Small Cap Value Report (24 Nov 2014) - NBU, AVG, MPOW, GBG, ECK, SOLI, FLOW

Monday, Nov 24 2014 by

Good morning! In case you missed it, I published another audiocast interview this weekend with renowned investor @WShak1 - click here to listen, sorry for the sound quality not being great, I have a cunning plan to fix that issue next time.

I am flying to Las Vegas in the morning, for a short holiday, so I apologise that there will inevitably be some disruption to these reports this week, mainly due to the time difference, as I will be 8 hours behind. Therefore my plan is to write tomorrow's report as usual from the departure lounge at Gatwick, then Wed-Fri reports this week will be published in the evening UK time.

Naibu Global International Co (LON:NBU)

Profit warning - this Chinese maker of sports shoes warns on profit today, blaming a sales slowdown leading to overstocking by distributors. So margins will be hit in Q4 of 2014, and Q1 of 2015 as stock is cleared by discounting.

Dividends - this company has paid dividends before, but from memory I think they had stopped. However, it says today;

Naibu has substantial cash balances (RMB 315 million as at 31 October 2014) and the Directors are confident that the Company has sufficient resources to implement the programme referred to above.

There seems to be a technical glitch stopping me from copying any more of this accouncement, but there is another section saying that Naibu, "intend to resume the payment of dividends in 2015, once the overstocking issues referred to have been resolved".

My opinion - personally I wouldn't put any reliance at all on any stated intentions, nor the accounts, from Chinese companies on AIM. I remain of the view that the inevitable end game here is likely to be a de-listing, probably in 2015.

Of course, if the numbers were real, then insiders would be massive buyers of these shares, given that the forecast dividend yield is about 50%, and the PER is 0.35! Funnily enough though, they are not buying. What does that tell you?!

Avingtrans (LON:AVG)

Share price: 104p (down 24% today)
No. shares: 27.6m
Market Cap: £28.7m

Profit warning - there seem to be so many profit warnings happening at the moment - which is the main reason that I don't like over-paying for any small cap, as you can end up…

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Avingtrans plc is a United Kingdom-based company, which is principally engaged in the provision of engineered components, systems and services to the energy, medical and traffic management industries around the world. The Company operates in energy and medical segment. The energy and medical segment is engaged in the designing and manufacturing of machined and fabricated pressure and vacuum vessels and process plant and equipment for the power, oil and gas and medical markets. The energy and medical segment is also engaged in the designing and manufacturing of fabricated poles and cabinets for roadside safety cameras and rail track signaling. The Company's geographical locations include the United Kingdom, Europe, North America and Rest of World. The Company's subsidiaries include Crown UK Limited, Stainless Metalcraft (Chatteris) Limited, Composite Products Ltd, Hayward Tyler Ltd and Peter Brotherhood Ltd. more »

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mporium Group plc is a holding company for mporium Limited and Fast Web Media Limited. The Company is a mobile first technology firm that monetizes the transformation that smartphones have had on consumer behavior. The Company provides Software-as-a-Service (SaaS) and supporting services. The Company is in the process of developing two products: impact and insights. The mporium impact is an advanced digital advertising platform. The mporium impact works for digital advertisers and their agencies. The mporium impact uses the stimuli that television content provides and generates the associated synchronized consumer digital activity. The mporium insights product provides enterprise level technology to the small and medium sized enterprise (SME) market. The mporium insights offers e-commerce analytics, customer segmentation, and real-time customer data, which include trend-based Web traffic reporting. more »

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

33 Comments on this Article show/hide all

cig 25th Nov '14 14 of 33

"The biggest selling point of the Flow boiler is the finance."

Then why they don't do this deal with any random boiler? If that's where the value is (and I agree there may be some value for some people here), they could just buy off-the-shelf boilers from the cheapest supplier they can get a group deal with every year. Conversely, if their boiler is any good they should sell it to anyone who'd like to buy it on its own merits (if any). The combo business model is bizarre.

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intuitive6191 25th Nov '14 15 of 33
Then why they don't do this deal with any random boiler?

They probably don;t realise that this is sales benefit. Also it would be a very different business with ordinary boilers. It would effectively be a finance company and this may not attract the same level of investor interest.

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herbie47 11th Dec '14 16 of 33

I did send them an email, believe they have an office in Ipswich, thats where I cam across them on the local radio. Anyway I gave them my gas usage figures and they said "We really suggest that you should be spending between £1213 and £2691 on your home energy every year, with between £667 and £1480 of that being on gas". Hmmm I don't think I should be spending £2,000 on energy thank you, I thought people were meant to cutting down? So anyway it seems their boiler are for larger users. If you have an boiler maybe its worth it but then how much do their boilers cost compared to a condensing boiler?

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testpack3 13th Dec '14 17 of 33

In reply to post #88054

Hi igotts
!) Not a sterling engine version. DYOR
2) Obviously only generates elec. when boiler is on. As you know, the most efficient way to run central heating is run the system for 24 hrs per day in Winter ( or cold snaps), at whatever temp you decide as background warmth.
3) You can be committed, or not. If yes, the Thames Tariff is one of the cheapest in the market place.
4) 'Inveigling their way into yr house' It's called The Internet of Things.From yr mobile, through a smart device ( incorporated in the boiler), control your boiler, alarms, cooker, lights, swimming pool temp etc.. If of no interest, do not fone smart device.
5) At present have over 3000 trained installers and maintenance ( to include Calor, Mears, and independents), Most of these, believe it or not, are outside London. Yeh, shocking isn;t it. The yocals getting something good. lol. Bad news though, Flows HQ is in Lancashire, or some other backward north country, btw, If customer takes the 10 yr deal ( 5 years to 'payback' boiler cost, and 5 years when elec, generated through Feed In Tariff is split 50:50 between customer and Flow, NO maintenance or service costs. Gets better, yes.
6) 500,000 offtake agreement with Jabil. ( who btw, finance all of the production costs, and with that amount of capital expenditure, on a new mfg plant in Scotland, have done more DD than you, Paul and me. I doubt if it is into high risk ventures. $4B MCap says not. The factory output can be variable., 1, 2 3 shift production? Market in UK is 1,6M replacement/new boilers pa. Unlikely to get 30% of market within 3 years ( ie. contracted offtake over 3 years). No figures released on max output since plant has only just started full time production. Best case scenario is that production cannot meet demand.
With agreement already in place for JV in USA, and major Eu gas supplier ( German) evaluating boiler now, exciting times ahead for shareholders. All in MHO of course, and DYOR. GL

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testpack3 13th Dec '14 18 of 33

In reply to post #88057

Clearly lightningtiger, you have misunderstood the business model. Rather than being told what is, as in Dragons Den scenario, DYOR and come to a conclusion on your misunderstanding. GL

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testpack3 13th Dec '14 19 of 33

In reply to post #88077

Hi cig, Would a large USA based mfg co want to own a retail gas supplier in UK? Furthermore, why would BOD sell co and leave shareholders with 'not much'. Doubtful if Flow would sell patent for under £300M, (All SH, Happy Days) If customer stays with Flow for 5 + 5 years ( the latter when both parties share the benefits of elect, generated), free servicing and maintenance. No rip off. If customer does not like Flow's Thames Tariff, he can choose to purchase outright, enjoy the FIT, and have the boiler maintained by whoever, ( 2 yr guarantee still applies), Flow provide finance, if required, for purchase. DYOR. GL
I am not aware of any short deadline to mfr 500,000 boilers. Info on this would be appreciated.

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testpack3 13th Dec '14 20 of 33

In reply to post #88078

The biggest selling point of the boiler is the 'scroll'. Plse research and see what it does, and then look at other application in which can be used .. Not a 'one trick pony company' Yes, customers can buy it outright.Cost should be revealed early New Year. GL

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testpack3 13th Dec '14 21 of 33

In reply to post #88708

Hi Herbie

You could not be farther from the truth. The 1st generation Flow condensing boiler being manufactured now, is aimed a 2/3 bed properties. Larger property boilers ( ie more output) are currently being developed. The main market is the 2/3 bed property. See above for answer to other concern. GL

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herbie47 13th Dec '14 22 of 33

Hi test pack,
Thanks for your response, ok why did Flow say it was not suitable for me then, and it was quoting what they said. Really who uses over £1000 on electric if they have gas central heating, esp. In 2/3 bed houses.

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herbie47 13th Dec '14 23 of 33

In reply to post #88776

Yes it maybe best to run heating 24 hours a day but that does not mean the boiler is running 24 hours a day, if temperature reaches the temp. Then boiler will cut out. Also when you go to bed most reduce temperature on thermostat, if I reduce mine to 15c then the heating does not come back on until at least 8am unless it's cold at night, last night it was freezing but thermostat did not come ont until 8. Also this is only in winter ie December until March in my area even then if it's mild or sunny you don't need much heating on.

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cig 13th Dec '14 24 of 33

In reply to post #88782

Do you have independent evidence that the "scroll" is better (in net economic terms) than existing exhaust heat reclaim technologies?

My impression is that it's a me-too technology which, while neat, does not offer a material enough improvement, in a field where the mainstream state of the art is already really good; hence the funky business model instead of licensing the tech to existing boiler (etc) manufacturers.

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testpack3 13th Dec '14 25 of 33

In reply to post #88788

DYOR, but my impression is this: You are contracted with Flow for 5 yrs, G&E. You pay on a monthly debit, say £25 ( actual figures being released in Jan), to purchase the boiler in 5 yrs. Flow credit yr A/c £25 every month, irrespective of the amount of time the boiler is running, effectively, the boiler is free. After 5 years, customer and Flow split income from Feed In Tariff. Flow take the 'risk' that yr gas consumption ( weather dependent) is sufficient for them to make profit. It is looking at World wide sales of boiler, it will not be 'mild' everywhere.. There are smaller and larger models being developed now. The scroll has other industrial applications. Check out website in detail. GL

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testpack3 13th Dec '14 26 of 33

In reply to post #88794

I'm a PI in FLOW cig, not an employee. All your queries can be answered at Flow's website. GL

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cig 13th Dec '14 27 of 33

In reply to post #88798

The point is I don't trust them to say the (complete) truth, hence the need for third party sources.

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intuitive6191 13th Dec '14 28 of 33

As has already been stated - the Flow website is very poor about explaning the cost savings to prospective users. It answers none of my queries.

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testpack3 13th Dec '14 29 of 33

In reply to post #88786

Herbie, I have no idea why it quoted you those figures. The figure that I have seen quoted by Flow is £1200 pa, gas and electric. I would drop Flow an e-mail asking for explanation. The co is starting surveys now, for installation in New Year. The survey is primarily to evaluate if enough electricity would be generated to enable Flow to recover cost of 'free' boiler. and make profit, and be suitable for property. Approx. 100 pre-production boilers were installed in 'test' properties, and Flow stated the feedback was 'Heavenly'. It is highly doubtful the co would contract for production of 500,000 units if the business model was not sound. Claire Spottiswoode is an Exec Dir,, Richard Griffiths has a 5% stake, Aviva 22%, and I'm sure their DD &R was more exhaustive than mine. DYOR & GL

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herbie47 13th Dec '14 30 of 33

That's probably why they advise my consumption is too low for them. My electric is about 3kw per day which should fall when I replace electric cooker with gas cooker and hob. Also my gas should fall when I have cavity wall insulation and a new boiler. As an investment I tend to agree with Paul's comments, it's an interesting company and one I will add to my watch list. I think there is a lot of potential but what about others producing similar products. If heat pumps and heat inverters come down in price, you would not need a boiler?

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herbie47 13th Dec '14 31 of 33

£1200 seems to be the minimum, my consumption is far lower, electric is about £200 a year. With price of oil dropping won't price of gas also fall?

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testpack3 13th Dec '14 32 of 33

In reply to post #88800

When you find a BOD in any company that tells the complete truth it will make history,lol.

A German energy supplier is evaluating boiler now, and reporting results early New Year. That is as independent as you will ever get, a German co evaluating a British designed and manufactured product, If their report is positive, and it enters into a JV agreement, sp N and rapid, and a large USA energy supplier (NRG), already signed as JV partner. Worst case scenario, Germans do not give good report, sp tanks bigtime. You pays yr money, u takes yr pick. Many 'insiders' believe this will be a £1B co in 3 years. sp =£4+. Might be 5p. All in MHO of course. GL

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herbie47 13th Dec '14 33 of 33

In reply to post #88796

I understand these boilers are expensive, Baxi do one that costs about £6,000, I'm struggling to understand how Flowgroup will make any money out of this, if they do it will be a long way down the line?

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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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