Small Cap Value Report (23 Jun 2014) - KMK, WHI, TRCS, FTC, VCP, PRV, ACM, ODX

Monday, Jun 23 2014 by
35

Good morning! Somewhat belatedly, I watched "The Wolf of Wall Street" last night for the first time, and have to say it's one of the best films I've ever seen. We were in fits of laughter at some of their antics. Although the portrayal of the villains as lovable rogues was rather too sympathetic for my liking - they were after all despicable characters, with appalling morals, who ripped off gullible members of the public for many millions. Hugely entertaining though.


Kromek (LON:KMK)

This company makes digital X-ray imaging equipment, and has been twitching away on my watch list for a little while, as the newsflow has been good lately. There are more contract wins announced today, although the biggest is only $1.45m.

Given the company being fairly early stage in terms of sales, I think the market cap of £51m (at 45p per share) looks a somewhat aggressive valuation. Even though sales are forecast to more than double to £12.5m this year (ending 30 Apr 2015), it is still forecast to be loss-making. For my tastes, there needs to be a more clear route into profitability to justify a market cap of over £50m. Especially now markets are much more sceptical towards speculative small caps than they were a few months ago, when the small caps indices peaked in Mar 2014.


WH Ireland (LON:WHI)

My main broker reports positive trading in H1 (to 31 May 2014) today.

Revenue growth in both the Private Client and Corporate Broking divisions has been encouraging and has continued the trends witnessed during 2013, namely a strong increase in management fees and commissions in the Private Client division and a solid increase in retainer income and success fees in the Corporate Broking division.

Profit before tax after specific reorganisation costs incurred during this period will be ahead of the comparable period a year ago.

Looking at forecasts, an increase in EPS this year to 6.2p is on the cards, so at 108p the shares are on a forecast PER of 17.4, which looks about right to me.

Note that there is a freehold property in Manchester on the books, which personally I like, as it's hidden value that supports the valuation. That's in the books at £4.75m, which is material to the market cap of £26m.

NTAV is about £12m, so the market cap…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Kromek Group plc is a radiation detection technology company. The Company develops radiation detectors based on cadmium zinc telluride. The Company's segments are UK Operations and US Operations. The Company designs, develops and produces x-ray and gamma ray imaging and radiation detection products for the medical, security screening and nuclear markets. The Company's solutions provide information on material composition and structure to enable the identification of cancerous tissues and hazardous materials (including explosives), and the analysis of radioactive materials. Its nuclear products include CPG, GR1-Gamma Ray Spectrometer, GR1A, SIGMA, TN15, RayMon10, Quant Air and RENA-Mini Development Platform. It offers detectors and subcomponents for original equipment manufacturer (OEM) customers in the medical imaging market, including computed tomography (CT), single photon emission computed tomography (SPECT), positron emission tomography (PET) and bone mineral densitometry. more »

LSE Price
27.59p
Change
-0.6%
Mkt Cap (£m)
72.2
P/E (fwd)
n/a
Yield (fwd)
n/a

WH Ireland Group plc is a holding company. The Company's principal activities are the provision of wealth management and corporate finance advice, research, products and services to the private clients, and small and medium sized companies. It operates through two segments, which include Private Wealth Management and Corporate Broking. The Private Wealth Management segment offers investment management advice and services to individuals and contains its wealth planning business, giving advice on and acting as intermediary for a range of financial products. The Corporate Broking segment provides corporate finance and corporate broking advice and services to the companies, and acts as nominated advisor to clients listed on the Alternative Investment Market (AIM). The Corporate Broking segment contains its institutional sales and research business, which carries out stockbroking activities on behalf of companies, as well as conducting research into markets of interest to its clients. more »

LSE Price
121p
Change
-2.0%
Mkt Cap (£m)
34.4
P/E (fwd)
n/a
Yield (fwd)
n/a

Tracsis plc is a holding company. The Company is engaged in the business of software development and consultancy for the rail industry. Its segments include Rail Technology and Services, and Traffic & Data Services. The Rail Technology and Services segment includes its Software, Consultancy and Remote Condition Monitoring Technology, and also includes Ontrac Limited and Ontrac Technology Limited (together being Ontrac). The Traffic & Data Services segment includes data capture, analysis and interpretation of traffic and pedestrian data to aid with the planning, investment and ultimate operations of a transport environment and it also includes SEP Limited (SEP). It provides software products, consultancy services and delivers customized projects to solve a range of problems within the transport and traffic sector. It specializes in solving a range of data capture, reporting and resource optimization problems along with the provision of a range of associated professional services. more »

LSE Price
425p
Change
 
Mkt Cap (£m)
119.1
P/E (fwd)
18.3
Yield (fwd)
0.4



  Is Kromek fundamentally strong or weak? Find out More »


23 Comments on this Article show/hide all

Delpher 23rd Jun '14 4 of 23
1

Ramridge
How right you are, hence the reason for asking Paul to comment now that the full report is available.

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Ramridge 23rd Jun '14 5 of 23
2

Re.Tracsis. IMHO Tracsis qualifies as an economic moat. The co. provides resource optimisation software to the transport industry. An impressive list of blue chip clients, from the regulated and non-regulated markets. As far I can tell there is no other competitor that comes close to matching their range of services to this sector. A premium PE is therefore justified.

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rmillaree 23rd Jun '14 6 of 23
1

In reply to bsharman, post #1

Ref Camkids

I had a look at Camkids recently and there is mention (ad***) that seed investors may be selling down their holding - working out if these seed investors are legitimate businesses/individuals or related parties of main shareholders isn't always easy to do - Seems a good way of cashing in wads of Cash though,for whoever these bods may be - said shares probably cost pennies and can be sold outside China raising nice cash that is probably untouchable by the Chinese authorities.

One thing about the recent update was the statement that they will be investing wads of cash in new facilities for the business. NBU went down this route only to find they can't find employees to do the work. If there is no need to risk wads of Dosh with rapidly changing labour rates and availability why take the risk?
Obviously the fact NBU made a pigs ear something similar doesn't mean Camkids are equally stupid.
Strangely still a slightly tempting share - on small punt basis - a temptation i am managing to avoid at present.

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Delpher 23rd Jun '14 7 of 23
2

Ramridge
Re Tracsis
I was at their CEO's presentation at the inaugural Brighton Share Soc meeting when he acknowledged that they dominate the UK market. However he was less clear (cagey) about the potential for future expanison into Europe and the US, possibly because of competition there or because their systems won't tranpose easily. If that is the case where is growth coming from?

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Roger Lawson 23rd Jun '14 8 of 23
2

Re Victoria, the CFD was a rather peculiar arrangement (but tax efficient) way to remunerate Geoff Wilding for sorting out this business after it had got into some difficulties. That he has mainly achieved. The terms of the CFD were (from memory without checking) based on achieving a total return over a period of time, which the special dividend will hence crystalize. Will have to await the full details of the proposals before seeing how this is actually going to work and where the cash is coming from, but presumably major shareholders have already been persuaded it's a good deal (I suspect some of the original "family" holders would be happy to get out a reasonable price. With the special dividend being almost as much as the share price before todays announcement, and shareholders still holding 50% of the company afterwards, it looks positive at first glance, even though I don't like holding shares where there is a dominant shareholder.

Website: Roliscon
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Ramridge 23rd Jun '14 9 of 23
4

In reply to Delpher, post #7

Hi Delpher
Interesting question. I went to their 2013 Annual Report and found this:
"
The Group has historically been largely based in the UK with only a small amount of revenue derived from
overseas customers. Given the significant presence that Sky High already has in Australia, and coupled with this being a key target market of Tracsis, we anticipate a higher proportion of overseas work in the coming year.
The Group recognises the importance and potential for growth in overseas markets as part of its overall growth
strategy and geographic diversification, and as such will continuing to exploit other overseas opportunities. In line with this strategy, during the period, the Group carried out a major software implementation in New Zealand, and continued to make further sales to our customers in Sweden and Ireland. Further sales opportunities are
currently being explored, with potential leads in mainland Europe and further afield being considered and appraised.
"
So the answer to your question seems to be through acquisitions and adapting their proprietary software to local needs and regulations.

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Delpher 23rd Jun '14 10 of 23
1

In reply to Ramridge, post #9

Thanks Ramridge clearly there is room for more research

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cig 23rd Jun '14 11 of 23

In reply to rmillaree, post #6

Did anyone really believe Naibu's "can't find workers" story? This is quite far off the plausibility scale...

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cig 23rd Jun '14 12 of 23
1

In reply to Ramridge, post #9

The thing is they will almost certainly have competitors internationally (a quick google on mere rail schedule optimisation software finds several players, and some large operators will have internal operational research teams, which they could productise if they saw a market for it) so the moat may not be that big. That said I think that good execution matters more than rare moats in that sort of business, so they're not necessarily overpriced.

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Ramridge 23rd Jun '14 13 of 23
3

Stand up Kentz shareholders and take a bow!

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Mark Carter 23rd Jun '14 14 of 23
2

In reply to Ramridge, post #13

... and some money ... the best accolade of them all.

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Sully8786 23rd Jun '14 15 of 23

On the subject of brokers, a very nice trading statement has been released from Cenkos Securities (LON:CNKS) this morning, I think that they are still worth a look.

Best,

Sully.

Company: Dave Sullivan - Talking Stocks
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Laughton 23rd Jun '14 16 of 23

Re "The Wolf of Wall Street" - I mentioned this to one of my brokers (name withheld to protect the guilty) a while ago and he said "that's exactly what it was like back then" although he also said that he'd never actually eaten a live goldfish!

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bsharman 23rd Jun '14 17 of 23

I think there was a good film in the Wolf of Wall Street somewhere but it needed HEAVY editing. It was at least one and a half hours too long!

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Fangorn 23rd Jun '14 18 of 23

""that's exactly what it was like back then" although he also said that he'd never actually eaten a live goldfish!"

Enjoyed it but Wall Street, the original a far better reflection of how things were back then. Don't personally recall any dwarf tossing or hookers on the trading floors I frequented in the nineties, nor the broking ones either. Surely they cant have all gone the way of the dodo post 80's blowout?

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rmillaree 23rd Jun '14 19 of 23
1

In reply to Ramridge, post #13

Ref Kenzt

Shame i sold a big chunk at 600p ish on the last takeover attempt when it was first announced - but i guess i should be happy that i get nice return on what is left. I sold my remaining holding today - i am happy with sale price so didn't see any point hanging around for a bidding war. Price dropped a bit on last failed offer so small discount to bid price seems understandable.

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Funderstruck 23rd Jun '14 20 of 23

In reply to bsharman, post #1

CAMK...Just reflecting it's value.

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Ramridge 23rd Jun '14 21 of 23

In reply to Funderstruck, post #20

Easy. If you believe chinese companies accounts to be sound and fair then it is a steal and you should fill your boots with their shares. If not, then stay a million miles away. all IMHO.

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imranawan 23rd Jun '14 22 of 23

Where do people get broker forecasts for different stocks. May be a dumb question but I thought I'd ask.

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Richard Goodwin 26th Jun '14 23 of 23

In reply to imranawan, post #22

They are on the Stockopedia page imranawan

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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