Small Cap Value Report (22 Sep 2014) - TUNG, MPOW, MOSB

22nd Sep '14 by Paul Scott

12 comments 16839 reads

Good morning!

Tungsten (LON:TUNG)

Share price: 380p
No. shares: 103.5m
Market Cap: £393.3m

If I had to pick my favourite more speculative share, then this would be it. Tungsten has bought an e-invoicing company, and a small bank, and the combination will be used to finance the supply chains of large corporations & Governments. It's work in progress so far, but the idea is brilliant, and looks do-able, given that they already have many blue chip clients using the e-invoicing system. Financing their customers supply base is the next step.

There's an AGM update today, which helpfully recaps what the company has achieved this year.

Two things I note from today's update. Firstly, that current trading sounds good;

This has helped to underpin a strong start to the financial year for Tungsten Network and as a result the Group is ahead of budget for the first four months of FY15. As we have from inception, we expect this year to be a year of heavy investment and transition in the rollout of our products and services.

Secondly, when the company mentions negotiations to raise financing for their invoice discounting activities, the previously-used phrase of something like, there can be no guarantee that funds will be successfully raised, has been omitted this time. Does this mean management are more confident about raising the money needed? Possibly.

How to value it? Absolutely no idea! Seriously, it's the type of situation that is pretty much impossible to value at the moment. If it works, then the company could be worth billions. If it doesn't, then who knows? There could be a series of fundraisings, and little commercial progress made, we'll just have to wait & see. I was very impressed with the level of Director participation in a small recent Placing, they stumped up a couple of million quid, not something you see very often.

Sorry for the interlude, we've got the carpet cleaners in, and I couldn't hear myself think.

MoPowered (LON:MPOW)

Share price: 7.65p
No. shares: 15.9m
Market Cap: £1.2m

This probably deserves the award for biggest car crash IPO of the year. Not one of N+1 Singer's finest moments (ranking alongside their change of name decision perhaps?). MPOW actually floated in late 2013, with inadequate cash resources, and as it now transpires a rather flaky business plan.

I flagged up concerns over…

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thomaschen

22nd Sep '14

hi paul,
can i ask you about nxr recent director share dealing, on 3rd sep, rns reported martin sold shares under apsp share excerise option, what is the differenc compare to sell share. and then on 19th he bought 120k shares again. i am confused here.

thanks,
thomas

Ramridge

Hi Paul -
Re. TUNG. The little research I have done tells me that the electronic processing of receivables, payables and invoice discounting is still driven by legacy systems at best, paper based at worst. The parallel is the old world of company accounting systems before the advent of Oracle, Sage and others which now offer web-based modern integrated systems with full management information systems. What Tungsten is trying to do is to be the first to offer a seamless integrated platform combining invoice discounting, financing, payables processing all wrapped up with analytics. Well if Tungsten succeeds then the sp will rocket. The market is huge and the usp is a no-brainer. If it fails, then it will simply be one of a hundred or so companies offering a patchwork quilt-like system or systems that customers find so frustrating.
So this is a bet on Edmund Truell, the CEO. He certainly has the vision and the gravitas. I am an investor and happy to back the company.
Regards, Ram

mikehunt

Some more on TUNG:

http://www.proactiveinvestors.co.uk/companies/news/72463/update-tungsten-corporation-trading-ahead-of-budget-closing-in-on-us1trln-landmark-72463.html

alexdonnelly

MoPowered

Why anyone would invest?

Never made 1p of profit and not forecast to make 1p of profit over the next 2 years

Seen it so many times great ideas don't always bring big profits.

Another Monitise

kbkb

alexdonnelly

I think your comparison of Mopowered to Monitise is a little silly to be honest.

Whilst I understand that Monitise have still to demonstrate that they have the basis of a long term successful business model, they are nowhere near the Mopowered.....Lemming approaching cliff edge, basket case (in my view) company.

To some extent that is reflected today, with MONI up by 10% and Mopowered down by 65%

FREng

I don't hold shares in Tesco (LON:TSCO) but I'm shocked by the news today that their half-year profit guidance was materially overstated. I'm used to small cap software companies playing fast and loose with their recognition of earnings, but the press reports on Tesco, if true, seem extraordinary. How many other FTSE 350 companies have equally suspect accounting, I now wonder.

Both have never made 1p of profit and not forecast to make 1p of profit over the next 2 years.
To me they are very much similar.

Yes Monitise have gone up today, but its a fraction when compared to its drop.

Well, Mopowered are the equivalent of a dead man walking, Monitise are not, and whilst they were over valued at £1BN, they are still worth hundreds of millions of pounds.

There is no comparison, no sensible comparison, to be made.

We will have to agree to disagree.

rmillaree

Hello FREng - welcome to the world of a new CEO and kitchen sinking - they might as well turn up for work with a kitchen sink and plumber on day one that they put on the end of their desk waiting for s*** to fill it up with.
The more they can Kitchen sink before they started (or just after) the better they will have done on their watch. It also says alot about how little integrity there is in business financials production where Directors and Auditors tend to be happy to stretch everything as far as legally permissible with their glass 99.99% full outlook. I want accounts to done on a fair and conservative basis - that doesn't really seem to exist nowadays with the souped up Directors and fancy auditors we have.

Obviously specifically for Tesco thats not so say that my generalised rant would be accurate here.
But as a shareholder i am not a happy Bunny that we are where we are, and i will be probably unhappier next week when the US shareholders sue the company to add to their woes - sigh.

rhomboid1

Surely there have been concerns on Tesco accounting for years ?

Eg. http://www.ft.com/cms/s/0/8f866d16-3280-11e4-93c6-00144feabdc0.html

"High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/8f866d16-3280-11e4-93c6-00144feabdc0.html#ixzz3E4B64Zmg

This piece eloquently slates Tesco for poor ROCE and profligate spending which left insufficient cash for dividends;

"So guess what they did instead? Yes, they borrowed it. Tesco’s gross debt, which was £894m when Sir Terry took over, peaked at nearly £15.9bn in 2009. The company spent much of its free cash on fixed-asset investment and raised debt to help pay the dividend. This is neither healthy nor sustainable, as investors in Tesco have now come to realise.
The concept that this might not be sustainable hardly requires much thought. Neither does charting the ROCE versus the growth in EPS. Yet it is evident that many investors, including it seems the Sage of Omaha (who has been trimming his Tesco stake in recent years) either didn’t do this or ignored the results if they did. It makes me wonder what else they are ignoring"

This piece was printed 2 weeks ago

That article to be honest is just a bit of a hatchet job and tells us shareholders what we already know - their investments in us, china and some other areas over the last 10 years have done poorly - that's simply business investing in new markets carries risk and they underestimated the risks involved in that strategy. as the uk grocery market has got more saturated it is also reasonable obvious the easy bang for your buck available in the 90's would not be so easy to replicate.

To say they borrowed to pay the dividend if factually incorrect they borrowed to invest in land and store expansion, debt went up but so did the value of their property portfolio - the freehold property value has increased in value by much more than the extra debt taken on - not that you would think so judging by what is said in this article.

To say the booking of property sale profits is dodgy is trying to argue that if you buy land you should not expect it to go up value in line with inflation long term. Tesco don't do revaluations they simply book a profit as and when they dispose of land and they have still managed to stay above 70% mark with regard to freehold properties on their estate.

For me, Tesco reached saturation point in the UK some time ago, and when they decided to give up, more or less, on their overseas expansion, there was only one way they could go.

Public opinion has also turned against big supermarkets in many ways, and Tesco appears to have been caught out by the likes of Waitrose raisong their game, and JS, with Aldi and Lidl squeezing them at the budget end.

They don't really appear to have any overall strategy anymore, and the £250M error is utterly astonishing, as it is either incompetence or something far more sinister, each of which are disastrous, and if they fall much lower, they may become a target for a hostile bid.

Perhaps those seeking to look seriously at buying JS, will now have a genuine look at Tesco.

Small Cap Value Report (22 Sep 2014) - TUNG, MPOW, MOSB

Tungsten (LON:TUNG)

MoPowered (LON:MPOW)

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Paul Scott

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