Small Cap Value Report (30 Jul 2015) - ACSO, SNCL, KMK, CMS, FDL, SWJ

30th Jul '15 by Paul Scott

22 comments 23869 reads

Good morning!

As usual, today I started reading RNSs in bed, once my iPad started bleeping at 7am. If there's nothing of interest, then a lie-in can be justified. However, on some days, especially Thursdays, there are lots of interesting announcements to look at. One really caught my eye as the stand-out announcement of the morning today, being this one from Accesso:

accesso Technology (LON:ACSO)

Share price: 617p (up 15% today)
No. shares: 21.9m
Market cap: £135.1m

(at the time of writing, I hold shares in this company)

Actually, there are two announcements from Accesso (an electronic ticketing group, primarily for visitor attractions such as water parks, formerly named Lo-Q) today, as follows;

Trading update - this looks very strong to me:

Based on excellent momentum across all of its business divisions, the Board of accesso is delighted to reiterate its guidance for 2015. In addition, encouraged by strong trading, and excellent new contract momentum across the business, the Board now expects 2016 to be ahead of current expectations, and 2017 to be materially ahead of current expectations.

Valuation - this company has always been tricky to value, so I'll keep it simple and work on broker EPS figures. The latest broker forecast (issued this morning, so including the big contract win separately announced today (see below) shows upgrades as follows:

2016: EPS fc from 39c to 43.1c (27.6p)

2017: EPS fc from 41.5c to 54.1c (34.7p)

Now comes the tricky bit - what PER to put it on, and on which year's earnings? Normally at this stage of the year, i.e. past the half way mark in 2015, I would be valuing the company on 2016 forecasts. However, given that its revenue/profit should be quite predictable, due to the nature of the contract wins, then there is an argument for pushing the boat out here (we are in a bull market after all), and basing the valuation on the 2017 numbers. That's what I'm doing anyway, but feel free to disagree and do it your own way if you wish.

Here are a range of values on various PERs based on the 2017 forecasts:

PER of 20 --> share price of 694p
PER of 25 --> share price of 867p
PER of 30 --> share price of 1041p

I'd say the middle one (bolded) is something I could just about cope with! The only reason a PER of 25 is justifiable here,…

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iwright7

30th Jul '15

I see Numis have a 910p target on accesso Technology (LON:ACSO) so whilst the price has a spectacular jump today, there should still be more to go. I have brought a few because its a likely momentum share after this transformative deal. A good example of an Earning Surprise that goes on to surprise again. Ian

unwise2

Hi Paul

2016: EPS fc from 39c to 43.1c (27.6p)

2017: EPS fc from 41.5c to 54.1c (34.7p)

MichaelFBS

Just wanted to add my thanks for these reports. Meant to write yesterday but ran out of time. I had £11k in Globo (LON:GBO) in my early days of investing and got out in March 14 with an £87 profit. Entirely thanks to your reports alerting me to the inappropriateness of Globo (LON:GBO) as investment for me (anyone?).

Thank you.

Michael

Paul Scott

Hi Michael,

Thanks for your comments. Globo (LON:GBO) might yet turn out to be a good investment, we don't know the final outcome yet.

I just alert readers to red flags that I see, and then it's up to you to decide what stance you want to take.

Although I think my track record here (e.g. on Quindell, China AIM stocks, and others) demonstrates that I've got a pretty good nose for spotting when something's not right.

And of course if there's significant doubt about a company, then steering clear is usually the best bet. After all, why take risks we don't need to?

Regards, Paul.

Hi Ian,

Yes I agree (your post no.3 above).

The accesso Technology (LON:ACSO) deal with Merlin struck me as a complete game-changer as soon as I read the announcement, hence why I sprang out of bed early this morning & typed up a review of it as quickly as possible (after it taking a bit of time to get hold of the updated broker note), as I suspected that the initial share price rise to 600p was probably still a buying opportunity.

I thought it was going to open much higher, so it's been strange that the price has just trickled up gradually today so far - maybe a large holder is using the liquidity to offload some stock into the rise? I can't see why, after such good news, but sometimes funds have redemptions, or changes of manager, and just want to sell regardless of fundamentals.

Regards, Paul.

janebolacha

Paul,

"And of course if there's significant doubt about a company, then steering clear is usually the best bet. After all, why take risks we don't need to? "

Yes, exactly, unnecessary risks are TABOO, which also stands for "There'll Always Be Other Opportunities".

As you say Globo (LON:GBO) may turn out well but the uncertainty is not worth the risk IMO and the bizarre accounting is enough to put me off based on what I have learnt over the past few years.

There are so many stocks out there (US, EU and UK ignoring the more obscure markets), I just don't don't understand the need for investing in the likes of Globo (LON:GBO) and others you mention.

I am more than happy with where I am putting my money to work now and how I have refined my investment approach over the past few years.

SingSing

Great report !

A lot of work..... Thank you

doug2500

Paul,

Re your comments on pre-emption rights, how do you vote on this issue at AGM's?

I'm never quite sure which answer is most appropriate, the narrative generally sounds sensible but doesn't it always?

I don't remember it ever being defeated, but this also seems the norm.

Thanks

Monty9

I have a holding in GBO and am waiting to see the outcome with considerable interest. I don't believe I am naive however. I am aware of a number of respected investors who are most sceptical, some who are talking it down for all they are worth and also some who believe in the opportunity. I don't plan to argue the merits (or demerits) of the company or its investors / shorters here but simply make the point that such positions can make sense. In my experience, picking the higher risk and unfashionable stocks has landed me with a total or >75% loss on a number of occasions, but those that went according to plan often exceed 100% (TNI [thanks Paul] and Photo me for e.g.) over 30 years this approach has generally been profitable, albeit with some note-able exceptions in 1987 and 2011) and put the deposit on my house in 1992 having started with £11K in some truly dreadful penny stocks.

In a tiny way my approach allows others to decide sell a stock they are unsure of at a reasonable price. That's a market. The one piece of advice I would give is do not bet the farm on any position - unless you are an active director or senior management close to the action, you can never be certain of the real picture and must rely on the integrity of the aforesaid management. Personally I used to keep a 20% concentration limit, but as I approach retiring age and get more loss averse, that has reduced to about 10%.

cyberbub

Paul, I agree with you about the nice way that a handful of companies put the nub of their RNS in the actual title! It's not only Findel, a couple of others do it too.

But your point about it helping to "go quickly to announcements in the 7AM rush" would surely be dealt with much more effectively by actually doing something very different? Something I have always wondered why we don't do in the UK, when they do it all the time in the US....

** ...RNSes at 17:00!!! ** Why on earth not? Surely investors should be treated with more respect than being given a maximum of 60 minutes to absorb news on potentially multiple stocks, and then make up their mind about their day's trading as well? Why should we not be able to take a few hours to analyse results in more detail and discuss them on the boards? Why should the UK be different to the US?

Hi Monty,

Most people are just talking their own books on Globo (LON:GBO) - some short sellers like to scare people into selling. Whereas other short sellers (e.g Matt Earl) have published detailed dossiers online, which raise serious questions.
Whereas the longs of course keep blathering on that all the red flags are imaginary things put out by spiteful short sellers!

Whereas personally, I don't have a position in it either way, so my views are the most unbiased. It doesn't matter to me financially what happens to GBO, as I would never invest in it - the figures look way too dodgy for it to be treated as a serious potential investment, in my opinion. Also, it's probably now too small for me to want to short it - I tend to keep my shorts to only large caps, as it's too risky shorting smaller stuff.

I'm prepared to contemplate the idea that the bulls might be right - IF the company can collect in all the cash that's piling up in debtors, reassure on the cash pile actually still existing, drop these ridiculous plans to raise bond funding at 10%, hold on to an auditor for more than a year or two, etc., and above all actually generate some real cash.

There's no doubt Globo does have a business, but it looks to me basically to be an App developer, that doesn't really make any genuine profit. I don't believe their sales figures either, but that's again just a personal opinion.

Looking at the bulletin boards, I think some of the bulls are starting to realise that actually the many issues being raised by bears do cumulatively put a large question mark over the company.

Regards, Paul.

P.S. I'll happily issue a grovelling apology if it turns out that I'm totally wrong on Globo, but in the meantime whilst the red flags remain, I'll keep talking about them. Safety first.

jonesj

RNS's at 17:00. Excellent idea.
That way Paul can enjoy a lie in on weekdays.
Those of us working would also be at less of a disadvantage compared with the institutions.

PS Can anyone say who they think is the best company to offer a 7AM 'streamer' of company announcements, in a nice list? Stockpedia? ADVFN?

Hi Cyberbub,

That's a really good point actually - in the US I think they shut the market at 4pm, and then have results releases & conference calls, etc, come out afterwards. That way everyone has time to digest the results overnight, which does seem fairer.

On the other hand, the 7-8am mad scramble here in the UK gives the well-prepared investor a big competitive advantage, since if we are well prepared, and put in the effort to correctly interpret announcements before 8am, then we can get the first bite of the cake on the open.

Trouble is, that can also go wrong, in that if you pay too much at the opening spike, and have missed something important in the announcement, then you can end up being the numpty who paid about 10% too much for the stock on an opening spike which quickly subsides! Been there, done that!

Bear in mind that results info does go out the night before to the analysts - that's how they can issue detailed morning notes so quickly the next day. Also there will be lots of other people who know the figure & commentary inside out, before it's announced, who can all deal on the opening bell on results day. So it's a competitive market.

On balance, I quite like things as they are - otherwise we would never get any sleep, getting all hyped up in the evenings, trying to analyse multiple results statements.

Regards, Paul.

31st Jul '15

Hi Jane,

I really like your saying, "TABOO" - there are ... no hang on, what was it again? Ah yes, They'll Always Be Other Opportunities - I shall put that on a post-it note on my screen!

Sorry I didn't get round to looking at Victoria (LON:VCP) after promising to do so. I tried, but my brain was just done for the day by the time I looked at it, circa tea time.

What's your take on things?

Regards, Paul.

Paul, no idea on Victoria (LON:VCP), not one I'd followed.

On being prepared for RNS announcements, one can sometimes get a little way ahead of the game by looking at the LSE Financial Diary listing of expected results statements. The diary is incomplete, I know, but if an RNS is due on a share that is particularly important to you, it can be useful to have jotted down in advance what you'd be looking for in the RNS, figures as well as other factors, also "what if" scenarios.

Best wishes,
Jane.

Hi Jane,

Thx. I'm usually well prepared with diary functions, but there are so many unscheduled trading updates, that I have a simple process between 7-8am, as follows - an email alert service which tells me RNSs from companies I hold shares in. Then a very quick visual review of the RNS service itself, and things just jump out at me!

Sometimes you miss things. As you say, impossible to cover everything.

Normally I'm very busy in bed every morning, skim reading RNSs, but I only leap out if something really exciting crops up like the ACSO thing y'day.

Then my hard work starts - to write up stuff on it that makes sense, and stands up to criticism, which needs the new broker notes, etc., contains no errors, etc.

I'm knackered, so may have a duvet day tomorrow. Listening to R Dawkins videos on YouTube now!

Thanks again for all your input into the community here - I always find your comments very interesting and insightful, you're a big asset to our group - I've always believed that investing is a team sport!

Regards, Paul.

PhilHofGrowYourDough

Hi Monty,

Why would you choose an approach where you can regularly get 75%+ losers and some 100%+ winners when there are strategies that allow you to retain the 100%+ winners and cut the 75%+ losers?

The evidence of the stockrank deciles (so far) demonstrates that the power of the top decile is not an outperformance of the winners but rather a strong reduction in losers.

Since shifting to qvm approach my biggest loss has been 22% on Southwest Airlines Co (NYQ:LUV) and that is a current holding and a failure to sell is a mistake on my part due to a lack of time to monitor my portfolio.

I've had numerous double baggers+ in that time.

Best of luck
Phil

No need for grovelling apology should you prove wrong - a pint of Peroni would do nicely! If I am wrong I will be happy to do likewise.

Small Cap Value Report (30 Jul 2015) - ACSO, SNCL, KMK, CMS, FDL, SWJ

accesso Technology (LON:ACSO)

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Paul Scott

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