Small Cap Value Report (31 Mar 2015) - ECK, PURI, MCO, CTG, ULT, CHA

31st Mar '15 by Paul Scott

17 comments 19722 reads

Good morning! I had a second wind last night, and added sections on four more companies, so to recap on yesterday's complete report, this is the link.

I saw a snippet on Twitter this morning, saying that UK consumer confidence has hit a multi-year high. So I will be increasing my focus on consumer-driven shares. Generally I'm bottom up in approach to picking stocks, but I like to keep an eye on which way the macro winds are blowing (very topical!), as you increase your odds of investing success if there's a macro tailwind assisting the companies that you invest in.

Eckoh (LON:ECK)

Share price: 39.25p
No. shares: 223.1m
Market Cap: £87.6m

Update - this speech recognition software company updates for its March year end. The company performed "particularly strongly" in Q4, winning 6 new multi-year contracts, and 2 new contracts with existing customers. The growth area seems to be secure phone payment systems, and the company refers to its "growing dominance in this sector". A further 8 contract renewals which came up, were all successfully renewed - good news. So this company clearly has a product which appeals to its customers, always a good starting point!

The financial benefit of the new contracts will not benefit the year ending today by the looks of it, as the company refers to revenue in the new financial year "supporting current growth expectations".

Outlook - all sounds positive (with my usual wonky highlighting of key phrases);

Valuation - hmmm, this is where it stops looking good. I like the company (have known it for years, I remember being in these when they were about 5p, and they never went anywhere, so I got bored & moved on), but everything has its price, and the price here just looks too high, given that growth is steady rather than stellar.

So a sea of red there, although it looks as if there might have been some one-off costs in the 2013/14 figures, which is suppressing the quality scores. Based on forecasts, net profit is seen rising to £2.88m for the year ending today, and £3.53m for next year, EPS of 1.25p and 1.35p respectively.

It would only make sense to buy this share if you think that the company can thrash forecasts for next year (y/e 31 Mar 2016). Given the positive contract…

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Mrx9000

31st Mar '15

Looks like decent results at MCO today Paul...

MrContrarian

There was a naughty prelims RNS after hours yesterday by Powerfilm http://www.investegate.co.uk/powerfilm--inc--pflm-/rns/powerfilm-reports-2014-full-year-results/201503301636218909I/

FREng

Positive results from Inland Homes (LON:INL) .

jraitt

Interested to hear your views on NANO placing and price movements. Pity no shareholder participation.

MichaelFBS

I dont suppose you could find the time to cast you eye over Christie (LON:CTG) figures out today http://www.investegate.co.uk/christie-group-plc/rn...

I am a holder and they have performed well for me over the past three years.

Thank you.

Michael

Paul Scott

Hi Michael,

Yes, I'm hoping to get to Christie (LON:CTG) fairly soon. Am having computer problems - shockwave flash has crashed the computer & I lost a whole section of the report, which I'm having to recreate now.

Regards, Paul.

actsofvolition

Paul,

RE Puricore

From what I can tell, if you exclude the exceptional "Loss on discount of convertible bond" from last years profit figures, then this year's loss from continuing operations is not slightly better than last year but actually a great deal worse as Operating Expenses have not reduced anywhere close to the the 50% reduction in Revenue.

Bugger. Flash is horrible software I believe. Hopefully Ed can give you a better way of updating the blog in time!

Hi jraitt,

I had a quick look at NANO, but it's too speculative - tiny turnover, but massive valuation. I'm trying to avoid that type of company, as they always seem to go wrong!

So am trying to keep the focus here a bit more on value situations.

Regards, Paul.

Hi actsofvolition,

Ah OK, thanks for pointing that out, I'll double-check & edit the article if necessary.
Must admit, it did seem odd that they said the loss had reduced, as I thought the company had traded a lot worse than in 2013.

Regards, Paul.

Thegrimester

Hi jraitt,

Be aware that there is a big fight between bull and bears on Nanoco (LON:NANO). Nanoco (LON:NANO) is always high on the list of most shorted shares. I wouldn't say bargepole but defintely high risk. I sold out recently (too late unfortunately) as it seemed to be going downwards.

The killer for me was that they were talking about big contracts with Dow and LG for nanodots for TV screens. However at the recent CES everyone one was talking about nanodots (samsung etc) but they werent buying them from Nanoco (LON:NANO). They clearly have competitors and even internal development from the big display makers.

If their IP has no value what is the point?

Hi actsofvolition,

Many thanks, I've now added an EDIT section to the main article, to correct the error.

Thank you for being on the ball, and spotting this.

Just shows, you can't trust the narrative in results statements, can you?! The company misled on this point in the financial highlights, although in fairness they do mention the loss on the convertible later on, in the financial review, but I didn't get that far.

Always good to have readers check my work, it's a team effort! I don't make many mistakes, and it's annoying when something does slip through the net, but thank you very much for pointing it out.

Regards, Paul.

Re Nanoco (LON:NANO), I'm not even going to look at it! My track record on story stocks is absolutely lamentable, and it's dawning on me that I'm dissipating a fair bit of the profits from my value/GARP investments by taking the occasional punt on a story stock.

So I think the furthest I keep away from this type of stock, the better!!!

PP.

Paul,

No problem! I've learnt a great deal and enjoy reading your reports, so happy to contribute. I think its accepted that to go over every detail of every piece of news would take a great deal of your time especially for certain stocks that aren't showing any signs of promise ; this omission did not detract from the essential point you made.

Ramridge

Hi Paul - precisely my sentiment. When I invest I focus on stocks with substance and value. When I want to gamble I play poker. Simple.

Paul, Sorry I was never suggesting you comment on NANO as a Company just the placing. You had made a point that PIs should be included - they were not. The day or so before notice of move from AIM it rose 12%+ the returned on the placing. Seemed odd.
I look forward to my daily read and have learned much from you approach. My recent buys are less exciting, but much more profitable Thanks

Hi John,

Ah I see what you mean, sorry.

Good to hear you're getting some good stock ideas here. The main rule is to ignore what I say on speculative companies, and DYOR on value situations!!! Now I need to practice what I preach lol!

PP.

Small Cap Value Report (31 Mar 2015) - ECK, PURI, MCO, CTG, ULT, CHA

Eckoh (LON:ECK)

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Paul Scott

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