There's no nonsense like bulletin board nonsense!

Don't you just love the total tripe that is often posted on bulletin boards. It's very entertaining, but should generally be disregarded apart from sensible financial commentary or the odd useful link.

If you read my blog on a regular basis then you'll know I'm not a fan of "story" stocks that have climbed to multi-million dollar valuations on the back of vast riches to come next year or perhaps the year after that or is it the year after that? Jam tomorrow companies. Let me say at this point I've occasionally invested in one or two in the past, but they rarely, if ever, turn out well. Why? Mainly because the figures just don't add up. Even if a company was the best thing since sliced bread, it doesn't make it a great investment if you pay too much for it. Let the financials be your guide to how much you should expect to pay. Read some books by the great investors such as Graham, Buffett, Lynch etc if you haven't already.

One story stock I'm not a fan of is OptiBiotix which I've written blog posts about before. Here's why I think it's a poor investment at it's current lofty market cap. My blog is written in response to an bulletin board avatar who said the following:-

https://uk.advfn.com/cmn/fbb/thread.php3?id=35291865

"Has it really gone up on hot air or numerous agreements across the world which will go straight to the bottom line. Strong fundamentals. Last time you spouted your saviour rubbish we didn’t have this pharma deal in place and the price shot up to £1.30. They’ll be injecting up to $50m. Pretty big investment for hot air don’t you think?.

Great opportunity to buy many stocks during this time of volatility."

My response:-

Your post is factually incorrect. Firstly, you have no evidence that these agreements will generate significant revenues which will go straight to the bottom line. Last reported interim revenues were £80,000 about the same as the previous year. Yet when you look through the RNS statements there were "agreements" between May 2017 and May 2018 into the double digits. If these were significant revenue generators then at least three or four should have ramped up revenues for the six months ending May 2018? Even just one would surely have improved revenues?

Something doesn't stack up does it? As I said this morning these agreements should be RNS Reach since they clearly mean diddly squat in terms of generating revenues. If the six months ending November 2018 still shows poor results then you'll know for sure that nothing significant is coming anytime soon.

Secondly, Opti doesn't have strong fundamentals. If you strip out intangibles and it's SBTX investment (which incidentally is pretty worthless since nobody would make an offer at it's current market cap. ) then tangible net asset value is about £2m and that's after a £1.5m fund raise at 62p at the end of May. Full year revenues last year were short of £200,000 and interims this year were £80,000. Needless to say that Opti is loss making and burning cash. Opti is valued at around £70m. It's laughable. Those fundamentals might support a £4m market cap at best.

The share price movements are immaterial unless you're a trader. If you're a LTBH investor then it's the end game you're looking at. Opti's share price is now below 80p again, so what's your £1.30 point?

A pharma "injecting up to $50m". Really? Point me to the RNS please. Besides even if this were true (please provide evidence) then it could fail the first hurdle. In fact, if it fails any hurdle then that's going to have a huge detrimental effect on the validity of Opti's claims for this Science. Everything they have tried to promote may then be regarded as "quackery"? I bet the bulls haven't  even considered that eventuality. Pharma is a dangerous route to tread.

"Great opportunity to buy many stocks during this time of volatility."
On that we can agree, sadly Opti isn't one of them.

As ever dyor, these are just my thoughts and views and do not constitute buy or sell advice.

twitter: @michae1mouse

King Canute won't stop the Tide!

I do love a micro-cap company with a great growth story to tell, particularly where there is relatively little risk to your capital in the long term.

Here's a company that fits the criteria called Crimson Tide (Tide) and below you'll find a link to it's website:-

http://crimsontide.co.uk//company-description/

I'm a fan of this company and my investment is currently showing a 37% gain. It's another long term hold for me since it's best days are yet to come.

As you'd expect if you read my blog on a regular basis, TIDE is a profitable, cash generative company with an excellent balance sheet. It's market cap. stands at slightly below £13m.

It has a healthy £782,000 in cash on the balance sheet with zero debt. It's gross margins are a mouth watering 86%.

Crimson Tide released their interim results at the end of September showing revenue growth of 8%, but profit down to around £4000. At first glance it doesn't look impressive, but delve further into the company's history and you'll see a terrific growth story unfolding. The temporary dip in profits is purely down to a planned investment in sales and marketing, and a measured and sensible approach  to global expansion.

https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/TIDE/13807975.html

Barrie Whipp, Executive Chairman said the following:-

"Our pipeline has grown significantly and have seen additional demand from Europe and the Middle East as well as in the UK & Ireland. The Board estimates that, considering increased investment in Sales & Marketing, like for like profit would have increased by approximately 50%. We are working on a much wider range of exciting opportunities and have developed mpro5's IOT capabilities. mpro5 is now publicly downloadable from app stores for demonstration purposes and for smaller businesses. We are extremely well placed to take advantage of the opportunities generated from our marketing activities and the Board is excited to accelerate our growth to the next level. " 

If you want a company to grow strongly and succeed then they need to invest and TIDE's management have seen the opportunity and are to determined to capitalise on it. This is a very telling sentence from the interim report:-

"We currently have over 100 identified opportunities with potential clients, five times more than typical levels before these investments were made."

Whilst not obviously cheap at the moment, once growth kicks in from investments then with such juicy gross margins and a strong balance sheet I expect the share price of TIDE to make excellent progress in the years to come.

Finally, keep your eyes peeled for those large contract announcements with enterprise clients.

As ever, this is not a recommendation to buy or sell.

twitter: @michae1mouse.

 

Disappointing results - SAL, SAL, SAL?

It's always a jolt when a company issues unexpectedly disappointing results, particularly when there's been no prior warning. That's exactly what Space and People did last week which caught investors unawares.

I took a stake in Space and People (SAL) in a couple of tranches back in December 2016 when the company had been in the doldrums, and the share price was in the low 20s and mid teens. From my research I had anticipated a recovery and was duly pleased that a recovery in fortunes did indeed occur in 2017. The company returned to profit, good cash generation and the restoration of a dividend. In fact the dividend alone meant a nice 7% return on my investment. The shares shot up into the mid thirties and until last week I was sitting on a nice capital return.

However, the interims results disappointed and full year results are anticipated to be below market expectations. With the dividend included, I'm back to a mere 1% paper profit.

The shares retraced around 35% last week. It appears a little harsh to me, and I'm happy to sit tight and see how things pan out for the rest of the year and hope they get back on track again in 2019.

SAL is currently valued at £3.9m. Whilst results for the full year will disappoint, they do expect to report a profit of around £200,000 and they have a solid balance sheet with net cash around £510,000 and no debt. Whilst there was a cash outflow of £1.72m in the first six months, this is a seasonal business and they may still pay a small dividend, although I have assumed this from the following statement, "The group will generate a profit this year and it is the Board's intention to maintain our dividend policy." The all important Christmas period is yet to come so fingers crossed that they deliver on revised expectations.

All eyes on 2019 then where they make the bold statement:-

"We are confident that we can regain sales momentum for next year which combined with the costs savings already identified. Our 2019 forecasts being unchanged despite the lower than anticipated 2018 outturn."

If they do this then the shares will be the bargain that I originally hoped. Meanwhile, at SAL's lowly market cap. and with a solid balance sheet, the shares have little downside and plenty of bad news already priced in.

I do like what SAL offer as a company and I'm sure that in a tough retail environment then companies will need their services short, medium and long term. Here's their website and recent half-year results:-

http://www.spaceandpeople.co.uk/

https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/SAL/13808000.html

Finally, George Watt (Non-Exec Chairman) bought around £20,000 of shares immediately following the interim results in a vote of confidence. I also notice that the share price has ticked up marginally today on a 145,000 share purchase (around £30,000) which I'd suspect may be another Director purchase, although this is speculation on my part.

As ever DYOR. I own shares in SAL and don't recommend buying or selling.

twitter: @michae1mouse