After nearly six months suspended from the stock market following it's stated intention to acquire 7Digital, UBC Media shares returned to the stock market on Tuesday. The share price immediately slumped by 50%, and has remained at around 3.125p since its reinstatement. Having been out all day, it was a bit of a surprise (to say the least!) to return and see such a dramatic fall. Before reading the RNS I assumed that the acquisition had fallen through. However, this was not the case, and the reason for the fall was the share issue priced at 2.7p to pay for the acquisition, and to raise additional working capital. UBC will change it's name to 7Digital, and the reversal will take place on 10th June if it is approved by shareholders at a General Meeting on the 9th June. The share capital will also undergo a 10 for 1 consolidation on the same date.
UBC's share price movement was in stark contrast to that of Audioboom (formerly One Delta) where the share price has more than doubled since it's reversal.
Whilst it's disappointing for UBC shareholders to wait six months only to see the share price fall so dramatically when it eventually relisted, some perspective is required.
Firstly when UBC's shares were temporarily suspended in November at around 6p, the shares had only recently been lifted to this price in a matter of days by speculators. The market cap. of around £11m would be difficult to justify given that UBC is loss making (and has been for a number of years) with recently reported year end revenues of just £2.9m.
Secondly, UBC needed to add considerable scale to it's business. It's done just that through the acquisition of 7Digital. You might argue that it should have just reversed in Audioboom, but whilst that may have had a more positive effect on the share price in the short term, for longer term investors I think a finger in both pies could be far more lucrative.
Thirdly, 7Digital (UBC) holds a near 20% shareholding in Audioboom. Any increases in Audioboom's share price will enhance the NAV of 7Digital. BOOM's current market cap. is worth just over £4.4m to 7Digital (UBC).
Both 7Digital and Audioboom are both highly speculative investments. However, Audioboom is yet to monitise it's business model whilst 7Digital boasts yearly revenues of over £11m. 7digital's unaudited management accounts for the quarter ended 31 March 2014 showed a 34 per cent. year-on-year increase in monthly recurring technology licensing revenue to £1,075,000 (2013: £800,000) with an overall gross margin for the business of 50.3 per cent. (2013: 45.2 per cent.). Furthermore, at the end of December 2013 the normalised yearly run-rate of monthly recurring technology licensing revenue was £4.6 million (2012: £2.5 million).
When 7Digital reverses into UBC on 10 June, the enlarged group will be worth around £33m at the current share price of 31.25p (post-consolidation). That doesn't sound too outrageous to me for what has the potential to be a very exciting growth story, particularly when combined with its 20% shareholding in Audioboom.
7Digital will also boast a heavy-weight board of Directors who should be able to steer the combined company in an upward trajectory. Simon Cole CEO of UBC Media states:- "our joint management teams have already started winning business together and I am confident that the combination of our combined global networks in technology and media will create an opportunity on the London market for investors to benefit from the growth of this dynamic sector."
At Audioboom, Rob Proctor CEO of the company states :- "We are working on a number of exciting developments, particularly in the US and Australia, which already account for a large proportion of our traffic, and have just opened our New York and Brisbane offices. We believe there are a number of potentially transformational deals for Audioboom in the US, Australia and Europe and I look forward to announcing developments in the near future."
Of course, 7Digital and/or Audioboom may or may not prove to be good investments over the longer term. However, at present I'm more than happy to hold on to my shareholding and watch developments with optimism and interest.
When you invest in small/micro-cap companies you have to be prepared to take the rough with the smooth, and possess a strong stomach for often volatile share price movements. However, with a reasonably good eye for spotting opportunities, and a long term buy and hold strategy, profits from your winners will more than make up for any losers in your portfolio.
Saturday, 24 May 2014
Sunday, 18 May 2014
Bull markets and Telematics
The bull market has been running for 5 years now, so surely we are due a bear market phase shortly. Not so according to Ken Fisher in his weekend article entitled "Back to the future as we rerun the nineties"
http://search.ft.com/search?queryText=back+to+the+future+as+we+rerun
You will need to be a subscriber or buy the paper for the full text.
It's an excellent article that draws a startling number of parallels between now and 1995 when the bull market ran for a further five years. He writes :-
"Then, as now, a five-year-old bull was still in its early stages. Small stocks had beaten large ones and US stocks had beaten the world. After stocks rose sharply in 1995, fear of heights was catching, just as it is today after 2013's big gains. Folks fretted that the bull was losing steam and couldn't fathom it lasting years more. It did.".
He talks about investors memories of the IPO frenzy, but points out that in the mid 90s mature firms such as Alcatel-Lucent, and Andarko floated and it was only at the end of the decade that companies such as Netscape - exciting technology that later became obsolete came to the stock market. He goes on "Those (later) memories drive jitters over Facebook today, but recent IPOs are mature, quality offerings such as Hilton and Container Store. This is a sign of rising optimism - just like the mid-1990s. No euphoria then, none now."
Whilst I consider myself a stock picker and long term investor with little interest in macro conditions, I believe that he may be right and this bull has a few more years to run yet.
I don't think investors have truly grasped the enormity of the financial crisis and deep recession or indeed the subsequent opportunity it presented to investors to pick up great stocks in a sort of "sale of the century". I said at the time and still believe that 2009 was a once in a lifetime opportunity to build a great portfolio at ludicrously low prices. The events that took place were unprecedented in recent living memory and global recovery is still in its infancy.
Whilst many p/e ratios may looked stretched, they may look less so when economic recovery moves rapidly through the gears. Other factors to consider are whilst interest rates remain at historic lows with no immediate threat of increasing, where else can you get a decent return on your money? Finally it is interesting to note that many Directors are snapping up shares in their own companies like they're going out of fashion despite (in some cases) their shares have risen considerably in the past 5 years. From a contrarian point of view, many traders and investment managers have already increased their cash piles. Bear markets are rarely anticipated.
I currently see no reason to sell any of my holdings, and touch-wood I have been very pleased with their progress where recent RNS releases have been very encouraging. As ever, I constantly keep my eye out for any bargains that may arise through irrational selling, or any other reasons. Mr Market always provides opportunities.
Moving on to one of my current portfolio favourites - TRAKM8 - this weeks Sunday Telegraph has made me think that as optimistic as I am about this company's future, its recent trading statement and tie up with Direct Line Insurance (sole supplier), perhaps even I've underestimated just what a potentially exciting area and company this could turn out to be. On the front page of today's Sunday Telegraph and in their money section we have:-
"Drivers to have a spy in the car"
http://www.telegraph.co.uk/finance/personalfinance/insurance/motorinsurance/10837263/Drivers-without-insurance-black-box-could-be-forced-off-the-road-within-10-years.html
Some of the key paragraphs include:-
"Drivers will within 10 years face inflated insurance premiums – or even be forced off the road – unless they allow their driving to be monitored at all times by tracking technology."
"Tom Ellis of Gocompare, the insurance comparison website, who spoke at the British Insurance Brokers' Association (Biba) seminar, told The Telegraph: "In 10 years' time there will still be customers who prefer not to have a telematics device installed, [but] it will be an opt-out situation, rather than an opt-in. "
"The technology will soon be fitted in new cars as standard. Under EU regulations, all new cars will need black box-style technology, known as eCall, from October 2015, to help emergency services find crashed vehicles. "
"Direct Line this year launched a self-install device available to all drivers, which it said could save young drivers up to 25pc. The firm said drivers with the best driving records could get a 40pc discount on renewal. "
It's worth reading the full article but it also includes this:-
"Penny Searles, managing director of the firm, said: "We are seeing a tipping point this year, where more insurers are making this technology available to the mass market. "
From Trakm8's recent trading statement they also talk about this year being a tipping point for their Telematics solutions. The market is potentially massive, and the sole supplier agreement that Trakm8 has with Direct Line is a hugely significant milestone.
Without trying to get too overexcited, Trakm8 are operating profitably with excellent cashflow, a high percentage of recurring revenues and gross margins (last reported) above 70% in a potentially explosive growth area. The market cap. is still just under £25m. If the company continues to develop in the way it has so far then it could potentially be worth many hundreds of millions in the not too distant future.
Here's hoping anyway.
http://search.ft.com/search?queryText=back+to+the+future+as+we+rerun
You will need to be a subscriber or buy the paper for the full text.
It's an excellent article that draws a startling number of parallels between now and 1995 when the bull market ran for a further five years. He writes :-
"Then, as now, a five-year-old bull was still in its early stages. Small stocks had beaten large ones and US stocks had beaten the world. After stocks rose sharply in 1995, fear of heights was catching, just as it is today after 2013's big gains. Folks fretted that the bull was losing steam and couldn't fathom it lasting years more. It did.".
He talks about investors memories of the IPO frenzy, but points out that in the mid 90s mature firms such as Alcatel-Lucent, and Andarko floated and it was only at the end of the decade that companies such as Netscape - exciting technology that later became obsolete came to the stock market. He goes on "Those (later) memories drive jitters over Facebook today, but recent IPOs are mature, quality offerings such as Hilton and Container Store. This is a sign of rising optimism - just like the mid-1990s. No euphoria then, none now."
Whilst I consider myself a stock picker and long term investor with little interest in macro conditions, I believe that he may be right and this bull has a few more years to run yet.
I don't think investors have truly grasped the enormity of the financial crisis and deep recession or indeed the subsequent opportunity it presented to investors to pick up great stocks in a sort of "sale of the century". I said at the time and still believe that 2009 was a once in a lifetime opportunity to build a great portfolio at ludicrously low prices. The events that took place were unprecedented in recent living memory and global recovery is still in its infancy.
Whilst many p/e ratios may looked stretched, they may look less so when economic recovery moves rapidly through the gears. Other factors to consider are whilst interest rates remain at historic lows with no immediate threat of increasing, where else can you get a decent return on your money? Finally it is interesting to note that many Directors are snapping up shares in their own companies like they're going out of fashion despite (in some cases) their shares have risen considerably in the past 5 years. From a contrarian point of view, many traders and investment managers have already increased their cash piles. Bear markets are rarely anticipated.
I currently see no reason to sell any of my holdings, and touch-wood I have been very pleased with their progress where recent RNS releases have been very encouraging. As ever, I constantly keep my eye out for any bargains that may arise through irrational selling, or any other reasons. Mr Market always provides opportunities.
Moving on to one of my current portfolio favourites - TRAKM8 - this weeks Sunday Telegraph has made me think that as optimistic as I am about this company's future, its recent trading statement and tie up with Direct Line Insurance (sole supplier), perhaps even I've underestimated just what a potentially exciting area and company this could turn out to be. On the front page of today's Sunday Telegraph and in their money section we have:-
"Drivers to have a spy in the car"
http://www.telegraph.co.uk/finance/personalfinance/insurance/motorinsurance/10837263/Drivers-without-insurance-black-box-could-be-forced-off-the-road-within-10-years.html
Some of the key paragraphs include:-
"Drivers will within 10 years face inflated insurance premiums – or even be forced off the road – unless they allow their driving to be monitored at all times by tracking technology."
"Tom Ellis of Gocompare, the insurance comparison website, who spoke at the British Insurance Brokers' Association (Biba) seminar, told The Telegraph: "In 10 years' time there will still be customers who prefer not to have a telematics device installed, [but] it will be an opt-out situation, rather than an opt-in. "
"The technology will soon be fitted in new cars as standard. Under EU regulations, all new cars will need black box-style technology, known as eCall, from October 2015, to help emergency services find crashed vehicles. "
"Direct Line this year launched a self-install device available to all drivers, which it said could save young drivers up to 25pc. The firm said drivers with the best driving records could get a 40pc discount on renewal. "
It's worth reading the full article but it also includes this:-
"Penny Searles, managing director of the firm, said: "We are seeing a tipping point this year, where more insurers are making this technology available to the mass market. "
From Trakm8's recent trading statement they also talk about this year being a tipping point for their Telematics solutions. The market is potentially massive, and the sole supplier agreement that Trakm8 has with Direct Line is a hugely significant milestone.
Without trying to get too overexcited, Trakm8 are operating profitably with excellent cashflow, a high percentage of recurring revenues and gross margins (last reported) above 70% in a potentially explosive growth area. The market cap. is still just under £25m. If the company continues to develop in the way it has so far then it could potentially be worth many hundreds of millions in the not too distant future.
Here's hoping anyway.
Monday, 5 May 2014
Trakm8 telematics - A Direct Line to success?
This is just a short blog after some reading and a little bit more thinking about the future of Trakm8 and telematics. Firstly, after wading through several hundred posts on the Advfn Quindell thread, I did actually read one that was useful which was simply the link below:-
http://www.telematics.com/telematics-blog/telematics-stay/
Whilst there is no mention of Trakm8 (Trakm8's clients now include Direct Line, Eon, St Gobain, the AA and Fujitsu), it does imply that telematics is at a key juncture which tallies with John Watkins' (Executive Chairman of Trakm8) outlook statement at the half-year where he states that a tipping point in mass market adoption of telematics appears to have been reached.
Bearing in mind Trakm8's Friday announcement of it's contract win with Direct Line as sole telematics supplier of self install devices, I then read Direct Line's recent trading statement which has this to say about its roll-out:-
"On 23 April 2014 the Group launched its self-install telematics proposition in the UK after a successful pilot. The Group believes this positions it as one of the leaders in developing the telematics market and enables it to offer telematics to a broader range of customers. Take-up remains strong in Direct Line new policies with one in five under 25 year olds electing for telematics."
No wonder John Watkins describes the partnership as a key milestone for Trakm8.
Even after Friday's share price rise, at 72p Trakm8 is still a minnow with a valuation of just less than £21m. With a short, medium and long term view I'm getting increasingly excited about Trakm8's prospects. Interestingly employees and others seem to share my enthusiasm and have been acquiring shares out of treasury with the last purchases at a price of 69.5p.
N.B. I don't have any interest in Quindell apart from its involvement in Telematics.
http://www.telematics.com/telematics-blog/telematics-stay/
Whilst there is no mention of Trakm8 (Trakm8's clients now include Direct Line, Eon, St Gobain, the AA and Fujitsu), it does imply that telematics is at a key juncture which tallies with John Watkins' (Executive Chairman of Trakm8) outlook statement at the half-year where he states that a tipping point in mass market adoption of telematics appears to have been reached.
Bearing in mind Trakm8's Friday announcement of it's contract win with Direct Line as sole telematics supplier of self install devices, I then read Direct Line's recent trading statement which has this to say about its roll-out:-
"On 23 April 2014 the Group launched its self-install telematics proposition in the UK after a successful pilot. The Group believes this positions it as one of the leaders in developing the telematics market and enables it to offer telematics to a broader range of customers. Take-up remains strong in Direct Line new policies with one in five under 25 year olds electing for telematics."
No wonder John Watkins describes the partnership as a key milestone for Trakm8.
Even after Friday's share price rise, at 72p Trakm8 is still a minnow with a valuation of just less than £21m. With a short, medium and long term view I'm getting increasingly excited about Trakm8's prospects. Interestingly employees and others seem to share my enthusiasm and have been acquiring shares out of treasury with the last purchases at a price of 69.5p.
N.B. I don't have any interest in Quindell apart from its involvement in Telematics.
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