Small Cap Value Report (11 Jun 2014) - GTC, FLYB, QPP, SAA

11th Jun '14 by Paul Scott

19 comments 21973 reads

Good morning!

Getech (LON:GTC)

I nearly fell off my chair when reading the latest announcement from Getech. Remember that they put out another profit warning yesterday, due to contract delays. Well this morning they've announced a major contract win, for $2m. Oh by the way, the hyperlinks I put into these reports link to the relevant announcement on investegate.co.uk, to make it easy for you to open up the announcement and read it in a separate tab in your browser (if you right click on the link & select new tab).

Encouragingly, this contract win is for the second period of their Globe programme, from 2014-17, which bolsters confidence that, although contact wins are lumpy & unpredictable in timing, the company does seem to have a viable product with continuing appeal to clients. It should be noted that the revenue recognition is such that it doesn't affect the profit warning yesterday for the current financial year (ending 31 Jul 2014).

I was lucky in buying some stock yesterday, as I would imagine today's announcement is good enough to take the shares back up to around 50p or near to that anyway.

The company's CEO summarises things as follows;

This order is from an existing Globe client and although the income had been substantially factored into our expectations, we are extremely pleased that the contract is now signed. We remain confident that further significant contracts will also be signed in the near future. This brings the value of new contracts signed in the period since mid-May 2014 to over $3m and, given that much of the income will be recognised after this year, contributes to providing a sound base for the future.

Therefore I suspect this is probably the turning point for these shares, where investor confidence is likely to start returning. Although given previous disappointments, I also suspect that there is probably limited upside for the time being, as it will take time to fully rebuild investor confidence. Perhaps investors will just have to accept that this is a volatile share, with limited forward visibility, and rate the shares a bit lower to alllow for that fact.

It's worth noting that Getech has a sound Balance Sheet, with current assets being 241% of current…

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maillotàpoisrouges

11th Jun '14

What's your view on Flybe's 2013 FY results Paul? I'm sure you are typing it up right now!
All the best
Hederz

JMLDutch

Something going on with airliners today. Easyjet and IAG are the biggest losers in the FTSE 100, while dart is also suffering big losses. Havent been able to find the cause yet.

Paul Scott

Hi JMLDutch,

There was a profit warning from Aer Lingus I think. Or some airline anyway, read it in one of my newsfeeds, but I forget the detail.

EDIT: Apologies, it was Lufthansa - link here

Regards, Paul.

NS23

Profit warning from Lufthansa (-7%) is probably pushing sentiment down.

Thanks Paul, very helpful!

PhilHofGrowYourDough

Re:airlines - Interesting as there was a lot of coverage today regarding significant delays at the passport offices as they had been deluged in applications. I took this as an indication that the Brits are looking to go on foreign holidays and so I bought back into one of my past favourites Dart (LON:DTG)

Let's hope it can replicate it's past performance.

johnrosier

Talking my own book obviously but looks like a great opportunity to buy easyJet (LON:EZJ). Half year figures were good, (with it winning over the business market), April and May traffic stats were strong and Stockopedia stock rank 95. Sure it will have a good summer with all the new passport holders jetting off to the sun. Just because the incumbent legacy operators are struggling does not mean EZJ is!

janebolacha

The stronger pound against the euro should also help easyjet and Flybe,
boosting tourism to Europe and second-home buying in France and Spain.

FREng

Thanks for the note on Getech (LON:GTC) . I picked up 20k this morning at 47p so it's already paid my Stockopedia subscription!

slartybartfast

"Jet2 loses delay compensation appeal
Court rules wear and tear is not 'extraordinary'"
http://www.which.co.uk/news/2014/06/jet2-loses-delay-compensation-appeal-370467/?cmp=RSS-GNS_370467

Seems it is also retrospective so there could be a lot of claims against airlines.

Edward Croft

We just pushed out a fancy new text editor. Fully expecting to be murdered by all here - but drag and drop images should help the pain.

If there's any lost functionality let us know via the usual green button.

Hi SBF,

Yes I saw that report on the news too. It's going to affect all airlines. It'd be interesting to know what the exposure is for Dart (LON:DTG).

Such is life.
Phil

cig

"It's going to affect all airlines,"

Were they all doing that? Jet2's position is essentially indefensible (broken kit is your problem, not the customers', in all normal businesses) and I'd hope the other airlines were not equally mischievous.

jonesj

So far, in my ~27 years of investing I've stuck to a NO AIRLINE stocks rule, although I do like the Flybe story above.
Airports seem like a much better investment, as there is much less competition in that sector. In fact they can thing of evil & monopolisitic new ways of making money, like charging customers £2 whilst their car pauses for 30 seconds to drop the customer off outside the building. Or slowing up the baggage checks, then charging for the "fast lane". Or charging premium rents to monopoly retailers inside the terminal. ie 1 bookshop, 1 electronics store, 1 coffee shop, 1 chemist & a duty free shop that creams off much of the duty saving for themselves.
We see Engineers working on constantly on light weight efficient planes, then the peverse tax system encourages customers to fly bottles of whisky with them.

"It's going to affect all airlines,"

Were they all doing that? Jet2's position is essentially indefensible (broken kit is your problem, not the customers', in all normal businesses) and I'd hope the other airlines were not equally mischievous. -

My understanding is that it's a test case for the industry. From catching the report on the news my understanding is that passengers should be recompensed over and above a delay of 3hrs if the airline could have forseen the issue.

So far, in my ~27 years of investing I've stuck to a NO AIRLINE stocks rule, although I do like the Flybe story above.

Dart (LON:DTG) isn't just an airline, it's also a travel agent and haulage business.

EDIT: Added a link to report that demonstrates the potential industry impact

http://www.manchestereveningnews.co.uk/news/greater-manchester-news/ron-huzar-jet2com-legal-compensation-7251944

Also from The Guardian (http://www.theguardian.com/money/2014/jun/11/air-p......

David Bott, an aviation lawyer at Bott & Co, who represented Huzar, said around 90% of the 15,000 flight delay claims on its books have been refused because of a technical defect.

However, Jet2.com said the judgment was disappointing and could, if unchallenged, "have a significant impact on the entire airline industry".
A spokesman said: "The judge noted that the issue 'is not without some difficulty' and as such we are taking the dispute to the supreme court.

So perhaps it might be overturned in the Supreme Court

ridavies

12th Jun '14

Just read this. Thanks for the posting. Live on the Isle of Man where Flybe is widely known as FlyMaybe, and has in my experience quite a lot of technical fault issues. They have now closed their Isle of Man base though they still fly from the IOM to Liverpool and Manchester several times daily. Right thing to do - along with quite a lot of other bases in UK - and good luck to the new( management. Doing a much better job.

shanklin100

Thank you for the many Jet2 related posts here since 4:30 p.m. yesterday. They meant I exited DTG as quickly as possible this morning. Must admit I am not a big fan of the excitement of being exposed to potential huge downside risk.

Interesting to see DTG still has a SR of 99 albeit the Momentum ranking has taken quite a hit. As has been noted on these boards many times, one still needs to DYOR.

Cheers, Martin

Thank you for the many Jet2 related posts here since 4:30 p.m. yesterday. They meant I exited DTG as quickly as possible this morning. Must admit I am not a big fan of the excitement of being exposed to potential huge downside risk.

Well it would be interesting to quantify the downside risk. The lawyer brining the case yesterday indicated that his firm had 15,000 claims on his books. He didn't indicate if each case represented just on individual or whether a claim could cover a family. The maximum claim per individual is £526 for long haul flights and I believe it's roughly £200 for a short haul flight. So worst case for these claims would be 15,000 families (of four) on long haul flights which would give a liability of £31m. I guess you could add legal fees to that too. Plus I guess there will be other law firms that have claims too, plus they will then start to advertise for other claimants and I think the threshold for claims is 6 years.

I'm still unclear as to the scope of the risk. One article claimed it was just Dart & Thomson that were exposed however other articles claim 'a big impact on the airline industry'.

My timing is impeccable. Deep joy! :-)

Regards

Phil

Small Cap Value Report (11 Jun 2014) - GTC, FLYB, QPP, SAA

Getech (LON:GTC)

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Paul Scott

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