Yes it's that time of year to provide an update on the blog I started two years ago, and perhaps I should be embarrassed to provide this update, but I'm not. From the outset I've pointed out that I'm not tipping these shares and that micro-caps are extremely volatile and their fortunes and subsequently share prices can turn on a sixpence. We are currently in the throes of a savage bear market, and even great news is largely met with a shrug of the shoulders. Bad news is catastrophic to share prices, particularly illiquid tiddlers like these.
If you have the right mind set though, you'll see massive opportunity which only arrives once every 10 to 20 years. There are so many companies at knock down prices presently, it doesn't mean prices won't go even lower in the short term but if you have spare cash then these are the moments to start buying not selling. Anyway, without further ado here's the update. Readers of a nervous disposition might like to look away now as they may find the content disturbing.
1) IXICO current share price 37.5p (down 46%)
Ixico is fundamentally still doing well and is on track to grow longer term. I have no major concerns with this company. It's share price was initially rocked when phase III trials with a major lucrative client were terminated and as a consequence Ixico's services on this project were scaled back significantly. This affected Ixico's growth projections for 2022 and 2023. This is a clear risk factor for Ixico, but they have and are very sensibly picking up a broader and bigger client base over time which will ensure that there is far less reliance on just one major contract.
A recent trading update is encouraging. In year-end 2022 (end of this month), they expect EBITDA to comfortably exceed previous guidance, and their order book will exceed £15m. For 2023, they expect revenues to come in at around £7m, £5m of which has already been contracted. The company (as mentioned) has a more diversified order book, a strong balance sheet and is debt free with cash.
2) CRIMSON TIDE current share price 1.8p (down 47%)
Crimson Tide is an excellent little company that is doing exactly what it has set out to do. Currently it's investing for growth and is achieving expectations. Hence the share price has fallen by 47% over two years. Spot the sarcasm. Indeed, it reported it's interims this morning which were in-line with expectations showing revenue growth of 15.3%, and Annual Recurring Revenue (ARR) growth of 22.7%. They recently secured two significant contracts which will further contribute to revenues in the second half and most importantly to ARR.
They expect to return to profitability in 2024 since at present they are continuing to invest for growth, but with very high gross margins (currently 84.5%) it'll be worth the wait since the revenues will pretty much start to drop to the bottom line. Needless to say, with the visibility of recurring revenue streams and a strong pipeline, management are very optimistic. Client churn is negligible which speaks volumes about their offering.
3) BIOME TECHNOLOGIES current share price 52.5p (down 78%)
It was all going so well until.......Yes, a profit warning last week!! In short, they've suffered from supply chain challenges, a major project delay and a far more uncertain economic backdrop which is severely curtailing the expected ramp up in revenues for the BioPlastics division. By contrast the RF Technologies division is beginning to recover and should show a marked improvement in the second half of 2022. However, the company warned on profits for both 2022 and 2023.
There are some interesting projects in BioPlastics including in the packaging film area, tree shelters and Home compostables, but clearly we're now looking medium to longer term.
Biome believes it has sufficient working capital for the foreseeable future, and growth is expected from 2022 to 2023 with revenues above £5m and rising, the selloff (imo) therefore is massively overdone leaving Biome on a market cap. of just £2m.
4) SRT Marine Systems current share price 29p (down 32%)
SRT has two key revenue streams, the transceivers business which is growing nicely and the systems division where major projects are promised. One of the systems projects has been confirmed this year for £40m and more large value contracts are expected imminently. So why is the share price at 29p? Largely because the company has promised imminent contracts for some time now and it does have a habit of having to raise cash from the markets at a discount.
If they do deliver the promised systems contracts and the transceivers business continues to grow then SRT shareholders should really prosper. It's a waiting game like with so many of these smaller companies.
5) TRAKM8 current share price 18p (down 4%)
In terms of share price performance Trakm8 is almost a success story compared to the above at a mere 4% down. In fairness, this is a recovery stock and a chink of light has appeared on the horizon.
Trakm8 have seen an uptick in business and recently reported a 13% increase in the number of telematics devices reporting to their servers (299,000). This is the number to look for since it translates into recurring revenues and encouragingly, they are expecting the number of devices to increase significantly in the second half of the year.
They are also streamlining the business and expect to make cost savings of £2.4m per annum. A small profit is expected this year with good growth again the year after. Microlise have confidence and recently backed the company with a loan to cover the restructuring process and provide working capital.
Has the corner been turned? We'll find out in the next six months or so I'd guess.
-----------------------------
In conclusion, after two years it might look like a bit of a blood bath and it has been, but largely due to sentiment rather than company performance and prospects. If you look at my previous reports, you'll see just how illiquid and volatile the share prices of these companies can be. Biome for instance was 75% up at one stage and is currently 78% down.
Market sentiment will change and so will the economic conditions, and I am optimistic that the medium to long term prospects of all 5 companies remain sound and hopefully when the tide turns (no pun intended) these will become multibaggers from here and from the prices I first recorded them at in 2020.
No comments:
Post a Comment