Small Cap Value Report (3 Dec 2015) - INTQ, TRCS, IMO

3rd Dec '15 by Paul Scott

14 comments 17402 reads

Good morning!

Apologies for the lack of a report yesterday. Things seem to be starting to improve, with the patient (in hospital) showing early signs of recovery, so I'm getting back into the usual routine again now. Therefore there shouldn't now (hopefully) be any more gaps here.

Ed's doing a webinar at 1pm today, and it looks like it's on track to be the most popular ever - with seats limited to 500. Hardly surprising, as Ed's NAPs portfolio, selected using StockRanks, has returned an astonishing +38% performance YTD. If there are any seats left, the link is here.

InternetQ (LON:INTQ)

Share price: 77p (down 42% today)
No. shares: 40.3m
Market cap: £31.0m

Damaging article - in a pattern which is now becoming increasingly familiar, another dodgy-looking company has been attacked online, with serious questions being raised by Tom Winnifrith over its accounts, and operations.

Stockopedia readers already know to avoid this share, as I've written about it five times here since Apr 2014, each time warning that the profits are not genuine (but are manufactured by capitalising a large amount of costs into intangible assets), that debtors were too large, and various other remarkable similarities to Globo, which led me to conclude in Jul 2015 that InternetQ looked "an almost carbon copy of Globo". That was before the full extent of the Globo fraud was known, of course - actually, we still don't know the details of what really happened at Globo, nor what has happened to the culprits since the wheels came off.

So the next step no doubt will be that InternetQ will issue a rebuttal document, and will either blow over, or blow up.

I haven't shorted InternetQ (pity) because it did get some third party investment into one of its companies, although from a fund that doesn't strike me as being the sharpest knife in the drawer (Tosca), with regards to its small & micro cap investments anyway.

It will be fascinating to see how this pans out, but once again it reinforces the point that AIM is a magnet for awful overseas companies, and it's safest to just avoid all of them, in my opinion.

EDIT: here we go, there's a rebuttal statement from the company. It confirms that trading is in line with management expectations;

InternetQ plc (LSE-AIM: INTQ), a leading provider…

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Ramridge

3rd Dec '15

Hi Paul - Really good to see you back.
Yesterday Tracsis (LON:TRCS) made an interesting acquisition. My initial analysis was very favourable and therefore bought a decent amount (besides being impressed by John McArthur). Would be interested in your take.
Regards, Ram

danyou

Paul, Glad to have you back.
Interesting discussion 2 days ago on CCT (Character's) results. Interested in your take. Seems to scream value- but you have a talent for spotting the suspicious stuff!
Thanks!

Re. Tracsis (LON:TRCS) Much appreciated , Paul.

Rusty2

Yes IMImobile (LON:IMO) does look interesting, the spread today is only about 1%, normal trade is 2,000 shares which may put some off, I have bought a few.

oscar247

Paul

Re: InternetQ

Once again, investors owe you a big vote of thanks for your continued vigilance in highlighting these dubious companies.

There can be little doubt those that heeded your constant warnings would saved themselves from a somewhat poorer Christmas, today!

WDWombat

Well I must say I was tempted to take a profit in Tracsis after its heady recent rise on the basis that selling on the good news is quite often the right thing to do, plus what looked like very heady forward valuations. I was especially concerned by the high price to sales - mkt cap is around 138m, last year's notional profit around 7m and I suppose revenues around 32m if you just add Ontrac to the Tracsis 4.5m profit and 25m sales. But I haven't done anything as just perhaps the acquisition takes it a step up and into new client territory, the big league if you like. Let's hope so though a reaction wouldn't be a surprise? What do you think?

I do hold Tracsis (LON:TRCS) as well, yes its tempting to take some profits I agree. I think share price will fall back soon, I was considering holding and topping up on any falls. I thinks its a good company, well managed, my only regret was was not buying more.

nigelo

I had a quick look at IMImobile (LON:IMO) and I see that there is potential for 40% dilution due to share options. That is where my interest in the company ended.

Where did you see that?

In Note 5 of today's interim statement:

Weighted average number of ordinary shares for the purpose of basic EPS 48.0
Effect of dilutive potential ordinary shares: share options 19.7

It seems to me that any downside would be borne by shareholders but upside is creamed off for insiders. The CEO does indeed sound very smart.

kalkanite

Herbie

Take a look at note 5....EPS in the interim statement. It's always worth finding out how they calculate diluted EPS, it can be quite revealing. Also with normal EPS, whilst average weighted number of shares for the year is a fair way of accounting, always take note if the updated number of shares are very different as this "may" affect future EPS.

Edit - Nigelo beat me to it.

OK thanks. I knew it was 11 before, yes something to watch out for.

Paul Scott

4th Dec '15

Hi,

I hadn't spotted the issue with share options dilution - if the potential dilution is over 10% of the existing equity, then normally I wouldn't touch a company. So 40% dilution sounds outrageous! Will check that out when time permits, but many thanks for flagging the potential issue.

As I always say, investing is a team sport, and I can't cover everything single-handedly, so it really adds value when readers comment here about pertinent issues, and specific info that I haven't covered.

Many thanks, Paul.

Re. IMImobile (LON:IMO)
It should be possible to check extent of dilution by comparing the number shown in the StockReport under Average Shares (44.3m) with the corresponding figure under "Diluted Weighted Average Shares" in Income Statement (click on 'Income' just across where it says Financial Summary).. Unfortunately in the case of IMO the data is wrong! It shows 44.3m when it should be 63.3m.
Maybe someone in Stocko could look at this?

Small Cap Value Report (3 Dec 2015) - INTQ, TRCS, IMO

InternetQ (LON:INTQ)

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Paul Scott

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