Small Cap Value Report (2 Jun 2015) - SEA, IGP, DRV

Tuesday, Jun 02 2015 by

Good morning! Let's start with two companies that have dropped this morning on disappointing announcements.

Seaenergy (LON:SEA)

Share price: 15.4p
No. shares: 56.4m
Market Cap: £8.7m

Trading update - this is a rather odd collection of small, sub-scale businesses. However, one particular subsidiary, called R2S did look interesting - it provides software which integrates detailed 3D photography of client premises (e.g. oil rigs, large ships, factories) into the client's database of service & repairs. So it's a visual interface for maintenance records. Growth had looked quite exciting, but since their main market is oil rigs, it's not surprising that the company today reports that business has become more difficult.

Overall, they say that 2015 will produce a "broadly comparable performance to 2014". So a bit below then.

The ship management subsidiary always looked a non-starter, and the penny seems to have dropped with management at long last, and they today say that it is non-core, and "management are reviewing exit strategies".

If I held shares here still, I'd want to see management reviewing their own exit strategies, as they've made a hash of things here, to be blunt.

Outlook - some hope for the future on international expansion;

(had to remove this picture, as it corrupted the text)

My opinion - the group strategy here didn't make sense from the start - a tiny group, trying to do lots of different activities, and ending up doing none of them well enough.

I think there's a strong argument for jettisoning everything apart from R2S, kicking out all the plc Directors, who have turned out to be a large overhead with questionable benefit (in my opinion), and instead focus the stock market listing on the most promising subsidiary company alone, with leaner overheads, R2S - as that's where the growth is likely to come from.

Intercede (LON:IGP)

Share price: 94.5p (down 11% today)
No. shares: 48.4m
Market Cap: £45.7m

Final results for y/e 31 Mar 2015 - we saw yesterday how GB Group (GBG) is rated very highly, as it operates in a sexy growth sector, namely online identity verification.

Intercede seems to be more about online security. This is part of the section on how they describe themselves;


The figures reported today look poor. The company complains about lumpiness of orders, and reports turnover down nearly 10% to…

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Intercede Group plc is a United Kingdom-based software and service company. The Company is engaged in developing and supplying of identity and credential management software. The Company provides MyID software, which is an identity and credential management system that enables organizations to create and assign trusted digital identities to employees, citizens and machines. Its MyID software protects the networks, facilities and intellectual property of governments, agencies and other enterprise customers. In addition, it provides MyTAM, which is a cloud-based service that provides Android application developers and service providers to deploy trusted applications to the trusted execution environment (TEE) on mobile devices. It offers its solutions to various sectors, including aerospace and defense, finance and telecommunications; governments and federal agencies, and mobile developers. The Company operates in the United States and the United Kingdom. more »

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Driver Group Plc (Driver) is a United Kingdom-based company, which provides consultancy services to the engineering and construction industries. The Company conducts its operations through three operating divisions: Europe & Americas (EuAm); APAC, Middle East & Africa (AMEA), and Initiate. The EuAm and AMEA divisions provide various services, such as quantity surveying, litigation support, contract administration, and commercial advice/management. The Initiate division offers development, project and contracting management services to the infrastructure market in the United Kingdom. DIALES is its witness support service provider. Driver Project Management provides the strategic and leadership disciplines necessary to develop and deliver a project. Driver Project Services provides customer-focused project controls solutions across a project lifecycle. Driver Trett provides multi-disciplinary consultancy services to support delivery of its clients' projects. more »

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

7 Comments on this Article show/hide all

herbie47 2nd Jun '15 1 of 7

Thanks Paul. I have come across SEA before, it was tipped by ST in Investors Chroncile a while ago at around 23p? I believe. Did not like it then, glad I did not invest. I will be interested in ST update.

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Aislabie 2nd Jun '15 2 of 7

While I agree that R2S looks like the core of the future business I am not sure that I would be so critical of the attempt to get into offshore ship management. Companies should try to extend their businesses, and if they do not succeed then be decisive and get out, this seems to be what SeaEnergy is doing. It is not clear that this was destined to fail even if hindsight seems to make it so.

Also reporting today is ACAL which in April you noted as interesting but in need of improved margins if it was not to be seen as "toppy" in valuation. The margins appear to be rising as their customised offerings increase. As before the account presentation seems to be clear and confident and largely clear of hype, which I appreciate

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herbie47 3rd Jun '15 3 of 7

Update on SEA, ST in Investors Chroncile is now advising to sell, the sp is now down to 13p.

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TheWatchmaker 5th Jun '15 4 of 7

Hi Paul,
Love the YouTube channel you've started - very interesting to hear your comments and musings.
It must be very time consuming to do the written report and also the video - but they are extremely useful.
I hope that this addition to the SCVR will continue.
Your dedication is much appreciated.

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Paul Scott 5th Jun '15 5 of 7

In reply to post #100530

Hi Geoff,

Thanks for the feedback.
The videos are just an experiment - I didn't even clear them with Ed (the boss!), so not sure if he likes them or not, but it's great to try out new ideas, and see what happens.

My main output remains in these written reports, but there are always some other bits & pieces that I want to cover, but which don't maybe fit the format here, or just haven't got time for. So I like the video format to have a quick rattle through other topical issues of the day, especially as I found some software online which can do screen capture video whilst I talk over it.

It has to be done in one take, so may not always be perfect, but if people like it, I'll keep doing it.

Regards, Paul.

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Shelboy 6th Jun '15 6 of 7

Hi Paul
Just wanted to add my thanks too for the videos. Very informative and good to get an insight into your thinking and strategies. Much appreciated.

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rhomboid1 6th Jun '15 7 of 7

Hi Paul

Just to say I enjoy the videos , they add a lot please carry on!

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 Are LON:SEA's fundamentals sound as an investment? Find out More »

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 on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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