Small Cap Value Report (13 Feb 2017) - CALL, EGS, VCP, PLA
Hi,
Paul has sent in comments on four companies, which I've pasted below.
Graham
Cloudcall (LON:CALL)
Share price: 84.5p (+10%)
No. shares: 20.1m
Market cap: £17m
Update on Bullhorn Strategic Partnership
(PS: at the time of writing, I hold a long position in this share)
Looks a bit of a non-announcement. We already know that Cloudcall (LON:CALL) has a close relationship with Bullhorn. So announcing that it is expanding that to cover Bullhorn's US operations is no great surprise. Actually I thought this was already the case.
No financial details are given, and no comment is made about overall company performance versus market expectations. Therefore this announcement goes into my mental dustbin.
eg Solutions (LON:EGS)
Share price: 49p (+20%)
No. shares: 22.7m
Market cap: £11m
This reads positively, with a strong H2 performance now in the bag (for year ended 31 Jan 2017);
Trading in the second half of the financial year has been strong, generating record revenues for the six months of not less than £5.69m (H1: £2.50m) and yielding adjusted EBITDA of over £2.0m (H1: loss of £0.89m). Cash at the end of the period was at least £2.40m.
Accordingly, the Board anticipates that the Company's financial results for the full year will be in line with market expectations on revenues of not less than £8.19m and an adjusted EBITDA of over £1.20m.
Mind you, it's only in line with expectations, so therefore in theory should be neutral for the share price.
A few comments from me;
1) EBITDA means nothing for software companies, as it excludes the costs of capitalised development spending. So I would want to see what the proper profits are.
2) This company tends to operate with large lumpy contract wins (licences). So performance has tended to yo-yo between good & bad half years. Therefore I wouldn't get too excited about one strong half year. There's no way of knowing if this stronger performance is likely to continue, or not.
3) The controversial CEO has been the big winner financially from this company in the past, extracting outrageous remuneration. Whilst shareholders have only put money in, and not received anything in dividends, as far as I am aware. Does that sound like a good investment proposition to you?
4)
Despite all the negatives, this company has won a series of impressive
client contract wins. Therefore it presumably must have a product which
is good, and is operating in an interesting space (back office
optimisation) which is very topical.
Can the company achieve a sustainable level of profits which would re-rate the shares? That I do not know. Given its history, I wouldn't make a leap of faith, especially as this share is so illiquid. However, it does look potentially interesting, if sustained profits can be achieved.
Victoria (LON:VCP)
Share price: 467.5p (+1%)
No. shares: 91m
Market cap: £425m
Acquisition of Avalon BV & GrassInc BV
(PS: I have a long position in this
share)
Another sensible-looking bolt-on acquisition, of a profitable Dutch artificial grass manufacturer. The price looks a very low multiple of profits, so I am assuming there must be some debt being taken on as part of the acquisition?
Plastics Capital (LON:PLA)
Share price: 123.5p (+1%)
No. shares: 36m
Market cap: £44m
An in line update for Q3. I can't get excited about this share. The balance sheet isn't brilliant, and it makes lots of adjustments to profits each year, which makes me wonder how real the adjusted figures are. Not bad divi yield though, around 4%.
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11 comments
Approximately 2 factories in China.
Over 1 in Thailand.
Amusing, but hardly likely to help us gain confidence in the management.
Re Cloudcal's RNS, I had the same reaction as Paul - I thought this was already the case and was non-news. Mind you, Mr Market did not seem to know !
(I used to work for consultancy business and one of the tricks was to refer to the same contract win in different forums with slightly different details, thereby creating the impression that your business area was doing better than it actually was. Obviously not applicable here)
Long CALL
Ref PLA
I remember buying shares in PLA simply due to poor memory, they came out with some decent numbers and i bought on a whim , i thought i had previously mentally okayed the business fundamentals only to realise that i was confusing them with Trifast. Nice little lesson learnt as i would have been better buying shares in Trifast. Some you win some you lose i guess - i did once win a nice golf bet betting on the wrong P Sheehan so i count that as being 1-1 on the stupidity stakes. I thought the better known one was obscure enough never mind the lesser known dude i actually bet on - at least i wasn't silly enough to bet of the third P Sheehan pro although she may have beaten the other two on a good day i suspect?
This reminded me of the CNBC report late last week about the pop in the share price of £STVI, which is up around 120% since the possible IPO announcement of Snapchat. See the Stockopedia page for a graph of the share price.
http://www.stockopedia.com/share-prices/snap-interactive-inc-OTC:STVI/
Ref STVI
Dang i was keeping an eye out for opportunities like that after the 500% + rise in Tweeters shareprice at the time Twitter was floating. 120% seems pretty pretty pedestrian but profitable enough to be worth a punt. Advance warning needed next time.
http://blogs.marketwatch.com/thetell/2013/10/04/twtrq-stock-up-as-much-as-1800-as-investors-confuse-tweeter-for-twitter/
How about $UBA
http://www.stockopedia.com/share-prices/urstadt-biddle-properties-inc-NYQ:UBA/
Or $UBAB (those this has 10 bagged since March lows of the financial crisis
http://www.stockopedia.com/share-prices/united-bancorporation-of-alabama-inc-OTC:UBAB/
Worth a punt?!:-)
My turn to confess to my only fat finger error so far having bought ROLL when I meant to buy ROL on the US market.
Having sworn a bit and worked out what I had done the ROLL chart looked OK so I kept it and bought ROL the next day. Both are in profit and I'm somewhat relieved that the one I meant to buy is the one doing better.
For anybody interested in finding out more about Plastics Capital (LON:PLA), they are presenting at the next ShareSoc company seminar in London:
http://www.sharesoc.org/london-mar.html
In my opinion these events are well worth attending if you are in or around London.
Steve
Steve,
In terms of investor events, Plastics Capital (LON:PLA) would turn up for the opening of an envelope! A bit like Avation (LON:AVAP) ! Mind you, that doesn't necessarily make them bad companies at all. It just amuses me that they're always at these events, and there must be a law of diminishing returns - I would say that 1 or max 2 appearances is enough. Above that, and I wonder why they're so keen to drum up PI buyers? Maybe an Insti seeking liquidity to exit?
Regards, Paul.
On a lighter note, would you invest in a company that is unsure of how many factories it has.
The Plastics Capital (LON:PLA) bio reads "It has over five factories in the United Kingdom, approximately two in China and over one in Thailand"
Love the quote from Plastics Capital. "It has over five factories..." Let's look out for the next final results announcement "and we've made a profit of roughly quite a lot, or maybe not so much. How should we know?" Or maybe the can follow in the footsteps of an infamous Chinese AIM stock and lose their accounting records in a van parked in a motorway car park.