Small Cap Value Report (26 Aug 2014) - BQE, BOOM, CNC

26th Aug '14 by Paul Scott

19 comments 16811 reads

Good morning! I hope you enjoyed the Bank Holiday as best the weather permitted.

It's interesting to note that the US market (the S&P 500) hit a new all-time high yesterday. People keep saying that the market is overvalued, but it still wants to go up whenever there's a correction. From my point of view, small & mid caps overheated in the spring, but have now corrected considerably, and I'm starting to see some pockets of reasonable value emerge again. We've also seen strong recoveries in some small caps shares in the last fortnight, so that usually pulls in buyers to the stocks that haven't yet recovered.

As ever, I remain focussed on the fundamental value of the companies I'm invested in, and to a large extent the short term price movements are just background noise. I think most transactions in small cap shares are done by people who don't have a clue about how the company is performing - they're just buying & selling on short term market sentiment. So if they sell below fundamental value, then that creates a buying opportunity for me!

So overall, I'm feeling considerably more bullish than I was a few weeks ago, because the market has done what it should do - i.e. scrubbed off many excessive valuations, which should clear the way for renewed upward moves in sensibly-priced companies which report good earnings & outlook statements.

Bioquell (LON:BQE)

Share price: 88.5p
No. shares: 42.43m
Market Cap: £37.6m

I've been watching this company for a couple of years now, but held back buying any shares because it never quite reached an attractively cheap valuation, and the newsflow has been rather negative - so it seemed to be a company that had a lot of potential, but wasn't executing well.

Interim results to 30 Jun 2014 are out this morning, and look weak to me, although the company had previously flagged that H1 would be weak, therefore the share price has only moved down 2p this morning, on what looks like just a single trade of 5,000 shares.

Profitability - at the operating profit level, has dropped to a loss of £78k in H1 this year, versus a £1.0m profit in last year's H1. The company has two divisions, and as you can see from the extract from today's accounts below, its TRaC division is trading quite well (flat against last year at…

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rmillaree

26th Aug '14

Awwwww - thought we had a company with ticker BOOM - every exchange needs a company with the ticker BOOM!

Ramridge

BOOM in your headline? Does it mean that your feel today full of beans, or were you intending to comment on Audioboom's results? :)

Mark Midmore

Paul, has your view of VLK changed. Share price looks attractive but movement is broadly sideways to down. I wondered whether it's something I missed or it's awaiting news? Mark

GrindertraderUK

I am in BOOM as a speculative buy a couple weeks back. I look forward to any comment by our PS ! Good or bad ;>

Paul Scott

Hi Mark,

I don't alter my fundamental views on companies in reaction to share price fluctuations, but only on newsflow. So in the case of Vislink (LON:VLK) there hasn't been any news, so my view is unchanged. Results are imminent I believe, and Equity Development are doing a results webcast again, on 3 Sept, which gave useful background last time. So we don't know how the company is currently trading, but we'll find out shortly when the interims are published.

Regards, Paul.

medlar

A small thought on Audioboom (LON:BOOM) (i hold) - much of the current share price anticipation is about the app due some time in September.
Past experience of app launches suggests that they are not quite shoot-the-lights-out products as investors hope, e.g. Facebook Paper, Google+. This is because it is not always immediately apparent how the new functionality will enhance usability, or necessarily add users. Only time takes care of that.

buz

I thought Patisserie Valarie's ticker of CAKE was rather good as well.

loudenr

Think Vislink (LON:VLK) has been tipped somewhere or people expect good results as there is a good movement up today

FREng

Paul

You seem to have overlooked this veiled profit warning by Concurrent Technologies (LON:CNC).

" Review of Operations

... As a consequence of these export controls, the Board has determined that a further write down in the value of certain designs may be required; the exact amount will be finalised at the year end and incorporated into the results for the full year ending 31 December 2014. "

bsharman

Vislink (LON:VLK) has been tipped by Simon Thompson in the IC

IC tips can provide a good selling opportunity.

Only if you are trading. I am a holder of Vislink (LON:VLK) and have a target of about 80p + dividends, so there is no reason for me to sell just because ST has tipped it.

Hi FREng,

I saw that bit in the Concurrent Technologies (LON:CNC) results, but I wouldn't describe it as a veiled profit warning. It's just writing down some capitalised intangibles by the looks of it, which I automatically write off in full anyway.

Regards, Paul.

cig

Audioboom (LON:BOOM) seems like it could be a great speculative punt, but kicking the tires on fundamentals:

- "growth is viral": their main service seems to be to package audio content for big names for distribution, in which case they're possibly piggy-backing their clients' visibility. If users then stay on the site and come back, yes, we could say growth is viral, but if they're just consuming the media embedded in other websites... User numbers are not that informative here as they're so easy to pimp up (counting non-recurring users as your own is not even as such dishonest).

- "the world's YouTube, but for audio": from their website it seems their ambitions are actually narrower, just trying to cover the "spoken word". This is actually okay as the audio space (including music) is very crowded so perhaps they can find a smaller but viable niche.

- "maybe one of the heavyweights (e.g. Google, Facebook, Twitter, etc) might bid" yes, but they tend to buy <1% of the candidates... If they're a service provider rather than a destination, and their functionality is novel, it can easily be reproduced in-house by the big boys once it's been proven. Startup graveyards are full of ideas Facebook etc successfully cloned and adopted.

Cisk

How is Audioboom different to Spotify? Can Spotify do the same thing?

PhilHofGrowYourDough

Re Audioboom (LON:BOOM):

Why would I be interested in audio content when I can find video content?

Some reasons:

1) I'm blind so video gives me nothing extra

2) I'm engaged in activity where I cant focus on video, e.g. driving, running, sleeping? (subliminal absorption?)

3) I'm a content provider that currently produces audio only content so I might as well make it available

It seems to me that 3 is what is driving the business but do I as a consumer want to listen rather than watch and listen? It'd have to be a really strong piece of content for me to choice audio over video content. Perhaps that's just me. It's interesting that when advertising the content on the website an image is included, perhaps indicating that the content itself isn't quite a strong enough draw and visuals are needed to draw you in.

I too would also be wary of the ability of the big boys to reproduce this at the drop of the hat. As a former software developer it looks reasonably straightforward to reproduce from a technical perspective.

My feeling is there are some short term gains as word gets out about the organisation as seen by today's rise, but (and I might be forced to eat my hat) I see little chance of them becoming YouTube for audio.

Best of luck if you hold.
Phil

TheMarinersWife

Sounds remarkably similar to these guys https://audioboo.fm/

Maybe it's the same outfit.

Yes, that is the website of Audioboo, which is owned by £BOOM

A few years back some of the smaller BBC radio shows were using Audioboo to host interviews and other content. The non-league show which at that time was made by Radio London certainly did.

Small Cap Value Report (26 Aug 2014) - BQE, BOOM, CNC

Bioquell (LON:BQE)

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Paul Scott

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