Small Cap Value Report (21 Nov) - UBI, FCCN, DTG

Thursday, Nov 21 2013 by

Good morning! Twenty-two minutes late, wrong type of leaves on the line at Aldrington. Regulars will know that I've been circling around a stock called Ubisense (LON:UBI) for some time now - it's an interesting technology company which provides systems that enable customers to track the location of people and things in real time. I don't pretend for one minute to understand the technology, but from what I have seen, it looks interesting, i.e. it has obvious potential & usefulness. More importantly than what I think, it is selling to big name customers, and that's what counts.

The problem with growth companies is that they're usually (especially at the moment in this bull market) too expensive, based on historic numbers, so any purchase is a leap of faith about future performance. Investors often collectively over-pay for growth, just assuming that growth will carry on forever, and ignoring the real world issues such as competitors emerging & chipping away at any competitive advantage that a growth company might have.

Anyway, rightly or wrongly, I decided to push the button & have bought a small quantity of shares in Ubisense (LON:UBI) this morning, on the back of this announcement, which announces an order of E0.7m from a large European automotive manufacturer for a Ubisense Smart Factory System. That order in itself is not material to their results, but what interests me is this part of the announcement:


The order, valued at approximately €0.7m, is part of a global framework agreement with the manufacturer that covers more than 100 sites and this represents the fourth installation since production acceptance was granted in July this year.


So that sounds like there could be considerably more orders in the pipeline.

These shares have edged up about 5% to 205p this morning, which values the company at about £45m, which is certainly not cheap by any means, as you can see from a generally poor performance over the last few years (other than steadily rising turnover):

So I will quite understand if regulars here come to the conclusion that I've taken leave of my senses, paying up for a speculative £45m market cap which doesn't really make any profit, and doesn't pay a dividend. But we are…

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IQGeo Group PLC, formerly Ubisense Group Plc, is engaged in providing enterprise location intelligence solutions for manufacturing, logistics, transit, communication and utility companies. The Company operates through Geospatial. The RTLS segment takes real-time location data from its own sensing hardware, or from standards-based integration with third party hardware, and transforms this data into spatial event information, delivering asset identification, real-time location and spatial monitoring. The Geospatial segment delivers software solutions that integrate data from any source, including geographic, real-time asset, global positioning system, location, corporate and external cloud-based sources into a live Geospatial common operating picture. The Company offers various products, such as Smart Factory, myWorld, myWorld Damage Assessment, myWorld Inspection & Survey, myWorld Network Insight, Dimension4 and AngleID. more »

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French Connection Group PLC designs and supplies branded fashion clothing and accessories for men and women. The Company operates retail stores and concessions in the United Kingdom, Europe, the United States and Canada and also operates e-commerce businesses in each of those territories. Its principal brand is French Connection, which designs, produces and distributes branded fashion clothing, accessories, such as toiletries and fragrances, shoes, watches, jewelry, eyewear, furniture and homeware through its distribution channels: retail stores, e-commerce, wholesale and licensing. Its other brands include, Great Plains and YMC. The Company operates in approximately 50 countries around the world. The Company's subsidiaries include French Connection Limited, French Connection UK Limited, French Connection (London) Limited, Contracts Limited, French Connection Group Inc., French Connection (Hong Kong) Limited, French Connection (Canada) Limited and YMC Limited. more »

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Dart Group PLC is a leisure travel and distribution, and logistics company. The Company is engaged in the provision of air travel organizer licensing (ATOL) licensed package holidays by its tour operator, Jet2holidays Limited, and scheduled leisure flights by its airline, Limited ( It distributes temperature-controlled and ambient products on behalf of retailers, processors, growers and importers in the United Kingdom. It operates through two segments: Leisure Travel, and Distribution & Logistics. The Leisure Travel business focuses on scheduled leisure flights by to holiday destinations in the Mediterranean, the Canary Islands and to European Leisure Cities. The Distribution & Logistics business includes the operations of Fowler Welch-Coolchain Limited, a distribution and logistics services provider. Its temperature-controlled operations are in Spalding in Lincolnshire, Teynham and Paddock Wood in Kent, and Hilsea near Portsmouth. more »

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10 Comments on this Article show/hide all

Tamarix 21st Nov '13 1 of 10

Hi Paul - You say that Ubisense is illiquid. How many shares did you try to buy? I couldn't buy 1000 shares on the Selftrade website, but I got 2000 shares by "sending trade to dealer"..
With these tiny companies, with tiny EMSs, it is difficult to build up a stake that is worth the bother. How do you handle it?

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Funnymoney 21st Nov '13 2 of 10

Two things:
I really like the way you write in real time, hence can get excited and then less so. Secondly, could you write a book as per Terry Smith (Accounting for Growth) which outlines how you go through a set of accounts to evaluate a company? It won't be selling the family silver for you as people wil still follow you and it would also increase your profile beyond its current domain. It might be prescient too, as by the time you have finished it the bull market will be over and our minds will be focussed on value. If you were to record yourself verbally every morning as you go though the process you could build up the bulk of the book which could be 30 or so end-to-end examples (which practical rather than academic approach is always by far the easiest way of understanding how anybody does anything).


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BahrainChris 21st Nov '13 3 of 10

Excellent idea Funnymoney.

Paul - whilst you're writing your book can you persuade Carmensfella to write one as well!

As you would say; cheese!

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Paul Scott 21st Nov '13 4 of 10

In reply to post #79320

Hi Tamarix,

Re Ubisense (LON:UBI) - I know, it's horribly illiquid. I tried to get 2,500 shares earlier, but could only get 1,000. Then I had to pay a higher price for the remaining 1,500. It's just the way it is with small & micro caps, and they are usually especially tough to buy on a day when positive newsflow has been issued.

Generally I try to keep some powder dry, and do my buying on days when the market is selling off. Then the opportunities tend to drop into your lap.

It takes time to build up a decent sized position in an illiquid small cap. Also, I don't like holding too much stock in very illiquid shares, as you can't get out if some bad news happens. So these days I'll tend to cap my position sizes at a quantity where I could easily exit in say 2 days if something went wrong.

Cheers, Paul.

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shanklin100 21st Nov '13 5 of 10

Interesting that, unlike the IMS on 21-Nov-12, FCCN make no comment regarding Q3 P/L. They also don't explain how their cash position is as it is, albeit in the H1 results this seems to be largely due to the £9m reduction (circa 18%) in the cost of inventory compared to a year earlier.

Net-net, I think its quite difficult to know what is going on.... ...or at least I am finding it quite difficult to understand.

Cheers, Martin

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clissold345 21st Nov '13 6 of 10

Hi Paul, I hope you don't mind me continuing to point out occasional typos. In the paragraph beginning: "The market cap is only about £40m ..." I think you mean "... Not one for the faint-hearted ...". Regards, Chris.

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mrmodha 21st Nov '13 7 of 10

Having read your blog for a little while now Ubisense (LON:UBI) buy is a real surprise! I just see too many red flags to even have a gamble. Having said that, at time of writing this it has jumped up 9.9% so plenty others seem to see things as positively. Also, would be interesting to see how they measure up in the global framework mentioned above, i.e. how many on it, size of competition and if tiered where Ubisense (LON:UBI) score.

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mcarfrae 21st Nov '13 8 of 10

Hi all,
My first post...gulp!
Re: Investing in Tech businesses - HQ location matters.
Outside silicon valley (South of San Francisco), Seattle and Boston for the US, the UK's talent hotspots are London East End and Cambridge (err...silicon fen!) the latter with its local talent pool sucked direct from the Colleges.
Of course these are generalisations and IT businesses setup all over the place but after 20 years in IT messing about these are my observations....UK examples would be Autonomy (now a subsib of HP), ARM and Blinkx
So from that perspective you shouldn't have `ubilaterally taken leave of your senses!!

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rmillaree 21st Nov '13 9 of 10

ubilaterally - that sounds like a word just waiting to be invented - perhaps a situation where directors/minor shareholders or related parties of the company screw all the minor PI shareholders by some dodgy antics - Example "us small shareholders have been ubilaterally screwed once again by the Directors awarding themselves a nice bonus at 7 times the level of the dividend for the current year"
In its abbreviated form it could be known as doing an UBI - buy shares in a Chinese company and one can expect to be UBI'd at some stage.

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andrewr 24th Nov '13 10 of 10

Hi Paul,
I would like to add my support to the suggestion of thinking about writing a book. Your knowledge and writing style would bring an 'interesting' practical guide to evaluating financial statements and would be a very worthwhile addition for any investor and particularly non-accountants such as myself.
Best wishes,

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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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