Small Cap Value Report (13 Jan 2014) - OFF, TCM, SIM, STT, TRAK

Monday, Jan 13 2014 by
22

Good morning. Quiet for news today. Office2office (LON:OFF) has put out a profit warning. Their shares have fallen from about 100p to 28.5p in the last year, and I would imagine are likely to take another tumble today. In their year end trading update issued today, the company says that underlying profit for 2013 will be around £4.2m. Borrowings are reported as down from £29m a year ago to £23m at 31 Dec 2013, but that's actually a negligible change from the last interim report at 30 Jun 2013.

Unusually for this early in the year, they warn on profits for 2014, saying that;

 

...trading conditions in this market will remain at least equally challenging this year, with continuing pressure on margins.

 

The problem here is the Balance Sheet. It's terrible. Once you write off the £57.4m intagibles, net assets are negative £40m. Given the poor outlook I'd be surprised if shareholders are willing to stump up the level of fresh equity that would be needed to fix the Balance Sheet, but you never know, we're in a bull market and surprising things can happen. Also, further cost cutting is underway, as you would expect.

As regards risk/reward though, my view is that it's pretty awful here. There's a high risk of the company going bust, due to its high debt, and extremely weak Balance Sheet. Yet there seems little upside, due to the poor trading outlook. So these shares are very much a bargepole situation. So the ultra-low PER of 2.55 shown on Stockopedia is a value trap in my opinion. It depends on whether the Bank are prepared to give the company time to trade out of this situation, if that is possible? It's difficult to see how that will happen, as any cashflow they generate will probably be used in paying bank interest, and in exceptional costs, as evidence by the negligible reduction in bank debt in the last six months.

Therefore in my view these shares are probably worth nothing, but good luck to them. House broker WH Ireland very surprisingly have issued an "outperform" rating on the shares this morning - how on earth does that make sense going in conjunction with them downgrading their forecast earnings for 2014 by 31.4%?! Although they do acknowledge that "the risk profile remains…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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Telit Communications PLC (Telit) is a United Kingdom-based enabler of machine-to-machine (M2M) communications providing cellular, short range and positioning modules via its brand Telit Wireless Solutions. The Company develops and markets cellular, global navigation satellite system (GNSS), short-to-long range wireless modules plus mobile connectivity services and application enablement platform to onboard edge devices to the Internet of Things (IoT). The Company is organized into three geographical segments: EMEA, APAC and Americas. Through its business unit m2mAIR, Telit provides platform as a service (PaaS), including M2M managed and value added services, application enablement and connectivity, including mobile network side and cloud backend services. Its modules are integrated in a range of applications, including asset tracking, remote industrial monitoring, automated utility meter reading, insurance telematics, consumer electronics and mobile health devices. more »

LSE Price
159.6p
Change
-0.9%
Mkt Cap (£m)
211
P/E (fwd)
25.5
Yield (fwd)
n/a

SimiGon Ltd is engaged in developing learning, training and simulation technologies and applications for use in professional communities. The Company has developed SIMbox, a personal computer (PC)-based software platform to create, modify, manage and deploy any simulation-based content across a multitude of domains, such as training, research development, operations analysis and entertainment. SIMbox is a three dimensional (3D) simulation engine including software modules that enable users to create new products and content. The Company also provides KnowBook is a training solution for aircrew and organizations. KnowBook includes all types of simulation, knowledge management, mission rehearsal, after action review (AAR), and time management. The Knowbook family consists of AirBook, GroundBook, and MarineBook. In addition, the Company offers AirTrack, which provides passenger inflight entertainment solutions, and D-Brief PC, an offline/real-time debriefing application. more »

LSE Price
9p
Change
 
Mkt Cap (£m)
4.6
P/E (fwd)
n/a
Yield (fwd)
n/a



  Is LON:OFF fundamentally strong or weak? Find out More »


11 Comments on this Article show/hide all

kevanp 13th Jan '14 1 of 11
2

Office2office (LON:OFF) offers another fine example of corporate-speak in their activity description: "delivering managed procurement and business critical services". Seriously, does that mean they are a stationery supplier?

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kevanp 13th Jan '14 2 of 11

I see Sports Direct International (LON:SPD) have taken a shine to Debenhams (LON:DEB). Let's hope they can reinvigorate the brand — and the share price. Currently up 5% (at 0850)

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ericb 13th Jan '14 3 of 11

No, they are more than a stationary supplier.

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Bouvier 13th Jan '14 4 of 11
5

Re: Office2Office. They might be more than a stationery supplier but they are definitely not a stationary supplier, in fact they seem to be going backwards.

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campbellsmith 13th Jan '14 5 of 11
2

Re: Office2Office. Clearly, businesses don't need their services critically enough. Maybe their services crucially need to be more critical to businesses. Maybe I'm too critical.

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billytk 13th Jan '14 6 of 11

Morning Paul,
Insightful blog as ever today.

I’ve taken a punt this morning on Active Energy (LON:AEG). The SP was up a lot this morning and I waited for things to settle down a little before buying in with a view for a long term hold. (You can get a lot better price than the spread quoted) I hadn’t done any research on this company until this morning but was very intrigued by the demand for their services. Looking at the previous 5 years of trading doesn’t necessarily instil confidence but looking at just the two recent contract wins for the next year is the reason I’m buying in; ie. I feel that I'm not jumping on a bandwagon, merely responding to the contract wins. The MC is very small but the upside seems very positive as demand massively outweighs the supply, although I can’t find much so far on expected margins. Some decent director buys at a higher rate than the current SP today as well. I’d be interested to hear your thoughts if you have time to give it a look.

Yes they are primarily based in the Ukraine but there is a recent interview on RNS-R with the CEO who dismisses any problems here. I can see some real upside here in the next year or so with the next results baring no resemblance to previous ones.

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lightningtiger 13th Jan '14 7 of 11
1

Office 2 office or pub 2 pub, that is the question?
West Berkshire Brewery are offering shares into their company up to the end of January. They are only offering the shares to the local people in Berkshire at the moment, which includes me. The director Dave Maggs has put another £50,000 into the company. The most popular beer is called Good Old Boy.
If you live in Berkshire try a pint first, or have a tour of the brewery. You can also try best of  best, BEST up 13.5% today around 11:30 AM . Regarding Sports Direct looking positive , as is JD sports.
Cheers from Lightningtiger

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snickers 13th Jan '14 8 of 11

Literally Cheers from lighteningtiger! Do your own research *hic* indeed!

However, Good luck supporting your local. Developers try some crafty tricks to get hold of pubs: buy it as a going concern, make sure trade is poor, pull the plug on it in a year and then apply for conversion. Wreck it, then kill it.

Going back on-topic for a share discussion site, the alternative for pubs of community ownership is probably just as bad for Vianet (LON:VNET), with the community spirit and trust which joint ownership implies. 

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bsharman 13th Jan '14 9 of 11

WHAT, Bins are uninteresting!! we all need wheelie bins! It cant be a high growth industry though as how often do wheelie bins get replaced....

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Mark Carter 13th Jan '14 10 of 11

In reply to post #80523

It's easy to scoff ... until you run out of toilet paper.

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lightningtiger 13th Jan '14 11 of 11
1

We managed to have a chat today with the founder & director Dave Maggs & his wife Helen of West Berks Brewery. He is 80% positive that his venture will be successful & told us he has invested everything he has into it He is hoping to raise £2M. The minimum investment is £1000. Already he has a distribution network to Waitrose, who collect it from the brewery saving him the distribution costs and their time to deliver it.
One of his brews is called Full Circle (4.5 ABV) which Dave created to celebrate a thousand brews. It is a golden beer highly hopped with full rich flavours and traditionally brewed using malted Maris Otter barley and whole English hops. Brewery tours and open days are popular too. 150 people visited the brewery to sample a brew called Yule Fuel on 30th November 2013.The Brewery tour is £12.50 Next dates are 9th Feb(Good Old Boy members only), 15th February and 15th March 2014. There is lots of information and photos at www.wbbrew.com.
Dave suggested a local pub called The Potkiln to have lunch. We shared a platter and tried 3 beers(halves) called Mr Chuck, The Guddler, and Brickiln. The pub was packed.
This is my first go at gathering information from a director of a company to invest in. It certainly has a success feeling to it. I should get all the paperwork through the post tomorrow.
Cheers from Lightningtiger

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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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