Small Cap Value Report (20 Jan 2015) - HMLH, DOTD, HYDG, FRP

Tuesday, Jan 20 2015 by

Good morning! A jolly time was had by all at the usual monthly Mello investor evening in Beckenham last night, organised by my friend David Stredder. These are excellent evenings, and very friendly, as everyone has a common interest in shares.

The company presenting was HML Holdings (LON:HMLH) who provide professional services to blocks of flats. Management were the type of people that I like to invest in - straightforward, down to earth, hands-on management. They gave clear answers to questions, and seemed to present the business in a non-hyped way. Crucially also, I felt they were not trying to conceal anything about the business, it was an open book. So a firm thumbs up from me for this management team.

As for the shares, I think they are fairly priced at 37.5p, so it's one to go on my watch list, to possibly buy on any future dips, who knows? It's a bit too small & illiquid for my taste though, so I would only buy if the market throws me a bargain buying opportunity at say 30p or less.

Some investors don't like meeting management, which is a good idea if you're easily sucked in by a persuasive pitch. However I find meeting management very worthwhile - I can usually detect problems instinctively, and seem to have a sixth sense that rings alarm bells in my head when something is wrong. Maybe it's subconscious reading of body language, who knows?

dotDigital (LON:DOTD)

Share price: 33.5p
No. shares: 285.2m
Market Cap: £95.5m

Trading update - today's update reads very positively - it covers the six months to 31 Dec 2014. Revenue is up 31% to £10.9m, and I think this growth is all organic too.

Net cash has grown to £9.5m, so that's 10% of the market cap.

A final divi of 0.2p has been approved, which is an unnecessarily mean yield of only 0.6%. Come on DotDigital! You've got the cash in the bank, so pay a proper divi! To my mind they should be paying about 3-4 times that figure in divis.

Valuation - I like this business a lot, but the price is so high on the historic figures. That said, with 31% organic growth being achieved, you could argue a strong case for this stock deserving a premium rating - if that growth rate…

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HML Holdings plc is engaged in the provision of property management services. The Company's segments include property management, professional services and insurance services. Its property management segment is engaged in residential property management. Its professional services segment is engaged in chartered surveying services. Its insurance services segment is involved in insurance broking intermediary services. Its surveying services include building surveys and inspection, project management, lease extensions and right to manage. Its ancillary services include company secretarial, management of site staff, and health and safety. It works with housebuilders and developers, and provides a range of services, including a review of the plans and specification, preparation of service charge structure and indication of costs and preparation of a management plan or strategy. Its residential property management services include accounts preparation and routine inspections. more »

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dotdigital Group Plc is a United Kingdom-based company, which is engaged in providing software as a service (SaaS) and managed services to digital marketing professionals. The Company offers dotmailer, which provides e-mail and multi-channel marketing automation platform with various tools that enable marketers to create, manage, execute and evaluate various campaigns. In addition to its automation technologies, the Company also provides multi-channel marketing consultancy and services for businesses seeking to manage customer acquisition, conversion and retention. The Company also has pre-built integrations with e-commerce platforms and customer relationship management (CRM) products, such as Magento and Salesforce. dotmailer helps in using contact data to design, test and send automated campaigns. The Company's subsidiaries include dotmailer Limited, dotsearch Europe Limited and dotmailer Inc. Through its subsidiaries, it is engaged in providing Web- and e-mail-based marketing. more »

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Hydrogen Group plc is a United Kingdom-based company, along with its subsidiaries, is engaged in the provision of recruitment services for mid to senior level professional staff. The Company operates through two segments offering both permanent and contract specialist recruitment consultancy for the organizations. The Company's segments are Professional Support Services and Technical and Scientific. The Company recruits for roles in Professional Support Services, including legal, finance, technology and business transformation placements, and in Technical and Scientific market sectors, such as power, mining, oil and gas and life sciences. The Company's subsidiaries include Hydrogen UK Limited and Hydrogen International Limited in the United Kingdom; Hydrogen Group Pty Ltd in Australia; Hydrogen Group Pte Ltd in Singapore; Hydrogen Group Ltd in Hong Kong; Hydrogen Norge AS in Norway, and Hydrogen Group LLC in the United States, among others. more »

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6 Comments on this Article show/hide all

lucien2k 20th Jan '15 1 of 6

I've held DotDigital since April, and even though they have dropped a bit in that time I am still happy to continue holding.

The growth is overall good, and they have a decent product. The advantage of this kind of product is that it runs itself so almost all new customer acquisition is extra profit.

The key to their business is to control their costs and focus on sales in my opinion. The product is solid.

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dradjackson 20th Jan '15 2 of 6

I'm with you Paul entirely on Fairpoint, a company I first looked in Q4 last year. The numbers looked to good for me so bought up some a few weeks ago. Hopefully rising interest rates will translate into better performance in the coming years.

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imranawan 20th Jan '15 3 of 6

Hi Paul

I've had a quick look at the Annual Report (2014) for dotDigital (LON:DOTD) and according to the cashflow statement they capitalised £1.4m in intangible assets but only amortised £866k through the P&L account. Are profits and therefore EBITDA being boosted slightly?

Best wishes,

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Paul Scott 20th Jan '15 4 of 6

In reply to post #90582

Hi Imran,

You are absolutely right, my apologies. I mis-read the Annual Report originally, and on checking it again, you are correct, the £1.4m capitalisation does exceed amortisation of £866k. I have amended the article accordingly, and inserted a screenshot of note 13 from the accounts.

Thank you for pointing out this mistake in the original article, much appreciated.

Standards are slipping, that's the second mistake I've made in the last week - I must try harder!

Regards, Paul.

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imranawan 21st Jan '15 5 of 6

In reply to post #90592

Hi Paul

Thanks for responding. I'm still a relatively new investor and find your daily blogs really useful and insightful and they help improve my accounting knowledge. Keep up the great work.

Best wishes,

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Paul Scott 21st Jan '15 6 of 6

In reply to post #90600

Hi Imran,

Well you seem very much on the ball to me!

Cheers, Paul.

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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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