Small Cap Report (15 Feb) - TRK, NXR, SNX, ISL, SAND, DQE, MBE, FFA

Friday, Feb 15 2013 by

Torotrak (LON:TRK) has been trying to commercialise its revolutionary Infinitely Variable Transmission (IVT) for vehicles, which they claim can deliver 20% fuel savings (in urban driving), for almost the entire time I've been actively investing in the stock market (about 15 years). It never quite seems to achieve proper success, but always seems on the cusp of it. Hence I'm very sceptical about this company, especially as the founder departed not that long ago - if the founder throws in the towel, why should anyone else believe in it?

They seem to have branched out into other areas, and now also make variable drive superchargers (V-Charge), and mechanical kinetic recovery systems (M-KERS), which I assume must be some form of energy recovery from braking? Automotive things interest me, as I've always been a total petrol-head, and used to love dismantling and repairing cars.

There doesn't seem to be anything exciting in this morning's IMS. Looking back at the last set of accounts (interims to 30 Sep 2012), Torotrak had current assets, less total liabilities of £9.4m (of which £10.7m was cash), so they are in a strong financial position. Historically they lose on average about £2-3m p.a., so there should be enough money in the kitty for them to keep going for about 5 years, even if they don't make any commercial progress.

The market cap is £42m at 25p/share, which looks pretty aggressive to me, given the long-term failure to make any significant commercial progress with this product (although they have managed to get it into some niche vehicles). Personally I'd only be prepared to have a flutter on this if I was paying little more than net cash, so about a quarter of the current share price.


Incidentally, the RNS news service from Investegate which I have used for years, every morning to get company results, has been very unreliable of late, omitting a lof of RNSs first thing, then they appear later in the day. I asked on Twitter a moment ago for an alternative, and Dan from Shares Magazine helped me out by recommending DigitalLook as an alternative source for company news. Thanks Dan! Just shows how useful Twitter is to investors, it's a great way to communicate.

I should also add that Stockopedia have major upgrade plans in the pipeline for…

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Torotrak plc is a United Kingdom-based technology development company. The Company designs, develops and delivers technologies focused on products, such as Gearless traction drive transmissions (Torotrak), Variable drive superchargers (V-Charge) and Mechanical kinetic energy recovery systems (Flybrid). The Company's segments include licence agreements, engineering services, and development activities, including research and the creation of new intellectual property. The Flybrid technology relates to design, development, manufacture and control of high-speed flywheels for use in moving vehicles. Its V-Charge is a variable drive supercharger for gasoline and diesel engines. The V-Charge allows downsized engines to maintain their emissions levels. The Company's infinitely variable transmissions (IVTs) combine its full toroidal traction drive variator with other conventional transmission components. more »

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Norcros Plc is a holding company for the Norcros Group. The Company's principal activities include development, manufacture and marketing of home consumer products in the United Kingdom and South Africa. The Company's segments include UK and South Africa. The Company has six United Kingdom businesses, including Triton Showers, Vado, Croydex, Abode, Johnson Tiles and Norcros Adhesives, and three businesses in South Africa, including Johnson Tiles South Africa, TAL and Tile Africa. The Company is focused on showers, taps, bathroom accessories, tiles and adhesives. In the United Kingdom, the Company offers a range of bathroom and kitchen products both for domestic and commercial applications. The Company offers mixer showers and accessories; tile and stone adhesives; taps, bathroom accessories and valves; bathroom furnishings; ceramic wall and floor tiles; kitchen sinks; tile adhesives, pourable floor coverings and tiling tools through its United Kingdom and South Africa business. more »

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Synectics plc is a United Kingdom-based company that designs, delivers and manages integrated security and surveillance systems for security environments. The Company operates through two divisions: Systems, and Integration and Managed Services (IMS). The Systems division provides specialist electronic surveillance systems based on its technology to customers in oil and gas operations, gaming, infrastructure protection, high security and public spaces. The IMS division supplies products and technology from its Systems division. The IMS focuses on delivering end-to-end, security and surveillance solutions, specialist mobile systems for transport operators, as well as service-led solutions for the management of facilities and security services. The Company primarily works across oil and gas, gaming, transport and infrastructure, and high security and public space sectors. It offers Synergy 3, which a command and control software platform for security. more »

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  Is LON:TRK fundamentally strong or weak? Find out More »

19 Comments on this Article show/hide all

ericb 15th Feb '13 1 of 19

How can digital look charge to read RNS ??
Is that where you get the news if investegate is mal functioning ?

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Paul Scott 15th Feb '13 2 of 19

In reply to post #70961

Hi Eric,
DigitalLook don't charge to read RNS.
What I meant was that Stockopedia will have to pay a data provider to get live RNSs on this site (as presumably other websites have to do too), but it's free to us, the end users.

I wasn't sure where to get news when Investegate is malfunctioning, but as mentioned in the article above, I've been told that DigitalLook is the best alternative, and have found it works very well, so I'll be using that myself from now on, as investegate is hopeless.

Cheers, Paul.

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SevenPillars 15th Feb '13 3 of 19

Agree on Investegate, not sure what is happening there, but yesterday the Norcros statement didn't appear for hours. I only found it in the end by doing an advanced search and including the word statement in the key words option. I've used Digital Look for quite a while and its free for use offering is quite good.

Norcros did see some share price movement the day before its statement so perhaps there has been a little profit taking on the statement? Still in a solid upward trend though.

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ericb 15th Feb '13 4 of 19


DigitalLook wanted me to upgrade to a subscription sub when i clicked on a news PDF


Oh OK thats the company fact sheet doh!!

i see its the same news feed as ADVFN, and it gets cluttered up with alll that ishares cr*p

Good luck with the half marathon :)

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shanklin100 15th Feb '13 5 of 19

Cluttered up with ishares stuff, etc, but a source I resort to id investegate and ADVFN are not working, is

Its not the prettiest site but does seem very reliable.

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Funnymoney 15th Feb '13 6 of 19

Ideally we would have a feed of just results, trading statements and director deals - who really urgently needs to read a net assets statement?

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johnrosier 15th Feb '13 7 of 19

Hi Paul,

Thanks for the DigtalLook tip.
It took until mid morning for Synergy Health to show up on investegate yesterday and they still have not got the Synectics, (which I bought a couple of weeks ago) contract win on the site.


Website: JohnsInvestmentChronicle
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som100 15th Feb '13 8 of 19

In reply to post #70963

Hi Paul,

firstly great service by you. secondly i find that that if Invertegate is not working that i go to LSE site and you will get all the RNSs but the site is not very user friendly.


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djpreston 16th Feb '13 9 of 19


Just a correction on Torotrak.

The founder hadn't just left. Dick Elsy, to whom I think you are referring was not the founder of the company, no where near. He joined a few years ago and decided to accept the offer from the government to head up a new drive.

Darron - disclosure, we are one of the biggest holders of TRK.

Fund Management: European Wealth
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Paul Scott 16th Feb '13 10 of 19

In reply to post #70995

Hi Darron,
Thanks for that, I stand corrected!
Dick Elsy was at least a long-standing CEO of Torotrak though I think.
I recall it raised a lot of eyebrows when he left.

Do you have any ideas about why the technology has never really taken off?

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Paul Scott 16th Feb '13 11 of 19

In reply to post #70970

Hi Shanklin,
I agree, I've started using the website too.
Funnily enough, I found that a simple keyword filter for the word, "results" seems to pick up nearly all interim & preliminary results, and IMSs, whilst cutting out all the background noise (click on blue highlighted link to see it for the last week)

Cheers, Paul.

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djpreston 16th Feb '13 12 of 19

Why? It's a very long story. I, trust you are sitting comfortably?

Short version is latent investment.

In cars the big companies have invested heavily in automatic gearboxes and didn't want to scrap in favour of new technology and that evolved to be 5,6,7 & 8 speed boxes. Also remember the last big technological revolution was, if I recall correctly, the Wankel rotary engine, which came close but wasn't taken up. Newer groups, such as tata without the legacy investment have taken a licence.

The main opportunity at the moment and indeed had been the focus for several years is in the truck and bus sector where there are very significant savings as are proved by the tests with the European outfit and of course Allison. Allison is very interesting as out is a private equity backed outfit. They don't waste money on licences and equity stake unless they have clear intention and advantage. As, if I recall correctly, Allison are the largest auto transmission manufacturer, there is a very big opportunity there.

Both the European and Allison have made steady progress over the years and of course, with the slowdown, there had been a lack of desire to invest in new systems.

The mkers and vcharge are newer ideas but, especially vcharge, have been warmly received.

The ever increasing pressure to reduce emissions and improve mpg is seeing a move to smaller engines but how to retain performance? answer is turbo and super chargers each have problems and charge does really address these, as those who have driven the test vehicle will attest. Add in the benefits of MKers vs electric and the future still looks very very bright. Then again, they have always been on the cusp of a break through.... If they do then the licencing model is very profitable, as per ARM.

Bhod on the TMF site can probably give a better response.

It will be very interesting to see what Allison say when it comes to the licence payment in march.

To me, the technology and proposition is compelling and will eventually work but when is the hard part.



Fund Management: European Wealth
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peterg 16th Feb '13 13 of 19

Hi Darron,

Short version is latent investment.

Thanks for that background on TRK. I'm in a similar position to Paul on this, it's one I've been aware of as interesting for as linage as I've been actively investing, but it''s never quite made the break. I think you might have stirred me to take another look.

One thing that does strike me with this sort of situation is that once one manufacturer takes it up seriously and gets trucks or whatever on the road which are significantly more efficient then the pressure on others to licence the tech too is likely become irresistible, so things could move quite quickly. I guess the counter argument is that once that situation exists the commercial pressure to find other ways of achieving the same end result increases too, and that's when we find out just how strong a technological moat TRK have?

Thanks also again Paul (and Stocko) for your morning post, it's getting to be essential reading!


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Paul Scott 16th Feb '13 14 of 19

In reply to post #71000

Hi Darron,

Thanks for that, very interesting.

My main reservation with TRK is that, to be blunt, I don't believe their claims of 20% fuel savings. It simply doesn't pass the common sense test.
A good quality manual gearbox drives the wheels with virtually no losses of power (through friction), and if driven well by a sensible driver, who changes gear promptly, and uses the torque band of the engine (without over-revving it), combined with an over-run fuel cut-off (so that you're using no fuel at all when slowing down, which is fitted to almost all road vehicles these days), and with a top gear which is as high as the engine can cope with, then it's simply not possible to make any significant fuel savings by changing the gearbox - you're already almost at the optimum level of efficiency that can be affected by the choice of gearbox.

I can see how an electronically controlled TRK gearbox could save fuel compared with if you had a bad driver who was over-revving, etc, using a conventional gearbox, and it could definitely save fuel compared with e.g. an old-fashioned 3-speed epicyclic automatic gearbox driving through a torque converter with no lock-up, in a small-engined car, which are notoriously inefficient.

So I suppose what I'm saying is that manual gearboxes with a heavily over-driven high top gear are already very close to perfectly efficient, and modern automatic boxes are pretty close, so in my opinion TRK are making unconvincing claims for efficiency in a rapidly shrinking efficiency gap. So perhaps conventional gearboxes have already been made so efficient, that there's little to no benefit from changing to a completely new type, especially bearing in mind the risks associated with introducing new technology, which might go disastrously wrong if they all started failing after say 3 or 4 years in service, or they self-destructed if customers put in the wrong grade of oil, etc.

All in all I think TRK have probably had long enough to hit the big time, if it was going to happen at all, and they might end up succeeding in some niche products, but I can't see any justification for a fairly hefty market cap premium over cash.
But they might suddenly crack it. The problem in your shoes, and I know what this is like, when you have a very big stake in a speculative company, you daren't sell, in case they succeed and the shares multi-bag just after you've sold!! So they are very difficult shares to disengage with emotionally after a long period of holding. I'm like that with IndigoVision - their new CEO has got to crack it in calendar 2013 in my view, or I'm just going to move on.

Regards, Paul.

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extrader 16th Feb '13 15 of 19

Hi paul,

My take FWIW on Darron's comments is that the original Torotrak product is still good for economies on trucks and buses (hence the focus there) whilst the later innovations are relevant for fuel economy in smaller vehicled by more efficient turbo charging and energy capture (nothing to do with transmission efficiency, per se....except negatively in the case of energy capture, if you see what i mean).

Speaking of energy capture, good luck with tomorrow's run ! I find that 'start slow, finish slower' works for me as a strategy - most of the time......


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jraitt 16th Feb '13 16 of 19

In reply to post #71003

Hi Paul,
I am not the right person to answer this as I know nothing about the workings of a motor car. You say you do not believe the fuel savings claimed and then compare with a good driver with a manual gearbox. I think you have misunderstood the product.
As I understand it the TRK gearbox includes a spinning flywheel that was the origin of KERS, which as you know from F1 stores energy from braking and uses it to when starting or accelerating. Buses and delivery vehicles are constantly stopping and starting using this stored energy thus saving fuel particularly as those conditions are the most fuel inefficient for motor vehicles.
Hope you get the gist - maybe worth a quick look at the website.
Hope the run went well - thinking of you
PS You did say some time ago you would comment on your meeting with Angle directors. Very interested as I heard their presentation last week.

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kenobi 18th Feb '13 17 of 19

I have traded toro in the past, but what puts me off is the lack of progress, and the always about to make it. If the product is so good, why didn't for example rover take a punt on it when they were saved by the tower consortium, or why doesn't any struggling car company, take a punt on it to give themselves a 20% efficiency boost ?

technically I guess it's possible, however efficient a manual is, if you only have 4 or 5 gears, and realistically for town driving you're probably only using 3, then you're in the wrong gear most of the time (compared to the infitnite number you could have). so I would assume savings are possible, especially when you see how some people drive manual cars, over reving, and being in too low a gear.

So why hasn't it taken off, I can only imagine that a big investment is required. I must say though, that now is the time in the economic cycle when someone might take this put, recovery is kicking in, car companies are doing better, but fuel costs are still high. You would think it would be GM who would do this, they make big cars, not fuel efficient, and importantly, the majority of cars they sell are autos, so it would be less of a culture shock to their sellers, I know fuel is cheap relatively in the US, but they feel it when prices go up, and you'd think this would be a great selling point. The amount of money needed to do this would be peanuts for GM, and perhaps this would make a high cost option ?

Still as of now, and as you say 15 years or so, no one has gone for it, I wonder if this is one of those technologies that will never catch on for consumer vehicles.


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djpreston 18th Feb '13 18 of 19

An interesting announcement of a deal with Tata.

LONDON--Torotrak PLC (TRK.LN), a provider of gearless traction drive technology to reduce carbon-dioxide emissions in vehicles, Monday said it has concluded a collaboration agreement with Tata Steel U.K. Limited, MIRA Limited and Productiv Limited, which are the lead partners in a government-backed initiative to help bring U.K. low carbon technologies to market.
-Agreement centers around the creation of 'The Proving Factory', which allows the company to benefit from shared development, manufacturing and quality processes.
-Initial application for the project will be Torotrak's "V-Charge" technology, which allows single or dual stage variable boost, addressing the growing market for CO2-reducing downsized engines.
-Proving Factory should allow capacity of up to 20,000 units of manufacturing capacity per annum.
-Higher volumes will then be targeted at licensed manufacturing arrangements.

By the way jrait, I think youve got the technology all wrong - see their website for a better explanation.

Fund Management: European Wealth
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Ramridge 19th Feb '13 19 of 19

Hi Guys
I bought TRK shares a while back and sold them reluctantly in Oct last at a loss. Why?
1. Thought they had a disruptive technology, actually it is a sustaining technology, meaning potential for incremental improvements to existing technology.
2. Large corporations such as Ford and other potential customers are not shy in spending large amount of time, money and effort in evaluating something like this which may have the potential to make a huge difference to their competitive advantage. If they haven't bought into this so far, then that's good enough for me to exit.

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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