Small Cap Report (26 Apr) - FCCN, SDM, ZZZ, IMTK, CMH, CAP, BEG

Pre 8 a.m. comments

Starting off with several announcements from companies that I hold shares in.

I'm scratching my head a bit over the abrupt departure of the FD at French Connection (LON:FCCN). He's leaving today, which seems unusual since there is no replacement. My guess is that suggests some kind of falling out, but who knows? A long-serving FD leaving is bound to make investors jittery. I think many of us would have preferred to see the founder resigning, as he's made such a hash of running the company in the last few years (as judged by the poor financial results), and most people I've spoken to agree is well past his own sell-by date.

 

On a similar theme, I was very surprised to read this morning that the CEO of Stadium (LON:SDM) is also leaving. He presented at the Equity Development Investor Forum only last week, talking about their strategic plan to build it into a bigger group. He did seem an unusually heavyweight Director for such a small group though.

 

Snoozebox Holdings (LON:ZZZ) results look pretty awful, but it's their first proper year of trading. Even so, a loss at the gross profit level calls into question whether they have a viable business model? Probably too early to say, but I'm glad I sold these a few months ago - the price looked to have got ahead of itself, as is often the case with small growth companies - people get over-excited with the concept, and then get a rude awakening when results are published.

Also, Snoozebox recently announced problems with revenue recognition, indicating a lack of financial control. I see both a new FD and COO have been appointed today, which is a good thing. I might revisit it if the price comes down substantially.

 

Post 8 a.m. comments

It's the Master Investor conference in Islington tomorrow. I'll be dropping in (probably after lunch), and might be hovering around the Stockopedia stall at some point, chatting to investors. So do come and say hello if you're there, I always enjoy meeting and talking to other investors.

 

Interesting to see that the plan to De-List at Imaginatik (LON:IMTK) has been changed. They are now having another crack at making it work, with investors putting in a fresh £1.2m through a Placing. Directors have also agreed to swap some of their salaries for shares. I wish them luck, but really don't think they have a viable business model at all.

 

Chamberlin (LON:CMH) might be worth a look. This is metal basher that warned on profits on 28 Jan. However, it looks like things have stabilised there, with a reasonable trading update today. 

 

I normally allow myself one reasonably priced, more speculative share, which is Clean Air Power (LON:CAP). They have interesting technology which allows diesel-engined HGVs to run mainly on natural gas. Given the boom in shale gas, especially in the USA, this could be big business. The product works, and is already out there being sold, both as retro-fit, and for new Volvo trucks.

Anyway, they have announced today the award of a $2.6m grant to develop vehicles for testing & sale in the USA. The market cap is only £16m, which strikes me as very reasonable for a promising technology that is just starting to be commercialised. Experience tells us that these things always take longer, and cost more to commercialise than anyone anticipated. However, the commercial logic for running HGVs on natural gas, given its abundance & low price, seems pretty crushing, which is why I like CAP.

 

As a holder of the shares, I'm pleased to see that Begbies Traynor (LON:BEG) have announced new banking facilities. Very unusually, their borrowings are unsecured, which gives you an idea of how good their relationship with the Banks must be.

Although they also announced recently that the insolvency market is quiet, with the economy showing good signs of recovery. The main attraction of BEG shares is the 6.7% dividend yield, and the forward PER is only 5.6, so that dividend should be well covered, and therefore reasonably secure, especially now new banking facilities are agreed.

 

That's all for today. Usual service resumes on Monday morning at 8 am.

Have a super weekend.

Regards, Paul.

(of the companies mentioned today, Paul has long positions in: FCCN, BEG & CAP. He has no short positions)