Small Cap Value Report (14 Sep 2016) - PCA, ACSO, SEPU

14th Sep '16 by Paul Scott

12 comments 11955 reads

Good morning!

ShareSoc's investor evening in Brighton last night was terrific, thanks to everyone who came along and survived extraordinarily hot weather. The urgent need for constant hydration was met by an excellent draught Asahi.

I was the warm-up act, and did a run-through of my favourite small caps - just a recap of the previous month's reports, so nothing new. I'll put them on a spreadsheet later, so we can track how my "best of" perform over time.

Next was a presentation from Palace Capital (LON:PCA) . I've not come across this company before, and don't usually invest in property companies. However, this one certainly sounds interesting. Management seem very shrewd in spotting bargains. It put me in mind of Newriver Reit (LON:NRR) when we first met them at Mello a few years ago. Although NRR is a REIT, whereas PCA is not. PCA offers a 5.2% dividend yield, plus hopefully long term capital gains on its properties too.

A job for later is for me to crunch the numbers properly, and check out how the spoils are divided. You have to be careful with property companies to ensure that management are not taking a disproportionately large slice of the upside, in remuneration, options, etc..

In other news, the lady at my local sandwich shop here in Hove is "still trying to digest the news that Bake Off is moving to Channel 4". She seems devastated. I tried to soften the blow by pointing out that commercial breaks are very handy when you need to spend a penny. She gave me a withering look, and responded that she just presses pause for that. Overall though, she surmised that Mary Berry is far too ethical to leave the BBC. As for Mel & Sue, well...

Right, onto some shares news now.

accesso Technology (LON:ACSO)

Share price: 1527.5p (down 4.7% today)
No. shares: 22.2m
Market cap: £339.4m

Interim results, 6m to 30 Jun 2016 - H1 results from this company tend to be of limited interest, because it has a very heavy H2 seasonal weighting. Notwithstanding this, the uplift on H1 last year is very impressive;

Revenue up 23.7% to $39.7m (note that it reports in US dollars)

Adjusted operating profit up 212.5% to $5.0m - a lot of the increased revenue seems to…

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Effortless Cool

14th Sep '16

Paul,

You mention with ACSO: "Management took a lot of money off the table, by selling over 1.8m shares at 950p". This took place in April 2016. What we did not know at the time, and what they only saw fit to announce today, is that they had previously awarded themselves £3.4m of shares in March 2016.

The obscene level of this award, the fact that it is based on performance conditions set when the price was 916p per share and the massive delay in announcing it (ludicrously blamed on "an extended close period") all strike me as absolutely disgraceful. Interestingly, Tom Burnett installed himself as Executive Chairman in May 2016; I would hardly find this reassuring, if I was still a shareholder here.

Any thoughts on this?

mike d

I was going to come along last night but trains on my line were terrible all day, surprised you got to Brighton, glad it went well.

Samsgrandad

I've been saying ACSO is too expensive since it was LOQ on Ofex, but it keeps marching upwards. Some large late trades showing now so it looks like it will tick up again. The price is being held down with buys showing as sells, so perhaps there are more buys to be filled.

biloseli

Re Sepura (LON:SEPU):

[The CEO]...has received medical advice to take an immediate and extended period of absence, in order to recover fully from injuries sustained in an accident earlier in the year.

Translation: "Shareholders were so hacked off with the problems in July they sent round the heavy boys with a length of lead pipe and now the CEO's done a bunk to avoid more of the same!"

Joking aside, I hope it's not too serious. The timing of the announcement is interesting. Perhaps a temporary (or is it?) change of management will help resolve some of the problems at this company. Good luck to holders.

Interesting, thanks for posting this. Reminds me of the situation at Tristel a few months ago.

smallcapman

A psychologist colleague once told me that someone going into unnecessary detail in an explanation is highly likely to be telling an untruth.

Less is more when it comes to veracity it seems.

Scm

Cricketfan

Re ACSO, my understanding is that the company does not take any significant licence fee. Rather, they take a share of each attractions revenue passing through their systems. This would account for the increased revenue falling through to the bottom line and also the comment re weather conditions affecting them.
If I am wrong on this, I hope somebody will let me know!

Carcosa

Mark... from the last annual report re accesso Technology (LON:ACSO)

Broadly, we would expect approximately 85% of our full year revenue stream to be repeatable and transactional in nature, with a further 6% repeatable from ongoing support agreements with the licensed element of our customer base. The balance is largely unrepeatable in nature and split between custom client work and software license sales.This combined with the long term nature of many newly signed or extended agreements in 2015 and post period end, together with a low level of attrition of those customers on shorter term agreements, now allows us to look out several years with substantial confidence at our revenue expectations. To put this into context, the Board estimates that contracted arrangements already in place with our top 5 customers alone will generate 60% to 70% of total Group revenues, for each respective year, through to at least 2022. This clearly allows the opportunity to out-perform future revenue expectations by delivering further new business.

Since then I have seen a presentation on their website which increased that 85% figure to 90%

Which is essentially saying you are right!

Paul Scott

Hi Mike D,

The trains from London to Brighton were so bad yesterday, that I ended up crossing London on a Boris Bike, then catching a National Grannies coach from Victoria Coach Station to Brighton, which took nearly 3 hours.

It's decades since I last went by coach, and have to say how impressed I was. It had a loo, free Wifi, a charging point for model phones or laptops, great aircon. All in all quite comfortable, although as always the downside is inconsiderate fellow travellers with loud headphones, tapping, breathing (!!).

The broker from Allenby who arrived about 5pm said it was mayhem on the trains - rammed full, fights breaking out at Victoria station, etc.

I would definitely consider catching the coach again in future, it was OK.

Regards, Paul.

Hi MarkC & Carcosa,

Useful comments, thanks. I have just added a short new paragraph in the main report to flag up your points.

Regards, Paul.

Raldridge

15th Sep '16

Any thoughts on Anpario?

That's dedication Paul, 3 hours on a coach! I'd be interested to view the spreadsheet of the talk. Where will that be?

Small Cap Value Report (14 Sep 2016) - PCA, ACSO, SEPU

accesso Technology (LON:ACSO)

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Paul Scott

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