Small Cap Value Report (10 Dec) - John Lee, SEA, ZYT, SEE, CPR

Tuesday, Dec 10 2013 by

Good morning. I'm writing this first bit early, at 1 a.m., to jot down a few thoughts after this evening's Mello investor evening in Beckenham. It must have been the best attended Mello ever, with about 75 investors descending on Sea Salt restaurant in Beckenham tonight, right by the railway station, just 20 mins from Victoria.

The star of the evening was John Lee, Britain's first ISA millionaire, a veteran investor, and a politician. To my shame, I've not come across him before, but listening to him speak was an absolute treat - literally every well-crafted sentence was a pearl of investing wisdom. When you listen to really successful, experienced value investors, they don't really tell you anything new - instead they charge you up again with common sense, like a flat rechargeable battery is brought back to life from plugging it into the mains.

John kindly signed copies of his new book, "How To Make A Million - Slowly", and I was particularly thrilled to receive a copy where he accidentally mis-spelt "successfull" with two "l"'s, so I quipped that it would be worth far more when I chose to sell it on Ebay due to the error! All in good humour.

We were then treated to a masterclass in value investing from Mr Lee, and to get a flavour for what he talked about, here is a link to a newspaper article.




Next, we had a presentation from an interesting little stock that I hold a few of, called Seaenergy (LON:SEA).

Now I don't want to sound critical, but if I'm honest, the presentation was a bit of a muddle. When introducing a company, an investor presentation needs to have a logical flow. It should go something like this;

  1. This is who we are - name, ticker, share price, no. shares in issue, market cap, key management.
  2. This is what we do - in really simple terms that everyone can understand.
  3. The investment case - explain the valuation & performance.
  4. The future - tell us why we should get excited about future growth.


Also, in a large room, with a lot of background noise from kitchen equipment, staff who need to prepare our food & drink, etc, you need to take control, and speak up & project your voice to the…

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Zytronic plc is involved in developing and manufacturing of touch sensor products. The Company is also engaged in the development and manufacture of customized optical filters. Its geographical segments include Americas (excluding USA), USA, EMEA (excluding UK and Hungary), Hungary, UK, APAC (excluding South Korea) and South Korea. Its products incorporate an embedded array of metallic micro-sensing electrodes. Its technologies include projected capacitive technology (PCT) and multi-touch mutual projected capacitive technology (MPCT). PCT touch sensors can be constructed from one, two or three layers of laminated, toughened glass. Its sensing products offer touchscreen solution for applications, such as leisure, digital signage, retail, surfaces, banking and industrial applications. Its touch sensors are used in video jukeboxes and slot machines. The PCT touch sensors are used in a range of workplace applications, from medical diagnostic equipment to oil field machinery controls. more »

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Seeing Machines Limited is engaged in developing, selling and licensing products, services and technology to detect and manage driver fatigue and distraction, including continued market development to secure sustainable channels to market for the product. The Company's segments include automotive, off-road, fleet, aviation, scientific advance and other. The Company is also engaged in developing driver-monitoring technology to incorporate into passenger cars; entering commercial agreements with partners for the development, manufacturing and sale of products into target markets, and research and development of the Company's processing technologies to support the development and refinement of the Company's products. It also offers driver monitoring system (DMS) technology. more »

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23 Comments on this Article show/hide all

Reynart 10th Dec '13 4 of 23


I was at Mello too and agree with your analysis, and hope the management will treat it as constructive criticism. If you have an investment such as Lansdowne which is worth half of your market cap you really do need to know the exact value as it is material to an investor's evaluation, particularly when it has dropped 40% in market value in 2 months.

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Gostevie 10th Dec '13 5 of 23

In reply to post #79782

Hi garbetklb,

I held some shares in Zytronic (LON:ZYT) for a while earlier in the year but sold out at a loss back in June after their latest profits warning. There is a lot I like about this company but they do seem somewhat, shall we say, 'accident prone' which is why even on today's possibly overdone SP fall I'm not tempted to jump back in.


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Funderstruck 10th Dec '13 6 of 23

I'm another one not paying attention; missed that John Lee was speaking. Have followed him for a long time as he regularly did a column in the FT and would have liked to see and meet him in person. He is a true value investor - fortunate you... but pity about the train.
Your usual analysis - saying it as you see it..the only way.

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carmensfella 10th Dec '13 7 of 23

Just for the records there were 73 attendees at Mello last night which exactly matches the previous record when Real Good Food presented about three years ago.

It was a fabulous event last night not least because everyone who attended had a real opportunity to get involved by meeting tens of other like minded investors, chatting with Lord lee whilst getting their excellent book signed, being entertained with his masterful talk and of course taking the opportunity to see a company presentation and ask tens of questions through the evening.

I am biased but I really do think these are great evenings and anyone who can possibly attend one should make every effort to do so as they will not only enjoy them but probably find a few mutual investing friends and contacts. Investing can be an isolated lonely existence but anyone who attended last night for the first time would have been excused for thinking they had arrived at a wild reunion of social animals meeting monthly on payday!. Individual investors need Mello events and Mello needs you so keep checking the website for the next available one that you can attend and email to say you can come.

After all...we need you on a wet Monday in February just the same as last nights magnificent Christmas Mello. A final word of thanks to John Lee who is a great man and friend along with the SeaSalt staff who certainly excelled themselves last night with a lovely three course (squid and sea bass for me was delicious) treat for us all....and 60 people in one sitting takes some concentrated effort.


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Funnymoney 10th Dec '13 8 of 23

In reply to post #79781

Hi Singsing,

Have Googled for said Youtube clip but to no avai - John Lee Hooker, but nothing else. Any chance of a link?


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kevanp 10th Dec '13 9 of 23


Thanks for your nocturnal musings, and commiserations on the reasons therefore.

It was thanks to John Lee that I was invested in Delcam (LON:DLC) for six years, for a nice annualised return of 22%. Shame I sold them, because I thought the price was getting over-extended, a couple of weeks before the recent takeover. Drat! I've also held another Lee favourite, Daejan Holdings (LON:DJAN), for five years. This hasn't been quite so successful, but even so an 11% a year return is not to be sniffed at.

Re Seaenergy (LON:SEA), have you looked at their website? I think it has been put together by the same people who prepared the presentation you saw. The company may have huge potential, but you certainly wouldn't be able to draw that conclusion from their website.

It is virtually impossible to work out what they do. They appear to have been until recently an investor in different offshore power generation projects. In 2011 they sold one of these, SeaEnergy Renewables. They still hold 21% in Lansdowne Oil & Gas, that "holds extensive acreage"; 40% in Mesopotamia Petroleum, that is struggling to establish a JV with the Iraqi state-owned drilling company; and 100% of Eagle HC, which "has royalty interests in a number of North Sea blocks", none of which is producing. SEA state that "it is the Board’s intention to dispose of these interests in an orderly manner over time."

So on what are they focusing? If you look under "About Us" they are an energy group, with a balance sheet strengthened by the sale of SeaEnergy Renewables. They are "currently establishing an offshore energy services business, which aims to provide access and other services to the expanding offshore wind industry as well as to other offshore energy clients." Maybe if you are in the offshore energy business you might be able to guess at what these "services" are, but I'm left without a clue.

Let's look under "Services". Their business strategy is to "build an integrated energy services business with a coherent, internally consistent vision… Based on delivering innovative solutions to industry problems". They go on to say "The core business will comprise the delivery of innovative value-adding services to clients across the energy space, and will grow sustainably by acquiring and developing existing and complementary businesses within that space." The only concrete statement of what they might actually do is in the last sentence on this page "The provision of operations and maintenance to offshore wind farms, and the vessels from which to provide these services, will form a part of this strategy."

Maybe I'm missing the point. Maybe they have some great, innovative products and services in the pipeline, that they want to keep quiet about. This of course vindicates your policy Paul of speaking to company managers, and trying to get the skinny from the horse's mouth, to mix some metaphors. Arguably if what you learn were readily available in the mass media, it would already be in the price.

Anyway, I shall keep an eye on Seaenergy (LON:SEA). And thanks as ever for your tireless efforts to bring your readers an honest and informed viewpoint.

Cheers, Kevan

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kevanp 10th Dec '13 10 of 23

Did you see the announcement from £SEE? Sounds like more good news:

"Canberra, Australia, 10 December 2013- Seeing Machines, (AIM: SEE), has signed a strategic agreement with Royal Beuk, a leading European coach fleet operator, for the deployment of automated Fatigue Monitoring Systems to ensure driver alertness and safeguard coach passengers. The installation of the Fatigue Monitoring Systems will be the first time that coach passenger safety has been protected by automated detection of driver fatigue and distraction, and is being put in place to eliminate the risk of catastrophic coach crashes that have led to large numbers of fatalities."

The first of many, we hope.

Best, Kevan

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mathewawood 10th Dec '13 11 of 23


You might be interested in Ashley House ASH. Interims today. Forward P/E 7 solid balance sheet. Looks like a recovery play (overheads down, pipeline of orders up).

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snickers 10th Dec '13 12 of 23

Have Seeing Machines any experimental evidence to show they reduce crashes, as opposed to just recognising when the driver's attention is wandering? When I 'm driving with a passenger who is telling me the route I find I immediately become extremely stupid and indecisive - having handed the thinking over to them. I wonder if an alertness machine might tend to make me hand that function over, and leave me making less effort to concentrate.. And aren't tachometers supposed to deal with driver alertness?

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Tamarix 10th Dec '13 13 of 23

In reply to post #79780

To danielbird193. - I agree that good public speaking skills are essential for all young professionals.. But it is not easy to get the practice, and you don't want to make a fool of yourself in front of your colleagues.. Can I recommend Toastmasters International? (Nothing to do with the red-coated people). They run voluntary groups for learning to speak: it is cheap, they give you an audience to practice on, they are very supportive, there are local groups all over southern England. And it is enjoyable. Go for it. . .
Tamarix .

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boothbym 10th Dec '13 14 of 23

Seeing Machenes hase made it to the BBC

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SingSing 10th Dec '13 15 of 23

In reply to post #79787


actually it was a podcast on motley fool. Can't seem to locate it now, but here is a full transcript - well worth the read.... this is where he mentioned that he was writing a book.

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Ned Kelly 10th Dec '13 16 of 23

Hi Paul, I saw the SEA presentation this morning (Mello is clearly ahead of the crowd) in the city and agree entirely with your comments. The one thing that is making money is R2S and that is growing impressively. The presenter is also on the board of Lansdowne so there are quite close linksbbetween the two companies. Take out the value of the Lansdowne holding and R2S should easily justify the rest of the share price.
Sorry I missed hearing John Lee though!

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jjis 10th Dec '13 17 of 23

Hi Paul - ironically you have not covered S&U (LON:SUS) today which is a classic John Lee stock which had an IMS today. So I have written in up for those who may not have seen it or know it.

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danielbird193 10th Dec '13 18 of 23

In reply to post #79793

@Tamarix - Thanks, you're not the first person to recommend Toastmasters to me, and in fact I have been on the point of going along a couple of times in the past few months. Trouble is there seem to be so many groups in London (where I'm based) which makes it difficult to decide which one to go to. Don't suppose you have any tips?

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laurie89 10th Dec '13 19 of 23

Last night was a brilliant evening and I fully agree with Paul's comments. SeaEnergy made a big sale a couple of years ago and need to find their salvation. It still looks like the bits of a jigsaw that have yet to be put together.

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Tamarix 10th Dec '13 20 of 23

@ danielbird 193 - The Toastmasters groups are all rather different, depending on where they are and who they attract. I was a member of Athenians at Hammersmith a long time ago. You can drop in without joining and see what they do. They won't expect you to speak if you are a guest. It is quite a commitment being a member, so you need to find a group which you can get to easily, but which is NOT full of your friends. They run a clever system (originally American) that really works from all points of view. Give it a go - please . . .

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carmensfella 10th Dec '13 21 of 23

For those who want to keep up to date with what is happening and the dates for the next Mello events just go to btw

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nevilleaustin 10th Dec '13 22 of 23

In reply to post #79786

A big thank you to David Sredder for organising yet another wonderful investor evening, I to enjoyed the most delicious squid and sea bass ever, the very friendly and lively atmosphere, and the terrific company of interesting and enthusiastic "private investors"
At our dinner table my wife and I enjoyed the company of interesting Sanjeeve, enthusiastic Eddy and the one and only Paul Scott.
Through having enjoyed many cruise holidays over the years I have been to many nice dinners meeting all sorts of people, but my experience of dinning at Mello, with so many private investors makes a far more interesting and memorable occasion, and amongst my favourite nights out ever, in fact I believe that Paul Scott and David Stredder are thinking about organising a Mello Investors Cruise!

 Lord John Lee spoke with such clear eloquence, a joy to listen to his wisdom.

Although the SeaEnergy presentation was a little bit of a muddle, that did not matter as the jewel in their crown "R2S" came over fairly well.

The CEO did explain that until now they have not tried to promote themselves, as they needed to know that they were ready to be able to deliver, so they have not been doing the rounds with a polished slick presentation as yet.
I am a holder but only about 1.5% of my portfolio, as John Lee advised build your position as you gain more confidence with a company, and I think that is exactly what we need to do with this one until we really know what is going on with those $50,000,000 service ships. That is a lot of outlay for just one, and the CEO said that in total there could be a need for 50, so it needs to be clarified where SeaEnergy are going with this, eg how much will they make from a service, how many services a day etc against the cost of a ship, obviously they can charge more than Mercedes do to service your car, but against $50,000,000.

This made me think of Avanti Communications as they needed about $70,000,000 for just one satellite, they have just 2 and another on the way, and have a look at their Stockopedia page!


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Geoffclark 10th Dec '13 23 of 23

In reply to post #79792

A tachometer is an instrument that has a purpose of measuring the rotation speed of a disk or shaft.
If you were thinking of a tachograph, a device fitted to commercial vehicles, i.e. trucks & coaches, then all that does is provide a record of the speed / movement of the vehicle. It does not keep you awake or "watch" you.

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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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