Small Cap Value Report (13 Oct 2014) - AMO, RNO, YOU, TSTL

13th Oct '14 by Paul Scott

15 comments 19706 reads

Good morning! The sell-off continued into the close on Fri evening in the USA, and overnight the FTSE100 futures were down c.100 points, so I was braced for a continuation of the selling this morning. Although so far it hasn't been that bad at all, with the FTSE100 down about 30 points at the time of writing.

The state of the markets was one of many issues discussed last night between me and ISA millionaire Leon Boros, in my latest Sunday evening audiocast. For anyone interested, the link is here, and it can be downloaded into iTunes by clicking on the iTunes button. They seem quite popular, so I'll keep recording them each week on Sunday evenings.

Amino Technologies (LON:AMO)

Share price: 82p
No. shares: 55.1m
Market Cap: £45.2m

Trading update - the company is nearing its year end of 30 Nov 2014, so should be in a position to give a fairly accurate view of the year as a whole. Accordingly, its statement today sounds good;

As outlined at the time of the interim results, revenue has returned to the traditional second half weighting and, as such, Amino expects to report revenue for the year ended 30 November 2014 in line with market expectations. However, the Company expects profit before tax to be ahead of market expectations.

Valuation - broker consensus is for 6.9p EPS this year, so if the company is ahead of that, then I suspect we might be looking at (guesstimate!) 7.2p? It's not likely to exceed forecast by a lot, because that would require higher turnover, and turnover is in line.

So if my guesstimate is right, then at 82p the shares are on a PER of 11.4, which looks good value. However, there is a big kicker here, as the company is stuffed full of surplus cash - as of the interims date of 31 May 2014, net cash was £19.7m - which is 36p per share, or 44% of the market cap! That's remarkable, and if you strip out the cash, then the Enterprise Value is only £25.5m, or 46p per share. Hence on a cash neutral basis the PER would drop to only 6.4, which looks very attractive to me.

Dividends - the company doesn't seem to know what to do with the surplus cash, so it's paying higher dividends, with a policy of increasing the divi…

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Walterkite

13th Oct '14

Paul
I went to your audio site but I can't find any iTunes button.
Hope you can help as I like to listen via the iPhone in the gym.
Keep up the good work

Walterkite

rick

Thanks for the audiocast Paul. It was really great to hear two such knowledgeable people discus stocks and the markets. I look forward to future episodes.

It would be very interesting to see if Leon's QARP investment strategy could be quantified and tracked by Stockopedia. It seems such a sensible investment style to me, and one that is definitely in tune with the message we get from Ed. i.e. high scoring Quality, Value and maybe also some Momentum (in EPS).

Paul Scott

Hi Walterkite,

Here is the direct link to AudioBoom, with the iTunes button, for my latest audiocast.

Regards, Paul.

raggedtp

I'm a happy holder of Amino since the spring. Yes, it's teccy, but they are now globally diversified, and I would say their lower-cost unit push is into Eastern Europe rather than Russia. I was first taken buy their cash, EV to EBITDA sub 5, and recent FCF. Not looking for the multi-bagger, but it certainly seems worth 100p+, with a great yield. I am seriously considering increasing my holding at this level today.

Gostevie

Paul wrote re: Amino Technologies (LON:AMO)

Also the 5p Bid/Offer spread is ridiculous, so it would only be worth considering these shares if your broker can get well inside the spread.

I bought some this morning at 80p when the bid/offer spread was showing 79/84p. The trade was shown on Morningstar as a 'sell', which I suppose just goes to show you can't always believe what you read on Morningstar.

Steve

Jardine

Paul,

I would be interested to hear your understanding of the terms used by YouGov (LON:YOU) in describing the various ways in which they have added to Other Intangible Assets during the year. These descriptions may be standard across all company accounts but I don't think they are particularly helpful to a reader who isn't an accountant. "Business Combinations" I assume means arising from the accounts of businesses they have acquired. "Separately Acquired" I assume means where they have paid another company to develop something for them (but wouldn't "Externally Developed" be a better description?). "Internally Developed" I assume means they've used their own staff to develop something and have capitalised the costs of this.

Andrew

scarletblue

Really liked your chat with Leon Boris - first one of the series I've heard so am going back to listen to the others you have done so far - thanks for all the hard work Paul. (I would agree entirely with Rick's comments above)

browner

Paul,

Please check your figs re AMO dividend. A lot of websites have inaccurate data on this (partly due to unclear wording at times in the company's own announcements). The most recent final dividend payment in April 2014 was 2.45p giving a full yr payment of 3.45p - I know because I received it.

From Final results rns (http://www.investegate.co.uk/amino-technologies--amo-/rns/preliminary-results/201401270700075206Y/): "In line with existing dividend guidance, the Board is pleased to recommend a full year dividend of 3.45 pence per share (FY 2012: 3p per share), representing a 15% increase year-on-year. The Board also reiterates its expectation to grow this by no less than 15% for the year to November 2014."

lewilewilewi

The obvious question here Paul - what are your thoughts on Quindell (LON:QPP) and their results today?

Hi lewilewilewi,

Under Stockopedia's editorial policy, I cannot discuss companies here where I hold a short position.

Regards, Paul
Twitter: @Paulypilot

nevilleaustin

Hi Paul,

I have very much enjoyed your three Sunday evening audiocasts, together with David and Leon, to date. Well done, and please keep up your good work.
See you at Brighton "BIG"

With my kind regards, Neville

Hi Browner,

Hmmm, looks like you're right & my data source was incorrect. I'm busy writing up Tristel results now, but will go back & amend AMO later today.

Thx for flagging.

Regards, Paul.

Reynart

Paul

Enjoyed your demolition of Yougov's statement - I agree entirely. Just to stick the knife in a little further, I find the size of overdue trade receivables and the size of accrued income very odd. It suggests that either a) they are just invoicing well ahead of when the customer really believes the debt is due or b) many of their customers like commissioning market research but only if they can pay for it after they have received value for the survey. I looked in the 2013 annual report for any explanation of the deferred income, but it was silent on the point.

14th Oct '14

Steve, I did go back in and buy more Amino Technologies (LON:AMO), at 79.5p. That also appeared as a Sell. I believe a relationship with a Dealing desk helps me buy well within spreads on small companies, although I have no evidence. I see all the adds for cheap deals, but wonder if you could really get these prices under that system. I don't no of any research comparing cheap deals versus personal execution and the like, but would be interested to hear of any.

kbkb

I too bought some AMO shares, as they look really solid, with good potential, in these volatile times.

Just to confirm I paid just over 80p, do the 4%/5% spread not evident for me either.

Cheers

Kevin

Small Cap Value Report (13 Oct 2014) - AMO, RNO, YOU, TSTL

Amino Technologies (LON:AMO)

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Paul Scott

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