Small Cap Report (8 Mar) - IND, AGA, CUP, SCO, ATY

Friday, Mar 08 2013 by
12

Pre 8 a.m. comments

I've been away from home, working on two tiny laptops this week, so have been not terribly well organised. So I forgot that it was interm results day for my largest shareholding, Indigovision (LON:IND) yesterday, and ended up reading the figures on my phone on a train in the afternoon!

It seems to me that IND's 3 year turnaround plan under new CEO Marcus Kneen is well underway, with sales growth accelerating in Q2, and a confident outlook statement that full year results should beat last year's, therefore the sales pipeline is clearly strong. It's all coming together nicely there, after many years holding the shares, the company's full potential appears to be (at last) emerging. I'm seeing the company next week, so will comment further then, but everything the CEO told me six months ago is happening, and the market has not yet woken up to the significant turnaround that is happening at IND.

There are some really good underlying signs, such as that "3 former top peforming members of the sales team have re-joined the business". Also IND has poached a top sales manager from its largest competitor in Canada, who has commented on IND's new product pipeline being so strong that it was a no-brainer to join them. These sort of signals can often be the precursor to a big improvement in financial performance in my view, so I am quietly excited about the prospects for IND later this year.

Gross margins fell sharply, but I discussed this with the CEO some time ago, and was satisfied with his explanation that margin simply go up & down (as they have with IND) depending on which particular products & markets happen to skew the sales mix in a particular reporting period. There isn't any underlying trend, so expect margins to fluctuate between 50-60%.

In the meantime IND have raised the interim dividend by 10% to 5.5p, and 12p forecast for the full year provides a healthy yield of 3.6%. The 70p Special Dividend last year also demonstrated management's focus on delivering shareholder value, so any suprises with dividends are likely to be on the upside.

The forward PER is about 10, as this year (ending 31 Jul 2013) is expected to be H2 loaded (which they have been saying for some time, so it's not an excuse) based…

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IndigoVision Group plc is a United Kingdom-based company engaged in the design, development, manufacture and sale of networked video security systems. The Company's segments include Europe, the Middle East and Africa; North America; Latin America, and Asia Pacific. Its cameras, encoders, network video recorders and software are designed both internally and with technology partners and manufactured in Asia and Europe. The Company's end to end Internet protocol (IP) video security systems allow full motion video to be transmitted around the world, in real time, with digital quality and security, over local or other area networks, wireless links or the Internet, using market compression technology to minimize the usage of network bandwidth. Its subsidiaries include IndigoVision Limited and IndigoVision Pte Ltd, which are engaged in marketing of its products, and IndigoVision Solucoes De Seguranca Eletronica Ltda., which is engaged in product repair and warehousing, among others. more »

LSE Price
114.5p
Change
0.4%
Mkt Cap (£m)
8.6
P/E (fwd)
n/a
Yield (fwd)
n/a





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6 Comments on this Article show/hide all

campbellsmith 8th Mar '13 1 of 6
1

Greetings Paul,

I whole-heartedly endose your views on the AIM market. What next? Write to Vince Cable?

Campbell

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Paul Scott 8th Mar '13 2 of 6
2

In reply to post #71444

Hi Campbell,
I've been talking to the Directors of ShareSoc about how we can lobby for changes to the small cap market to improve liquidity & narrow spreads.
They welcomed me getting involved, so it's a project I'll be getting involved in, and trying to push for change.
Regards,
Paul.

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SevenPillars 8th Mar '13 3 of 6
1

You will certainly get very little argument and lots of support from investors (and traders) to sort out this market maker vested interest spread issue. You are totally right to say that it does put people off from wanting to invest, after all who wants to start down 5-20%+ which can be the case on many of the AIM and smaller companies, when you can go for something slightly bigger listed on the full market and pay a small % on the spread?

AIM spreads are often a joke, but if the argument from the market makers is often one of liquidity, what is likely to happen if they are accepted into ISA's from next year? In theory this might attract more investors to AIM companies, but surely only if the spreads are better. Acceptance into ISA's should help liquidity, but only if the market makers play ball.

There is no reason why what you are suggesting, the move to a an order-driven electronic order book should not be done other than vested interests looking after their own money making interests. They behave as if technology hasn't moved on and it's still pre-big bang. Ironically, these are the type of people that tell others, especially businesses to get with the modern age or we will mark you down, yet fail to do so themselves. Seems to me they are engaged in a monopoly and restraint of trade, yet seem to get away with it.

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jraitt 8th Mar '13 4 of 6
1

In reply to post #71448

Hi Paul,
May I suggest that when looking at Investment Trusts you also look at their warrants. These are a very good way to leverage your investments without much of the risk usually associated with leverage as the risk can easily be valued. They are particularly good in the present market, but may be too illiquid for your investing style.
I enjoy reading your posts and learn much - a nice combination - keep them flowing,
John

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ericb 8th Mar '13 5 of 6
1

if ATY wasnt listed the fabulously named Hugo Deschampsneufs wouldnt get his regular media exposure. He really should write some articles for Stocko - how about it Stocko ??

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garbetklb 9th Mar '13 6 of 6
1

Hi Paul
There are some very interesting Investment Trust etc plays around. Discount on NAV is good starting point, but not THE answer when looking at unlisted assets, where valuation policy & robustness are key.
It amazes me that Investment Trusts have been so downplayed compared to open ended vehicles.... Except, when you look at IFA remuneration, it doesn't at all!
Maybe RDR will also be a factor in narrowing discounts?
Garbetklb

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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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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