I haven't written about Stilo since September 2016. Link below:-
http://michae1mouse.blogspot.co.uk/2016/09/updates-avesco-and-stilo.html
Stilo's full year results are usually published in March, and I recently wrote a small piece on ADVFN which I've reproduced here for those unfamiliar with the company.
Firstly, let's deal with results for 2017 which will soon be announced. Since we have not received any trading updates (year end was December 2017), I think it relatively safe to assume that they were in-line with management expectations.
This implies continued profitability, excellent gross margins, cash generation, a very healthy balance sheet and no debt. They will undoubtedly pay a dividend and, overall, I think we can expect an increase on last year's payout.
That's pretty good for a company currently valued at just £5.4m. Even better when you strip out the cash on the balance sheet of £1.6m i.e. the business is valued at around £3.8m. My guess is that earnings for 2017 will be similar to last year (see half-year results) giving a p/e ratio of around 12 (minus cash basis).
On those figures alone it's a pretty safe and solid investment for such a minnow.
However, all eyes are on 2018 now. If AuthorBridge does finally begin to contribute to revenues then the bottom line will grow quickly because of the very high gross margins. Operating costs are well controlled. In fact, revenues don't have to grow exponentially to make a big difference to the bottom line.
In conclusion, the shares are at worst conservatively priced and (depending on progress with AuthorBridge) possibly very cheap. In other words, I can see limited downside but huge potential upside.
It's also worth noting that in May they said this:-
"The Company remains un-geared, and cash balances at 30 April 2017 stood at £1,560,000 (31 December 2016: £1,466,000). Current levels of cash will serve to fund additional development, sales and marketing efforts as we look to grow our portfolio of solutions and enter new market sectors. It will also be used to assist with potential acquisitions, whilst providing an appropriate financial reserve for the business. Ongoing, it is the Board's intention to maintain a progressive dividend policy with scope for special one-off dividends as may be deemed appropriate from time to time."
A special dividend would be very welcome and an acquisition would be very significant for a company of this size.
I'm looking forward to the results in March with interest.
Saturday, 17 February 2018
Monday, 27 November 2017
Keep it simple - Trakm8
Trakm8 released their interims this morning, and it appears that the company has now resumed it's growth trajectory.
You can crunch the numbers all you like and perform some sort of forensic analysis on the results, but I've always found that sticking to very simple measures works for me.
Simply put, the interims were a great improvement on last year. What do you need to know?
For me it's just these facts:-
1) They generated £3.6m cash, paid down £2m in bank loans and added £730,000 to the balance sheet in the latest 6 months. Cash on the balance sheet stands at £2.7m.
2) Adjusted profit was up 78% to £1.05m, and adjusted basic EPS up 125% at 3.56p.
3) Solution sales were up 29% with the all important recurring revenues up 17% (£5.5m). Forget the overall revenue figure (up 12%) because it's distorted by their move out of low margin product sales.
4) At the period end they had approximately 217,000 units (Sept 2016: 177,000 units) reporting to their servers, being an increase of 23% over the last twelve months. This is an increase of 27,000 units (14%) since 31 March 2017.
5) Gross margin is steady at a more than healthy 48%.
They anticipate a stronger second half (as usual) with the visibility to support their second half expectations.
Pretty straightforward to me.
The share price was up 0.5p today, but has risen strongly in recent weeks following their October trading update. There were no surprises in the interims.
All the basic measures look pretty impressive to me, and I am hopeful that the company will go from strength to strength. For a growth company at the cutting edge of an exciting space, I'd suggest the share price has far further to run in the short, medium and longer term, although ultimately I'd expect Trakm8 to be acquired for between 4 and 10 times revenues (based on other Telematics company acquisitions).
You can crunch the numbers all you like and perform some sort of forensic analysis on the results, but I've always found that sticking to very simple measures works for me.
Simply put, the interims were a great improvement on last year. What do you need to know?
For me it's just these facts:-
1) They generated £3.6m cash, paid down £2m in bank loans and added £730,000 to the balance sheet in the latest 6 months. Cash on the balance sheet stands at £2.7m.
2) Adjusted profit was up 78% to £1.05m, and adjusted basic EPS up 125% at 3.56p.
3) Solution sales were up 29% with the all important recurring revenues up 17% (£5.5m). Forget the overall revenue figure (up 12%) because it's distorted by their move out of low margin product sales.
4) At the period end they had approximately 217,000 units (Sept 2016: 177,000 units) reporting to their servers, being an increase of 23% over the last twelve months. This is an increase of 27,000 units (14%) since 31 March 2017.
5) Gross margin is steady at a more than healthy 48%.
They anticipate a stronger second half (as usual) with the visibility to support their second half expectations.
Pretty straightforward to me.
The share price was up 0.5p today, but has risen strongly in recent weeks following their October trading update. There were no surprises in the interims.
All the basic measures look pretty impressive to me, and I am hopeful that the company will go from strength to strength. For a growth company at the cutting edge of an exciting space, I'd suggest the share price has far further to run in the short, medium and longer term, although ultimately I'd expect Trakm8 to be acquired for between 4 and 10 times revenues (based on other Telematics company acquisitions).
Friday, 10 November 2017
Update AEO - a no brainer now surely?
AEO have just released their year end results at 11:15 today (Friday). They often tend to do this which gives the impression that they are trying to bury bad news. However, this isn't the case. In fact I'm suddenly a little more excited about AEO.
It's the best set of results they've put out since I've been interested in this tiddler.
The market may be slow to wake up, but if AEO execute well going forward then this could be primed to get very exciting.
It's a clear change of strategy as they try and move more towards growth than income (although a small dividend is always welcome). Dividend reduced from 2p last year to 0.5p this year. Was this why the two founders left the company earlier this year since their substantial shareholdings provided sizeable dividends?
The £469,489 of cash they added to the balance sheet over the year could have been used to pay shareholders a 5p dividend (i.e. 20% return) if they had wished and still retain a healthy £1.4m on the balance sheet. Which brings me on.
If they can prove they can generate growth by retaining the cash then that will be very exciting going forward. If not then the business if a great cash generator and can go back to being a terrific dividend payer. A win win situation surely?
I'm tempted to say that at these prices AEO is a no-brainer, although the caveat would be that it's a very small company. It has no debt and the cash on the balance sheet is almost equivalent to the current market cap. (£2.2m)
In fact the market cap. is less than 5 times the FCF for the year. If you take the last 6 months in isolation then it's even more impressive where they have generated almost £750,000 of FCF.
I don't think I've seen a cheaper company valuation since Avesco, albeit AEO is much smaller. The results have exceeded my expectations and then some.
Interesting times ahead.
It's the best set of results they've put out since I've been interested in this tiddler.
The market may be slow to wake up, but if AEO execute well going forward then this could be primed to get very exciting.
It's a clear change of strategy as they try and move more towards growth than income (although a small dividend is always welcome). Dividend reduced from 2p last year to 0.5p this year. Was this why the two founders left the company earlier this year since their substantial shareholdings provided sizeable dividends?
The £469,489 of cash they added to the balance sheet over the year could have been used to pay shareholders a 5p dividend (i.e. 20% return) if they had wished and still retain a healthy £1.4m on the balance sheet. Which brings me on.
If they can prove they can generate growth by retaining the cash then that will be very exciting going forward. If not then the business if a great cash generator and can go back to being a terrific dividend payer. A win win situation surely?
I'm tempted to say that at these prices AEO is a no-brainer, although the caveat would be that it's a very small company. It has no debt and the cash on the balance sheet is almost equivalent to the current market cap. (£2.2m)
In fact the market cap. is less than 5 times the FCF for the year. If you take the last 6 months in isolation then it's even more impressive where they have generated almost £750,000 of FCF.
I don't think I've seen a cheaper company valuation since Avesco, albeit AEO is much smaller. The results have exceeded my expectations and then some.
Interesting times ahead.
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