Small Cap Value Report (26 Feb 2014) - Bitcoin, SNX, MLIN, IDOX, QRT

Wednesday, Feb 26 2014 by

Good morning. Lots of results this morning, so I shall crank up a gear and get through as many as I can.

As an aside;



Is anybody really surprised that things seem to be going badly wrong with Bitcoin? It was only a matter of time before it all went pear-shaped. People who think Bitcoin is a good idea should be sent on a compulsory reading course, to study other financial manias from the tulips, South Sea bubble, technology shares in the 1920's, technology shares in the 1990's, and of course technology shares now! So maybe we should start calling this the Third Technology Shares Boom (& Bust)?

The golden rule in my view is to always remember that anything which creates wealth out of thin air, with nothing of any real value supporting it, is just a speculation that will eventually fail. Some people might flag up fiat currencies, but that's different because they are issued by the State, and hence have the State's revenue raising power behind them. So whilst they can devalue, and become worthless if money printing creates a spiral of hyper-inflation, that's an extreme and rare event, and you can see it coming and get out anyway.

So personally I will always stick to assets where you own something of measurable, and sustainable value - i.e. shares (a part ownership of a business), bonds (a loan), or property (houses, cars, etc.). I will never own Bitcoins.

For people who did want to gamble on Bitcoin, its key selling point was that the whole thing was meant to be secure. It now clearly is not, as an exchange appears to have gone down, along with several hundred million dollars of Bitcoins apparently. That surely will be the death knell of this project? This type of asset is based on confidence, once that's gone you haven't got anything.




Synectics (LON:SNX)

This is a CCTV group that I've been following for years, since the days when it was called Quadnetics, a rather nice name I thought, so it seemed a backward step changing it to the difficult to pronounce Synectics.

Their final results for the year ended 30 Nov 2013 are out today. Whilst the results look OK, the outlook and reduced order book are a concern. The order book…

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Synectics plc is a United Kingdom-based company that designs, delivers and manages integrated security and surveillance systems for security environments. The Company operates through two divisions: Systems, and Integration and Managed Services (IMS). The Systems division provides specialist electronic surveillance systems based on its technology to customers in oil and gas operations, gaming, infrastructure protection, high security and public spaces. The IMS division supplies products and technology from its Systems division. The IMS focuses on delivering end-to-end, security and surveillance solutions, specialist mobile systems for transport operators, as well as service-led solutions for the management of facilities and security services. The Company primarily works across oil and gas, gaming, transport and infrastructure, and high security and public space sectors. It offers Synergy 3, which a command and control software platform for security. more »

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MPAC Group PLC, formerly Molins PLC, is a United Kingdom-based technology and services company. The Company is engaged in providing instrumentation, machinery and analytical services to the fast-moving consumer goods (FMCG), healthcare and pharmaceutical sectors, together with aftermarket support. The Company’s Packaging Machinery segment supplies automated product handling, cartoning and robotic end-of-line packaging machinery and systems, and operates from three locations, in Mississauga, Canada; Wijchen, the Netherlands, and Singapore. The Packaging Machinery segment provides technical consultancy and machinery to solve packaging and processing challenges from its base. more »

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Idox plc is a supplier of specialist information management solutions and services to the public sector and to regulated asset intensive industries around the world. The Company operates through five business segments: Public Sector Software (PSS), Engineering Information Management (EIM), Grants (GRS) and Compliance (COMP). PSS segment is an application provider to the United Kingdom local government for core functions relating to land, people and property, such as its planning systems and election management software. The EIM segment delivers engineering document management and control solutions to asset intensive industry sector. The GRS segment delivers funding solutions to private and third sector customers. The COMP segment provides compliance solutions to corporate, public and commercial customers. more »

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25 Comments on this Article show/hide all

jjis 26th Feb '14 6 of 25

In reply to post #81619

You say Jim Rogers said  "if you want to become rich, learn to drive a tractor". I'm sure tractor drivers don't get paid that much and farmers are alway bleeting about how poor they are as they nearly run you over in their 4 x 4's or hold you up on the road in their massive tractors. I have a different take on "The best way to get rich." 

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Calalily 26th Feb '14 7 of 25

More the tractors owner and I don't know a poor farmer. In reality down to my last tenner is poor, for someone else down to their last £100k or £1m is poor!

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bsharman 26th Feb '14 8 of 25

In reply to post #81621

Hi, He was making the point that the Agricultural sector will be extremely important in the future as demand increases and supply cannot keep up. Farmers will be able to command higher prices and increased margins. Profits will go to the person in the tractor (farm owners and managers)/ or the person selling the tractors....

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jjis 26th Feb '14 9 of 25

In reply to post #81623

I know my reply was slightly tongue in cheek and the piece I have suggested is along the same lines - the link should work now.

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cig 26th Feb '14 10 of 25

In reply to post #81620

A peer-to-peer currency at some sort of parity with fiat would be interesting, but it requires inventing new technology. It may be possible, but it's currently an unsolved problem with a solution yet to be invented, and then you also need to invent a way to bootstrap adoption.

Paypal is primarily a fraud regulation network, that's what the fees pay for (the actual money transfer problem is relatively trivial). You pay a fee so that they kick out rogue vendors (and customers) from the network and refund you if you get hit by one before they get kicked out. In Bitcoin-type systems, as used for transactions, theft is the dominant business model: it's always going to be more profitable to sell stuff and keep the money than bothering delivering products or services. It's only moderated by external trust systems which cost something (be it your time to research the vendors) so "fees" of some form come back. If you can run a fraud prevention system better and for less than paypal does, just do it and take their market away from them.

On micropayments the core problem is that the decision cost easily overwhelms the benefits. Nobody wants to spend their day making thousands of 1p decisions (they value their time). Imagine people could pay 1p for your comment, and that it takes 10 seconds to make your mind if you pay or not (assuming actual comment reading for granted). If 1000 people assess your comment, 100 of which decide to pay 1p, you get £1 but people have spent collectively 10000 seconds. Assuming people's time is worth say a modest £20/hour, people would have spent collectively £50+ in opportunity cost so that you get £1. Any payment that is worth making a decision for is working fine through the current infrastructure (the practical minimum for paypal/cards is like £1 or £2).

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SevenPillars 26th Feb '14 11 of 25

In reply to post #81620

Surely all paper money is created from nothing? It is little more than a confidence game with a promise, the banking system essentially being backed by the state. When that confidence and trust collapses 2008 is the result or much worse. Alternative money like gold and silver has to be found and dug out of the ground and therefore there are limits to it, but also a perceived value from the activity required to get it. Bitcoin mining seems to be based on similar principles in that it is supposedly hard to do - hard to create a Bitcoin and therefore would have some value to those that do it. There is a limit to the number of Bitcoins that can exist, so you can see why it might appeal to Libertarians who oppose the continued creation of out of thin air money by the banking system, backed by a state. Of course, the interesting thing about alternative money, at least psychologically, is that their value is measured by fiat currencies. In other words, everyone who had a Bitcoin would have been delighted when it reached $1000 dollars, not so happy now. Same with gold and silver, accept for those few that completely ignore the fiat value placed against it.

It seems to me that Bitcoin's problem is mainly one of legitimacy and how it is policed or whether it should be. I would have thought that any totally free currency is open to abuse from criminal elements. As with paper money, trust has to be there somewhere.

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Gostevie 26th Feb '14 12 of 25

Hi Paul,

I remember seeing Molins (LON:MLIN) directors giving a presentation at an investor seminar (Equity Development I think) last year. They were very 'cagey' when questioned regarding the pension deficit and seemed almost embarrassed by it.

Not a company that interested me but good luck with your investment.


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William Partridge 26th Feb '14 13 of 25

One word - Invensys

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rick 26th Feb '14 14 of 25

Always thought that Bitcoin would end in tears, a bit like some speculative shares with no earnings, or hope of earnings.

However, it could also be said that the value of ANY type of asset is based on confidence. Once that's gone you haven't got anything. So whilst shares, bonds, or property are tangible, they are only as good as the level of confidence we place in them at the time. We found this out in the financial crisis e.g. Bank shares, Emerging market bonds, even house prices (US in particular).

Whilst a select few tech shares seem to be overvalued I'm not sure this is anywhere near either a late 1990's or 1929 bubble.

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DJLJ23 26th Feb '14 15 of 25

Hi Paul,
I'm hoping that you might get round to avingtrans IMS, according to some of the other boards, numbers are not quite right, but i'm not fullys understanding and hoping you might be able to explain.
many thanks for your helpful information and enjoyable reads.

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hedley05 26th Feb '14 16 of 25

Paul or anyone else, where is the best site to find broker notes, and is a subscrition required?

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IGC WHITE 26th Feb '14 17 of 25

I too spoke to Molins directors after the Equity Development seminar (27.11.2013)and found them very open and positive about the pension deficit problem which was described in documents as a "Key Risk". " UK funding valuation at 30th June 2012 close to being completed-expected deficit recovery payments to be £1.7m. p.a. plus annual inflation increases (currently £1.2m p.a. resulting in a 17 year recovery period". Scheme is now closed and member numbers much lower.

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purpleski 26th Feb '14 18 of 25

In reply to post #81618

Hi Fegger

I hesitated over this (I have know of the firm for decades as they have a factory near Princes Risborough where I used to live) before I bought Molins but decided that if I decided my investments based on ethical type criteria I restrict my sphere of investment too much. If you say a supplier to the companies that are deemed or could be deemed unethetical (tobacco (this would exclude super markets as they are one of the major purveyors of cigs and what about trucking companies who ship them etc), alcohol producers/sellers, weapons, fast food, processed food, high sugar beveragaes, airlines (polution/climate change), customers and suppliers of all the foregoing), where do you stop? I don't necessarily subscribe to all of the list but am trying to make a point.

Yes I would not invest, even as an ex 40 a dayer (20 years ago now thank god) in tobacco companies directly and I am not sure I would invest in armaments companies but I think I have to draw the line there.

I would be interested in your thoughts or anybody else's.

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bsharman 26th Feb '14 19 of 25

Hello, Can anyone recommend a good book for a Technical Analysis beginner - with a view to learning spread betting using chart signals and strategies. Thanks.

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Calalily 26th Feb '14 20 of 25

Malcolm Pryor spreadbetting books, Martin Pring's Intro to TA book also very good. For candlesticks take as look at The Candlestick Course by Steve Nison.

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jjis 26th Feb '14 21 of 25

Not a book as such but a video and he does e-mail updates if you want to sign up for them.

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bsharman 26th Feb '14 22 of 25

Perfect thanks for the info - i'll check those out!

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jonesj 26th Feb '14 23 of 25

I took one look at the bitcoin valuation graph, decided it was a bubble and stopped my research right there.
Seems like a waste of time even researching it.

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Paul Scott 2nd Mar '14 24 of 25

BitCoin is something that has zero value, that is then chased up to a high valuation - so it's a classic bubble/ponzi scheme, however people dress it up. Also the supposed safeguards have started to fail. Again, classic signs of a meltdown that will eventually reach zero in value. Just IMHO.

Fiat currencies differ in that they have the backing of the State, and hence the taxpayer's future deep pockets to support their valuation, allowing for the fact that they will scrub off 3% p.a. roughly. When hyperinflation kicks in, then different rules apply, obviously.

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Bezhe 4th Mar '14 25 of 25

In reply to post #81633

You have highlighted a dilemma that many conscientious people have - where to draw the line. In the end, most people will pick and choose based on their own priorities: no to tobacco and munitions, ok with supermarkets, alcohol, defence, airlines etc. I would say no to anything related to tobacco myself, including no to Molins.

I found it ironic that the Equity Development research report (well researched and written otherwise) said "Looking ahead, there is a healthy slate of innovative new products coming
on stream." I think he should truthfully have said the exact opposite.

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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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