Small Cap Value Report (2 Nov 2015) - TRCS, WTM, ZTF, FLYB, QPP, EPWN

Monday, Nov 02 2015 by

Good morning!

Tracsis (LON:TRCS)

Results are out this Weds, for this interesting group of companies with niche products/services targeting the rail industry. I interviewed the CEO just after results a year ago, and have set up another interview this Thu morning.

My interviews are interactive, so the idea is that readers can submit questions in advance. I can't promise to ask all of them, but will select the best questions, and bunch together similar questions into one. The deadline for submitting questions is midnight on results day, so that gives you time to digest the figures first.

To submit a question, please either message me via Stockopedia, or add a reply to this article.

Waterman (LON:WTM)

(at the time of writing, I hold a long position in this share)

CEO interview - just to flag up that I published an interview with Waterman's CEO yesterday. A transcript is also available for the hard of hearing, or those who just prefer to read, rather than listen to the audio.

He sounded upbeat, and the UK commercial property sector appears to be buoyant right now, so there should be good read-across for other companies active in the same area.

I should add that a major shareholder, Ruffer, appears to be drip-feeding stock into the market.

Zotefoams (LON:ZTF)

Share price: 355p (up 0.7% today)
No. shares: 43.8m
Market cap: £155.5m

Q3 trading update - there's a fair bit of detail, but no specific comment on performance against market expectations. The final paragraph reassures that they're probably in line, but if so, why didn't they actually say so?

The business is trading well and we have strong order books in all three of our business units for the final quarter of this year.  Whilst being mindful of the potential impact of economic conditions the Company continues to expect 2015 to be another year of progress and remains confident about the long-term prospects for the business.

Reading between the lines, it sounds like they're not terribly confident about the medium term, but are confident about the long-term. So I feel the above comments are hinting at potential problems, or at least covering themselves in case problems do emerge.

Increased capacity - note that the "major investment" in more production capacity at their Kentucky plant, is expected to start production…

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Tracsis plc is a holding company. The Company is engaged in the business of software development and consultancy for the rail industry. Its segments include Rail Technology and Services, and Traffic & Data Services. The Rail Technology and Services segment includes its Software, Consultancy and Remote Condition Monitoring Technology, and also includes Ontrac Limited and Ontrac Technology Limited (together being Ontrac). The Traffic & Data Services segment includes data capture, analysis and interpretation of traffic and pedestrian data to aid with the planning, investment and ultimate operations of a transport environment and it also includes SEP Limited (SEP). It provides software products, consultancy services and delivers customized projects to solve a range of problems within the transport and traffic sector. It specializes in solving a range of data capture, reporting and resource optimization problems along with the provision of a range of associated professional services. more »

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Waterman Group plc (Waterman) is a United Kingdom-based holding company that offers a range of engineering and environmental services. The Company, through its subsidiaries, is engaged in the provision of design services and advice in the fields of civil, structural, mechanical and electrical engineering together with environmental, and health and safety consultancy. Its segments include Property, and Infrastructure & Environment. The Property segment consists of the United Kingdom structures and building services consulting businesses, which are involved in development projects both in public and private sectors. In addition, this segment includes its overseas business in Australia, Ireland and Poland. The Infrastructure & Environment segment comprises Waterman's civil, transportation and environmental consulting business, which trades as infrastructure and environment consulting and Waterman's highways and transportation outsourcing business, which trades as Waterman Aspen. more »

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Zotefoams plc is a United Kingdom-based cellular material technology company. The Company is engaged in the manufacture and sale of cross-linked block foams. The Company's segments include Polyolefins, High-Performance Products (HPP) and MuCell Extrusion LLC (MEL). Polyolefins foams are made from olefinic homopolymer and copolymer resin. HPP foams include ZOTEK F foams and T-Tubes insulation, made from polyvinylidene fluoride (PVDF) fluoropolymer. Other products include foams made from polyamide (nylon) and PEBA. MEL licenses microcellular foam technology and sells related machinery. The Company offers a range of categories of products, such as AZOTE, including PLASTAZOTE, EVAZOTE and SUPAZOTE; ZOTEK, including ZOTEK F, ZOTEK N and ZOTEK PEBA, and T-FIT. Its products are used in a range of markets, including sports and leisure, packaging, transport, medical, Industrial, building and medical other construction, and other. more »

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

6 Comments on this Article show/hide all

Glaws2 2nd Nov '15 1 of 6

Paul - thanks for the transcript of the WTM interview; very interesting and much appreciated. The directors are very bullish.

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peterthegreat 2nd Nov '15 2 of 6

Hello Paul. I have a question for the Tracsis CEO which I would be grateful if you could consider asking. With the expected advent of driverless cars, there will be increasing reliance on computer software for controlling safety and optimising journeys and there is perhaps greater potential for managing traffic flows with such vehicles. I would like to know whether Tracsis currently has any projects in this or related areas and whether the company sees this as an important area of growth - or is it too far in the future to comment on this?

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spglet 2nd Nov '15 3 of 6

Hi Paul,

Regarding Tracsis, I've some observations that could form the basis of questions about their competitive advantage, and the story going forward... I think they have grown because of the rather disfunctional way the UK mainline rail system operates. Things are changing at Network Rail, and they have too many different suppliers supplying stand alone systems to the different operating regions. I reckon Tracsis could be hit by rationalisation within the Train Operating Companies (TOCs) and Network Rail itself. Furture nationalisation of the TOCs is a possibility of course, and would definitely lead to a more centralised crew and rolling stock management approach. Tracsys focus on condition monitoring, crew management and they overlap into general railway planning and operations as well as the associated analytics. There are big players in the condition monitoring space - Ellipse, Maximo and SAP who have strong enterprise class offerings backed up with large R&D spends and large consultancy practices to provide on site deployment and support services. I think they are a big threat to Tracsys. In the crew scheduling area you have multinational competitors like Siscog (Lisbon) and Giro (Montreal) and for rail planning RMcon (Hannover). All these companies have rolled out large projects across different railways. Tracsis is much more UK rail focused, I wonder how it will grow and be successful in other markets and still ensure it retains its U.K. rail revenues.

Regards, Simon.

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ericb 2nd Nov '15 4 of 6

Paul the outcome so far at VLK is hilarious! Theyve tried to hoodwink the investing classes and steer the company towards a ridiculous self gratification exercise for the directors with limited reward for shareholders - their own bosses - and the whole thing has backfired calamitously. I really hope this is a lesson to be learnt from many a crooked board who might think they can get away with shuffling through some 'agreement' behind the backs of honest and decent hard working investors who are trying to offer support to growing companies.
Good work from those who have been exposing this backhanded scam.

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apad 4th Nov '15 5 of 6

Results out.
Their expansions seem to cut margins and the data logging turnover is down 'after a strong previous year'.
Overseas expansion is still the golden horizon.
Simon's comments above re data logging turnover.
The USP for TRCS is the data loggers plus their software. I.e. they generate the data then analyse it. C.f. queues and festivals!

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iwright7 4th Nov '15 6 of 6

In reply to post #110412

Paul - I have just looked at the SEP Limited website and looks like a "event parking company" - Difficult to see how buying a company managing guys with high viz jackets fit into the Tracis core business? A question to ask? Ian

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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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