Small Cap Value Report (19 Dec) - WHI, EPO, PBTY

Good morning! There's a positive trading update from my broker, WH Ireland (LON:WHI) this morning, which is good to see. Their shares are up 6p to 89.5p at the time of writing. The statement says that "...revenue and profit before tax for the Group exceeding market expectations". That's all very well, but I can't find any market forecasts, so am not able to quantify this.

We're in a tremendous bull market for small and mid caps right now, and on pretty much a daily basis there are Placings and IPOs galore. That's all lucrative for brokers, so this is a good area to be looking at for potential investments I reckon. Although prices have already gone up a lot.

 

 

My computer has crashed a couple of times this morning, so am rapidly running out of time, despite starting work at 7am today, as I have to catch a train for another investor lunch in about an hour. So will quickly skim over a couple more announcements.

 

 

 

 

I've been pretty scathing about Earthport (LON:EPO) before, since it has been promising great things for many years, with numerous bullish announcements, none of which ever amounts to anything - the company just burns up cash, and has repeated fund-raisings from shareholders.

However, today's announcement of a strategic agreement with Bank of America Merrill Lynch sounds a lot more credible. It talks of;

 

...minimum revenue to Earthport of $11.3m, with the majority of the revenue anticipated within the first 30 months of the agreement.

 

So assuming that means actual fees to Earthport, and not the size of client transactions, then it could possibly be finally going somewhere near commercial viability? That said, the market cap is now well over £100m, which is an eye-wateringly optimistic valuation given this company's appalling long-term track record of heavy losses.

The shares are up about 20% to 29.5p this morning. They've promised a lot in the past, so I shall certainly be waiting to see real evidence of a turnaround in the financial results - because previous contract announcements have not improved financial results, so it has paid to be sceptical with this one in the past.

Maybe they might be turning the corner now at long last? We shall see.

 

 

 

 

I've had a quick look at interim results to 30 Sep 2013 from Probability (LON:PBTY), and they're really not good. This is a gambling company for mobile phones, but at the current rate of cash burn they only seem to have about six months cash remaining. So another fund-raising looks virtually certain here I would say, so best avoided in my opinion.

 

 

 

Sorry, I have to leave it there for today.

See you tomorrow.

Regards, Paul.