Stilo results and important matters re:AIM listing

Following the release of today's results from Stilo International, I have written a short blog post about the figures, the narrative and their AIM listing:-

https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/STL/14001536.html

Firstly, let's address this line where some have hinted it suggests that Stilo will seek a de-listing,

"Given our size, we continue to incur significant financial overheads associated with being a public listed company, but notwithstanding this we were able to generate a post-tax profit for the period of £177,000."

Whilst a de-listing is not out the question, it should be noted that Stilo's Directors hold less than 25% of the company's shares which makes it impossible at this juncture to secure a de-listing without significant support from it's other shareholders. If the company wanted to de-list they would need to make an offer for the entire share capital in my opinion i.e. a Management buyout. As a shareholder I would expect a far higher offer than the current lowly market cap.

As for today's results, I'm pleased that they still managed to make a profit after warnings earlier in the year, and I'm extremely pleased with a 20% hike in the proposed dividend (2018:0.12p, 2017:0.10p). Incidently, this is the 5th consecutive year of rising dividends. In short, they continue profitably with plenty of cash and a strong un-geared balance sheet.

As for the outlook, they appear non-committal at this stage. In fact, mixed messages possibly? We have:-

"The Company continues to invest in the development of leading technologies for the structured content market and in so doing build long-term value for shareholders. As we look forward to growing future sales, supported by healthy cash reserves and a strong balance sheet, I am pleased to announce the payment of an increased final dividend of 0.06 pence per share, providing a total dividend for the year of 0.12 pence".

then

"In the short term, growth will be primarily driven by sales of Migrate and OptimizeR solutions to new customers and we will be stepping up our sales, marketing and development efforts accordingly. 2019 is going to be a challenging year for the Company, with potential demand, as always, difficult to predict at the current time. " 

Here's my blog from September 2018. 

http://michae1mouse.blogspot.com/2018/09/its-steal.html

Not much has changed for me following these results. Stilo is undervalued and I continue to hold and await developments.

Some very mice news from Angle!

Well investors in Angle should be smiling this evening following the release of this RNS and a near 80% jump in the share price:-

https://londonstockexchange.com/exchange/news/market-news/market-news-detail/AGL/13930951.html

Fabulous stuff. Not least because Angle's Parsortix diagnostic kit has the potential to help in saving thousands of lives. Whether you're a shareholder or not you should be extremely pleased that companies like Angle are assisting in the search for effective ways of personalising cancer treatment.

I'd be a very happy shareholder, except I'd already sold my shareholding. It's a familiar story, and one that sometimes comes back to haunt me from time to time. I bought my shares in December 2012 at around 27p:-

http://michae1mouse.blogspot.com/2012/12/a-new-angle.html

I recognised they were speculative, but could see potential. The share price raced ahead in the early days around the levels seen towards the end of today, but quickly retreated again. After what I deemed slow(ish) progress and several fund raisings, I eventually took profits selling my shares for around 50p.

As a long term buy and hold investor, I must remind myself just to tough it out most of the time. Many companies take many years to make the required progress, but when they do the rewards can be spectacular. I hope Angle eventually rewards it's patient and loyal following.

I note that today's RNS says it's "ground breaking" work, but fairly early stage since the tests were on mice. However, it's another potentially significant use of the parsortix system. I wish the company and long term investors good luck.

I must remind myself that I must not get frustrated and remain patient. Whilst some investments will fail to perform, my personal experience is that if you have a reasonable flair for spotting long term potential, the winners eventually render the laggards insignificant.

As such, Angle's news today has provided a timely reminder to just hang on in there with my current holdings and patiently wait until latent potential has been fully realised or the company becomes a total non-starter. For those that missed it, here are a few ideas of micro-caps with the possibility of a big future yet to be fulfilled:-

http://michae1mouse.blogspot.com/2018/12/micro-cap-christmas-presents-or.html

Wishing you all a belated, but healthy and happy new year.

Micro-cap Christmas presents or Christmas Turkeys?

It's a little while since I last posted, and market turbulence is still evident. That said, whilst I'd be very nervous holding stocks on p/e ratios of 50+ or loss making, low revenue companies on multi-million pound market caps. of say £30m+, it does appear that the rout in micro-caps (under £10m market caps.) may be close to an end? Or is that just wishful thinking on my part? We'll see.

Common sense does dictate that when a company's market cap. falls below a certain level, assuming it's reasonably well funded (i.e. not going bust) then it's unlikely to fall as heavily as the over-priced multi-million pound companies briefly referred to above. However, this is the stock market and short term you can find that almost anything is possible!  If you're not familiar with the quote about "voting" and "weighing" machines then it's worth looking up.

Anyway, I'm going to list a number of small and micro-caps that I'm currently invested in and that you might want to investigate yourselves. Most have been mentioned before in my blogs or twitter or the bulletin boards. I am not recommending that you buy or sell any of these companies of course, and I am currently sitting on paper profits in some of these companies and losses in others. All I'm going to do is list bear and bull points for each stock, and if one or more companies pique your interest then you might wish to do some extensive research.

Will these stocks turn out to be Christmas presents or Christmas Turkeys? I can't say for sure, although of course I'm hopeful that they'll all prosper. At this point I should emphasise that I'm looking at their performance with a minimum 5 year outlook, and I'll review their performance at regular intervals. From my past record of serious investing from the early 2000's then I'd hope that in 5 - 10 years time then 3/4 will have more than 10 bagged. I'm listing 12 companies in order of market cap. (smallest to largest) alongside their current share prices (please note these are not the share prices I purchased at). In all my time investing only one company has ever gone bust on me, although that might be tempting fate! I sincerely hope not. Anyway, here goes:-

Mediazest (MDZ) - current sp 0.075p, market cap. £0.96m. Tiny company that's never made a full year profit and always appears on the brink of a cash call. Latest interims show a maiden profit and increasing recurring revenues. Has it turned a corner?

Aeorema Communications (AEO) - current sp 32.5p, market cap. £2.94m. Always looked a good value share, but growth has never been sustained. There's a new management team. Excellent start. Balance sheet still provides considerable comfort. If they deliver sustained growth then it's off to the races.

Stilo International (STL) - current sp 2.75p market cap. £3.13m. For many years it's been a bit of a plodder. Suddenly growth kicked in, and then disappeared this year when two major contracts came to the end of their lifetime. Can't believe this is the third cheapest company on my list? Fabulous balance sheet and progressive dividend policy even in this dip year. Can they resume growth from 2019 onwards and get back on track? Certainly the product list is expanding. Impressive client list.

Immedia (IME) - current sp 26.5p market cap. £3.86m. History has seen IME win big contracts and lose others in equal measure. Recent acquisition failed to have an immediate impact. Client retention is much improved, and the acquisition is beginning to bear fruit. Encouraging interims. Is growth about to take off?

Spaceandpeople (SAL) - current sp 21p market cap. £4.1m. This was a rising star that fell from grace with a large bump. In 2017, it looked like it had got it's mojo back and they reinstated a dividend. Disappointing again this year unfortunately, but certainly not a write-off with management confident that this year is a temporary blip and they can indeed restore former glories. We'll certainly find out in due course.

Trakm8 (TRAK) - current sp 21p market cap. £7.3m. Another rising star that came unstuck. Well documented on my blog and elsewhere. Ambitious plans that unravelled through slower than anticipated growth. Fabulous client base though and second half of this year will be far better than the first six months. Recurring revenues are building very nicely. A white knight has appeared in the form of a company called Microlise in the same telematics space. They bought a 20% stake in Trakm8 at a 22% premium to the depressed sp. Huge opportunities for Trakm8 if they can execute this time around. If not then Microlise might just snap them up anyway?

One Media IP Group (OMIP) - current sp 5.5p, market cap. £7.46m. Shift in music consumption caused a temporary halt to their growth. Inflection point has been reached and growth restored. Nicely profitable and cash generative business. A recent cash raise came out of the blue as the company was joined by industry heavyweights and an ambitious plan for much accelerated growth. The cash raise is to fund acquisitions in the music rights space. Big gamble? Spectacular if it pays off.

7digital (7DIG) - current sp 2.3p, market cap. £9.2m. Big promises but disappointing so far. Has had a habit of pulling defeat from the jaws of victory. Up until now it's been a big cash guzzler and diluted shareholders. Major acquisition should now be fully integrated? Cost savings will be £5m per annum? Gross margins should be 70%+ , and profitability just around the corner in a potentially exciting space. Market doesn't currently believe the promises, but if 7digital proves them wrong then expect a multi-bagger in double quick time.

Crimson Tide (TIDE) - current sp. 2.2p, market cap. £10.06m. Hasn't really put a foot wrong in recent times, but excellent progress is being temporarily masked by investment for growth. Market sentiment has currently depressed the share price, but TIDE is growing impressively with huge gross margins (80%+) and a great balance sheet. One of those companies that is currently overlooked, but will set the market alight when investors twig about future growth prospects?

Biome Technologies (BIOM) - current sp. 545p, market cap. £12.88m. A stock market favourite in it's early days. A loss making "story" stock that was valued far too highly with little to show in terms of revenue. Share price collapsed to around 80p at one time. It was friendless. Now beginning to fire on all cylinders. Two businesses in one company. RF business is profitable and in demand, Bioplastics is currently loss making but in the right place at the right time. Recent reports suggest Bioplastics revenues could see very significant growth in the medium to long term. Very exciting space, excellent balance sheet with plenty of cash. Mouth watering potential with a still modest market cap.

Scientific Digital Imaging - current sp 37.75p, market cap. £31.6m. Not a micro-cap, but was when I bought in. Like TIDE it hasn't put a foot wrong in recent times. Growing organically and through acquisition. Buy and build can be risky, but so far so good. Another JDG?

PCF Group - current sp. 36p, market cap. £77m. Certainly not a micro-cap, but a very promising company. PCF has endured it's hardships in the past, but has now transformed itself and investors should be handsomely rewarded. Don't listen to my blathering, but read PCF's finals released earlier this week. One year ahead of schedule with impressive growth and modestly valued.

That's it. They are not tips, but you may wish to have a more detailed look at one or two of the companies listed. As I said earlier, I'd be disappointed if there aren't at least 3/4 potential 10 baggers in there (with a long term time frame e.g. 5+ years). Which ones will they be though, I have no idea? Of course it could be all of them or none of them since (as they say) past performance is not a guide to future performance, or something like that anyway?

May I be the first to wish you all a ……...No it's still far too early!

ATB.