GLOBO MKII ?

6th Nov '15 by Bonitabeach

4 comments 11880 reads

Telit Communications TCM has drpped heavily again today - the market seems very nervous about this once favoured stock despite being bombarded with good news stories. I lost enough on GLOBO, where I was a nervous holder but was comforted by whay I hade made on Telit when it was at £3.50.

I did quite a bit of comparison between GLOBO and Telit and held on to GLOBO because they always came out on top - for what the numbers were worth!

All Figures €000's All Figures at 31 December Fixed Exchange Rate Used: $1.1/€
Globo Telit Communications
2009   2014 Movement 2009 2014 Movement

Goodwill        0.85            7.62           6.77        3.17     14.55              11.37

Intangible Assets      12.80          45.30         32.50        8.36     51.45              43.09
Total      13.65          52.92         39.27      11.54     66.00              54.46

Retained Earnings      11.00        102.20         91.20 (23.90)     51.45              75.35

% of Retained Earnings Absorbed

By Increase in Goodwill & Intangibles 43%

72%

Operating Profit
       37,321

13,834

Internally Generated

Intangible Assets in the Year        23,565

25,395

As % of Operating Profit 63.1%

183.6%

Trade Receivables

Total
       49,448

58,152

Past Due
         5,833

13,535

% Past Due
11.8%

23.3%

Does somebody know something the poor PI doesn't?

Disclosure: Long: GBO, TCM.

Bonitabeach

Unlock with Email

Unlock with Google

Already have an account?
Login here

ls2g08

6th Nov '15

Hi Bonitabeach, you may want to look at reformatting your note by placing the numbers in a table, it is hard to interpret your point.

Kind Regards

L

Mark Carter

I almost think software houses can't be valued on PE ratios. Cash from operating activities was £46.2m, but "investing" activities was £40.8m. £26.1m of that was for software development costs. Depreciation and amortisation costs was £14.9m.

You COULD argue, of course, that the reason that the development costs are so much higher than depreciation is that it is due to investment in the busines.. Or, you could argue that there's a major massaging of figures going on. I don't think it's unique to Telit Communications (LON:TCM), though, I think it's just a little game that all software companies like to play.

A few other points ... mean ROCE over 5 years is 7.2% according to Stockopedia, which is not good, especially if you consider possible massaging. The median is 9.7%, which is better.

I know that this is going to come across as xenophobic, but being on AIM and all the directors having foreign-sounding names puts me off. Also, the company has been public for a decade, but has never paid a dividend.

What would I pay for the shares? As an incredibly incredibly lazy valuation, how about 15 X FCF (5.24p). About 80p.

I see that TCM has released an RNS today. What caught my attention in particular was "By 2020, it is expected that over 50 billion objects, machines and devices will be connected to the Internet worldwide, which will enable entirely new business models,". To my mind, the RNS is a bit of a red flag, in that it is heavy on the rhetoric, but contains no hard numbers. The RNS comes across as being very promotional.

I am sure others will completely disagree with my assessment, and I completely respect them for that. I guess I'm too jaded by AIM-listed companies.

As ever, we shall see. Best of luck.

I noticed that Paul Scott did a report on Telit Communications (LON:TCM) today (http://www.stockopedia.com/content/small-cap-value-report-6-nov-2015-tcm-110730), which I was unaware of.

I see that we both highlighted concerns over the cashflow statement and the capitalisation of development spending. He also pointed out the lack of dividends.

I wonder if we were separted at birth. Which one is the evil twin?

Hi Is2g08,

Apologies for the lack of coherent formatting but I have almost lost the will to live with the Stockopedia text editor. It looks fine in the draft, press the submit button and it goes through the shredder.

Try: GBO v TCM

GLOBO MKII ?

Unlock the rest of this article with a 14 day trial

About the Author

Bonitabeach

4 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...