A week of mixed fortunes for two speculative investments

As I have mentioned in previous blogs, I have made two very speculative investments. One in a company called Angle and the other in Avanti Communications.

This week both reported news on progress.

On Monday, Angle informed the market that

"ANGLE plc (AIM: AGL), the specialist medtech company, is pleased to announce successful results from third party testing of its Parsortix non-invasive cancer diagnostic product on colorectal cancer patient blood."

This validation from the University of Surrey Oncology Group (Surrey) is another key milestone in their pursuit of selling their Parsortix device for research purposes and ultimately for clinical use.

The share price rose in response to the news and continued to rise over the next few days.

According to the milestone chart, next up should be validation from the Paterson Institute for Cancer Research with lung cancer patient blood.

Whilst this is a highly speculative investment, it does appear that things are progressing on track at the moment, and I'll continue to hold.

Preliminary results should be released this month.

If this device does turn out to be as effective and cost efficient as it appears to be then the future could be very promising indeed, not least for the patients that may ultimately benefit from its diagnostic capabilities.

On Wednesday (a day before they had recently announced a trading statement would be released), it was not such good news from Avanti Communications, although the initial pounding that the share price took was more than a bit harsh.

A revenue shortfall of £10m for their year ending the 30th June appears to be the main reason for the sell-off, but the company did become cash flow positive at the operating level in June and has signed contracts with major telecoms and media companies including Vodafone, Technicolor and CNN.

The main worry with Avanti is the large amount of debt that it carries, but the company "is conservatively financed, with a very long term repayment profile on its debts and remains in full compliance with all covenants."

I bought shares in Avanti around the £2.60 mark, and this investment has fluctuated between profit and loss since I have held them.

With this type of company (just like Angle) you have to accept that it's a highly speculative play, a long term game and that you could lose all or most of your money. The hope is that either or both might multi-bag.

As long as you don't bet the house on these type of investments then they can provide an exciting ride.

Some investors would argue that the preservation of capital is the most important dictum in investing and I'd agree. However, if you're a stock picker I'd strongly argue that it's the whole portfolio of shares that you look at and you shouldn't get too hung up about any individual stock losses.

I will remain a holder of both these two companies and would love to see both of them succeed over the long term. Firstly from a selfish point of view, but also both companies have already achieved significant milestones from humble beginnings which is testament to their innovation and entrepreneurship.

I wish both companies well, and will continue to monitor their news flow with interest.

OMG!!!! Murray wins and is this a good AIM opportunity?

OMG!!!! Andy Murray currently holds the US open and Wimbledon titles. Well done Andy!!!!

OMG again!! Is this aim listed company (OMG) worth backing following a recent reversal in it's share price.

I don't own shares in OMG, but it has come to my attention over the weekend through an article in the 'Money' section of the Daily Telegraph and recent Director purchases.

Firstly the article is essentially about AIM shares being eligible for ISAS by the Autumn, and it then goes on to say that Paul Mumford who runs the Cavendish Aim Fund (and formerly the hugely successful Cavendish Opportunities Fund) is a fan of OMG, and he will be backing the recently announced £9m fund raising.

To quote from the article he says "The real reason I get quite excited about this one is that it has developed intelligent, wearable camera technology".

"It's the first camera in the world that's been made like that and will be sold exclusively through Amazon. Remember what happened when Amazon sold Kindle exclusively?"

I also noted that Directors bought £205,000 worth of shares in the fundraising at 29p (the current share price is around this figure).

It would appear that the shares have suffered a bit of a hit following the dilutive placing and open offer, and the mild profits warning that OMG issued with their interim results.

I haven't researched the company properly, and have only had a superficial glance at the moment but it may be worth researching further.

The fundraising was for an acquisition and "to exploit opportunities in the Autographer market".

The interims did show a small loss, but the company was profitable last year with diluted EPS at 1.47p (p/e around 20) . The company seem to be generating cash and have paid a steadily rising dividend since 2005, although the current yield is only around 1.2%.

Cash on the balance sheet was around £4m at the interims and if you strip out intangibles and goodwill then tangible NAV is about £7m. The current market cap. is £21m.

Not a screaming buy for me with those figures, but it certainly merits further research and with the price hovering around the fundraising mark it might just have hit its low point?

I'll put OMG on my monitor and keep a close eye on developments.

TRAKM8 final results

I last wrote about Trakm8 at the end of April following a very positive trading update. This is a small company that is well below the radar of most investors and valued at just £3.3m.

They released their final results on Monday, and they are certainly very encouraging. I am becoming increasingly confident that this small outfit is a hidden gem that will prosper in the short, medium and long term.

As mentioned in my last report, as expected revenues for the year came in below last year's figures at around £4.75m (2012 - £5.22m). The group made a small operating profit and diluted EPS was 0.78p, slightly above last year despite lower revenues. This puts the shares on an historic p/e ratio of 22 which makes the shares look expensive on first glance.

However, in my view, the company is extremely cheap. Firstly, Trakm8 have invested heavily for growth this year, and despite an increased overhead of around £50,000 per month, the company have remained profitable. This is due to their robust financial model that now places a greater emphasis on their high margin solutions and engineering services divisions rather than their product division where revenues are less predictable and margins far tighter. Products are still an important segment, but not the most strategically important segment.

Gross margins improved from 64% in 2012 to 72% this year due to continually improving recurring revenues. The company is generating healthy amounts of cash and cash balances increased 29% during the year to £1.41m at year end. Net assets increased to GBP2.52m (2012: GBP2.38m).

The important point with Trakm8 is that it is generating cash and profitable with a healthy balance sheet. Moreover, their investment in growth is already making a large impact with revenues already up by 23% on last year. The full effect should start to show through in the second half and in future years.

As revenues improve year on year, operational gearing will really kick in. For example, if revenues were to remain 23% ahead (although the suggestion is that the second half may see an even larger upturn) then full year revenues would be around £5.84m. If margins remain around 72% and assuming admin. expenses are around £3.8m then diluted EPS comes in at 2.1p putting the shares on a forward p/e of around 8. Projecting further forward then even a 10% improvement in revenues doubles the EPS figure and puts the shares on a forward p/e of 4.

I like what I see with Trakm8 and have in recent times considerably increased my holding. (Please note that a good broker will easily pick up decent amounts of stock at a discount to the quoted offer price).

The outlook statements make encouraging reading, and they have also announced the appointment of a new Non-Executive Director, Keith Evans.

John Watkins had this to say,""I am delighted to welcome Keith to the Board of Trakm8. His extensive experience and knowledge gained as a senior partner with PwC will prove invaluable in the next phase of our growth and investment plan and as Trakm8 evolves into a leading player within the international telematics industry".

Ambitious plans indeed, but so far they seem to be delivering on their promises.

As ever, no advice intended or given.