Buy one get one free (BOGOF)!!

I've been umming and ahing about whether or not to mention this little company for some time. Despite being up 160% on my investment already after adding in several tranches over time, I still think the company is (potentially) ridiculously cheap. Any pullbacks in the share price and I certainly will consider adding further depending on the circumstances.

The company in question is Biome Technologies.

There is a certain irony in my investment here since I've essentially bought into their Biodegradable plastics story and yet that is the division that is losing money presently. The exciting part though is it looks likely that's about to change with a medium and long term view. More later.

Why have bought a loss maker then? Isn't this just another overvalued "story" stock? Why do I think it's cheap?

Well in short, the company boasts two divisions. Alongside the Bioplastics division sits the Stanelco RF Technologies Division which designs, manufactures and supplies fibre optic furnaces largely to customers in Asia. This division is currently highly profitable, and in the 6 months ending in June produced an operating profit of £1.3m. Now take a moment to consider that operating profit in the context that the whole company is valued at just over £12m. That is stupidly cheap!

Let's temper it though with the fact that the Bioplastics division is still loss making, and in fact made an operating loss of £0.3m on revenues that had fallen £0.3m from £1.2m in 2017 to £0.9m in 2018. 

So why does the Bioplastics division excite me so much?

I shouldn't need to mention the backdrop at all since conventional plastics are making a great job of slowly but surely causing massive damage to our planet, and thank goodness that the world is gradually waking up to this huge problem. So this is an ethical investment, but also it appears that Biome are in a sweet spot to provide an environmentally friendly alternative. 

Whilst loss making at this stage, the interims suggest that the tide may be turning for this division. They had this to say in the interims:-

"It was noted in the July 2018 trading update that two projects in particular are advancing encouragingly through the development phase and, if successful, could lead to substantial revenues in 2019 and 2020. These projects are both with new customers. One of them has now completed its technical development phase in the USA and commercial production is expected in 2019. The second project, being developed in continental Europe, has passed an important milestone in recent weeks and work continues to support an aggressive launch timetable with the customer with commercial revenues being anticipated in 2019. Additionally, in recent weeks an initial six-month feasibility study, supported by an international consumer goods company, has been completed and discussions are underway regarding a product launch in 2020."

and

"Positive interest remains in the UK, with the Government looking to progress innovative material solutions to the problem of single use plastics in the medium term. This may provide an opportunity to accelerate our work in industrial biotechnology solutions and Biome is engaged with a number of parties in this area."

As far as I'm aware, the interims were the first time in the company's history where they produced an operating profit (£200,000). Put that alongside a strong balance sheet which boasts £2.3m in cash and zero debt then Biome still looks exceedingly cheap.

Of course there is no guarantee that the Bioplastics division will ultimately deliver since no company is risk free, and there are always potential banana skins, but there is a great margin of safety here with the RF Technologies Division which on it's own is arguably worth far more that the £12m that the whole company is valued at presently. In the interims the company said:-

"Strong demand for fibre optic furnaces continues into the second half of this year. The design and manufacturing teams have responded very well to the rapid and significant upturn in activity. The manufacturing footprint was expanded during the period providing increased production capacity."

Whilst I always sound a note of caution with any investment, this is certainly one of the most promising minnows that I've ever bought into. In summary, Biome is profitable, cash generative, strong balance sheet and with the potential for huge short, medium and long term growth.

As ever this is just my rationale and reasons for holding shares in the company, and is not intended as investment advice.

N.B. Just be aware of the illiquidity of dealing in Biome shares. I invest for the long term.

hTTps://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/BIOM/13775570.html

"If music be the food of love, play on"

I've suddenly realised I've developed an unhealthy appetite for investing in 'music related' companies in my portfolio. I've mentioned 7digital many times in the past, here's Simon Cole with a neater and shorter summary than I could give about the investment case for this company:-

https://www.voxmarkets.co.uk/company/7DIG/?mediaAssetId=5b8e4ba6a768f800118d1463&jwsource=cl

I've also mentioned a company called One Media IP (OMIP), and here's another quick and neat summary by Michael Infante about his company:-

http://onemediaip.com/news/industry-update-summer-2018/

It goes without saying that you need to do far more research than listening to or reading a quick overview of these companies before investing, but they are in essence simple business models to understand which I'm a great believer in. If it's a good enough rule for Warren Buffett then it's good enough for me. ;-)

Here's one I haven't mentioned before. The company in question is Immedia (IME).

I've struggled a bit with an investment here. It's a micro-cap and has possibly the most illiquid company shares I've ever dealt in. It's market cap. is around £4m and it has next to zero debt. I'm expecting the Interim results around the end of September. In keeping with the rest of this blog, here's a brief summary of the company by CEO Bruno Brookes (yes that Bruno Brookes ex-R1 DJ - yikes!! ;) :-

https://www.insider-trends.com/music-as-a-media-opportunity-immedia-on-why-brands-can-use-audio-to-reach-their-audiences/

When I say that I've struggled a bit with an investment here, I mean I've kept falling in and out of love with the company. More by luck than judgement I've had a successful run trading the shares whilst keeping a decent holding to run for the long term (I wasn't intending to trade but just kept changing my mind about company prospects). I've made 112%, 32% and 16% respectively. Indecision has proven to be lucrative in this instance.

Results for the full year 2017 were frankly horrible, but 2018 looks far brighter for a £4m minnow. Here's the outlook statement:-

https://uk.advfn.com/stock-market/london/immedia-broadcasting-IME/share-news/Immedia-Group-PLC-Final-Results-for-the-year-ended/77179409

"2018 has started very positively for the Group. The recent announcement of a substantial installation rollout in branches of a major UK financial institution is just one of numerous new business opportunities currently in play.

Our collective knowledge and skills-set have underpinned our ability to integrate, consolidate and strengthen the Group's product and service offering which, by the 2017 year-end, has also afforded us greater marketing and client opportunities in our key target sectors.

The confidence referred to at the start of this statement is palpable within the business and reflected in the amount and quality of work accomplished by all the team in both Aberdeen and Newbury. I would like to thank each and every one of them." 

I do recommend that you read the whole report.

I'm currently feeling very optimistic about 2018 for Immedia, and added to my core holding at prices around 22p. Being a long term investor at heart, I shall now hopefully hold on until this becomes a multi-bagger (fingers crossed anyway!)

A few extra points of interest include:-

1) In 2016 they acquired a company called AVC Media which took a while to bed in, but may now be starting to bear fruit

2) They own 6,000,000 shares in AudioBoom (BOOM).

and also from the 2017 report they say:-

3)
     a) Costs have been optimised to the size of the business, with c.GBP250k of annual cost removed

     b) The Group remains virtually debt free and is now cash generative

     c) Having launched in late 2017 our new engagement platform DreamStream X, interest levels in            Immedia's products and services are exceptionally high and point to a much-improved financial         performance in 2018 compared to the disappointing results in 2017 

As ever please do thorough research, and this is just a personal blog which reports my own thoughts and ideas. Good luck.

Exciting prospects but with added risk

OMIP (One Media IP) is not a company I've written about before on my blog, but I have briefly commented on ADVFN.

https://uk.advfn.com/forum/search?q=michaelmouse&post_poster=on&post_post=on&index=posts&thread_id=28458514

I bought into this micro-cap at prices around 3.5p, and took my original stake off the table when the share price doubled in a very short time frame. I've left the profit to run for the long term. The re-rating was chiefly due to a return to profitability and cash flow generation and significantly aided by "so-called" heavyweights Michael Grade and Ian Dunleavy joining the board of Directors.

The company appealed to me because of it's lowly valuation at the time, alongside it's past ability to generate healthy profits, cash flow and pay a dividend. It was also debt free. All the signs were that after a temporary hiatus OMIP was returning to growth which has now been confirmed by recent results. A lovely, overlooked little company in other words. I took out my original stake after the share price had doubled simply because I couldn't see how they could significantly ramp up growth without a larger war chest.

All that changed yesterday with an over subscribed fund raise and debt financing which will enable the company to acquire the rights to more valuable music catalogues that they can then monetise.

https://uk.advfn.com/stock-market/london/one-media-OMIP/share-news/One-Media-iP-Group-Plc-Proposed-Fundraise-of-a-min/78169362

https://uk.advfn.com/stock-market/london/one-media-OMIP/share-news/One-Media-iP-Group-Plc-Results-of-the-Placing-and/78174779

This is an exciting development, although with added risk because of the debt funding. However, with the expertise they have available, I can imagine that any purchases will be very prudent and have the potential to significantly enhance earnings in future. It's also worth keeping your eye on their TCAT services sales which are used to monitor music conflicts and potential copyright infringements. Sales are in their infancy but there is excellent potential here also. The placing price of 6p announced yesterday was disappointing but only in the context of the recent share price, and my remaining holding is still 82% in profit and a "free" ride. OMIP will now be a very long term hold for me, and will hopefully offer significant upside from here, but as ever DYOR.