Small Cap Value Report (5 May 2015) - GVC, XSG | Paul Scott

5th May '15 by Paul Scott

27 comments 18114 reads

Good morning!

So, it's General Election week - as we get to decide which dismal set of lying nonentities will nominally be in control for the next five years - the next set of media-trained, clueless departmental spokespeople with (often) no relevant experience at all. The sort of people whose CVs are so lacking in practical experience & entrepreneurial vigour, that in many cases, any business owner would not even consider them for the shortlist, if recruiting for an office admin role supervising perhaps 4 or 5 staff. Let alone a more senior position. Yet they end up running the country!

Still, at least it leaves the civil service and the EU machinery untroubled to get on with running the show as before - in this charade of a democracy. I am currently undecided, and am awaiting today's guidance from Russell Brand, as to whether I should vote Green, Labour, or start a revolution.

GVC Holdings (LON:GVC)

Share price: 446p
No. shares: 61.3m
Market Cap: £273.4m

Trading update - this sounds upbeat and slightly negative at the same time. Confidence in the year sounds solid though;

KPIs look good, apart from the margin, which is down;

There's an amazingly high dividend yield here - questions have been raised about sustainability of earnings, but it keeps chucking out big divis. From memory, I think this is the company where staff bonuses are linked to dividends - sounds a good idea, providing they don't overpay and strip the balance sheet bare.

Xeros Technology (LON:XSG)

This one is impossible to value, and I see is down 17% today, after previous spectacular rises. It looks a ramped up speculation to me. Impossible to value, and probably over-valued. Lots of punters in it, using stop losses, so lambs to the slaughter. Reminds me of Bioprogress a few years ago - very volatile & lots of punters trading it on margin, so rich pickings for the city spivs, providing they can move the price more than 10% suddenly, to trigger those stops.

The market generally is looking frothy to me, and I think we could be due for a sharp correction in story stocks like this. Social media stocks have sold off in the US, and that seems an ominous sign to me -…

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Peter171

5th May '15

Coy still seems to be growth mode. It has consistantly paid above average divs which is why I invested in first place.just so long as the punters dont get the upper hand the bottom line should continue to grow.

Ramridge

Re, Tungsten (LON:TUNG) . I liquidated my position in TUNG on 24 Feb when the sp dropped approx 28% and have since kept a watching brief. Today TUNG has issued another trading update about the launch of their e-invoicing platform in Mexico.
Here is a brief recap about the company's business model and where they expect to make profits.
- an e-invoicing platform. This is more or less a loss leader to attract/ capture customers and sell on the following two services
- a spend analytics component which is not seen to be a major contributor
- an invoice discounting or financing arm which is really meant to be the money spinner and underpins future expectations in terms of revenues and profits

Since 24 Feb, the company has issued no less than 8 trading updates or announcements. And yet all of them provide news about e-invoicing and spend analytics and zero news about what really matters, the invoice discounting and financing side.

And this is from a company that has not been shy lately in putting out RNS announcements. I will leave you to join the dots and come to your own conclusions. I for one will continue to remain watching from a safe distance.
Regards, Ram
DYOR et al

hayashi22

Eleco might be worth a look. The 2014 figures are nothing special but the company has transformed itself into a fairly pure software play which looks to be a much better business model. Big operations in Germany and Sweden which might not be for everyone. I'm not a holder but it has crossed my radar a few times.

Paul Scott

Hi Ramridge,

The RNS today from Tungsten (LON:TUNG) strikes me as bizarre - pure PR.

I've got serious doubts about Truell - far too much stock promotion, but no sign of a workable business model yet. Relieved that I'm out of this stock.

Regards, Paul.

Can someone please give me a credible explanation for the FTSE100 being at a near 5-year all time high, when we know with near certainty that we are facing a hung parliament with no idea who will be leading and which party or parties will have the balance of power? I am baffled.

Wol

Nice to see that I am not the only one despairing of this sham of a democracy. But what a way to run a country! Yesterday a friend asked me whether I had read the party manifestos. But why? They have less connection to reality than a TV advert with its fake promises of eternal youth, happiness and sexual fulfilment if you buy the right chocolates / soap powder...
For those who are interested the FT's summary of the proceedings (in today's edition) was headed

Good riddance to a carnival of nonsense and futility
Janan Ganesh

The election campaign has shown up Britain with its studious avoidance of things like fiscal reality

davids_h

I'd say two possible reasons:
1. Politicians have little real effect on the economy. Most decisions have now been taken away from them (Bank of England, EU, OBR etc).
2. FTSE100 companies derive most earnings from abroad i.e. UK election is fairly irrelevant.

Perversely I suspect a Labour government would lead to an initial drop in the indices, followed by a longer term rally. Their fiscal expansion and no EU ref are going to be supportive, assuming the bond markets don't wobble. While a Conservative 'victory' would mean a market rally, followed by lots of drift while they 'bang on about Europe'.

Small Cap Value Report (5 May 2015) - GVC, XSG

GVC Holdings (LON:GVC)

Xeros Technology (LON:XSG)

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Paul Scott

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