Small Cap Value Report (31 Oct) - GBO, PLA, MMC, SMJ

31st Oct '13 by Paul Scott

39 comments 23903 reads

Good morning! I'm running slightly late today, this was due to the first planning meeting taking place last night at a local watering hole for the new Brighton & Hove branch of ShareSoc. This is intended to be a friendly, fun group of investors, who will meet on Friday evenings once per month informally, probably in a Pub near Brighton railway station (so easy to get to, even for people in London), and then a more organised meeting with speakers (e.g. local Listed companies, and other interesting speakers, and a buffet) once a quarter. So far about a dozen people have expressed an interest, so anyone else who likes the idea of meeting up with fellow investors (of all levels of experience) for a fun evening every now & again in Brighton, then do please let me know, so I can put your name on ze list. Being Brighton, we're looking to make it Green, PC, fully-recyclable, and gender-balanced, rather than all-male! So I'm particularly pleased that out of the 12 people who have already expressed an interest, 4 are ladies. More details to follow.

The big news this morning is the Additional Information statement from Globo. Quite why it has taken them 3 days to put together a 4-page series of bullet points, is beyond me. On a quick skim, I can't see anything in there that changes my view about the company. The main focus of the statement is explaining why debtor days are so extended. Also, it emphasises that the divestment of the legacy business was almost cash/debt neutral.

Although I am puzzled by their statement that;

?o trade receivables due to Globo
were moved off balance sheet as part of the disposal.

This just doesn't make sense to me. If you de-consolidate a subsidiary by selling 51% of it to your own management, then all the figures will be moved off the balance sheet, and be replaced by an "investment in associate" single line on the Balance Sheet. So I am perplexed as to how they can claim that no trade receivables were moved off balance sheet, when in reality all of GT's trade receivables (and other Bal Sheet items) will have been moved off Bal Sheet. Perhaps any reader who understands this point better than me can explain?

There's no convincing rebuttal…

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Roger Lawson

31st Oct '13

Regarding Paul's comments that "The existing laws of defamation, etc, already cover this area, such that the company is free to sue EK if they wish to.", it is not practical for them to do that. Firstly it takes much too long and the damage has been done. Secondly it just spreads the libel around. See the Maclibel case for why companies generally do not sue for libel. It's exactly the same problem as we have seen with the Press. Impractical to sue them and those who make money from malicious or untrue comments or otherwise misbehave generally get away with it.

Jam7

Royal London increases stake in GBO.

The must be delighted the shorters got them such a good entry level.

RBC increased price target other day to 110p.

Let see what happens after today's better than expected trading statement which showed growth is actually accelerating to 70%.

Leven

"Not to mention the entire financial system being geared up to persuading investors to over-pay for shares" Yep, including all the central banks!

lightningtiger

With revenues profits , and EPS all increasing every year from 2007,that is good enough for me with GLOBO. It has an excellent track record behind it. OK dodgy accounts have had their impact, but now having a more realistic valuation, I can see the only way is up. That is only my opinion, but it is my gut feeling. It goes against my usual sell on a stop loss principle.
I have made a few mistakes in the past, but I try and learn from them.
Cheers from Lightningtiger

Oh what a great humbler of man is the stockmarket.

JakNife

Paul,

When Globo write:

"?o trade receivables due to Globo were moved off balance sheet as part of the disposal."

I interpret this as meaning that receivables were not deliberately transferred into the subsidiary in advance of the disposal. The various online commentary questions if (alleges that) this was done.

On the "market abuse" front I quite agree that people should learn to ignore the ramping/de-ramping comments but FWIW so do the FCA, here's an old publication:

Market Watch, Markets Division: Newsletter on Market Conduct and Transaction Reporting Issues
We recognise that people are always free to express their own opinions via bulletin boards and that often these are not based on careful analysis or research. For this reason, we have warned people in the past to take particular care when basing their investment decisions in whole or in part on such opinions. We regularly receive complaints from investors about opinions that are being expressed where they personally hold a different view. We are clear, however, that the market abuse regime is not designed to limit the freedom of expression of personal opinion; rather it is designed to prevent abuse by those who disseminate information purporting to be fact that is false or misleading.<i>

from:http://www.fsa.gov.uk/pubs/newsletters/mw_newsletter13.pdf

regards,

"rather it is designed to prevent abuse by those who disseminate information purporting to be fact that is false or misleading. "

Openly calling a company a fraud and a scam would fall into this category and must not go unpunished,

staverly

Paul,
Re. point 2 of their "Disposal of subsidiary", Note 15 in AR shows that "Trade receivables" include intra-group balances. Given the offending amount is material: euro 29.7m - are we any the wiser? Me thinks not. Have i missed something?

Share purchase by founder & CEO

Globo plc (LSE-AIM: GBO), the international leader and technology innovator delivering enterprise mobility management and telecom software products and solutions, announces that its founder and CEO, Costis Papadimitrakopoulos, today purchased 150,000 ordinary shares in the Company at 65 pence each.

Hey that's more good news, seems my hunch could be right after all. Being the founder,he knows it is the right thing to do. It's a buy from him & a buy from me.
cheers from Lightningtiger

I always find it rather unsettling when analysts lose the ability to be objective.They are simply falling into the same trap everyone else does.

cig

Roger, it seems to me you want to make adulthood illegal. It's a basic life skill to be able to identify clowns and false prophets, in investing and outside. While it makes sense to police what companies say, to some extent, because they are a primary source, third parties should be able to say whatever they want, and let people judge what is balloney and what not. The volatility that clowns choreographing dumb money creates is just a tremendous opportunity for your adult members.

Edward Croft

Everyone is really getting their knickers in a twist about Globo. The stock is up 200% over the last 12 months and was recently up 300%. People who invested in it at 23p have tripled their money. Anyone who is upset by volatility in a stock like this really ought to just go on holiday. Frankly, with or without supposed 'bear raids' a fast growth stock like this is always going to see wild swings in it's share price. This is what happens. It's called a market. It's an argument. It's Bulls versus Bears. Grow up everyone.

Just for fun here's a chart of a stock that had a similar decline in 2008. Exactly the same rocketing share price. A 300% gain, and then a big drawdown. It didn't need any bear raids to make this happen. It's called Gravity.

Is there anyone who can tell me the name of the share ?

Gravity will explain the Asos share price then!

Pennies to almost £60 in a few years.

With serious doubters all along the way.

Which begs the question,better to be right,or be rich?

Edit:" After writing this, I decided to open a short position on ASOS at £52.60, now done. I very rarely short anything, and am only interested in shorting large caps & keeping the position size small, to limit the risk)."

Talking of which have you closed your short?

I see the shares are trading at £56

extrader

Hi Edward,

Looks like ASC to me.

I had 100,000 at an average of 5.9p......

Sold out far too early (expiry of AIM taper), but still cleared about £ 180K.

Small beer, compared to the current £5.7M, but there you go !

ATB

kevanp

And here's what I think in relation to the Globo discourse (as someone who has never owned, and quite probably never will, Globo shares).

1. Shares are traded in a market place. If anyone who buys shares doesn't understand this, they really shouldn't be there.
2. In a market place there will always be people trying to sell you something, or trying to buy something from you. To endeavour to obtain the highest, or lowest, price, they will often use hyperbole or other trickery. This is human nature. Not for nothing was the phrase 'caveat emptor' coined.
3. At what point these devices become illegal is normally something that the courts have to decide. It can hardly be left to the judgement of the market place owner, who is unlikely to be equipped with all the relevant facts, nor the required legal knowledge. And as we are all aware, obtaining legal redress, even in a sophisticated and democratic society such as the UK's, is difficult and potentially not worth the expense.
4. That being the case, anyone buying or selling in a market place can only rely on their own judgement, knowledge, and research. If any of these is lacking, they really have no one to blame for their poor decisions but themselves.
5. If society doesn't feel that people should be exposed to the risk of exercising poor judgement the only solution is to shut the market place, or to limit entry to those who are considered to be qualified to understand and accept the risks. Is that what we want?

Just to be clear, I am not condoning illegal behaviour. I am just saying that it is probably a good idea to accept that it exists, and to take the necessary steps to minimise the likelihood of being a victim of it.

Ultimately this is why I concur with Paul's philosophy, which, in my words, is to mitigate risk in the share trading market place by basing investment decisions on whatever facts (remember those?) are available about a company; and the whole point of company accounts is to present the facts (though even these are subject to manipulation and interpretation). If you are confident in the logic of your decision to buy a company's shares, and their price is subsequently depressed by nefarious manipulation, this surely represents a good buying opportunity. If of course their price is inflated by similar means, just ride the wave to the point at which your original purchase judgement is no longer valid. Either way, decisions made on this basis are much less likely to be bad ones.

Rather than just accept illegal behaviour exists,why not try and stamp it out?
The problem with your argument is there are people,no names mentioned Mr Cawkell,who take advantage of the idea they are above the law and unstoppable.

Yeah - it was too easy - its ASOS (LON:ASC) ! But of course ASOS has had a number of big drawdowns along the way without anyone needing to blame shorters. Drawdowns are part and parcel of big moving stocks.

Boom let's crash the housing market...
Osborne 'to tax foreign property owners' on profits they make from UK homes to deflate London and South East property bubble
Chancellor could slap capital gains tax on on non-resident property sellers in December's Autumn Statement
UK residents pay CGT at 18-28% on proceeds from the sale of second homes
Wealthy foreign buyers blamed for pushing property prices out of reach of many UK workers

By Ed Monk

PUBLISHED: 11:36 GMT, 31 October 2013 | UPDATED: 12:45 GMT, 31 October 2013

GeorgeOsborne will move to deflate the London and South East property bubble by forcing foreign property owners to pay tax on the gains they make selling UK homes, according to reports.

The Chancellor of the Exchequer is considering announcing in his Autumn Statement in December that capital gains tax will be imposed on non-resident property sellers for the first time, Sky News reported today.

UK residents must pay CGT - at 18 per cent for basic rate taxpayers but more usually 28 per cent - on proceeds from the sale of second homes. This does not currently apply to non-resident owners.
Imposing the tax would reduce the attraction of UK property to foreign buyers who have been blamed for helping to push property prices to record highs and taking home-ownership out of the reach of many UK workers. The Treasury would not comment on the speculation.

Small Cap Value Report (31 Oct) - GBO, PLA, MMC, SMJ

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Paul Scott

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