Small Cap Value Report (6 Nov 2013) - IDEA, HSM, NXR, GDP, VCP

Wednesday, Nov 06 2013 by

Good morning! It should be a fairly undramatic start this morning, with the FTSE 100 futures currently indicating that we should open up 25 points at 6,757.



Ideagen (LON:IDEA) has issued a trading update this morning, which reads pretty well. It's a small software group, speciialising in compliance software for health, and other sectors. I've commented favourably on it here before, saying on 16 Jul 2013 that the shares looked potentially interesting at 20.75p.

This is what they say about current trading (as usual, my bolding below);


Trading during the six month period continues to be robust with revenues and adjusted EBITDA* expected to show significant growth over the same period last year.

Revenues and adjusted EBITDA* have increased significantly due to the acquisitions of Plumtree and MSS combined with strong underlying organic growth**.  

Furthermore, the Balance Sheet remains robust with a strong cash balance, which provides the Company with the financial platform to make further complementary acquisitions.

The Company continues to trade in-line with market expectations for the full year to 30 April 2014.



So a thumbs up, as the key phrase "in with with market expectations" is used here. This is much better than the vaguer "in line with management expectations" sometimes used by other companies. Of course the market doesn't really know what management expectations are, since we're not told! So we just have to assume that they will be similar to broker forecasts. It's all a bit daft, there must be a better way.

Far greater transparency is needed in the UK, and best practice is for companies to inform the market of the range of expected profit outcomes for the year, and then update (and narrow) that range as the year progresses. As a former FD myself, I know that this is how companies work with internal forecasts, and therefore it's how they should also report to external investors.

Going back to Ideagen then, broker consensus seems to be for 1.6p adjusted EPS this year, and 1.8p next year, so that puts the shares on a PER of 14.2, dropping to 12.6. That's not expensive for a company with net cash, but it's not especially cheap either, especially as the company has had some hiccups in the past. The maiden dividend of 0.05p…

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Ideagen plc is engaged in the development and sale of information management software to businesses in various industries, and the provision of associated professional services and support. The Company is engaged in supplying governance, risk and compliance (GRC) solutions primarily to the healthcare, transport, aerospace and defense, manufacturing and financial services sectors. The Company’s portfolio products include Q-Pulse, Coruson, Pentana Audit, Pentana Performance and PleaseReview. Q-Pulse, which provides quality and safety management. Coruson,which provides cloud-based software solution. Pentana is an auditing software within its internal audit.It has operations in the United Kingdom, European Union, the United States, Middle East and Southeast Asia. more »

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Samuel Heath & Sons Plc is engaged in the manufacture and marketing of a range of products in the builders' hardware and bathroom field. The Company's products include bathroom products, such as taps, showers and accessories; kitchen products, such as taps; fittings, such as door furniture, window furniture, cupboard fittings and ancillary hardware fittings, and door closers. The Company's collections include Royal Crown Derby, Antique, INTRO, Style Moderne, Georgian, Profile, Fairfield, Curzon, Contour, Xenon, Novis and Cobden. The Company's bathroom accessories include toilet roll holders, soap dishes and liquid soap dispensers, tumblers, shelf units, robe hooks, toilet brush sets, towel stands, toothbrush holders, trolleys and stands, soap and sponge trays, shower seats, grab rails, light pulls, mirrors, shower baskets, cotton wool holders and waste bins. Its ancillary hardware fittings include cabin hooks, ventilators, coat hooks and specialist hardware fittings. more »

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Norcros Plc is a holding company for the Norcros Group. The Company's principal activities include development, manufacture and marketing of home consumer products in the United Kingdom and South Africa. The Company's segments include UK and South Africa. The Company has six United Kingdom businesses, including Triton Showers, Vado, Croydex, Abode, Johnson Tiles and Norcros Adhesives, and three businesses in South Africa, including Johnson Tiles South Africa, TAL and Tile Africa. The Company is focused on showers, taps, bathroom accessories, tiles and adhesives. In the United Kingdom, the Company offers a range of bathroom and kitchen products both for domestic and commercial applications. The Company offers mixer showers and accessories; tile and stone adhesives; taps, bathroom accessories and valves; bathroom furnishings; ceramic wall and floor tiles; kitchen sinks; tile adhesives, pourable floor coverings and tiling tools through its United Kingdom and South Africa business. more »

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  Is LON:IDEA fundamentally strong or weak? Find out More »

17 Comments on this Article show/hide all

Funnymoney 6th Nov '13 1 of 17

Ideagen.....How about "Sales are up 12%"? I've no idea what the market expects.

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Gostevie 6th Nov '13 2 of 17

Hi Paul,

death planning (I'm sure there is a nicer term, but it escapes me)

I think the term you are looking for is 'estate planning'.

I see that Goldplat (LON:GDP) have their prelims out today. Do you still report on them? (I remember you held some for a while.)


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Paul Scott 6th Nov '13 3 of 17

In reply to post #78885

Hi Steve,

Ah yes of course, thank you for reminding me!

Sure, I'll have a look at Goldplat (LON:GDP) now. It was already on the list!

Cheers, Paul.

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jraitt 6th Nov '13 4 of 17

Paul, I'm sure one's next of kin would be happier if one had invested in the likes of ASOS rather than HSM.if the rules been the same then. I'm trying to invest in an AIM portfolio with IHT in mind - ie long term value. Would value any thoughts.

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nevilleaustin 6th Nov '13 5 of 17

In reply to post #78886

Hi Paul,

Eric Sprott "precious metals billionaire legend" is confident that gold will hit $2400 next year! He says that his view is based on huge demand in comparison to the actual supply, and that the downwards price manipulation will not be able last.
Eric right now is actually selling some physical gold and silver to move into gold and silver mining stocks where he sees upside of up to 1000% on some mines when the gold price rises again.

So I guess Goldplat will also do very well if the gold price does rise.

I agree with you, gold makes me nervous to. I do not find it an interesting thing to invest in unlike owning a companies shares, it is just a shiny lump.

Best wishes

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clissold345 6th Nov '13 6 of 17

Hi Paul, I know you are not using your usual computer, so it must be more difficult for you to proofread. I noticed a couple of typos in your writeup of Goldplat. It should say "... I don't really have the expertise ..." and "... there's never been any question of hyper-inflation ...". Regards, Chris.

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jraitt 6th Nov '13 7 of 17

Warren Buffet's well known comment on gold

"You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what it’s worth at current gold prices, you could buy — not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils (XOM), plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”

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Paul Scott 6th Nov '13 8 of 17

In reply to post #78893

Hi Chris,

OK I fixed those typos, thx for flagging. The screen is really small on this Chromebook, but it's small & light, so handy when travelling.

Cheers, Paul.

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bsharman 6th Nov '13 9 of 17

In reply to post #78892

There is huge demand for gold from China and India and gold is not far off the price where certain mines become uneconomic. This should restrict the supply and as a result the gold price should have a floor of around $1100 per oz. The potential upside to gold could be as a result of all the money printing which will probably filter through into higher inflation. I'm in quite a few gold mining companies - Goldplatt and AAZ being the biggest. I must say that there has also been a large divergence between the physical gold price and the share prices of gold mining companies. If this corrects - even if there is no price rise in gold - there should be a large potential upside the gold miners!

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cig 6th Nov '13 10 of 17

Re Ideagen's token dividend: I wouldn't want to credit them with cleverness that may not be there, but one reason for a small dividend is that it makes you visible on dividends >0 screens of both algorithmic and human investors, and also gives you the opportunity to build a straight line of "dividend growth" over a few years which will also show ups on the screens, and all at a modest real expense.

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nevilleaustin 6th Nov '13 11 of 17

Hi Bsharman,
I know you go to a lot of gold mining company presentations, can you suggest any that you are keen on that are managing to produce gold at low cost against the current gold price?
Gold mining (or gold recovery - Goldplat) is obviously a contrarian investment right now, and also a leveraged play on gold, so although I find gold and digging for it not interesting, I am considering adding a couple of gold mines investments.
Considering the fact that most mines share prices are very low at present, how do you think they would hold up in a general market correction, as that is likely.


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bsharman 6th Nov '13 12 of 17

Hi Neville. I would definitely recommend Anglo Asian Mining. They are a producing, profitable low cost (ave. cash cost of $564) company operating in a relatively stable country - Azerbaijan. They are expected to produce 60000 ounces of gold this year and 90000 ounces in 2014. They are quite conservatively managed and would suggest that they are hugely undervalued with price to book being 0.51. Check out their website and the advfn BB (which is quite sensible for ADVFN!) and the interview with their CEO.
The share price has been very weak over the past few months due to a large seller (an individual not institution) and seems like a very good entry point at circa 27p! Please let me know what you think.

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nevilleaustin 6th Nov '13 13 of 17

In reply to post #78901

Hi Ben,
Thank you for that, I shall enjoy doing the research on Azerbaijan based Anglo Asian Mining tonight, it sounds promising. I imagine there will be some exciting returns for investors who are buying the right mines today.
I will let you know what I think on this board tonight, probably by 9.00pm, so check around that time.
All the best

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V4Value 6th Nov '13 14 of 17

Have a look at Goldplat on Stockopedia's stock report - very impressive. Also features in their screen of screens, so looks like an interesting stock to research further. Shame about the divi though...Did Medusa Mining put you off gold stocks Paul? ; )

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nevilleaustin 6th Nov '13 15 of 17

In reply to post #78901

Hi Ben,
Thank you again, this does look good, the CEO appears very honest.
Most things look good about this company, the enterprise value is twice the market cap though - I guess that is because of the recent spend on the mine, but the CEO did say that the loan would be cleared in 2 years.
I could go on but you know the facts already,
The bottom line is that this company next year will be producing more gold for as little as $450, it fits my requirement well, but I guess when the gold price goes up and/or the gold mining sector wakes up it will probably end up that the highest percentage gains will be had by the more trashy mines rather than quality mines, anyway I'm in!
Cheers Ben,

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nevilleaustin 6th Nov '13 16 of 17

In reply to post #78907

V4Value, I could not agree more, what an impressive page indeed.

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slartybartfast 7th Nov '13 17 of 17

In reply to post #78912

I was a holder of AAZ but sold as I was concerned about their net take once they have covered their capital costs. Currently AAZ receive 87.25% of the gold mined, the remaining 12.75% goes to the government. Once they have recovered capital and costs they will receive 49% of net income. I think they will still pay tax on that. This would seem to be reflected in the forecast of eps for 2014 of just $0.05 per share.
I must admit that I'm not 100% clear on this and it may be that costs of other developments can be offset but that's not my reading of it.

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 Are LON:IDEA's fundamentals sound as an investment? Find out More »

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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