In November 2013 I wrote a small article about a company called Synety that I had made a modest investment in:-
http://michae1mouse.blogspot.co.uk/2013/11/synety-very-promising-speculative-stock.html
As I mentioned in the article, this was a highly speculative investment which didn't meet my usual investment criteria, but a number of factors encouraged me to follow the Directors lead and buy shares in the company. At first my speculation appeared justified by their rapid progress from a low base, and the share price shot up accordingly:-
http://michae1mouse.blogspot.co.uk/2014/03/ubc-media-trakm8-and-synety.html
However, the story hasn't quite panned out as management and investors hoped. Clearly, "pushing at open doors" has resulted in a few slamming back in their faces. In short, an overly optimistic management team, high cash burn, and subsequently a deeply discounted fund raise (around 90p) scuppered the expectations of early investors and decimated the share price from it's highs of around £3+ in February 2014. Management have since recognised the importance of trying to reach cash flow breakeven as soon as possible by adopting a change of strategy.
This morning Synety released their interim results where investors can assess their current progress. The results broadly paint a positive picture of their prospects in achieving their revised aims. The positives are that the user base is up 104% compared to the same point last year and 28% since the year-end, revenue is up 130% vs the same period last year, operating expenses are tracking in line with the Board's expectations and annualised monthly cash absorbed by operations is decreasing. Simon Cleaver, the Executive Chairman asserts that, "The Company has cash and cash equivalents of just over £3m at the end of this reporting period, which the Board believes will, on the current trajectory, be sufficient to reach cash break-even." Since the year end annualised recurring revenue has improved from around £3m to £3.9m.
Cleaver also states that, "Whilst the Group's change in strategy did have an impact on new orders received in April and May whilst staff were retrained and internal systems amended, I'm pleased to report that the Group has witnessed a strong recovery, with June and July being the strongest months to date for new sales. The Group's sales teams on both side of the Atlantic are now building strong pipelines, which is encouraging for the remainder of the year."
In my view the group still has it's work cut out to achieve cash break-even and an operating profit. That said, they are clearly getting there quite rapidly which means that even in the eventuality that they do need to raise more cash in the future then the scale of the cash raise should be minimal, and with a supportive shareholder hopefully not at a deeply discounted price. It's also worth remembering that whilst there haven't been any Directors purchases in recent months, they do have significant "skin in the game".
In early trading this morning the share price rose 9%. I'd guess that early investors who have been disappointed by the rate of growth have sold into this strength and the share price has since fallen back to 91p.
On balance, I would suggest that the price is about right for all the known information, but if they can manage cash break-even by the year end and continue with their growth trajectory then there is plenty of upside potential from here. Gross margins of 77% and recurring revenues streams will provide significant operational gearing if they can hit their targets.
I continue to hold.
Tuesday, 15 September 2015
Monday, 14 September 2015
If you're looking for security..........try this tiddler?
Croma Security Solutions is an Aim market tiddler that made it onto my monitor when the share price was in the low 20s, but never made it into my portfolio. That's a shame because it is a small company that is progressing very well, and indeed the share price is now around 47p (at time of writing) and I believe has further to run from here.
This morning Croma released a RNSNON which I'd imagine has been missed by most investors. The announcement relates to two significant contract wins with a Healthcare Institution and a major London based property group, worth £1.5m and £1m per annum respectively. Furthermore, the Directors state that they "are increasingly confident about the prospect for Croma Vigilant in both the short and medium term."
What particularly captured my attention was this assertion from Sebastian Morley, the Executive Chairman. He commented: "These contracts have been awarded to Croma in the face of sharp competition. Although our offering was not the cheapest, we won because of our luminous difference as the ex-military security professionals. This is becoming a welcome theme for our business and we will aggressively spread this message to companies who demand the highest standards for their security services."
Since the interim results were released in February this year, they have also announced 4 further contract wins with Odeon, Hilton Hotels, the second largest bank in the UK and a Saudi Arabian customer.
Croma describes itself as a total security services provider. In their interim results they announced revenue up 14% to £8.8m, diluted EPS up by 92% to 1.44p (six months to 31 December 2013: 0.75p), net assets at £9.1m (31 December 2013: £8.7m), cash at £0.68m (31 December 2013: £0.84m) and they declared a maiden dividend of 0.3p per share with the promise of a final dividend.
The current market cap. of Croma is around £7m. Broker forecasts for this year and next are for revenues of £15.3m and £15.7m with EPS at 3.3p and 3.8p respectively giving forward p/e ratios of 14 and 12. The balance sheet is sound, although if you strip out goodwill and intangibles then net asset value is around £2m. The company appears to generate cash, although at the interim stage there was a slight outflow due to changes in the net working capital.
All in all, for investors interested in good value micro-caps I would be inclined to believe that Croma warrants further investigation. I might add that I don't hold shares in Croma, but would consider picking some up on any significant price weakness, however that does appear unlikely in the short to medium term.
This morning Croma released a RNSNON which I'd imagine has been missed by most investors. The announcement relates to two significant contract wins with a Healthcare Institution and a major London based property group, worth £1.5m and £1m per annum respectively. Furthermore, the Directors state that they "are increasingly confident about the prospect for Croma Vigilant in both the short and medium term."
What particularly captured my attention was this assertion from Sebastian Morley, the Executive Chairman. He commented: "These contracts have been awarded to Croma in the face of sharp competition. Although our offering was not the cheapest, we won because of our luminous difference as the ex-military security professionals. This is becoming a welcome theme for our business and we will aggressively spread this message to companies who demand the highest standards for their security services."
Since the interim results were released in February this year, they have also announced 4 further contract wins with Odeon, Hilton Hotels, the second largest bank in the UK and a Saudi Arabian customer.
Croma describes itself as a total security services provider. In their interim results they announced revenue up 14% to £8.8m, diluted EPS up by 92% to 1.44p (six months to 31 December 2013: 0.75p), net assets at £9.1m (31 December 2013: £8.7m), cash at £0.68m (31 December 2013: £0.84m) and they declared a maiden dividend of 0.3p per share with the promise of a final dividend.
The current market cap. of Croma is around £7m. Broker forecasts for this year and next are for revenues of £15.3m and £15.7m with EPS at 3.3p and 3.8p respectively giving forward p/e ratios of 14 and 12. The balance sheet is sound, although if you strip out goodwill and intangibles then net asset value is around £2m. The company appears to generate cash, although at the interim stage there was a slight outflow due to changes in the net working capital.
All in all, for investors interested in good value micro-caps I would be inclined to believe that Croma warrants further investigation. I might add that I don't hold shares in Croma, but would consider picking some up on any significant price weakness, however that does appear unlikely in the short to medium term.
Sunday, 31 May 2015
Intelligent choices?
Access Intelligence plc is one of my long term holds, and I last mentioned the company in July 2014
http://michae1mouse.blogspot.co.uk/2014/07/access-intelligence-interims.html
The company released their final results at the end of April, and I am hopeful that the next year or two may prove to be transformational for the company. Firstly, turnover was up a modest 2% on last year at around £8.5m. Encouragingly recurring revenue was up 8% at £6.6m making up 77% of sales and providing a solid financial footing for the company going forward. The company reported a small operating loss of £21,000, and cash on the balance sheet stood at just over £1.1m, although most recently the company disposed of Willow Starcom to K3 Business Technology for a total consideration of £1.75m which significantly increases their cash reserves.
Access Intelligence is cash generative, but over recent years has been investing heavily (around £4m per annum) in new product development. This is where it is getting interesting because whilst they "believe that during 2015 the Group will benefit from the significant investment made in new product development in previous years.", this exceptional level of investment to redevelop their integrated software platform will come to an end in 2015.
Hopefully, in 2015 and beyond, Access Intelligence will move swiftly into a profitable, cash generative, growth company which will be able to return generous dividends to shareholders. My very rough calculations suggest that if they cut development spend even by £1m from £4m to £3m per annum, and revenues increased modestly, if you add back around £800,000 for impairment of intangibles then adjusted EPS would come somewhere between 0.6p-0.8p. A p/e ratio of 12 then gives an SP somewhere between 7p-10p, against a current share price of just over 3p. In reality I would expect development spend to fall more significantly and revenues to increase more robustly.
Further points of interest are that Access Intelligence has gross margins of 72%, and recent reports suggest that a possible acquisition of Cision UK and Vocus UK is likely, making the growth story even more compelling.
There was a small tick up in the share price on Friday and whilst share sales have left the share price unmoved in recent weeks, a small number of buys quickly moved the price upwards.
On a separate note a company called Intelligent Energy caught my eye in the FT Weekend. Intelligent Energy is a hydrogen fuel cell company and relatively new listing. Sadly, since the IPO the share price has made an inauspicious start falling from £3 to 77p in less than 12 months. It is clearly a company that is burning through cash at a rate of knots and will require more fundraisings to further it's development. However, the technology does look exciting and it boasts a very creditable client list. I have given the final results a cursory look, and management appear confident of meeting full year expectations, with this bit piquing my interest:-
"DP&G division - our objective is to build a
portfolio of customers generating high quality,
long-term, recurring revenues and free cashflow,
creating substantial demand for Intelligent
Energy's proprietary fuel cell technology to
address some of the most important challenges
facing global growth
o Excellent progress has been made toward
finalising the landmark, long term power
management transaction with GTL
o The proposed agreement is to provide economic,
efficient and clean power to over 26,000
telecom towers
o In April 2015, an interim agreement on
c.26,000 towers started to recognise c.
GBP10m revenue per month ahead of completing
this long-term transaction
o The GTL contracts are expected to be free
cashflow positive to IE from completion
with cashflows then projected to increase
substantially over time as the margins
in this business expand"
They describe this as a proposed landmark £1.2BN revenue transaction. The market cap. currently stands at £145m (ADVFN figures - not checked).
For me, the share price looks due for a bounce this week given that the chart suggests it has reached a temporary nadir at least, the technology looks exciting and the FT has suggested that the company could be taken over by a big carmaker. If I was a trader then I'd take a punt on Monday, it could recover some lost ground quite rapidly.
http://michae1mouse.blogspot.co.uk/2014/07/access-intelligence-interims.html
The company released their final results at the end of April, and I am hopeful that the next year or two may prove to be transformational for the company. Firstly, turnover was up a modest 2% on last year at around £8.5m. Encouragingly recurring revenue was up 8% at £6.6m making up 77% of sales and providing a solid financial footing for the company going forward. The company reported a small operating loss of £21,000, and cash on the balance sheet stood at just over £1.1m, although most recently the company disposed of Willow Starcom to K3 Business Technology for a total consideration of £1.75m which significantly increases their cash reserves.
Access Intelligence is cash generative, but over recent years has been investing heavily (around £4m per annum) in new product development. This is where it is getting interesting because whilst they "believe that during 2015 the Group will benefit from the significant investment made in new product development in previous years.", this exceptional level of investment to redevelop their integrated software platform will come to an end in 2015.
Hopefully, in 2015 and beyond, Access Intelligence will move swiftly into a profitable, cash generative, growth company which will be able to return generous dividends to shareholders. My very rough calculations suggest that if they cut development spend even by £1m from £4m to £3m per annum, and revenues increased modestly, if you add back around £800,000 for impairment of intangibles then adjusted EPS would come somewhere between 0.6p-0.8p. A p/e ratio of 12 then gives an SP somewhere between 7p-10p, against a current share price of just over 3p. In reality I would expect development spend to fall more significantly and revenues to increase more robustly.
Further points of interest are that Access Intelligence has gross margins of 72%, and recent reports suggest that a possible acquisition of Cision UK and Vocus UK is likely, making the growth story even more compelling.
There was a small tick up in the share price on Friday and whilst share sales have left the share price unmoved in recent weeks, a small number of buys quickly moved the price upwards.
On a separate note a company called Intelligent Energy caught my eye in the FT Weekend. Intelligent Energy is a hydrogen fuel cell company and relatively new listing. Sadly, since the IPO the share price has made an inauspicious start falling from £3 to 77p in less than 12 months. It is clearly a company that is burning through cash at a rate of knots and will require more fundraisings to further it's development. However, the technology does look exciting and it boasts a very creditable client list. I have given the final results a cursory look, and management appear confident of meeting full year expectations, with this bit piquing my interest:-
"DP&G division - our objective is to build a
portfolio of customers generating high quality,
long-term, recurring revenues and free cashflow,
creating substantial demand for Intelligent
Energy's proprietary fuel cell technology to
address some of the most important challenges
facing global growth
o Excellent progress has been made toward
finalising the landmark, long term power
management transaction with GTL
o The proposed agreement is to provide economic,
efficient and clean power to over 26,000
telecom towers
o In April 2015, an interim agreement on
c.26,000 towers started to recognise c.
GBP10m revenue per month ahead of completing
this long-term transaction
o The GTL contracts are expected to be free
cashflow positive to IE from completion
with cashflows then projected to increase
substantially over time as the margins
in this business expand"
They describe this as a proposed landmark £1.2BN revenue transaction. The market cap. currently stands at £145m (ADVFN figures - not checked).
For me, the share price looks due for a bounce this week given that the chart suggests it has reached a temporary nadir at least, the technology looks exciting and the FT has suggested that the company could be taken over by a big carmaker. If I was a trader then I'd take a punt on Monday, it could recover some lost ground quite rapidly.
Subscribe to:
Posts (Atom)