Disappointing year for Trakm8, but still confident going forward

It's been a disappointing year for Trakm8 where they have failed to meet ambitious growth targets.

It appears to me that Trakm8's management saw a massive market opportunity and have gone for it all guns blazing.

Let's not pretend that this wasn't and isn't risky. It is.

However, following the full year profit warning, John Watkins the CEO stumped up £50,000 to buy more shares at 76p.

A small fund raising quickly followed at 65p, and Watkins plus five other Directors purchased an even more substantial £811,000 in support. Institutional holders have been quick and keen to follow in the fund raise.

The Director's have a massive amount of "skin in the game" and I hope that this year proves a blip in what has been a terrific growth story to date.

I remain confident that this will be the case.

I just looked back to when I first bought my Trakm8 shares (see blog post below):-

hTTp://michae1mouse.blogspot.co.uk/2011/09/your-m8-my-m8-trackm8.html

A couple of interesting things to note.

1) Directors had just purchased a big wedge of shares between themselves showing massive confidence. Share price went on to 30 bag from that point.

2) It shows just how far the company has come since 2011 when revenues at that point were around £4m per annum.

One or two "gob shites" trying to say "I told you so" at the moment. Perhaps they'd have done better to alert investors to the 30 bagging potential in 2011.

As mentioned above, there can be no guarantees that management's strategy works longer term, but if they get this right then I still see £10-£20 on the cards with a medium/long term outlook. If nothing else you have to admire their full on commitment to making it work, they've certainly "put their money where their mouth is" and deserve continued success.

We'll see in due course.

Trakm8 interims

Trakm8 released their interims this morning and the share price has currently taken a 30% hit. I'm not sure what investors were expecting, but in my view, it's the usual wild over-reaction by myopic investors looking for short term gains. Trakm8 has a fantastic opportunity to exploit in the telematics industry, and has clearly gone for that opportunity in a big way with a very large spend on engineering capacity, alongside sales and marketing resource. We'll be able to judge in the medium to long term. In the short term, although revenues continue to grow, profitability will suffer a little. I'm happy with that. As I said in a recent blog :-

http://michae1mouse.blogspot.co.uk/2016/11/still-on-trak-week-on-monday.html

"My view is that with a long term view, the company is hugely undervalued. I'm not particularly bothered whether or not they hit expectations this year, as long as they keep growing that order book."

I'm not going to do a forensic analysis of the results:-

http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B0P1RP10GBGBXAIMI.html

but as usual you should DYOR.

It's also worthwhile taking a look at the short video presentation by John Watkins:-

hTTp://www.piworld.co.uk/videos/2016/11/28/trakm8-trak-h1-results-presentation-september-2016

For me, the clear risk going forward is can they turn the increased engineering, sales and marketing spend into the proportionate eventual increases in revenues and profitability, and will their expansion into China and the US bear fruit?

However, in my previous blog I wrote this:-

"With a medium/long view on Trakm8, I'm looking for £10-£20. In the short term, at the current lowly valuation, they are possibly vulnerable to a bid at around £5. "

Personally, I think they'd have been remiss not to go for the opportunity in the telematics arena with their market leading solutions, and I see no reason to change the targets stated above, as things stand at the moment.

I am in the advantageous position in that I bought my holding in Trakm8 when the SP was in the teens, and I accept that some investors may have bought recently and are sitting on paper losses.

I bought my shares in 2011, and if I'd closed down my computer and not come back until now then I'd be very pleased with progress. Bully for me eh!!

Something to think about if you're currently sitting on paper losses. If you'd bought Avesco shares in 2007 then you'd have paid just over a £1 and then watched as they fell to around 20p. Not nice. However, assuming that you didn't sell then even if you didn't pick any more up from that time onwards you'd now have got yourself a 6.5 bagger, a £1.10 special dividend, and all their interim and final dividends.

I offer no advice with Trakm8, but I'm happy to stick around. If all else fails, think about their blue-chip clients and installed devices (recurring revenues) and think what a larger player might pay to enter this growing and lucrative market.

Another bad CALL?

I mention this company with some trepidation. Cloudcall formerly known as Synety. All my history with Cloudcall is contained in the following blog and links:-

http://michae1mouse.blogspot.co.uk/2015/09/open-doors-that-needed-far-bigger-push.html

The link above will give you a feel for why I invested in the first place at around 150p. Fortunately, as explained above, I only place small amounts of capital in my more speculative investments. It's just as well since they are more often than not my worst performers. Why wouldn't they be? Why do I bother with them? Answers on a postcard please.

From the link above, I wrote:-

"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."

The share price was in the low 90s at the time. Oops, cue another placing at 57.5p. You need a sense of humour when you're investing or should I say speculating in the case of Cloudcall.

Anyway, as you've guessed I've taken the sensible option and walked away.

Except that's a lie and I haven't done the sensible thing, and instead I've bought some more at prices around 55p.

Now I know what you're thinking. He's lost the plot with this one, and you might be right.

However, in my defence, the company is making progress (albeit far more slowly than originally hoped), and if they do reach break-even then it's game on since this company's revenues will largely be recurring revenues.

I like the ties with Bullhorn and I don't recall the Directors selling any shares, in fact quite the contrary, they have been constant buyers and have a lot of skin in the game.

I should emphasise that I have bought another modest amount for me, and except this speculation could go either way.

The only consolation (if it goes wrong) would be that at least I know the Directors would be sharing my pain. Only more acutely.

I'd suggest starting your research with the latest interim results if you're interested, but I will say again that this is not a conviction buy for me at this stage, although things can change depending on their progress.