Small Cap Value Report (29 Jul 2015) - CAP, RSTR, GBO, QED, TWTR

Wednesday, Jul 29 2015 by
34


Good afternoon.

Apologies, but I'm running late today, so please refresh this page every now and then, as I'll be adding sections to this article all afternoon.


Clean Air Power (LON:CAP)

Share price: 0.33p (down 22% today)
No. shares: 257.3m
Market cap: £0.8m

Just a post-script on this one, it's a micro cap which had promising sounding technology, but it just hasn't worked commercially to date. The company was struggling before the plunge in oil price, but with much cheaper oil, one of the key cost advantages of ts technology (to allow trucks to run on a mixture of diesel and natural gas) has gone.

Personally, I threw in the towel at 4p per share last year, when it became clear that things were not going to happen, and my thinking here on Sep 2014, was that the shares were probably worth nothing.

Update - this was issued yesterday, and makes it fairly clear that the existing shares might end up being worth nothing. Once a company gets to the end of the road, and can't raise any more equity from the stock market, then at that stage its only options are usually deals whereby a new financier ends up owning the whole company, or almost all of it - massive dilution since the only alternative would be Administration.

Every now and then I get sucked into a jam tomorrow stock, and it nearly always ends badly. That's why it's so important to avoid them altogether, if you have the willpower, or if not then to avoid forming an emotional attachment to the share/story, and be willing to pull out once it becomes clear that the future is grim,

Even though I lost about a third of my original investment (in at c.6p, out at c.4p), it could have been a lot worse if I'd hung on, hoping for the best, which is what most people do with jam tomorrow stocks.

As ever, cash is king with jam tomorrow stocks. Another test I usually apply before buying, is to be sure that the company has at least two years' of cash on the balance sheet, at the current rate of cash burn. If it doesn't, then you're running a big risk that the company will come back to the market for more cash, and it's a lottery whether, and at what price, fundraisings…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Clean Air Power Limited designs, develops and delivers Dual-Fuel and second-generation MicroPilot engine systems. The Company designs, develops and delivers compression-ignited natural gas engines for heavy duty transport applications and manufactures hydraulic valves, injectors and filters for natural gas engines sold to truck manufacturers around the world. Its business segments are the Dual-Fuel segment, which sells, installs and services compression-ignited natural gas engine systems, and the Components segment, which designs and delivers hydraulic valves and components for natural gas engines. The Company operates through three business units out of facilities in Leyland, United Kingdom and Poway, California: engineering services, natural gas systems and specialist components. It assembles, distributes and installs two types of Dual-Fuel engine system: Non-interfaced Dual-Fuel Systems and Interfaced Dual-Fuel Systems. more »

Price
0.62p
Change
 
Mkt Cap (£m)
n/a
P/E (fwd)
n/a
Yield (fwd)
n/a

Brave Bison Group Plc, formerly Rightster Group plc, is a United Kingdom-based provider of an online video distribution and marketing network, providing rights holders, online publishers and advertisers with the tools required to engage audiences. The Company is engaged in creating and capturing advertising spend using online video content and audience management. The Company operates through monetising content online segment. The Company brings together content owners, creators, brands and publishers and helps them build and engage online audiences. It enables clients to commercialize their content to audiences, utilizing various online video platforms, such as YouTube, Facebook and Twitter. It offers a multi-platform network. more »

LSE Price
0.815p
Change
 
Mkt Cap (£m)
4.7
P/E (fwd)
n/a
Yield (fwd)
n/a

Globo Plc is a technology company engaged in enterprise mobility management and application development. The Company offers solutions, such as application development and delivery services, mobile application development platform, ready for business mobile application and mobile device management, among others. Its products include GO!Enterprise Mobile Device Management, GO!Enterprise Workspace and GO!AppZone. Its GO!Enterprise Mobile Device Management product allows information technology (IT) administrators to manage and secure corporate owned, personally enabled (COPE) and individual-liable devices (bring your own device (BYOD)). Its GO!Enterprise Workspace product is an enterprise mobility solution, which uses a secure mobile application container and mobile backend services to provide management, control and compliance to enterprise applications and data. Its GO!AppZone product helps to develop and deploy cross-platform mobile applications for various audiences. more »

Price
28.25p
Change
 
Mkt Cap (£m)
n/a
P/E (fwd)
n/a
Yield (fwd)
n/a



  Is Clean Air Power fundamentally strong or weak? Find out More »


38 Comments on this Article show/hide all

DarwenLad 29th Jul '15 19 of 38
1

I have never forgiven myself for bailing out of 4imprint at £2.71 and then £3.36 in 2010 and 2012 having more than trebled my money. I keep on thinking I should buy back in but the current price of close to £12 (a prospective p/e of 23 and yield of less than 2%) seems too steep for what seems a pretty tacky business - selling promotional pens, mugs etc. Clearly, I badly underestimated the potential of this company unlike Ken Minton, the former chairman who remains a big shareholder, and GVO/Strategic Equity Capital, the investment trust, which was increasing its stake during the dog days when its valuation was depressed by concerns about its large pension fund deficit, loss-making UK operations, and lack of obvious management talent. As a small cap investor without privileged access to corporate information I pay close attention to where Strategic Equity Capital is investing its money given its superior investment record. I note, for instance, that it has recently been building up a stake in Tribal, the education administration software company, which shares some of the same turnaround potential that 4imprint did five years ago.

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purpleski 29th Jul '15 20 of 38

In reply to Paul Scott, post #16

Excellent!!

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Roger Lawson 29th Jul '15 21 of 38
2

Paul, re Globo your speculations are interesting but you do need to get the facts right. You say "inexplicable disposal of 51% of a subsidiary in order to get its figures off the balance sheet". The reason was very clear at the time - namely that they did not want to appear to be a Greek business for obvious reasons because of the financial crises in Greece which are still on-going, and disposing of the legacy stuff in Greece at a good price made very good sense. In any case the legacy stuff was irrelevant to their future market focus which is/was to sell Go Enterprise to the corporate IT sector and become a US focused software business. It made a great deal of sense to make that disposal so it is hardly inexplicable.

Website: Roliscon
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LovelyLovelyGorgeous 29th Jul '15 22 of 38

As a new issue - Clipper Logistics is doing pretty well.

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cherrybrook 30th Jul '15 23 of 38

As usual. Very informative. Would Paul or anyone care to share their views of Nostra terra. Is this a stock I've just become too emotionally attached to. Thinking that some day it's going to rocket. Opinions please

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TheWatchmaker 30th Jul '15 24 of 38
5

Some claim that Globo is a super growth stock
Others just think that this is a crock
Actions suggest that the cash has all gone
They report lots and Paul thinks there's none
Some investors will believe every excuse
That Globo give for balance sheet abuse
Always the promise of jam tomorrow
And fanciful reasons for needing to borrow
A 10% bond seems like a begging letter
Yet another prayer that things will get better
Is Globo a blackhole or is it a star?
My suggestion to you is DYOR

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Bonitabeach 30th Jul '15 25 of 38
2

In reply to Paul Scott, post #11

Hello Paul,

The comments about the (alleged) cash pile of €82.8m having been stolen, disappeared, or current whereabouts unknown; all in only three paragraphs, smack of desperation. There are quite enough issues to be raised about Globo without wild speculation.

However,you are not the only one being totally negative about Globo plc GBO.

See:A Shorter's Meat & Drink

(You will note this is the only article "Market Mirage" has ever posted on this website.)

Globo is a small company and many of the more blatant frauds have taken place in very big companies like Enron/Olympus/Toshiba - there are fewer places to hide things in a small company.

Only two views seem to exist about Globo: total fraud (falsified debtors/cash/invoicing, ergo profits) or stockmarket rocket awaitng lift-off

I hold Globo (does this make me a "ramper"?) but Standard Life dumping shares is a big negative. Plenty of other well-equipped professionals must have had a hard look at Globo but nobody has owned up to buying yet. 

In the 3 years ending 31 December 2014 MobileIron Inc. has raised €235.4m in debt/equity finance, Globo €79.1m. Now I wonder what they have done with all that money?

Interesting times.

Bonitabeach


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Paul Scott 30th Jul '15 26 of 38
2

In reply to Bonitabeach, post #25

Hi Bonitabeach,

I'm not going to get drawn into a slanging match on Globo (LON:GBO), I just report things as I seem them.

Feel free to disagree, that's what makes a market.

I am not saying that the cash has been stolen at Globo. I am simply making the point that the company's actions are consistent with a company which is financially distressed, not a company which has a large net cash pile.

The only logical explanation I can come up with, for the company's actions, is that the cash pile may not be intact. Time will tell if that supposition is right or wrong.

Regards, Paul.

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Paul Scott 30th Jul '15 27 of 38
3

Hi Roger.

You said:
Paul, re Globo your speculations are interesting but you do need to get the facts right. You say "inexplicable disposal of 51% of a subsidiary in order to get its figures off the balance sheet". The reason was very clear at the time - namely that they did not want to appear to be a Greek business for obvious reasons because of the financial crises in Greece which are still on-going, and disposing of the legacy stuff in Greece at a good price made very good sense. In any case the legacy stuff was irrelevant to their future market focus which is/was to sell Go Enterprise to the corporate IT sector and become a US focused software business. It made a great deal of sense to make that disposal so it is hardly inexplicable.

That's not the way I see it. You're taking the facts literally, and uncritically.

Why on earth would any group decide to sell 51% of a subsidiary? It doesn't make sense. If, as you claim, the intention was to dispose of the non-core, Greek (tainted) business at a good price, then the logical thing would have been to sell 100% of it. Indeed, I would agree with your points above, if Globo had sold 100% of their Greek business.

But they didn't do that. They sold 51% of it. Why on earth would anyone do that? There is only one credible explanation in my view - that they wanted to reclassify it as an associate, rather than a subsidiary for accounting purposes. It's so transparent as to be laughable, and I'm amazed that you can't see this (owning shares in a company can make one blinkered, I know).

Furthermore, you are factually incorrect in saying that Globo disposed of the Greek business "at a good price". This is simply not true. They actually <b>gave the business away</b>, with a large cash dowry, in return for deferred repayments spread over several years.

As with any sale on credit, it is a gift until paid for! So far so good on the payments, but I wonder if all the scheduled payments will be met? Often deferred payment deals like this result in at least a partial write-off later on.

Regards, Paul.


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Roger Lawson 30th Jul '15 29 of 38

Paul re Globo, maybe the buyers could not afford to pay for 100% of the business. But it certainly enabled Globo to achieve the prime objective. Which was to look less like a Greek company with major business operations in Greece. The way one views this depends on your view of the honesty of the directors. You seem to always assume the most dubious motives for everything in the case of Globo. Me I prefer to consider folks not guilty until proven otherwise. As it was sold to the management it might have been at a favourable price as is often the case but without knowing the operating position and detail finances of the subsidiary it is wrong to assume that it was completely dubious. Most investors seemed to welcome the deal at the time.

Website: Roliscon
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jonesj 30th Jul '15 30 of 38

In reply to Paul Scott, post #11

Hi Paul,

Keep moaning if your dealing platform is playing up. These things need to WORK properly.
That's the number 1 priority & as far as I can see, some of these brokers spend too much time messing around with the website layout when they should be focussing on making it work reliably.

Perhaps the way forward is to follow the Singapore model where stocks are apparently held electronically & you can buy with one broker and sell with another. Seems like a damn good idea to me. If I cannot sell my holding via broker X, I can use broker Y.
Disclosure: IG shareholder, however b****** self interest, they need to provide a reliable platform.
I use Halifax, TD Direct & AJ Bell. Halifax seem to be the most reliable.

Jeff

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Paul Scott 30th Jul '15 31 of 38

In reply to jonesjeff, post #30

Hi Jonesjeff,

In fairness to IG, I find their dealing platform is normally superb. It only occasionally goes wrong, and usually not for long. It was just a pity that it failed right at the crucial point I was rapidly gaining (and then losing!) a 5-figure sum on Twitter shares. Grrrrrr. Never mind, it's just one of those things. If it keeps happening, then I would move my business elsewhere, but 99.9%+ of the time their system works really well.

I don't think I'd ever buy shares in a SB co though, as all such companies are only potentially minutes away from going bust at any time, if their systems go haywire & start dealing at the wrong prices, and/or if their hedging fails, and/or if they are massively the wrong way exposed to some unforeseen aberration like the Swiss Franc decoupling from the Euro.

Regards, Paul.

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Paul Scott 30th Jul '15 32 of 38
4

In reply to Roger Lawson, post #29

Roger,

Sorry, but this doesn't make sense:

Paul re Globo, maybe the buyers could not afford to pay for 100% of the business.

Given that Globo gave away the 51%, with a cash payment out, not in, in return for deferred consideration, then it would have been even easier for the "buyer" to buy 100% rather than 51%.

However, on this we can agree:

The way one views this depends on your view of the honesty of the directors. You seem to always assume the most dubious motives for everything in the case of Globo.

There's a reason why I don't trust the Directors at Globo - because the accounts are riddled with red flags. That puts me on guard.

Anyway, let's see how it all pans out. I will happily apologise to you & congratulate you, if you turn out to be correct on Globo in the long run.

Regards, Paul.

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pka 6th Aug '15 33 of 38
3

In reply to Paul Scott, post #32

Simon Thompson of the Investors Chronicle published a bullish article on Globo on 5th August on the online version of the magazine. He believes what Globo's management is saying.

However, Simon also believed last year what the management of Naibu were saying, and look how that turned out!

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Paul Scott 6th Aug '15 34 of 38
7

In reply to pka, post #33

Hi pka,

Well put. Simon Thompson is an excellent analyst, and I always read his articles, as he flags up some very interesting companies. However, his Achilles Heel is that he's incredibly gullible - so he just uncritically laps up whatever management tell him, never questioning whether it passes the common sense, or smell test.

As you say, he had (has?) a total blindspot on Chinese companies, and seems incapable of understanding that they are not what they appear to be. So not being able to see the glaringly obvious flaws in Globo is very much in the same vein, although perhaps not quite as extreme.

His latest article in IC where he basically teams up with Globo's CEO in an open attempt to cause a short squeeze, was in my view disgraceful. Should a magazine really be trying to participate in share price manipulation of this kind? Very much not, in my opinion. It's fine for him to give an opinion on a company, but to be a sycophantic mouthpiece for management of questionable track record, is I think very unwise.

The company management's threats to short sellers in Thompson's article is yet another red flag. Remember how Rob Terry buttered up a Shares magazine journalist to write gushing things about him & the company when he was really under pressure not long ago? It's a sure sign of desperation because things are going wrong.

Why would a company with significant net cash embark on a junk bond issue, at c.10% coupon? It's complete madness, and the explanations given by Globo are absurd. If they are worried about bank covenants, then why did they take out the bank debt in the first place, when they didn't need to borrow at all, given their large cash pile?!

Also, if the bank covenants scare them, they should just repay the bank debt in full, and still have a substantial cash pile to start making some acquisitions. Once they have proven that they can make good, cash generative acquisitions, then they could raise fresh funding at a far cheaper rate.

Doing everything the opposite way around, as Globo is trying to do, is bound to raise huge question marks. The only reason people borrow at a very high coupon is because they are desperate for money. Why would a cash-rich company be desperate to borrow at punitive rates? You tell me, I've never come across a situation like this before.

There are only 3 possible explanations that I can think of;

1) That the CEO is a lunatic,
2) That the cash has been stolen or otherwise disappeared, or
3) That there is bad news in the pipeline, so the company wants to get a Junk Bond issue away asap, on a now or never basis.

I am absolutely convinced that Globo is going to end very badly.
However, it's too small & risky for me to short, so am remaining neutral on it.

Regards, Paul.

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herbie47 6th Aug '15 35 of 38
2

In reply to pka, post #33

He also believe Camkids and Polo and look at them now. Unfortunately some readers take his word as gospel until they get their fingers burnt. If ST cut out foreign companies and energy he would do a lot better.

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Bonitabeach 6th Aug '15 36 of 38

In reply to Paul Scott, post #34

Hi Paul,

I am prepared to concede you may be right about Globo , the lunacy of it's CEO, the theft of it's cash and the absurd explanations for wanting to borrow money at ~10% coupon.

You have no nagging doubts:

"I am absolutely convinced that Globo is going to end very badly.

Well maybe justafew:

"However, it's too small & risky for me to short, so am remaining neutral on it."

Regards,

Bonitabeach

Disclosure: Long: GBO


I am absolutely convinced that Globo is going to end very badly. - See more at: http://www.stockopedia.com/content/small-cap-value...
I am absolutely convinced that Globo is going to end very badly. - See more at: http://www.stockopedia.com/content/small-cap-value...
I am absolutely convinced that Globo is going to end very badly. - See more at: http://www.stockopedia.com/content/small-cap-value...
I am absolutely convinced that Globo is going to end very badly. - See more at: http://www.stockopedia.com/content/small-cap-value...



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extrader 6th Aug '15 37 of 38
1

Hi all,

Re GBO, interesting to see how it stacks up compared to QPP, for which Paul listed the flwg indicators of legitimate concern :

(1) Too many costs being capitalised into intangibles
(2)Ballooning debtors & work-in-progress - nearly always a can of worms
(3)Far too many acquisitions, being done too rapidly
(4)Repeated fundraisings, and little to no dividends
(5)Amazingly low PER on exponential growth forecasts
(6)Suddenly switching the focus into new business areas
(7)Management with a poor track record - the amazing thing with Quindell is that it was almost a carbon copy of Rob Terry's disastrous reign at Innovation (LON:TIG)
(8)A business model that is too complex to explain - which means it's actually being obscured deliberately because there's something wrong
(9)Financial engineering of any kind - where you're left scratching your head as to why deals have been done in a particular way
(10)Rampy-sounding narrative to the results statements, e.g underlining or bolding growth figures & comments
(11)Gobbledegook management-speak in announcements, all designed to sound impressive, but with very little meaning
(12)Repeated clarification statements, or unscheduled trading updates when the share price is falling
(13)Sending solicitor warning letters to outspoken bears/bloggers/journalists, but then failing to take further action when they refuse to back down

I reckon you could reasonably apply 5 or 6 of the above to GBO, don't know enough about the industry to comment re (8) and (11).
ATB

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Paul Scott 6th Aug '15 38 of 38
3

In reply to Bonitabeach, post #36

Hi Bonitabeach,

Well neither of us can be absolutely certain that Globo (LON:GBO) is either good or bad, because we have imperfect information. The only people who really know everything about any company are usually just its CEO and FD, in my experience. Everyone else is to some extent in the dark, and private investors rank fairly low down the list of people in terms of overall knowledge of any company, since nearly all our information on the company is coming from the company itself. There's virtually nothing on the internet about Globo that backs up management claims about the business.

So I don't think we can really verify anything much about the company, other than that it exists, and does have a software business. Whether the real figures are anything like the reported figures, who knows? Quindell (LON:QPP) and many other failures have shown that audits aren't worth the paper they are written on. Clearly previous auditors at Globo have probably balked at signing off the accounts, hence the change of auditor, twice. I don't believe the reasons the company gave to explain the change of auditors, having worked in the audit field myself.

I'll only change my mind on Globo when the figures & the way the company behaves, start to make sense - in particular its financing arrangements. Any rational FD would bang the table and insist that the bank debt was paid off immediately using surplus cash, thus saving something like E4m p.a. in superfluous interest charges instantly. I would also want to see debtors reduce to a sensible level (under 90 days, nearer 60 days preferably).

If and when it can put its accounts in order, then and only then will I stop banging on about the red flags in its accounts!

Regards, Paul.

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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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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