Small Cap Value Report (7 Aug) - FLTA, TAP, PTSG, TCM, UPSG, SGP

Monday, Aug 07 2017 by
75

Good afternoon!

Today I've covered::

Cheers

Graham


P.S. It's Paul here - Graham has passed me the baton, and I have added some extra comments on the poor interim results from Telit Communications (LON:TCM) , plus additional comments on Graham's sections below.




Filta Group (LON:FLTA)

  • Share price: 134p (+7%)
  • No. of shares: 27 million
  • Market cap: £36 million

Trading Update

This is a US & UK franchisor of services for restaurants and other food establishments. The main service is FiltaFry (see here) which recycles cooking oil and cleans industrial fryers. There are a bunch of other related services too, some of which are operated directly by the company itself in the UK, rather than by franchisees.

2016 results were hurt by AIM admission costs but otherwise it would have been profitable.

Obviously that makes it a new listing: it has only been listed since November 2016.

I've studied it before and come away with a positive impression: strong growth rates combined with the capital-light franchise model make for a happy combination, in my book.

This trading update (for the six months to June) continues the high growth story:

The Group has experienced revenue growth of some 38% over the same period last year with each of our primary operating segments experiencing double digit growth. We have seen strong performance in both the US and in the UK, with US growth being driven by increasing numbers of franchisees, increased royalties from our existing franchisees and the UK growth being due, principally, to a very strong performance from our owned businesses.

The shares are up today even though the company confirms that H1 growth is merely in line with expectations.

Perhaps the gains are due to the company re-iterating its view that growth is expected "for the foreseeable future", as it takes advantage of cross-selling opportunities to existing customers with more valuable services.

That is a really strong point in the company's favour: once you start selling a restaurant or public canteen services to do with their fryer, it's potentially quite…

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Disclaimer:  

All my own views. I am not regulated by the FSA. No advice.

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Filta Group Holdings plc is a provider of various services to national and independent commercial kitchen operators and owners. The Company's principle service is FiltaFry, which is the micro-filtration of cooking oil, the vacuum-based cleaning of deep fryers and full Fryer Management. Its business operations are within the United Kingdom and the United States. The United States operations are operated as a franchise network, while the United Kingdom activities are operated under both franchise and direct sale business models. In addition to FiltaFry, Franchise Owners offer other fryer management services provided and managed by it, including waste cooking oil collection and removal (FiltaBio) and the supply of cooking oil (FiltaGold) and non-fryer related kitchen services, including the provision and servicing of moisture absorption panels for refrigeration units (FiltaCool). It has over 169 Franchise Owners, of which 130 are located in the United States and 39 in the United Kingdom. more »

LSE Price
135p
Change
 
Mkt Cap (£m)
36.4
P/E (fwd)
20.9
Yield (fwd)
1.6

Taptica International Ltd offers data-focused marketing solutions that drive execution and brand insight in mobile, leveraging video, native, and display to reach the users for every application, service, and brand. The Company’s technology is based on artificial intelligence and machine learning at big data scale. The Company works with more than 450 advertisers, including Amazon, Disney, Facebook, Twitter, OpenTable, Expedia, and Zynga, and more than 50,000 supply and publishing partners worldwide. more »

LSE Price
392.5p
Change
-2.5%
Mkt Cap (£m)
241.3
P/E (fwd)
12.0
Yield (fwd)
1.5

Premier Technical Services Group plc (PTSG) is a United Kingdom-based company engaged in the maintenance, inspection, testing, repair and installation of permanent facade access equipment, fall arrest systems and lightning protection systems together with fixed wire and portable appliance testing and high level cleaning. The Company operates through three segments: Access and Safety, Electrical Services and High Level Cleaning. The Company's Access and Safety segment offers Safety Testing, Safety Installation, Cradle Maintenance and Cradle Installation. The Company's Electrical Services segment offers Lightning Protection, Fixed Wire Testing, Portable appliance testing (PAT) Testing, Fire Alarm and Extinguishers, and Steeplejack Services. The Company's High Level Cleaning segment offers Window Cleaning, Gutter Cleaning, Building Cleaning and Pressure Cleaning. The Company's Training Solutions division offers Training, Consultancy and Insurance Inspections. more »

LSE Price
160p
Change
-0.3%
Mkt Cap (£m)
166.4
P/E (fwd)
18.0
Yield (fwd)
1.1



  Is Filta Group fundamentally strong or weak? Find out More »


60 Comments on this Article show/hide all

FREng 8th Aug 41 of 60

In reply to Graham Ford, post #31

Graham

Good point about the low percentage of Taptica International (LON:TAP) sales being in Europe, though AFAIK, GDPR covers all processing of the personal data of EU citizens, so the impact may be greater than the sales percentage.

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FREng 8th Aug 42 of 60
8

In reply to JohnEustace, post #28

Shouldn't they be called "Scotty dogs"?

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willhampson 8th Aug 43 of 60
1

In reply to Graham Ford, post #32

Agreed with that. I think its fair to query why an overseas company lists overseas, but I think often people place too much emphasis on this. I do query the massive skepticism that appears to exist towards Israeli stocks in the U.K., which I think unduly prejudices a stock like Taptica International (LON:TAP). This simply doesn't exist in the U.S., which is why the majority seek a listing on the NASDAQ. I would not be shocked to see Taptica look into this in the future.

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Beginner 8th Aug 44 of 60

In reply to martinthebrave, post #12

Premier Technical Services (LON:PTSG) remind me of Lakehouse (LON:LAKE) , in that they are growing by acquisition and are less a business than a conglomerate of separate ventures. They may be a little more specialised, and a bit higher margin, but there are marked similarities.

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Howard Adams 8th Aug 45 of 60
1

In reply to InvestedGeordie, post #23

Hi InvestedGeordie

Following up on your note about the share sale by the CFO of Taptica International (LON:TAP) being one of your concerns. (I hold). And thanks for prompting me to look more deeply (see below).

According to this RNS (22/03/17) the CEO still holds 18.2%

https://www.investegate.co.uk/taptica-int--ltd--tap-/rns/director-pdmr-shareholding/201703220700081460A/

Detail of major share holdings is on page 19 of the 2016 annual report.

http://www.taptica.com/investo...

The report states that as at 7 June 2017 total issues Ord. shares 60.558m and 8.088m held in treasury (13.36%).

CEO hols 18.2%. I interpret (but do not know for certain) that three others close to the company hold 18.3% then a cohabiting couple (disclosed in the notes) hold 10.6% between them. Thus 41.1% between these four people. Then six institutions hold 43.16% between them.

If my interpretation is correct this implies these four people and the six institutions hold 90.26% of issued shares!! Wow .... that has surprised me.

Will I still hold???? time to think more. Comments welcome

Regards

Howard

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andrea34l 8th Aug 47 of 60

I didn't understand the update on SGP. Is there any news?

It looks like it has just broken through it's 200 day MVA...

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Howard Adams 8th Aug 48 of 60

In reply to circuslover, post #46

Hi circuslover

Thanks very much for that link. That offers useful insights.

The article has helped me understand that the four insiders I mentioned are the Angel investor, the CEO, the former COO and her co-habitee. The article states they sold 16.9% of their holdings (26/07/17).

As the June report states between them they held 47.1%, this suggests that instead of 90.26% of shares being held by insiders and institutions, 73.36% are now liquid (if they haven't been hoovered up by the institutions or other big holders).

Looking at the recent share price graph, whereby the 26/07/17 event can be seen in a SP drop, I gain some confidence in that after that the SP has risen steadily.31/07/17 382.5, today 08/08/17 407.4 up 6.5%.

I think I'll hold for a while. But I keep my -2% Alerts primed to trigger.

Many thanks for the link.

Other comments gratefully received.

Regards
Howard

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martinthebrave 8th Aug 49 of 60
2

In reply to Beginner, post #44

Beginner - #PTSG I think you need to look a bit deeper. Another contract awarded today & currently up +8%. Nothing like #LAKE IMO. A much bigger Moat as they are specialists in their field. A very "hot" field at the moment! DYOR.

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Beginner 8th Aug 50 of 60

In reply to martinthebrave, post #49

Yes, very different in many ways, and I can definitely see the price increasing from here. But it still seems a little overpriced for a small scale contractor (PER = 17). One poorly performing acquisition or one contract failure, and this could stumble in a big way. And stumbling is to be avoided at all costs if you are working at heights!

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Paul Scott 8th Aug 51 of 60

In reply to FREng, post #42

Shouldn't they be called "Scotty dogs"?

I like it!

PP.

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Alexgedla 9th Aug 52 of 60

Telit - the parallels with Globo seem alarming. Has finncap replaced Canaccord ??

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catalogue 9th Aug 53 of 60
1

For those looking to dig into Taptica in more depth - this might help https://www.pulpix.com/insights/blog/what-are-ssp-and-dsp/. There are lots in this space https://www.quora.com/Who-are-the-leading-mobile-SSPs-in-India?share=1, http://investors.matomy.com, https://clickky.biz/publishers/ - I am not sure that GDPR will have much impact other than that it will be the same for everyone. This is quite interesting as well https://adexchanger.com/tv-and-video/end-ssp-era/ - i sent an enquiry to Taptic and signed up to their site and have received no reply.

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ricky65 9th Aug 54 of 60

Filta Group (LON:FLTA) breaking out from the first primary base since the IPO.

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LittonOwl 9th Aug 55 of 60
1

In reply to FREng, post #9

One of the more reliable poster's on advfn (nurdin) has posted an email reply from Taptica  when queried on the potential impact of the EU regulation:

"Many thanks for your email to Taptica. They have asked me to respond to your query regarding the impact of the European regulation.

We are still examining and evaluating the finer details of the bill but on first reading, the bill will not have an impact on Taptica as the Company uses annonimised data rather than personalised data such as name, address etc.

Hope this answers your query."

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timarr 9th Aug 56 of 60

In reply to LittonOwl, post #55

If that's correct then Taptica are largely isolated from the impact of GDPR - the aim is to prevent personal data being collected and used without consent. As long as the data can't be traced to an individual then the impact is largely benign. However, this has been known about for a year, so it's a bit surprising they don't already known what the impact is on their business.

timarr

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FREng 9th Aug 57 of 60
2

In reply to LittonOwl, post #55

I'm not a shareholder in Taptica International (LON:TAP) and I haven't studied their business in detail, but that seems bonkers.

It is perfectly reasonable if all they do is statistical analysis of the data they hold. But if they use it in any way to help companies to target advertising to individuals, or to assess the impact of advertising campaigns on individuals, then they are processing personally identifiable information.

GDPR specifically defines IP addresses, for example, as personal information.

If they are never processing tdata hat is personally identifiable, then where is the revenue growth coming from?

| Link | Share | 1 reply
timarr 9th Aug 58 of 60
1

In reply to FREng, post #57

Interesting ...

http://www.taptica.com/privacy/

Pseudonymous personal data under GDPR is not excluded - it just makes it less risky to hold. However, as long as the personal data - in this case the Device Id - isn't shared and they don't hold any other personally identifiable information then they're pretty safe from most aspects. However, a Device Id is still considered personally identifiable information and pseudonymisation doesn't change that - so consent is needed and they'll need to re-establish it on the basis of GDPR.

So, in short, on the basis of the above link I think they're wrong: GDPR will have some impact. On the other hand, as long as they're careful I wouldn't think it would be a major problem because the data isn't used and isn't usable to actually identify people.

Of course, the link may not be representative or may be out of date ...

timarr

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kev231072 9th Aug 59 of 60

Hi Paul,

Just a quick one - in telit statement above you say the following....

Note that $17.9m of costs were capitalised into intangible assets in H1 - an enormous number, and another red flag.

Where did you get this figure from?
I am a newbie and still finding my way....thanks for everything.

Kevin

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PeterW 11th Aug 60 of 60

In reply to Graham N, post #6

Thanks for that Graham. If I meet them or get any better insight I will give you feedback. I remain a slightly nervous investor.

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About Graham N

Graham N

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified and hold an audited, FTSE-beating investment track record.  Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »

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