Small Cap Value Report (7 Oct 2015) - BDI, PLUS, IGP, GRA

Wednesday, Oct 07 2015 by

Good morning!

I added several more sections to yesterday's report in the early evening, so you might wish to revisit that report here.

There have been some spectacular upward moves in oil & resources stocks this week, on a bounce in the price of oil - apparently due to news that supply is tightening, according to one of the morning notes I read today. So that's an interesting area - but not one I follow here. Although it could have spin-off benefits, as rising resources stocks will pull up the main Indices, and hence improve overall market sentiment.

There are some interesting price movements going on for companies that are "in play":

Bond International Software (LON:BDI)

Share price: 104p (up 2.5% today)
No. shares: 38.0m
Market cap: £39.5m

As I reported here on 20 Mar 2015, the company reported a good outlook, and effectively put itself up for sale. As you can see below, that fuelled a dramatic surge in share price, as investors anticipated a takeover bid, but here we are over six months later, and nothing has come of it. Note the sharp price fall in the last few days. Is Mr Market telling us that a deal is not happening now? Looks like it.


As regards its strategic review, the company recently said (on 28 Sep 2015);

In March 2015 the Group announced a strategic review to evaluate the Group's future strategy to maximise the potential of its market leading software and services and take full advantage of the Group's growth potential. This is a wide ranging review which is considering all strategic options available to the Group including partnerships, acquisitions, corporate divestitures, a sale of the Group or a new or extended bank facility to continue to invest in the Group. The Board can confirm that good progress has been made in this wide ranging exercise and that expects to make further announcements as to the conclusions reached in the coming weeks.

It's difficult to know what to make of that.

My opinion - I quite like this company, but have reservations about its weak balance sheet, and that the cashflow isn't great, once you look at all the costs being capitalised into intangible assets.

It's probably best to wait and see what the outcome of the strategic review is. Companies which put themselves up for…

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Plus500 Ltd is an Israel-based company that develops and operates an online trading platform for individual customers to trade contracts for difference (CFDs). Its online trading platform allows its customers to trade CFDs on over more than 2,200 different underlying global financial instruments comprising equities, indices, commodities, options, exchange-traded funds (ETFs), crypto currencies and foreign exchange. The Company enables individual customers to trade CFDs in more than 50 countries. The trading platform is accessible from various operating systems, such as Windows, iOS, Android, and Surface, as well as Web browsers. more »

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Intercede Group plc is a United Kingdom-based software and service company. The Company is engaged in developing and supplying of identity and credential management software. The Company provides MyID software, which is an identity and credential management system that enables organizations to create and assign trusted digital identities to employees, citizens and machines. Its MyID software protects the networks, facilities and intellectual property of governments, agencies and other enterprise customers. In addition, it provides MyTAM, which is a cloud-based service that provides Android application developers and service providers to deploy trusted applications to the trusted execution environment (TEE) on mobile devices. It offers its solutions to various sectors, including aerospace and defense, finance and telecommunications; governments and federal agencies, and mobile developers. The Company operates in the United States and the United Kingdom. more »

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

9 Comments on this Article show/hide all

simoan 7th Oct '15 1 of 9


Completely agree on the BDI situation. For my sins I hold a few which have been gathering dust in the outer reaches of my portfolio and I should really have dumped them months ago but I took my eye off the ball. 

When they announced the "strategic review" I guess like many holders I was hoping that Constellation (who hold 26% of the company) would just take them out for a smallish premium by making an offer to other shareholders but that now looks very unlikely. In fact, Constellation have been selling a few recently, so it's not clear what the final outcome will be. 

The balance sheet is weak, particularly following the acquisition of Eurowage but I like that over 50% of revenues are recurring. Having said that I do not believe the move to the much hyped SaaS model has helped the company in growing revenues from it's existing products. 

It will be interesting to see what the outcome of the review is and it makes little sense to sell now but I'm certainly not expecting anything earth shattering and guess it will just be "business as usual" at which point you have to call into question the credibility of the management that started the whole process.

All the best, Si

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Camtab 7th Oct '15 2 of 9

Your defence of FCCN on ADVFN appears to have got some investors rethinking it today.

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herbie47 7th Oct '15 3 of 9

Paul, I see Ab Dynamics (LON:ABDP) trading statement is out today, market likes it, shares up 17%.

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Chris Johnson 7th Oct '15 4 of 9

Hi Paul

Do you have any thoughts on the Cancellation and Grant of Options for Eclectic Bar. Share price seems to have moved around in the last few days but I can't get to grips with what the motive might be.

Appreciate your thoughts.


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Sully8786 7th Oct '15 5 of 9

In reply to post #107724

Hi Herbie,

I tend to agree with Paul on market updates during trading hours. @ 15:31 I was picking my son up from school. The price had been cooling for a while and it was on my watchlist....never mind, there are other on my watchlist :|



Company: Dave Sullivan - Talking Stocks
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JASPERTHEDOG 7th Oct '15 6 of 9

Nothing to do with today's post.
I follow AB Dynamics (ABDP), at 15.31 hrs today they put out a very upbeat RNS F/Y report. Now, I think that 3.31pm is an odd time to put out a report of this importance but, from about 12.00 the share price began to take off. Apart from the usual suspects: Nomad, Broker, PR CO, should anyone else be privy to such price sensitive information? This looks suspiciously like a bit of insider trading to an innocent such as myself.

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Ramridge 8th Oct '15 7 of 9

Re. Ab Dynamics (LON:ABDP) I have just checked on Investegate and they also put out a trading update RNS last year on 30 Sept 2014 at 4:17pm. Also a "likely to exceed forecasts" statement.
I think cases like these should be automatically investigated by the AIM regulators. Light touch regulation is well and good but it has its limits.

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iwright7 8th Oct '15 8 of 9

Ab Dynamics (LON:ABDP) are out of order issuing their update late in the day and it may well be the +ve news leaked out. 

Just to clarify their statement reads... revenues and profits materially ahead of market forecasts, so it looks like again they have surprised the market.  They have a specialist niche in vehicletesting for all 20 of the biggest car manufacturers and are to my mind a quality growth business. I am a holder and ABDP it is rapidly becoming a conviction share. Ian

Admission document background

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accumulator 8th Oct '15 9 of 9

Hi Paul,

On Intercede's trading update, you've asked for some views on the company. So I thought I may as well give you my tuppence worth. :-)

I've held a few shares for around 10 years now, from 20p all the way up to 240p, then back down to 100p!

As you rightly say in your report, Intercede has some impressive clients. It says a lot for the quality of the company.

Ten years ago, this identity management business was fairly easy to understand. That was when it basically just managed a worker's identity credentials to control access to secure areas, documents, etc via the MyID platform.

The past few years have seen the company evolve into more of a cyber security business managing the identities of staff, devices and apps with much more emphasis on the mobile digital identity market.


Intercede is now preparing for the IoT. To prevent hacking, the digital identities of all these "things" need to be secure. So hopefully, Intercede should pick up a good chunk of IoT business.

In terms of numbers, no one knows how the IoT is going to evolve. It's all pie-in-the-sky. In the Proactive interview link below, CEO talks about 15 Billion IoT devices that are going to need trustworthy identities. Who knows?

At the Final Results of June 2014, Intercede is anticipating explosive growth in the mobile digital identity market, talking about a 2020 target of 100 million identities under management. In the Final Results of June 2015, that's been increased 2.5 times to 250 million identities. The reason for the increase is all due to their predictions for the IoT. (I await with interest, next years predictions!)

Working with Intel

Intercede is working with Intel to deliver a more secure and convenient alternative to passwords. If this interests you, take a look at these links:  (Click on the "Learn More" link and watch the 3 short videos on right of page.)

New NED from Silicon Valley

A very interesting addition to the BoD in April 2015 was NED, Rob Chandhok. He previously held Senior Vice President and President positions at Qualcomm - before leaving to become President, Chief Operating Officer and member of the Board of Helium Systems Inc., a San Francisco based IoT startup.

He chose to join Intercede because he considers their software to be the best in the world. So he's an IoT expert, being incentivised by 100,000 free Intercede shares which vest on 30 June 2018, subject to him remaining a member of the BoD at this date.

Takeover target

Intercede CEO's exit strategy is for Intercede to be bought out.


I'm afraid I'm now finding Intercede a pretty complicated business to keep track of. They're getting involved in so many new areas. And they are doing deals and forming partnerships with so many companies, for which we have absolutely no idea of the numbers of licences involved. So all we can go on is FinnCap's Andrew Darley estimates. He does have a thorough appreciation of the company, having been the main analyst ever since Intercede listed on AIM.

Contracts have always tended to be very large and sporadic. So licence revenues have always been very lumpy. However, this is gradually smoothing out as clients move across to Intercede's Software-as-a-Serice (SaaS) model.

Also, over the last few years there has been progressive growth in recurring revenues for Support & Maintenance and Professional Services. These tend to be independent of the lumpiness of licence revenue.

In addition to their main MyID product, in February this year, they launched their MyTAM product. This is expected to increase growth and smooth the volatility of MyID licence sales from FY2016

In the latest Annual report, they talk about currently having over 10 million identities under management, generating an annual average revenue of approximately £1 per identity. But that revenue is all from corporate business. We don't know what it would be for IoT devices - but I expect it will be a lot less.

The profits are being reinvested into growing the company organically, investing heavily in research & development and sales & marketing. The CEO intends to continue this growth plan for the foreseeable future and to just keep on recruiting. At some point, they should reach an inflection point, where the revenue does a "hockey-stick".

This July 2015 interview with CEO is useful:

Cheers, Andy

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 Are LON:BDI'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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