price of TIDE to make excellent progress in the years to come.
Finally, keep your eyes peeled for those large contract announcements with enterprise clients.
As ever, this is not a recommendation to buy or sell.
twitter: @michae1mouse.
Wednesday 3 October 2018
Disappointing results - SAL, SAL, SAL?
It's always a jolt when a company issues unexpectedly disappointing results, particularly when there's been no prior warning. That's exactly what Space and People did last week which caught investors unawares.
I took a stake in Space and People (SAL) in a couple of tranches back in December 2016 when the company had been in the doldrums, and the share price was in the low 20s and mid teens. From my research I had anticipated a recovery and was duly pleased that a recovery in fortunes did indeed occur in 2017. The company returned to profit, good cash generation and the restoration of a dividend. In fact the dividend alone meant a nice 7% return on my investment. The shares shot up into the mid thirties and until last week I was sitting on a nice capital return.
However, the interims results disappointed and full year results are anticipated to be below market expectations. With the dividend included, I'm back to a mere 1% paper profit.
The shares retraced around 35% last week. It appears a little harsh to me, and I'm happy to sit tight and see how things pan out for the rest of the year and hope they get back on track again in 2019.
SAL is currently valued at £3.9m. Whilst results for the full year will disappoint, they do expect to report a profit of around £200,000 and they have a solid balance sheet with net cash around £510,000 and no debt. Whilst there was a cash outflow of £1.72m in the first six months, this is a seasonal business and they may still pay a small dividend, although I have assumed this from the following statement, "The group will generate a profit this year and it is the Board's intention to maintain our dividend policy." The all important Christmas period is yet to come so fingers crossed that they deliver on revised expectations.
All eyes on 2019 then where they make the bold statement:-
"We are confident that we can regain sales momentum for next year which combined with the costs savings already identified. Our 2019 forecasts being unchanged despite the lower than anticipated 2018 outturn."
If they do this then the shares will be the bargain that I originally hoped. Meanwhile, at SAL's lowly market cap. and with a solid balance sheet, the shares have little downside and plenty of bad news already priced in.
I do like what SAL offer as a company and I'm sure that in a tough retail environment then companies will need their services short, medium and long term. Here's their website and recent half-year results:-
http://www.spaceandpeople.co.uk/
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/SAL/13808000.html
Finally, George Watt (Non-Exec Chairman) bought around £20,000 of shares immediately following the interim results in a vote of confidence. I also notice that the share price has ticked up marginally today on a 145,000 share purchase (around £30,000) which I'd suspect may be another Director purchase, although this is speculation on my part.
As ever DYOR. I own shares in SAL and don't recommend buying or selling.
twitter: @michae1mouse
I took a stake in Space and People (SAL) in a couple of tranches back in December 2016 when the company had been in the doldrums, and the share price was in the low 20s and mid teens. From my research I had anticipated a recovery and was duly pleased that a recovery in fortunes did indeed occur in 2017. The company returned to profit, good cash generation and the restoration of a dividend. In fact the dividend alone meant a nice 7% return on my investment. The shares shot up into the mid thirties and until last week I was sitting on a nice capital return.
However, the interims results disappointed and full year results are anticipated to be below market expectations. With the dividend included, I'm back to a mere 1% paper profit.
The shares retraced around 35% last week. It appears a little harsh to me, and I'm happy to sit tight and see how things pan out for the rest of the year and hope they get back on track again in 2019.
SAL is currently valued at £3.9m. Whilst results for the full year will disappoint, they do expect to report a profit of around £200,000 and they have a solid balance sheet with net cash around £510,000 and no debt. Whilst there was a cash outflow of £1.72m in the first six months, this is a seasonal business and they may still pay a small dividend, although I have assumed this from the following statement, "The group will generate a profit this year and it is the Board's intention to maintain our dividend policy." The all important Christmas period is yet to come so fingers crossed that they deliver on revised expectations.
All eyes on 2019 then where they make the bold statement:-
"We are confident that we can regain sales momentum for next year which combined with the costs savings already identified. Our 2019 forecasts being unchanged despite the lower than anticipated 2018 outturn."
If they do this then the shares will be the bargain that I originally hoped. Meanwhile, at SAL's lowly market cap. and with a solid balance sheet, the shares have little downside and plenty of bad news already priced in.
I do like what SAL offer as a company and I'm sure that in a tough retail environment then companies will need their services short, medium and long term. Here's their website and recent half-year results:-
http://www.spaceandpeople.co.uk/
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/SAL/13808000.html
Finally, George Watt (Non-Exec Chairman) bought around £20,000 of shares immediately following the interim results in a vote of confidence. I also notice that the share price has ticked up marginally today on a 145,000 share purchase (around £30,000) which I'd suspect may be another Director purchase, although this is speculation on my part.
As ever DYOR. I own shares in SAL and don't recommend buying or selling.
twitter: @michae1mouse
Saturday 29 September 2018
On the brink of collapse? What makes a company insolvent?
One of the things that brings fear into the hearts of all investors is when a company fails to release it's results until after hours on the last day before it would be suspended from trading.
That's exactly what a company called Premaitha Health did yesterday (Friday 28th September). Their full year results and details of a proposed placing were released at around 6pm. Gulp! Were investors right to be fearful. You bet they were! In short this company needs massive cash injections just to keep the lights on. I'm not an accountant, but I do wonder if the company is even solvent? I'll explain below.
I've mentioned Premaitha before in a blog post last year as "one to avoid at all costs." Even more reason to avoid now since one of two things will happen. Either the company will fall into administration or shareholders will be diluted into oblivion. Neither option is palatable.
Where do we start? Let's start with the balance sheet.
Cash was around £300,000 and borrowings around £12,000,000 at the end of March. Wow!
Total assets were around £14.6m, and total liabilities £17.2m. That's £2.6m of negative asset value.
It gets worse since £8.4m of NIPT's assets are goodwill and intangibles i.e. unquantifiable and worthless in a fire sale. Strip these out and that's a staggering £11m of negative asset value. Blimey!
Losses for the year totalled £9.6m and cash used by operations around £9.5m.
I don't know what makes a company insolvent, but surely those figures do? Absolutely awful.
It's difficult to see any positives at all. They're frantically trying to raise cash, and are hoping for an extra £2.5m at 10p per share following on from a cash call as recently as May this year which raised £3m at 4.5p.
The cash call will barely keep the company going for a month or two given the perilous state of the balance sheet.
NIPT has had litigation to deal with, but even stripping those costs out of recent results, the situation isn't demonstrably much better.
What of NIPT's growth prospects? What's happened in the 6 months since these full year results?
In the trading update it says this:-
"Six month revenues to 30 September 2018 expected to be up approximately 40% to £3.8m (H1 2017: £2.6m)"
However this is not the measure to look at. This is not a seasonal business. What you should be comparing is growth from H2 March 2018 to H1 September 2018. That's far less impressive. In fact growth went from around £3.6m to £3.8m i.e. £200,000 (around 5.5%). Nowhere near enough to survive without a massive injection of further funds.
Unbelievably the company will have a market cap around £50m if they succeed with the proposed £2.5m fund raise. I kid you not!! It takes your breath away.
All in all the situation looks perilous, and that's an understatement. The company admits that the latest fund raise is a stay of execution and they'll need further funds to survive.
If you're not convinced then read the notes at the bottom of the report. Here's what the auditors say at the very end of the report:-
That's exactly what a company called Premaitha Health did yesterday (Friday 28th September). Their full year results and details of a proposed placing were released at around 6pm. Gulp! Were investors right to be fearful. You bet they were! In short this company needs massive cash injections just to keep the lights on. I'm not an accountant, but I do wonder if the company is even solvent? I'll explain below.
I've mentioned Premaitha before in a blog post last year as "one to avoid at all costs." Even more reason to avoid now since one of two things will happen. Either the company will fall into administration or shareholders will be diluted into oblivion. Neither option is palatable.
Where do we start? Let's start with the balance sheet.
Cash was around £300,000 and borrowings around £12,000,000 at the end of March. Wow!
Total assets were around £14.6m, and total liabilities £17.2m. That's £2.6m of negative asset value.
It gets worse since £8.4m of NIPT's assets are goodwill and intangibles i.e. unquantifiable and worthless in a fire sale. Strip these out and that's a staggering £11m of negative asset value. Blimey!
Losses for the year totalled £9.6m and cash used by operations around £9.5m.
I don't know what makes a company insolvent, but surely those figures do? Absolutely awful.
It's difficult to see any positives at all. They're frantically trying to raise cash, and are hoping for an extra £2.5m at 10p per share following on from a cash call as recently as May this year which raised £3m at 4.5p.
The cash call will barely keep the company going for a month or two given the perilous state of the balance sheet.
NIPT has had litigation to deal with, but even stripping those costs out of recent results, the situation isn't demonstrably much better.
What of NIPT's growth prospects? What's happened in the 6 months since these full year results?
In the trading update it says this:-
"Six month revenues to 30 September 2018 expected to be up approximately 40% to £3.8m (H1 2017: £2.6m)"
However this is not the measure to look at. This is not a seasonal business. What you should be comparing is growth from H2 March 2018 to H1 September 2018. That's far less impressive. In fact growth went from around £3.6m to £3.8m i.e. £200,000 (around 5.5%). Nowhere near enough to survive without a massive injection of further funds.
Unbelievably the company will have a market cap around £50m if they succeed with the proposed £2.5m fund raise. I kid you not!! It takes your breath away.
All in all the situation looks perilous, and that's an understatement. The company admits that the latest fund raise is a stay of execution and they'll need further funds to survive.
If you're not convinced then read the notes at the bottom of the report. Here's what the auditors say at the very end of the report:-
"Auditor's report: material uncertainty relating to going concern
|
|
||||
|
|
|
||||
|
The Auditor's report includes a material uncertainty relating to going concern. Extracts from the Auditor's report are reproduced below.
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1 of the financial statements concerning the group's and parent company's ability to continue as a going concern. The group incurred a loss in the year of £9,482,927 and, at that date, the group had current assets of £4,268,649 and current liabilities of £4,640,943. In their assessment of the group and parent company's ability to continue as a going concern, the directors have focused on the potential for future fundraising, assessing both the expected outcome of the fundraising round in progress at the time of signing the financial statements, and the requirement for a further fundraise in the coming months. The directors have also focused on the rate of growth of revenue in making their assessment.
These considerations, in particular the assumed successful outcome of the fundraising currently in progress and the assumed successful outcome of the next fundraising round to be completed within 12 months, along with the other matters explained in note 1 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the group's and parent company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group and parent company were unable to continue as a going concern."
Please note well, "indicate the existence of a material uncertainty which may cast significant doubt about the group's and parent company's ability to continue as a going concern."
As ever, this is a blog with my thoughts and is not intended for advice. However, I personally wouldn't touch this with a bargepole now or anytime in the future, and if I already held shares I'd be heading for the exit first thing Monday morning.
As ever, AIMHO.
| |||||
Thursday 27 September 2018
Immedia, Concepta and Zinc Media
Let's start with Immedia, a company I've written about very recently in this blog post:-
http://michae1mouse.blogspot.com/2018/09/if-music-be-food-of-love-play-on.html
Immedia released their half-year results today, and I haven't much to add to my recent post. As expected, the results were significantly better than last time.
There was a 9% increase in revenue to just over £2m, EBITDA turned positive at £40,000 against a loss of £104,000 in 2017, and cash on the balance sheet has improved significantly to £149,000. The headline loss is around £91,000 which is again significantly better than 2017. The company remains virtually debt free. Full results are below:-
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/IME/13806214.html
The only things I will add to the previous report is that they have a great client list including JD Sports and Subway where they say:-
"It is also pleasing to report that recent major contracts with both JD Sports and SUBWAY® are exceeding Board expectations."
and they most recently won a large contract with a major UK high street financial services institution.
The tone of the report reads very positively and they are comfortable with meeting market expectations for the full year. I feel very encouraged by the progress they are making and impressed with the turnaround, particularly the cashflow. I'll be sticking with this one, and as ever, being a minnow with a strong balance sheet, another major contract award could see the share price significantly higher.
Now to Concepta. I've mentioned this company before, it's a "story" stock ("jackanory" comes to mind). What does the company do then? Who cares? It's an absolute mystery to me why PIs bother with these companies, it really is? CPT released it's interims today. How have revenues grown for this wonderful growth stock I wonder? Revenues have gone from zero last year to (wait for it) zero this year. Wow! So what does the report say? Again, who the bloody hell gives a monkey's? Investors just get diluted into oblivion with these companies whilst the jam grows a pair of legs and keeps running further and further away.
Even after today's 21% kicking, CPT has a market cap. near £7m. It'd be overvalued at a market cap of zero in my opinion. When there are companies out there with real revenues, profits and good cashflow at lower market caps then why would you bother with this?
Finally Zinc Media. I hate these types of company. It used to be called Ten Alps and didn't impress in it's previous incarnation either. It sits near it's all time lows today after a 12% drop following (at best) lacklustre results. Actually I have a bit of a jaundiced view of these production/distribution companies following my worst investment ever in a company called DCD Media. Here is a comment I made on the ADVFN bulletin boards which pretty much sums up my aversion to this sector:-
"The reason I wouldn't touch this lot with a barge pole is through a lesson learnt early in my investing days where I built a stake in a production/distribution company called DCD Media. I learnt the following about these types of companies, and personally wouldn't touch any of them in future:-
1) Margins in production are generally p*ss poor. Basically they don't make much money. Distribution is better but even then not great.
2) The only value in a Production company is it's staff. In the case of DCD Media they heavily overpaid for acquisitions. After a very short period of time most key production personnel just upped and left. All the value of the acquisitions is then lost, commissions cease and all value is written off.
3) At the drop of a hat, the tv companies can just decide that they're no longer interested in re-commissioning a series and revenues fall off a cliff.
4) Take a look at the balance sheet. If you strip out goodwill and intangibles then the company has negative asset value. Goodwill and intangible assets almost certainly relate to the acquired production companies (see above). In other words, it has no tangible value.
http://michae1mouse.blogspot.com/2018/09/if-music-be-food-of-love-play-on.html
Immedia released their half-year results today, and I haven't much to add to my recent post. As expected, the results were significantly better than last time.
There was a 9% increase in revenue to just over £2m, EBITDA turned positive at £40,000 against a loss of £104,000 in 2017, and cash on the balance sheet has improved significantly to £149,000. The headline loss is around £91,000 which is again significantly better than 2017. The company remains virtually debt free. Full results are below:-
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/IME/13806214.html
The only things I will add to the previous report is that they have a great client list including JD Sports and Subway where they say:-
"It is also pleasing to report that recent major contracts with both JD Sports and SUBWAY® are exceeding Board expectations."
and they most recently won a large contract with a major UK high street financial services institution.
The tone of the report reads very positively and they are comfortable with meeting market expectations for the full year. I feel very encouraged by the progress they are making and impressed with the turnaround, particularly the cashflow. I'll be sticking with this one, and as ever, being a minnow with a strong balance sheet, another major contract award could see the share price significantly higher.
Now to Concepta. I've mentioned this company before, it's a "story" stock ("jackanory" comes to mind). What does the company do then? Who cares? It's an absolute mystery to me why PIs bother with these companies, it really is? CPT released it's interims today. How have revenues grown for this wonderful growth stock I wonder? Revenues have gone from zero last year to (wait for it) zero this year. Wow! So what does the report say? Again, who the bloody hell gives a monkey's? Investors just get diluted into oblivion with these companies whilst the jam grows a pair of legs and keeps running further and further away.
Even after today's 21% kicking, CPT has a market cap. near £7m. It'd be overvalued at a market cap of zero in my opinion. When there are companies out there with real revenues, profits and good cashflow at lower market caps then why would you bother with this?
Finally Zinc Media. I hate these types of company. It used to be called Ten Alps and didn't impress in it's previous incarnation either. It sits near it's all time lows today after a 12% drop following (at best) lacklustre results. Actually I have a bit of a jaundiced view of these production/distribution companies following my worst investment ever in a company called DCD Media. Here is a comment I made on the ADVFN bulletin boards which pretty much sums up my aversion to this sector:-
"The reason I wouldn't touch this lot with a barge pole is through a lesson learnt early in my investing days where I built a stake in a production/distribution company called DCD Media. I learnt the following about these types of companies, and personally wouldn't touch any of them in future:-
1) Margins in production are generally p*ss poor. Basically they don't make much money. Distribution is better but even then not great.
2) The only value in a Production company is it's staff. In the case of DCD Media they heavily overpaid for acquisitions. After a very short period of time most key production personnel just upped and left. All the value of the acquisitions is then lost, commissions cease and all value is written off.
3) At the drop of a hat, the tv companies can just decide that they're no longer interested in re-commissioning a series and revenues fall off a cliff.
4) Take a look at the balance sheet. If you strip out goodwill and intangibles then the company has negative asset value. Goodwill and intangible assets almost certainly relate to the acquired production companies (see above). In other words, it has no tangible value.
I could go on and on and on. Good luck if you want to take a punt, but I'd be very careful. Imo these types of companies shouldn't be listed."
I might be being unfair to Zinc Media since it does produce substantial revenues, but I've no real enthusiasm for researching this type of company. So as ever, these are just my thoughts and you must do your own thorough research.
twitter: @michae1mouse
Subscribe to:
Posts (Atom)