Small Cap Report - AMO, CLL, TMMG, FTC, PRV, SEPU, SPRP, KBC

Welcome to my first Small Cap Report published exclusively on Stockopedia!

I'll start with a share in my personal portfolio, Amino Technologies (LON:AMO). They announce results for year-ended 30 November 2012. They look good, in the context of a market cap of £40.2m at 73p a share. Amino is based in Cambridge, and makes TV over IP set top boxes. Its largest markets are the USA, and the Netherlands.

Particularly noteworthy with Amino is the very strong balance sheet, which is stuffed full of cash. Indeed, net cash has risen from £14.1m to £17.1, which is 43% of the market cap, so highly significant in valuation terms, and providing a solid underpinning to the share price.

Whilst revenue fell 6% to £41.7m, a much stronger gross margin (up from 32.7% to 42%) means that EBITDA rose 42% to £6.2m. I'm not terribly keen on the use of EBITDA for companies which capitalise material amounts of development spending into intangible assets, as this gives an inflated picture of underlying performance. Globo is another example of that, so it's worth checking the figures. In the case of Amino, it capitalised £2.1m into intangible assets, and amortised £3.1m, so that EBITDA figure is halved once you take off amortisation, or drops by a third once you take off capitalised development spending in the year. EPS is a much safer valuation measure, since it is stated after amortisation expense.

Earnings per share (EPS) came in slightly ahead of market consensus, at 5.4p.

Their outlook statement sounds pretty upbeat, and a final dividend of 3p has been proposed, with the stated intention of raising the dividend by at least 15% in each of the two next years, giving 3.45p and 3.97p. That works out at a dividend yield of 5.4% on the latter figure, which certainly appeals.

Therefore it's a thumbs up from me to these results from Amino, and I shall continue holding my shares. I could see them going a lot higher if some decent top line growth is generated, whilst the downside is covered by the bullet-proof balance sheet - which is exactly the type of low risk situation I like best - a value share with good growth potential in for free.

Marketing group, Cello (LON:CLL) has seen a 10% jump in its shares this morning at the time of writing, on the back of a solid trading update for calendar 2012. Trading is in line with expectations, net debt has reduced to £9m, and they indicate a solid start to 2013 due to good new business wins in Q4 of 2012. All sounds pretty good.

Cello has been on my radar for some time, but unfortunately I forgot to buy any shares in it, and baulk at paying 10% more this morning. Furthermore, as with many small caps, the Market Makers do their utmost to deter any deals by quoting a ludicrious 10% spread. I do wish we could move to an order-driven (instead of quote driven) market, and just give everyone direct market access. Why on earth can't this just be done?! We all have computers & internet, it should have happened years ago, I get so frustrated with our antiquated market structure in the UK.

I should also mention the attractive dividend yield at Cello, which looks to be just over 4%, with 1.8p in dividends forecast for 2012.

Another marketing group which issues a trading update today is Mission Marketing (LON:TMMG). Their quirky style of wording RNSs continues, which is beginning to get irritating. Just stick to the facts, instead to trying to turn RNSs into showcases of your promotional skills.

The key points are that calendar 2012 has turned out in line with expectations, net debt has reduced (but they don't give any figures, as usual), the outlook for 2013 is that, "early signs remain positive", and their intention is to resume dividend payments with the interim results in 2013.

The shares are up slightly this morning, and look fairly good value to me. The forecast PER is 7 times 2012 earnings, falling to 6 times 2013. Although I'd want to see the latest net debt figure before buying, as it was around half the market cap last year, which is a material figure.

Interim results to 30 November 2012 are issued by Filtronic (LON:FTC).

The shares are going through the roof, up 17% at the time of writing, to 46p, which with 97m shares in issue give a market cap of £45m. I'm struggling with that, given that they barely got above breakeven in H1.

They do say that performance (both turnover and profit) will be above market estimates for the year, which is a good thing considering that the forecast PER is about 40! This one's not for me, with too much future growth (based on roll-out of 4G) already priced-in.

Specialist filtration group Porvair (LON:PRV) issues very impressive results for year ended 30 November 2012.

EPS rose 38% to 10.1p. Very good, but the share price of 179p puts that on a PER of 17.7, which means decent performance is already priced in. Hence not of any interest to me, as I'm looking for bargains, not share prices which already reflect good performance.

In a similar vein, Sepura (LON:SEPU) issues a solid trading update, but a forecast PER of about 15 looks fully priced to me.

I'm struggling to get a price quote on Sprue Aegis (OFEX:SPRP), which is a pity as it looks potentially cheap. Their trading statement this morning indicates revenue to be slightly ahead, and earnings to be slightly below market expectations. The outlook sounds good, and the StockReport page here shows an attractively low PER, high dividend yield, and net cash. Looks worthy of more research.

Finally, a quick mention of KBC Advanced Technologies (LON:KBC). The price has dipepd 2p this morning, and this looks like a buying opportunity to me. Although the shares have risen strongly of late, this is on the back of a strong trading update and a $100m contract win. The forward PER is still only 8.5 times 2013 forecasts (which may well be revised upwards, given strong current trading). I believe these shares could re-rate to a PER of 12 or 13 in 2013, giving decent upside.

Have a good day, and see you back here tomorrow morning.

Regards, Paul.

(of the shares mentioned today, Paul has long positions in AMO and KBC only, and does not hold any short positions)