Small Cap Value Report (10 Nov 2014) - INTQ, TNI, RTG

10th Nov '14 by Paul Scott

10 comments 9152 reads

Good morning! I'm still recovering from a tremendously busy & interesting three days in Derby, for the Mello 2014 investor event. For anyone interested, I've done a write-up on a panel discussion held there talking about when to sell shares, with some tremendous pearls of wisdom from Lord John Lee & Giles Hargreaves. Click here for that article.

Not much going on this morning with results, but there is a very interesting situation going on at a company I cannot mention (as I have a short position), which has kept me busy this morning.

InternetQ (LON:INTQ)

Share price: 270p
No. shares: 39.8m
Market Cap: £107.5m

Q3 update - this Greek software company listed on AIM, puts out an update this morning which reads positively - turnover up 20%, adjusted profit before tax up 26% to E7.6m, and EBITDA up a strong 49% to E13.5m.

That's all great, but as I explained in my article on 12 May 2014, the EBITDA figures at this company are meaningless, because it capitalises so many costs into intangible assets on the Balance Sheet. On a cash basis it was trading barely above breakeven, despite reporting big EBITDA numbers.

Outlook - today the company says as follows;

Our pipeline remains strong and we are confident that results for the full year
will be in line with current market expectations."

My opinion - the way I look at things (expensing all development spend as a normal & ongoing P&L cost), then this company doesn't make any profit at all. So for that reason it's not of any interest to me. Although the growth is good, and I shall scrutinise their next set of figures, to see if any genuine profit is starting to come through.

Trinity Mirror (LON:TNI)

Share price: 160p
No. shares: 257.7m
Market Cap: £412.3m

IMS - covering the 17 weeks to 26 Oct 2014. Not great, as it shows revenue trends have once again deteriorated, after steadying in H1.

On the other hand, Trinity Mirror is still a cash machine, and has repaid nearly all its loan notes. Net debt is now only £24m. The thorny issue of the huge pension fund still exists though, but that is not mentioned in today's update.

Dividends - at last the divis are being reinstated, and 3p will be paid for this (almost) calendar year.…

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FREng

10th Nov '14

Half year report from Red24 (LON:REDT) today. Any views?

iwright7

Half year report on engineer Energy Technique (LON:ETQ) today too with excellent growth/Any comments please - I agree Mello 14 was excellent.

Ian

narp

Re: Trinity Mirror,

At Mello 2014 , Andy Brough of Schroders mentioned that he usually cycles to work, but when he uses the Underground, he usually walks up & down the carraiges, he had noticed that everyone was reading the Metro newspaper (free paper), not one was reading a paid for paper.

coombe

Just a quick thank you for daily comments and analysis. Fun, cryptic and insightful.

Mark Simpson

Red24 (LON:REDT) HY results look ok to me, obviously the loss of the HSBC contract is going to impact H2 but the rest of the business seems to be performing well and generating cash. The narrative is fairly positive and I'm a big fan of dividend increases in stocks that have had issues since it usual signals that management think the worst is behind them. The increase is modest but I would think a management who are still struggling to deal with a big contract loss would be much more likely to hold or cut a dividend than increase it. Given the current rating and previous quality of the business it feels like this may be starting to turn around?

Fugwit

Re: TNI The pension deficit was covered on the call this morning, circa £36m over the next 11 years, year end valuation to Dec 2013 still being worked out for some reason.

Call also covered where majority of decline in revenue occurred and wasn't surprising to hear the supermarkets were largely to blame with the two largest account declines overall being Tesco then Morrisons. I do believe supermarket spends will return in due course as national press remains one of the best ways to outline product pricing to consumers, it is unlikely that the price wars will disappear any time soon between the grocers.

Generally I remain bullish on TNI.

That should read £36m per yr for 11 years above re TNI

Paul Scott

11th Nov '14

Good that he's caught up with the bleedin' obvious!

I heard him slagging off TNI on CNBC a couple of years ago, whilst obviously unaware that his firm held 18% of the company!

cig

Red24 (LON:REDT) did a farcical coordinated directors' buy a few weeks ago (where the whole board buys a few pennies' worth of shares each on the same day). Not impressive.

Hi cig,

Usually when you get co-ordinated small buys that are presented in table form it's more to do with a contractual obligation to purchase shares regularly, or an opportunistic buy where the broker had a line of stock and they split it amongst themselves or similar. Given that it's a fairly illiquid stock and they recently set up a EBT either one of these would seem a more likely explanation to me than any attempt to influence the market. If they really wanted to do this they'd buy on consecutive days and RNS each one separately. So I'm not seeing this as a big red flag personally.

Danger

Small Cap Value Report (10 Nov 2014) - INTQ, TNI, RTG

InternetQ (LON:INTQ)

Trinity Mirror (LON:TNI)

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Paul Scott

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