Small Cap Value Report (14 Dec 2016, Part 2) - BOOM, IDOX, IQE

Wednesday, Dec 14 2016 by
73

Paul and I are going to try having two separate articles, on days when we are both writing.

Here is the link to Part 1, where Paul covers BOO, VCP, LVD, PUB



Audioboom (LON:BOOM)

Share price: 2p (-6%)
No. shares: 638m
Market cap: £12.7m

Trading Update

Key points from this podcasting platform's Q4 update:

  • Unique file requests (i.e. how many times people listened to something on the platform) are up by 42% to 145 million, compared to Q3.
  • Number of unique users has doubled compared to a year ago, now at 58.6 million

On the financial side:

Overall 2016 revenues are expected to exceed £1.3 million, an increase of more than six fold compared to last year, and ahead of market expectations. The rate of growth in 2016 has continued to accelerate from H1 to H2, with Q4 revenues of more than £630,000. This rate of revenue growth has continued post year end, with over £1.1 million already booked for advertising campaigns in 2017.

When something is starting from a very low base like this, the fact that the growth rates are explosive is not too important me - there is no alternative, or the company won't go anywhere!

However, I must admit that the operational metrics sound quite good. The others, less so:

Due to acceleration in audience acquisition costs and higher recruitment fees to acquire USA commercial head count, the Company expects its EBITDA loss for the full year to be greater than market expectations. The Company has taken steps to reduce costs through new ad-serving and bandwidth partnerships which it expects could achieve cost savings of approximately 40% for 2017 over 2016 in this area. Additionally, UK annual headcount has been reduced by £465,000 to allow the Company to focus on its growth opportunities in the USA.

The year-end cash balance was c. £710,000.

Clearly, then, this is not an instance of self-funding growth, since growing the audience base is increasing the rate of losses.

Slashing UK headcount sounds worrying - is the company caught between two stools, the US and the UK? It's never very encouraging to see a company spreading to a new jurisdiction, without having first achieved success at home.

Also, the funding discussions with the Chinese fund (for an injection of up to $8 million) have ceased. Audioboom's cash balance is now £710k.

My…

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Disclaimer:  

All my own views. I am not regulated by the FSA. No advice.

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Audioboom Group plc operates an audio platform for hosting, distributing and monetizing content. The Company works with approximately 2,400 active broadcasters, content creators and podcasters around the world, and hosts in over 7,400 content channels. The Company's hosting and distribution platform allows partners to embed, share through social channels and re-syndicate their content. The Company receives over 40 million listens per month. It also works with its partners to monetize their audio through live in-reads, the dynamic insertion of pre and post roll audio adverts and video advertisements. Its audio, cloud-based, software as a service (SaaS) platform enables the creation, broadcast and syndication of digital audio content across various devices, networks and geographies. Its subsidiaries include Audioboom Limited, Audioboom Inc, One Delta Limited and Audioboom Pty Limited. more »

LSE Price
1.25p
Change
 
Mkt Cap (£m)
14.7
P/E (fwd)
111.3
Yield (fwd)
n/a

Idox plc is a supplier of specialist information management solutions and services to the public sector and to regulated asset intensive industries around the world. The Company operates through five business segments: Public Sector Software (PSS), Engineering Information Management (EIM), Grants (GRS) and Compliance (COMP). PSS segment is an application provider to the United Kingdom local government for core functions relating to land, people and property, such as its planning systems and election management software. The EIM segment delivers engineering document management and control solutions to asset intensive industry sector. The GRS segment delivers funding solutions to private and third sector customers. The COMP segment provides compliance solutions to corporate, public and commercial customers. more »

LSE Price
32.4p
Change
-2.7%
Mkt Cap (£m)
138.3
P/E (fwd)
9.8
Yield (fwd)
3.3

IQE plc is a United Kingdom-based holding company. The Company is engaged in the research, development and provision of engineering consultancy services to the compound semiconductor industry. The Company's segments include wireless, photonics, Infra Red and CMOS++. The Company is the manufacturer and supplier of Compound Semiconductor wafers or epiwafers using a process called epitaxy. Its photonics business enables a range of end applications, from data communications and advanced optical-fibers, to sensors in consumer and industrial applications. It operates through business units, including wireless, photonics, InfraRed, CPV (advanced solar), power switching, light emitting diodes (LEDs) and advanced electronics. It produces atomically engineered layers of crystalline materials containing a range of semiconductor materials, such as gallium, arsenic, aluminum, indium and phosphorous. The Company has operations in the United States, Asia and Europe. more »

LSE Price
60.75p
Change
1.3%
Mkt Cap (£m)
465.6
P/E (fwd)
14.8
Yield (fwd)
n/a



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


31 Comments on this Article show/hide all

oscar247 14th Dec '16 12 of 31
5

Graham

Congratulations, on the news your joining the excellent Stockopedia team ..... well deserved.

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Graham Neary 14th Dec '16 13 of 31
2

In reply to post #162469

Thanks Oscar, it's great to be here. Thanks for your support.

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Graham Neary 14th Dec '16 14 of 31
1

In reply to post #162361

Thanks for the feedback Ramridge, you may be right on valuation.

Good points by monty too... I've just retweeted an IDOX shareholder (carmensfella) who has expressed disappointment at the lack of an open offer.

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Graham Neary 14th Dec '16 15 of 31

In reply to post #162352

Hi Alan, sorry I've got nothing to add on TUNG at the moment - but I'm glad to see that Paul has answered you! Cheers for making the request.

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Graham Neary 14th Dec '16 16 of 31
1

In reply to post #162367

Hi herbie/howard, it's too late in the day for me to start doing a writeup on Burford Capital (LON:BUR) but it does look very interesting alright - and I like midcaps and financials! If I can figure out a way to make time for it somewhere then I will.

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seadoc 14th Dec '16 17 of 31
1

Graham,

IQE (LON:IQE) was a story share when I bought in at 14.08p in 2008 (new plant in Singapore, 35% utilization, profit straight to bottom line, from FT, mid noughties) I held until the "de-stocking crisis" and sold at 30p. They then took over three competitors one of which at no cost just a, well below commercial, discount for an agreed period (not disclosed). All results from 2013 are adjusted to assume the product was sold at the non-discounted price. They make a profit. They have no cash flow. Smoke and Mirrors and I have reservations about the joint venture with Cardiff University, assets have been transferred to P&L as profit in relation to the venture and now boost the balance sheet. As far as I can see "real" cash flow has ben negative for years but the increase in "adjusted profit" has funded huge benefits to directors. Was Ponzi the director of any firms other than his own?

Just saying,

Caveat emptor, regards, Seadoc

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rhomboid1 14th Dec '16 18 of 31
3

In reply to post #162487

Hi seadoc
The history is interesting and complicated but I'm interested in the present;

http://www.investegate.co.uk/iqe-plc--iqe-/gnw/iqe-plc---interim-statement/20160913070101H1668/

"Strong financial performance with double digit growth in revenues, profits and cash generation
Revenues up 18% reflecting increasing revenues in all markets
Adjusted fully diluted EPS up 62% with the benefit of the Groups highly geared business model
Increased profitability converted into 176% increase in cash generated from operations
Balance sheet leverage reduced by 28% to £35.4m
Kopin deferred consideration balance of £10.7m settled in full in January 2016
Remaining balance of deferred consideration will be settled in full by the end of this month (September 16)."

So £12.4m in cashflow in H1 and Net cash generated from operating activities increased more than threefold from £3.5m to £11.0m.

So profits are real and turning into cash.

I hold a lot of IQE and the history you allude to is one of the reasons it popped up as a value play and I'm sure it'll take time to rerate to reflect more about its future than its past.

Cheers


| Link | Share | 1 reply
Monty9 14th Dec '16 19 of 31

In reply to post #162394

IDOX No surprise here - Placing at 60p. If I am not invited to take part I recon they should pay me something like 7p per share to compensate.

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rmillaree 14th Dec '16 20 of 31
2

In reply to post #162445

Ref Free

I use most of the online book-keeping offerings and FreeAgent is a class above most of rest with regard to the Simplicity of Use and the Logical Layout and customer Support. It does cost more than the other competitors though so its tricky so say whether they will be able to hold their own with the Onslaught from Sage/Xero/Kashflow/Quickbooks et al. It should be down to subscriber numbers though as their product is fairly complete so double the sales and the extra costs shouldn't be much. I would have confidence that their customers and nice and sticky once signed up so perhaps i need to have a look at this one.



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AlanJenkins2 14th Dec '16 21 of 31

In reply to post #162478

Thanks,Graham.Cheers.

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seadoc 14th Dec '16 22 of 31
4

In reply to post #162496

Rhomboid,

I am sure you are right, as per your evidence, witnessed by investigate. I bought into the rise from the last trough on the basis of FT (not Sir John Lee but one of other excellent columnists in weekend FT). I doubled my money, may you do the same or even better. Clearly had I not sold on the way down from 60p and held on for another few years and through the next trough I would have got a few pence more for my shares but nothing in dividends for 6 or probably a few more years to come. I hold a bus pass and look for income in my remaining years and value this above the promise of jam tomorrow.

As I said, I await the results March 2017 with forensic interest and accept I may well be wrong but for me this is not the one.

Regards,

Seadoc

| Link | Share | 1 reply
Roger Lawson 14th Dec '16 23 of 31
3

IDOX figures OK, not clear how the acquisition fits into their current market focus though. Also really don't like the fact there will be no Open Offer alongside the placing. I am going to get diluted. Smaller shareholders should object and there will be a vote, so vote against the placing.

Website: Roliscon
| Link | Share | 1 reply
Monty9 15th Dec '16 24 of 31

In reply to post #162529

I would except my modest holding is in a SIPP which makes it all hard work. I doubt that there is a realistic chance of successfully voting it down.

To me the best likelihood of stopping this abuse is maximum publicity - starting with the excellent ShareSoc, social media, letters and emails to the board etc. Anything that pricks the conscience and draws it to the eye of the FCA, the Stock Exchange and the popular press.

| Link | Share | 1 reply
ls2g08 15th Dec '16 25 of 31

In reply to post #162526

Hi Seadoc - would be interested in a write up of your thoughts on the results in March if you would be so kind!

| Link | Share | 1 reply
Roger Lawson 15th Dec '16 26 of 31
1

In reply to post #162580

Am certainly planning to get some publicity on IDOX.
Roger Lawson

Website: Roliscon
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seadoc 17th Dec '16 27 of 31
1

In reply to post #162583

Is2g08,

Yes, I tend to spend (waste?) my time fussing over what I still hold but probably I, and indeed we all, should spend a bit more time on near miss shares, whether that be one already sold that bombed or perhaps worse ones we nearly held or nearly bought that went stratospheric.

It is one of the reasons I look forward daily to read comments from Paul, and now Graham. The ones Paul got wrong have been more "educational" than those (?the majority) he got right. I confess that I hold a couple he would prefer to avoid, and one of those is my best performer of 2016. And I still have high hopes for the other.

Write up on IQE, late March, is on my to do list. Will be on here if the grime reaper spares me, this site and IQE.

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tomps3 15th Feb '17 28 of 31

Idox (LON:IDOX) are presenting next Tuesday 21st February 2017, in the afternoon, in Central London. Contact piworld.co.uk if you'd like to attend.

Tamzin

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Bav3 23rd Mar '17 29 of 31

I was expecting a review article from Graham after the final results.

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FREng 19th Jun '17 30 of 31

In reply to post #162973

Seadoc. Did you ever find time to look again at IQE (LON:IQE) ?

| Link | Share | 1 reply
seadoc 19th Jun '17 31 of 31
1

In reply to post #194983

FREng,

Yes, spared by the grim reaper and got to read the annual report, but see numbers do not appear until page 74:

http://www.iqep.com/media/149511/2016AnnualReportWEB.pdf

and ten of the preceding pages explaining the ridiculous pay for directors. In the days of paper reports any company who had an AR weighing more than the market cap was a sell. My summary: Profit £24m, divs nil, cash up £300,000. Who got all the pies?

I sold out at 30p having doubled my money, perhaps I should have taken a valium, a big spliff, put a clothes peg on my nose and held on, would have doubled my money, actually in last few days potentially trebled my money, but hopefully whoever took my shares has already passed them on. I still see (OK imagine?) a big crash. And your reading of the annual report?

Regards, Seadoc

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About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »

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