Avesco - interims due mid-June

Avesco should be reporting interim results around the middle of June. This is an even year which includes the Winter Olympics, the World Cup and the Commonwealth Games. These events should boost earnings, and hopefully expectations for the full year will be in-line with management guidance.

I do expect some exceptional costs associated with their recent restructuring, but this is a cash generative company valued at a substantial discount to NAV which currently pays a generous 5% dividend. What the market may also have overlooked is that Avesco recently bought back 30% of its share capital. This should substantially boost future earnings, and indeed dividend payouts. I expect a hike in the interim and final dividend distribution. Please see my reasoning from a previous blog:-

http://michae1mouse.blogspot.co.uk/2013/12/proposed-share-buy-back-and.html

Other recent news items from Avesco's  website include "With CT around the world":-

http://www.ct-group.com/news/ct-around-world

"JVR and Creative Technology Holland Combine Their efforts:-

http://www.ct-group.com/news/%EF%BB%BF%EF%BB%BF%EF%BB%BFjvr-and-creative-technology-holland-combine-their-efforts

and

"CT Streamlines European Operational Structure":-

http://www.ct-group.com/news/ct-streamlines-european-operational-structure

For investors, it's worthwhile visiting their facebook page on a regular basis to keep abreast of the projects they are involved with on a global scale.

https://www.facebook.com/creativetechnologygroup

Avesco has been a fantastic investment for me since I first bought shares back in 2009. However, the company with a market cap. of less than £20m still looks incredibly cheap on all sorts of measures.

http://uk.advfn.com/p.php?pid=charts&symbol=LSE%3AAVS

Please note that the sudden dip on the chart from over £2 to the current price relates to a special dividend payout to shareholders of £1.10 per share.

Belgravium Technologies and Avanti Communications

Belgravium Technologies have released an encouraging AGM trading statement this morning, alongside a contract win for around £420,000 with a European airline operator. Trading in the year to date is "significantly ahead of the equivalent period last year", although they also add that "it has commenced more slowly than anticipated". They also state that their new sales strategy has created a good deal of opportunity, and that the separately announced contract is in addition to an earlier contract win of £1.1m with First Great Western.

Significantly, cash flow looks strong and they now have £1.9m cash on the balance sheet which is similar to that prior to the Feedback acquisition.

Last year's earnings were around 0.4p, so if they are significantly ahead of this figure then the forward PE will be a single digit for 2014. Broker forecasts for the dividend payout, at 0.2p, would be double 2013's distribution, and amount to around 4.7% at the current share price.

I like these small, profitable and cash generative companies which can demonstrate good growth at a reasonable price. In fact BVM looks cheap to me.

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11967696

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11967603

In other news, Avanti Communications have announced yet another contract win.

Whilst an investment here is highly speculative, the quality and quantity of contract wins in recent weeks and months is very encouraging, and I intend to hold on and watch developments.

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11967629

7Digital reverses into UBC

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.