Small Cap Value Report (25 Jul 2014) - AXS, BVM, SSY, RTC

Friday, Jul 25 2014 by

Good morning!

Accsys Technologies (LON:AXS)

A lot of small cap share prices have been drifting down over the quiet summer weeks. However, every now and then I look at a share that is relentlessly dropping a bit every day, and think to myself, I wonder when the bad news, or the Placing, will be announced to the market? Sure enough, usually a week or two later some price sensitive news is announced.

That's been the case with this company lately, and the bad news has been issued this morning, namely a bizarre tribunal ruling over a >E100m damages claim against Accsys by its former far eastern distributor, Diamond Wood.


The good news is that the tribunal has ruled that damages cannot exceed E250k - so a bit of a difference from E100m! The bad news is that the tribunal says that the distribution agreement has to be reinstated. Furthermore, Diamond Wood is obliged to resume the construction of a factory to make Accsys's specialised wood product, Accoya.

This is clearly a ludicrous ruling. You cannot force parties to resume an ongoing commercial relationship, if they don't want to. Instead the legal system should be helping to ensure a fair separation takes place, with compensation as appropriate. I don't know any of the detail, but it sounds to me as if Accsys and Diamond Wood would be better off just negotiating a sensible compromise deal between themselves. Perhaps the tribunal wanted to trigger that happening by forcing them back together again?!

It's something of a cloud over Accsys though, which together with a rather toppy valuation, means I will continue to watch this one with interest from the sidelines. Longer term though, this looks a very interesting company, with a new product, which is in demand, globally. So I shall keep this one on my watch list, but would like a solution of the Diamond Wood problem before investing - big legal cases can often take longer & cost more than anticipated, and are also a big distraction for management.

There has been no share price move as yet (at 08:19), with only two small sells printed, and the Level 2 order book looks evenly balanced, so the market seems to be interpreting this news neutrally at the moment. 

Belgravium Technologies (LON:BVM)

Micro cap niche electronics company Belgravium,…

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Accsys Technologies PLC is a chemical technology company. The Company is focused on the development and commercialization of a range of transformational technologies based upon the acetylation of solid wood and wood elements (wood chips, fibers and particles) for use as construction materials. Its segments include Licensing, Management and Business Development; Manufacturing, and Research and Development. It is engaged in the production and sale of Accoya solid wood, and licensing of technology for the production and sale of Accoya wood and Tricoya wood elements through its subsidiaries. The Accoya solid wood and Tricoya wood elements technologies are manufactured through the Company's acetylation wood modification process. Accoya wood is used for windows, external doors, siding, decking, structural and civil engineering projects. Tricoya Wood Elements are used in Facade cladding/siding and other secondary exterior applications; window components, and door skins and wet interiors. more »

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Touchstar plc, formerly Belgravium Technologies Plc, designs and builds mobile computing devices and develops software solutions used in a range of field-based delivery, logistics and service applications. The Company is engaged in the supply and maintenance of real time electronic data systems. The Company focuses on the industrial and retail environment: logistics, transport distribution, secure access control and mobile point of sale. The Company's product range include: elements in three distinct sets; Software applications, Mobile computer hardware and Managed services. The Company provides mobile computing solutions for warehouse operations for both truck-mounted and hand-held applications. The Company's mobile computing solutions communicate using wireless technology and provide real time data. The Company designs and supplies access control systems for industrial and retail environments. Its subsidiaries include Feedback Data Limited and Touchstar Technologies Limited. more »

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SCISYS group PLC is a United Kingdom-based company, which is engaged in developing information technology (IT) services. The Company develops application solutions and products, and provides supporting services. The Company provides IT services to corporations and public sector organizations through four divisions: Space; Enterprise Solutions & Defence (ESD); Media & Broadcast (M&B) and ANNOVA Systems. The Space division provides various aspects of a space system, from fundamental research and onboard software solutions, to supplying ground segment infrastructure and services. The ESD division provides software solutions across various markets, including defense, security, marine, public sector and commercial. The M&B division is a supplier of digital radio production, archiving, asset-management and playout solutions. The Annova systems develops a portal for ARDAktuell based on the ground-breaking, product OpenMedia Newsboard. more »

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

19 Comments on this Article show/hide all

shanklin100 25th Jul '14 1 of 19

Hi Paul

Given its a fairly quiet day for small-caps, might you be able to comment on the RTC interim results from yesterday please?

Thank you, Martin

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Mark Midmore 25th Jul '14 2 of 19

Any view on the slide of Pittards share price. From A high of just over £2.00 to just over a £1? It's either very good value or something is going to break to explain the fall - do you still hold?

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Paul Scott 25th Jul '14 3 of 19

In reply to post #84959

Hi Martin,

Sure, there's not much news today, so I will look at RTC (LON:RTC) for you, from yesterday.

Regards, Paul.

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shanklin100 25th Jul '14 4 of 19

In reply to post #84961

Thank you Paul :-)

Regards, Martin

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Paul Scott 25th Jul '14 5 of 19

In reply to post #84960

Hi Mark,

Re Pittards (LON:PTD) - recent broker research indicates that they are suffering from the strength of sterling.
Also sentiment was badly dented by a Director selling 200k shares at 120p in Jun 2014, which if I recall correctly was at a discount to the market price at the time. There were 2 token buys from other Directors shortly afterwards, but the damage had been done.

The company has some debt, and to be honest I don't really know the company well enough to increase my existing position. I only add to losing positions if I really know the company well, and have redoubled my research and am convinced that any problems are fixable. I've just not been through that process with Pittards, so cannot increase my position.

The main reason I went long here was because, as well as looking reasonable value, it recruited a former CEO of Mulberry as a Non-Exec. So my hope is that he can show them how to break into the luxury handbags space, which is unbelievably lucrative. The prices that often quite ordinary (in wealth) women will pay for handbags is pretty insane. So if you get the product, branding & the marketing right, then the rewards are extraordinary. There's no indication I can see that Pittards are making any progress on that front, but Rome wasn't built in a day, so I'll probably hold for a couple of years more & see what develops.

Just an opinion, as always, not advice, DYOR as usual!

Regards, Paul.

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billytk 25th Jul '14 7 of 19

Very good write up on SCISYS (LON:SSY) Paul, much appreciated and a good read. On the watch list for some further research when time permits.

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rivaldo 25th Jul '14 8 of 19

I've bought some BVM this morning following the positive trading statement. It sounds rather exciting to me now.

For a £5.2m m/cap, one gets a company with £1.9m cash and forecast by WH Ireland to make £0.7m PBT and 0.66p EPS this year, followed by 0.8p EPS next year. There's also a 0.2p dividend, i.e a 3.7% yield.

The £3.3m EV looks pretty good against those figures.

Plus BVM made the Feedback acquisition mid last year, so it's a little unfair to complain about sedentary management and lack of new products. With the cash pile we may even get a further acquisition. And trading appears to be on the up, especially the airline SkyPOS solution.

It's not difficult to see a 10p share price based on 0.8p EPS with the accompanying cash pile. Not bad against the current 5.2p share price.

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purpleski 25th Jul '14 9 of 19

Thanks for the comments on Pittards (LON:PTD). Trading 36% below book I will continue to hold.

Belgravium Technologies (LON:BVM) if "but cannot say it in any way excites me!" why do you bother, surely a distraction and one more bit of noise to deal with?

SCISYS (LON:SSY) does sound very interesting and will try and find some time to do some more research over the weekend.

Thank you for a great post.

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Ramridge 25th Jul '14 10 of 19

Hi Paul
Re.BVM. Interesting company. But beats me why such a small company pays dividends. They have nearly exhausted their cash balances so a call for additional fundings is probably around the corner IMHO.

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rivaldo 25th Jul '14 11 of 19

Ramridge, please read my post two posts above yours - BVM have £1.9m net cash per their May AGM statement, which noted excellent cash inflows reversing the unusually low cash position at the Dec'13 close:

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Ramridge 25th Jul '14 12 of 19

In reply to post #84971

OK. I stand corrected.

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Delpher 25th Jul '14 13 of 19

Hi Paul
Thanks for a most comprehensive, incisive and revealing report on SSY. I wish I'd had the privilege of attending the meeting. Thanks again for the quality of your blogs.

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Paul Scott 25th Jul '14 14 of 19

In reply to post #84973

Hi Delpher,

Actually, SCISYS (LON:SSY) is very open with shareholder communication, so note that with their AGM statement, they invited not just City types, but also private investors, to a series of investor lunches (the London one I attended):

Investor Lunch Programme
SCISYS will be holding a series of Investor Lunches in London, Bristol, Birmingham and Leeds for Private Client Investment Managers and Private Investors. Those wishing to attend should contact Tom Cooper on or 020 3176 4722 for further details.

I like Tom from Winningtons (Scisys's PR company), as he's very proactive in encouraging small cap companies to engage with their PI base, something that not enough companies do. He "gets" the fact that a decent PI following means that liquidity improves, the bid/offer spread narrows, and companies therefore get more out of their Listing.

Although I'm lucky in that, being my own boss, I can nip into London for meetings whenever I like, whereas people doing conventional 9-5 jobs cannot get the time off usually. Hence why I like sharing my thoughts with others, which hopefully is a way in which I add value to the investing community.

Regards, Paul.

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Funderstruck 25th Jul '14 15 of 19

Re Pittards;
One further reason I invested was the main controlling shareholders which included P.Gyllenhammar; he has sold some stock but still holds nearly 13%.

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Paul Scott 29th Jul '14 16 of 19


If you don't like it, shit happens!



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slartybartfast 29th Jul '14 17 of 19

In reply to post #85012


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extrader 29th Jul '14 18 of 19

Hi slarty,

Look at time of posting and remember that Paul warned yesterday that he was going out for' a few jars' with an old mucker.....

'Nuff said !

ATB (to you both !)

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slartybartfast 29th Jul '14 19 of 19

In reply to post #85012

@Paul I would really like to know if that was aimed at me.. and if so ...why??

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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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