Small Cap Value Report (22 Nov) - INS, EPO

Friday, Nov 22 2013 by

Good morning! It's a quick rattle through the morning's small cap announcements today, as I'm off into London again for more meetings. Instem (LON:INS) has issued an in-line trading update, and details of a small (£1.0m) acquisition. Checking back through the archive here, I last reviewed this company's results on 27 Mar 2013, coming to the conclusion that the shares might be interesting at 121p. They have since risen to 164p (although practically all small caps have gone up by that sort of ratio over the last six months).

It looks a good steady company, making £1m+ profit each year for the last four years, but the Stockopedia graphics are not showing it as good value. The forecast PER is 18, which seems a pretty rich rating to me for such a small company that has not been delivering profit growth, and doesn't pay a dividend. So it's not of interest to me.
A new award category should be invented for Earthport (LON:EPO), perhaps the "plates spinning award", for the company which is able to keep promising great things (which never materialise), and continue raising wave after wave of cash, seemingly forever. Their results for the year ended 30 Jun 2013 are issued today (seriously, it's taken them almost 5 months to produce the figures!), and as usual they're diabolical. Turnover rose from £3.0m to £4.1m, and an operating loss of £8.1m was generated, a bit better than the previous year's £9.6m loss.

After yet another fundraising, they had £13.4m cash in the bank at 30 Jun 2013, and ignoring the £1.6m share-based charge on the P&L, their cash burn looks to be around £0.5m per month, so they should be able to keep those plates spinning for another two years before the latest lump of cash runs out.
Remarkably, the accumulated losses from this company now total £120.1m, and still no sign of anything even vaguely near a viable business emerging. As their own former FD told me about 6 years ago, when I visited their offices, "I can't believe people keep putting money into this!". Nor can I.

Results for the year ended 30 Jun 2013 from private jet operator, Hangar 8 (LON:HGR8) look pretty good. EPS has doubled from 4.9p to 9.7p, although at 197p…

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Instem plc is a supplier of information technology (IT) applications to the early development healthcare market delivering solutions for data collection, management and analysis across the research and development continuum. The Company is engaged in Global Life Sciences operations. Its lead product suite, Provantis, is an application in the Early Development Safety Assessment (EDSA) market. The Provantis solution incorporates a suite of modules required for managing and recording EDSA studies, from receipt of the compound through to the automated assembly of statistical analyses and final reports. Its software allows scientific staff to collect, analyze and share data across the organization and externally. It also offers ALPHADAS, an early phase clinical software solution. The Company offers Centrus suite, which provides pre-built applications, as well as the ability to utilize a range of business intelligence and analysis tools. more »

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Earthport plc is a financial services company. The Company provides cross-border payment services to business enterprises and banks. The Company's payments solution connects international payment and local infrastructures to provide clients access to global payment options via a managed service. Its service offers a range of options for connectivity, including application program interface (API), file-based solutions and Society for Worldwide Interbank Financial Telecommunication (SWIFT); validation and message transformation; advisory services for market entry and new product development; project management support during implementation; client funding options and liquidity management services, and various currency offerings to support a range of currency requirements. It has a range of country-specific checks and validations for payment processing, including modulus checks on account numbers, referential checking on beneficiary bank details and enrichment of beneficiary bank data. more »

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

2 Comments on this Article show/hide all

rivaldo 22nd Nov '13 1 of 2

I've bought some HGR8 (Hangar 8) this morning.

With adjusted EPS up 148% to 19.1p, compared to 7.7p last year, one could forecast say 25p EPS this year at minimum?

Plus there's a strong Balance Sheet, with £3.8m cash against a £19m m/cap.

And the outlook is extremely rosy:

"Current trading in the first quarter of the new financial year has enjoyed a strong start, and is in line with our expectations with further new aircraft in the process of being introduced."

Plus this year HGR8 will get the benefit of a full year's profits from their IJC acquisition (only just acquired halfway through last year).

 And HGR8 have diversified heavily away from jet hire (see note 4 to the Accounts for a revenue split). To illustrate, they say "only 9% of the Group's gross margin now derived from short term spot charter revenues ".

They are now a "leading supplier of private aviation services", i.e aircraft management, charter, long-term contract, aero-medical, engineering and training, with long-term contracts providing an impressive 42% of total revenues.

Finally, the adjusted EPS is - in this case- the true measure of value here, as it ignores one-offs like acquisition and restructuring expenses, and amortisation, enabling a truer picture reflected in the £1.9m operating cash inflows compared to the £1.16m reported PBT.

Worth a look imho.

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SingSing 23rd Nov '13 2 of 2

Paul thanks again for the great posts this week - a real pleasure to read..

Sing Sing

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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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