Regular readers of my blog will remember my posts about a company called DCD Media. DCD Media was an awful investment on my part, but it did teach me some invaluable lessons and in truth you learn far more from your mistakes than you do from your successes. I have a "virtual" fondness for the ADVFN BB investors in DCD Media, and their recent optimism and the current strength in share price prompted me to take a second look at the company. Please bear in mind that less than 20% of the company is in free float. In other words, the shares are extremely illiquid. Following some exchanges of opinion on the DCD bulletin board (http://uk.advfn.com/cmn/fbb/thread.php3?id=32717631), I am posting my final response to shareholders:-
I said I wouldn't post again, but given the optimism expressed on this BB, I've had another look at the interim accounts to see if this particular leopard has changed it spots, and whether or not I'm missing a massive opportunity.
Here are my thoughts. With great respect to all shareholders please consider the following extracts from the report. Remember Craven is hinting that profitability is just around the corner.
Firstly, last year's gross margins were 33%, at the interim stage they had fallen to 26%. They may recover to nearer 33% for the full year of course, I don't know? Anyway let's be generous and assume that they do. We'll assume that admin expenses come in around £6m(again generous indeed). To break even, they need to make over £18m in revenues. Revenues fell at the interim stage and were around £14m last year. Admittedly the market cap. is a measly £2.2m, but then how much is a loss making company with negative current assets worth?
Next up. Here is a classic from the DCD accounts:-
"Funding of GBP0.8m secured in the form of new convertible loan notes from the Group's largest shareholders, including GBP0.6m issued to Timeweave Ltd in settlement of amounts relating to accounting and director services."
They have borrowed near £1m to pay the Directors and "settlement of amounts relating to accounting". Given what I have said above how often are they going to have to do that? Oh dear, have a look at previous accounts and my previous reports. Leopard and spots instantly comes to mind. Still not to worry, the loan notes only carry a modest interest rate of 10% and can be converted into equity at £1 in May of next year (current share price £4.875). Good grief.
"UK productions, consisting of September Films UK, Rize USA and Matchlight, contributed GBP3.2m to revenue but made an operating loss of GBP0.1m."
As mentioned in previous posts, they make s*d all from productions.
"September Films USA contributed no revenue to the Group in the period as a result of the cancellation of the Bridezillas series."
At least the Directors got paid. Note the heavy sarcasm which pervades this report.
"DCD Rights has performed well in the first half of the year although revenue has decreased by GBP0.3m to GBP2.2m. Gross margin has remained constant between the periods. A focus on content acquisition in the first half will benefit sales in the second half and beyond."
A long way to go with this then given that distribution is where their focus will lie. £6m in revenues at year end possibly? What is the gross margin and did they make a profit? In fact there is no mention of margins or profits for the separate divisions only revenues. To be frank DCD Publishing and Sequence Post are hardly worth mentioning since they contributed a combined £0.6m in revenues and again we have no idea about margins or profitability.
Despite Craven's bluster about:- "the foundation is laid for accelerated growth" and "These developments, we believe, position DCD Media well for a return to profitability". I can find no evidence within the report to suggest that DCD is any different to how I remember it. Loss making and still some way off ever making sustainable profits.
Still they could always sell September Films USA. What price a production company that doesn't produce anything and contributes zilch to revenues?
DCD, a trader's punt maybe, but personally I wouldn't hang around.
As ever AIMHO and happy to be proved wrong.
Michael.
previous blogs re:DCD Media
http://michae1mouse.blogspot.co.uk/2013_06_01_archive.html
Sunday, 5 April 2015
Sunday, 8 March 2015
Belgravium and Avesco still looking cheap!!
This week brought good news from two companies that I hold in my portfolio.
Firstly, Belgravium Technologies released their final results for the year ended 31 December 2014 which were as expected with EPS more than doubling to 0.5p from 0.22p the previous year leaving the shares on a p/e ratio of just 10 times falling to 8 times if they meet this year's forecasts. Cash generation was strong at £1.5m, and cash on the balance sheet improved from £219,000 (2013) to £731,000. The company has no debt.
I am still confident that the Belgravium share price will double this year from its 4p starting point:-
http://michae1mouse.blogspot.co.uk/2014/12/my-2015-stock-choice-will-it-double-in.html
Certainly the narrative in the final report is encouraging with John Kembery, Chairman of Belgravium, saying: "2014 was a much improved year with increased revenue and profits. The Group has made continued progress in extending its activities and offerings to cater for a wider and more discerning market. The Board believes that further progress will be achieved in the current year."
A final dividend has not been proposed, but may be paid at the interim stage depending upon the outcome of a proposed acquisition. Whilst I enjoy receiving increasing dividends, Belgravium have demonstrated that their recent acquisitions have been fairly priced, prudent and quickly earnings enhancing. In addition, any acquisition will be made with existing cash resources and bank debt. I'd anticipate that if the acquisition is successful then the EPS figure may be significantly higher than the anticipated 0.6p, otherwise investors can still look forward to a very healthy dividend and a less than demanding forward P/E ratio.
Further encouragement is provided from the fact that having established dominance in the airline industry, they are now gaining traction in the rail sector with a number of notable contracts, including First Great Western and Leo Express (Czech Republic). I look forward to news of further developments as the year progresses.
Avesco, a great favourite of mine, also released a trading statement ahead of it's AGM which stated that:- "the directors anticipate that results for the year to 30 September 2015 will be comfortably ahead of their previous expectations."
I have held shares in Avesco for a number of years,
http://michae1mouse.blogspot.co.uk/2015/01/playing-long-game.html
Two things strike me about this statement. Firstly, I have never known them release such a confident statement so early on in their financial year (just 5 months in), and secondly, as promised, they appear to be minimising the odd year dip effect that may have put off some investors in the past. Given the confident early statement, and clear forward visibility, I wouldn't be surprised to see further upgrades as the year progresses. The current p/e ratio is 13.1 for the current year falling to 8.1 in 2016. The company still trades below it's tangible NAV (backed by quality assets), and boasts a progressive dividend policy with a current yield of 4.6%.
Looking even further ahead, Avesco is likely to further dampen any odd year effect in 2017 when London hosts the World Athletics Championship. 2012 was a truly bumper year for Avesco when England hosted the Olympic games.
A pleasing week indeed, as these two growth companies appear to be going from strength to strength.
Good luck with all your investments.
Firstly, Belgravium Technologies released their final results for the year ended 31 December 2014 which were as expected with EPS more than doubling to 0.5p from 0.22p the previous year leaving the shares on a p/e ratio of just 10 times falling to 8 times if they meet this year's forecasts. Cash generation was strong at £1.5m, and cash on the balance sheet improved from £219,000 (2013) to £731,000. The company has no debt.
I am still confident that the Belgravium share price will double this year from its 4p starting point:-
http://michae1mouse.blogspot.co.uk/2014/12/my-2015-stock-choice-will-it-double-in.html
Certainly the narrative in the final report is encouraging with John Kembery, Chairman of Belgravium, saying: "2014 was a much improved year with increased revenue and profits. The Group has made continued progress in extending its activities and offerings to cater for a wider and more discerning market. The Board believes that further progress will be achieved in the current year."
A final dividend has not been proposed, but may be paid at the interim stage depending upon the outcome of a proposed acquisition. Whilst I enjoy receiving increasing dividends, Belgravium have demonstrated that their recent acquisitions have been fairly priced, prudent and quickly earnings enhancing. In addition, any acquisition will be made with existing cash resources and bank debt. I'd anticipate that if the acquisition is successful then the EPS figure may be significantly higher than the anticipated 0.6p, otherwise investors can still look forward to a very healthy dividend and a less than demanding forward P/E ratio.
Further encouragement is provided from the fact that having established dominance in the airline industry, they are now gaining traction in the rail sector with a number of notable contracts, including First Great Western and Leo Express (Czech Republic). I look forward to news of further developments as the year progresses.
Avesco, a great favourite of mine, also released a trading statement ahead of it's AGM which stated that:- "the directors anticipate that results for the year to 30 September 2015 will be comfortably ahead of their previous expectations."
I have held shares in Avesco for a number of years,
http://michae1mouse.blogspot.co.uk/2015/01/playing-long-game.html
Two things strike me about this statement. Firstly, I have never known them release such a confident statement so early on in their financial year (just 5 months in), and secondly, as promised, they appear to be minimising the odd year dip effect that may have put off some investors in the past. Given the confident early statement, and clear forward visibility, I wouldn't be surprised to see further upgrades as the year progresses. The current p/e ratio is 13.1 for the current year falling to 8.1 in 2016. The company still trades below it's tangible NAV (backed by quality assets), and boasts a progressive dividend policy with a current yield of 4.6%.
Looking even further ahead, Avesco is likely to further dampen any odd year effect in 2017 when London hosts the World Athletics Championship. 2012 was a truly bumper year for Avesco when England hosted the Olympic games.
A pleasing week indeed, as these two growth companies appear to be going from strength to strength.
Good luck with all your investments.
Monday, 16 February 2015
Speculating on success
Angle PLC is one of the more speculative holdings in my portfolio, and I bought shares in the company at the back end of 2012 at around 27p.
http://michae1mouse.blogspot.co.uk/search?updated-min=2012-01-01T00:00:00-08:00&updated-max=2013-01-01T00:00:00-08:00&max-results=17
At the time I mentioned that the share price would be volatile, and this has certainly proved to be the case as the story has developed. In general, the progress has been encouraging and I have maintained my position and holding in the company.
This morning they released details of a discounted placing, subscription and offer of 65p per share to the prevailing share price of 85p on Friday . This should see the company through to delivering its first clinical application to address the ovarian cancer market which they estimate to be worth in the region of £300m per annum. Since the placing is substantially above my purchase price, and will raise a net amount of £8.2m for the company, I am more than happy to continue to hold my shares in Angle and await developments.
Whilst I continue to emphasise that Angle PLC is a highly speculative investment, and the share price movements will continue to be volatile in the short term, there is also the potential for substantial rewards. The key to unlocking the multi-million pound market for their Parsortix device is essentially in the hands of Key Opinion Leaders who are currently evaluating it's clinical potential. Whilst research sales may appear later this year, it is the clinical utility of the Parsortix device that will realise Angle's and investor's future return.
Alongside, the placing announcement today, Angle also detailed a collaboration with MD Anderson to "investigate the clinical use of ANGLE's Parsortix system as a companion diagnostic in colorectal cancer." An encouraging collaboration since, "United States News & World Report's "Best Hospitals" survey has ranked MD Anderson as one of the nation's top two cancer centres every year since the survey began in 1990. MD Anderson's Clinical Center for Targeted Therapy is the largest programme in the world expediting the development of new cancer drugs.". This increases the number of highly respected KOLs to nine.
If all goes well then I would expect a raft of good news stories emanating over the next two years with the key drivers being positive patient data from the KOLs and sales of the Parsortix device for research purposes. The company also awaits FDA approval which is critical for US sales, although effectively meaningless without validation of Parsortix's clinical utility.
For me, the single biggest indicator that my speculation in this stock could prove to be hugely lucrative in the long term was the news release on 27 January that The Medical University of Vienna will lead, in collaboration with ANGLE, a clinical study of the use of the Parsortix system as a clinical application in the routine detection and treatment of ovarian cancer patients after patient data showed "unprecedented sensitivity and specificity" for Parsortix ovarian cancer clinical application. In my experience, medical staff are not renowned for hyperbole, and hence the most striking quote was from Dr Eva Obermayr, Principal Investigator at the Medical University of Vienna, who described the results with ANGLE's Parsortix system as "sensational".
In conclusion, whilst accepting that an investment in Angle PLC is still speculative, with funding now in place and KOL data highly positive so far, I am hopeful that this could turn out to be an exceedingly rewarding long term hold.
http://michae1mouse.blogspot.co.uk/search?updated-min=2012-01-01T00:00:00-08:00&updated-max=2013-01-01T00:00:00-08:00&max-results=17
At the time I mentioned that the share price would be volatile, and this has certainly proved to be the case as the story has developed. In general, the progress has been encouraging and I have maintained my position and holding in the company.
This morning they released details of a discounted placing, subscription and offer of 65p per share to the prevailing share price of 85p on Friday . This should see the company through to delivering its first clinical application to address the ovarian cancer market which they estimate to be worth in the region of £300m per annum. Since the placing is substantially above my purchase price, and will raise a net amount of £8.2m for the company, I am more than happy to continue to hold my shares in Angle and await developments.
Whilst I continue to emphasise that Angle PLC is a highly speculative investment, and the share price movements will continue to be volatile in the short term, there is also the potential for substantial rewards. The key to unlocking the multi-million pound market for their Parsortix device is essentially in the hands of Key Opinion Leaders who are currently evaluating it's clinical potential. Whilst research sales may appear later this year, it is the clinical utility of the Parsortix device that will realise Angle's and investor's future return.
Alongside, the placing announcement today, Angle also detailed a collaboration with MD Anderson to "investigate the clinical use of ANGLE's Parsortix system as a companion diagnostic in colorectal cancer." An encouraging collaboration since, "United States News & World Report's "Best Hospitals" survey has ranked MD Anderson as one of the nation's top two cancer centres every year since the survey began in 1990. MD Anderson's Clinical Center for Targeted Therapy is the largest programme in the world expediting the development of new cancer drugs.". This increases the number of highly respected KOLs to nine.
If all goes well then I would expect a raft of good news stories emanating over the next two years with the key drivers being positive patient data from the KOLs and sales of the Parsortix device for research purposes. The company also awaits FDA approval which is critical for US sales, although effectively meaningless without validation of Parsortix's clinical utility.
For me, the single biggest indicator that my speculation in this stock could prove to be hugely lucrative in the long term was the news release on 27 January that The Medical University of Vienna will lead, in collaboration with ANGLE, a clinical study of the use of the Parsortix system as a clinical application in the routine detection and treatment of ovarian cancer patients after patient data showed "unprecedented sensitivity and specificity" for Parsortix ovarian cancer clinical application. In my experience, medical staff are not renowned for hyperbole, and hence the most striking quote was from Dr Eva Obermayr, Principal Investigator at the Medical University of Vienna, who described the results with ANGLE's Parsortix system as "sensational".
In conclusion, whilst accepting that an investment in Angle PLC is still speculative, with funding now in place and KOL data highly positive so far, I am hopeful that this could turn out to be an exceedingly rewarding long term hold.
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