Small Cap Value Report (Thu 17 Sept 2020) - EYE, PCIP, WAND, WATR, TTG, BEG

17th Sep '20 by Paul Scott

101 comments 10594 reads

Good morning, it's Paul here with the SCVR for Thursday.

Timing - there should be a reasonable amount up by the official finish time of 13:00, but I'll probably carry on writing until mid-afternoon, as there's nothing else on my agenda for today, other than a bit of food shopping later.

Today's report is now finished.

Agenda - it's a rather uninspiring list of companies reporting today, so I've plucked out a few which might be of moderate interest, as follows;

Wandisco (LON:WAND) - interim results look terrible, more to follow

Water Intelligence (LON:WATR) - Interim result

Begbies Traynor (LON:BEG) - trading update

Eagle Eye Solutions (LON:EYE) - left over from yesterday

Note that Pci- Pal (LON:PCIP) is doing a results webinar at 10am on Investor Meet Company, so that's going to take up a section of my morning, because I think this share looks potentially interesting - strong growth, but also rather heavily loss-making at the moment. So I'm on the fence, but leaning a little towards a positive view, and keen to learn more about it. It's fine to be neutral on lots of shares, we don't have to have a view on everything.

EDIT at 11:04 - the Pci- Pal (LON:PCIP) webinar has just finished, and I found it very interesting. Worth a look, when the recording is published on IMC. I liked the rapid growth, and recurring revenues, means that it should reduce losses considerably this year, and move into profit the following year. Also, the lack of competition is interesting - larger tech companies apparently prefer to outsource this niche, seeing it as a distraction. CEO & CFO came across well - the sort of management I look for - hands-on people, who know the business inside out, not gravel-voiced pompous city financial engineer types!

Mello Monday Virtual - 6pm Mon 28 Sept

Many of us have attended renowned investor David Stredder's "Mello" investor evenings over the years - it used to be a monthly evening in a restaurant in Beckenham, and ran for something like 10-15 years. It's not practical for us to meet at the moment, so David has moved online, with a new "virtual Mello" which is being organised through Zoom.

It mirrors the format of the…

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4351anf

17th Sep '20

Paul, Tt Electronics (LON:TTG) has a comment on the Virolens manufacturing partnership in it's aquisition announcement at 5pm this evening. I contacted them earlier about the FT story and am holding my breath!

Gromley

No, if you go long by £1m - IG would buy £1m of the shares in the market, and make their money on the additional spread and financing costs.
(For less well traded stocks you can often see do deal executed in the market)

What it is suggest that Plus do is NOT buy the underlying shares and bank on more customers being wrong than right!

jonthetourist

Given they have risen today, could you offer slightly more insight into your conclusion?

Paul Scott

I've just heard Tt Electronics (LON:TTG) is doing a £20m placing. Looks a mess. I'm seriously unimpressed. CEO has a lot of explaining to do.

Bluesky Ventura

Hi Jon,

I am just a great fan of Stockopedia and its rating system. It rates Pci- Pal (LON:PCIP) as Speculative, Micro Cap, Momentum Trap. I share the algorithm's opinion.

The company made a loss (£4M+) in 2020 even though its sales increased by 56%. The basic reason is costs are scaling as quickly as sales. This means profitability is further away, and they will need to raise more funds in my opinion.

By way of example take SG&A expenses the largest cost to the business. From 2016-2020 sales grew by 400%, at the same time SG&A expense grew by 821%. (See table below).

I Just want investors on the forum to be aware of some of the risks here.

For me it has promised much for many years and never really been able to grow while control costs. I see it as not investable.

(I have no position).

As always do your DYOR, don't trust the vloggers and bloggers.

All the best

BSV

Nick Ray

No, if you go long by £1m - IG would buy £1m of the shares in the market, and make their money on the additional spread and financing costs.

And of course IG only need to take a net position. So if some customers are long and some are short IG can save a bit of effort because the customers will pay each other (minus IG's slice.)

But also IG can take a statistical position. If customers are broadly holding an overall position in FTSE100 stocks of a certain size then a position in a tracker (or something with a strong correlation to the positions to be covered) will roughly cover the situation. But that's where you have to start waving your hands about to justify the shortcuts.

tony axon

What a shame if TTG have gotten caught up with some scam firm. Held many years ago, successfully. Very well run growth co. in those days.

Two cos. you might like to look into if you fancy some possible??? profits from covid winners ?? ODX,and SYM. I have small profits on both,and have bought more with recent news. They both seem to have tested,and proven covid technology, especially ODX who appear to be near to selling large quantities of the antibody test [ulster univ. testing showed the 20 min result test was 98% accurate]. Similarly SYM have a material which added to plastic,in manufacture fully impregnates the full thickness of plastic and kills the coronavirus ,landing on the surface in an hour,from lab testing. Would suggest in this age where new products are being discovered all the time these two at least appear to be test proven to work ,so have a leading advantage currently.

On BEG I have bought more throughout the pandemic ,having introduced it to the portfolio jan/feb from using my growth[similar to zulu] sieves. It would appear to me it is likely ,sadly,to be a steady winner throughout the crisis. It is the only growth co. I selected from that time,[now seemingly a lifetime away], that remains in my portfolio. I have also taken a position in FRP as that would fall into the same category of possible ? winners,as the axe is likely to fall on so many businesses.

Cheers stay safe and welll Tony

Being your own boss means you work harder & longer, but when you feel like it. EDIT - which is awesome! :-)

Boon

Quickly skimming through their website, it looks like Wandisco (LON:WAND) proposition is a less painful migration from owned storage to cloud storage, for enterprises?

In which case they have the worst revenue model. One time payments instead of recurring. Big procurement cycles (large corporate, critical migration project). Will be a subcontractor, never the main external project lead (for the migration).

Just an enterprise service company IMO operating in a sexy space (cloud).

Thanks Peter,

I didn't see that news re Foxtons, so topped up my existing holding.

Much appreciated, Paul.

This comment has been moderated

rexiemc

18th Sep '20

what are your thoughts on ODX ?

Hi Susan,

Glad to see the updated content moderation system is working appropriately and the obnoxious post was removed.

recommended all posters to read them well not to fall foul of them.

rizler007

Well put and agreed. With my (limited knowledge) this is exactly how I interpreted the RNS when I read it. I currently hold, and will continue to for at least the next 6m, but can probably see myself selling in 12-18m also depending on outlook of the pandemic, as seriously question whether the company can continue its sudden success out of the COVID arena. I'd be happy to be proven otherwise, but at the moment just enjoying riding the wave.

Thanks for coming back BSV. I have spent some time looking under the hood on this one. They grew the service out of an outsourced call centre operation which they sold to generate funds. Inevitably they took some wrong turns and needed more funds than anticipated, but that is so often the case. But the sweetspot is on the horizon - see Paul's note in the Friday SCVR.

What I like is imagining the board-level purchase discussion. "We can guarantee card data security and not be responsible if anything goes wrong ?- Let's do it".

As you rightly point out, if they can't get the sales revenue to accelerate past the cost line they are uninvestable, but in this case I think they have a very reasonable chance.

Two views to make a market etc.

Jon

Shrubby

Do you know whether Eagle eye's recurring income is contracted forward, if so how far ?Large amounts of forward contracted income attract high multiples when selling Co's. If that is the case here they may not be as expensive as might appear on the surface

Yes, two views make a market.

I wish you luck and hope all goes well for you.

20th Sep '20

Thanks EI. I hadn't thought of it like that. Things are better now, having low cost overheads. My main priority is to look after everyone around me. These days, it's all about running for a few £k per month. Back in my heyday, I was burning through £10-20k per month, which was crazy. That made implosion almost inevitable. It was fun though

Better to run the engine lean now. 4.0 6-cylinders, a most purring cat!

I wasn't madly keen on the tone of the main speaker on EYE. Sounded a bit arrogant to me. I prefer more down to earth entrepreneurs.

The Phoenix

Indeed Paul owning one's own abode if possible mortgage free with no other debts means you can obtain freedom and live ok for 2-3k per month, you must have been on cloud nine in your younger days though when Indigo multi bagged and the south coast night clubs were banging to the sounds of Robert Miles and Faithless great days on hot summer nights.

Regards Andy

Small Cap Value Report (Thu 17 Sept 2020) - EYE, PCIP, WAND, WATR, TTG, BEG

Mello Monday Virtual - 6pm Mon 28 Sept

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Paul Scott

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