Small Cap Value Report (5 Nov 2015) - ZZZ, TRCS

Good morning!

It's very quiet for results and trading updates again today.

I really enjoyed the ShareSoc Masterclass last night. The topics were "Spotting shares with multibagger potential", where David Stredder in particular was the man to listen to on this - as he has an astonishing track record of spotting major multibaggers early on, and more importantly, holding them all the way - he revealed last night that his original purchase of accesso Technology (LON:ACSO) is up 118 times, and he still holds (I also hold ACSO, but bought much more recently).

We then had a discussion on the lessons to be learned from Quindell (LON:QPP) and Globo (LON:GBO) , with of course me explaining where to look for the really very obvious signs that the accounts are not quite right. At some point I'm going to record a video going through it all in detail, so that people can learn how to spot, and avoid this type of fraud again - it's really not difficult, the clues are always there in abundance, people just (bizarrely) choose to ignore them!

Snoozebox Holdings (LON:ZZZ)

Share price: 9p (down 6.5% today)
No. shares: 211.8m
Market cap: £19.1m

Trading update - this update follows the now very familiar pattern of saying lots of positive-sounding things about the company, but then revealing awful financial results. This looks like a profit warning, so I'm surprised the shares are not a lot lower today;

Turnover for 2015 is expected to be in line with market expectations.  The Company anticipates higher operating costs this year associated with the substantial increase in activity in events and the acceleration of the deployment of the original stock on a semi-permanent basis.  It is anticipated that the mobilisation costs in respect of the five additional semi-permanent hotels, will be incurred prior to the year end, with the hotels ramping up in Q1 2016.  As a result of these developments, the expected 2015 EBITDA level is a loss of approximately £5m. The revenue from the further semi-permanent deployments is expected to be realised in 2016.

Stockopedia shows the current broker consensus as turnover of £5.2m, but no loss forecast is given other than EPS of -1.7p. With 211.8m shares in issue that equates to a forecast loss after tax of £3.6m. So the indication given by Snoozebox today of a £5m EBITDA loss, would be considerably worse once depreciation is added, so maybe £6-7m loss before tax?

Overall then, it looks like quite a big miss, with losses a lot worse than expected. That's likely to mean yet another cash call, sooner or later.

My opinion - it's a really nice concept, but is still no closer to proving that there's a viable business here. It looks to me as if further, drastic cost-cutting is needed to get to breakeven asap. Whether it should be a listed company, is the big question? I would have thought its prospects would be better as a lean overheads, private company.

The share count has risen more than 4-fold since the company listed, so the share price probably won't ever get back to anywhere close to the price when it listed. That's the problem with dilution for businesses that are cash hungry. It hardly ever pays to buy the shares in the IPO for loss-making companies, in my experience.

Tracsis (LON:TRCS)

CEO interview - I've just interviewed the CEO & CFO of Tracsis, following their results which were published yesterday. There's a lot of interesting stuff in this interview, and I managed to ask the Stockopedia reader questions which you posted here in recent days.

Here is the audio link . A transcript will be published hopefully on Sunday 8 Nov 2015.