Small Cap Value Report (Thu 23 July 2020) - CALL, G4M, DOTD, SBIZ, GETB, CHRT,

23rd Jul '20 by Paul Scott

45 comments 8980 reads

Good morning! It's Paul here with the SCVR for Thursday.

See the header above for the company updates that look interesting this morning. There might be room for more, depending on how I get on.

Cloudcall (LON:CALL)

(I'm long)

I really enjoyed the investor presentation yesterday afternoon - apparently the video isn't quite ready. I'll add the correct link here when it's ready. It's well worth watching if you're interested in the company, or not entirely sure what they do (which seems to be the case with a lot of people who comment on the company!).

What I particularly liked is that 4 Directors/senior staff spoke. Usually investor presentations are just the CEO & CFO. In this case, the CEO effectively interviewed his own team, including CFO, CMO & CRO. I asked what CRO means, and how it differs from a Sales Director, just to make the point that investors may not all be familiar with these abbreviations. All speakers struck me as straight-talking, which made the presentation useful, as opposed to just PR fluff.

Key points which I put an asterisk next to, in my notes;

"Huge, painful, and rapid" drop-off in business due to covid, but recovering strongly now - the way they talked about this gave me more confidence, as it's clearly a one-off. Also, the company and its clients are better prepared, should a second wave hit.
CRO indicated that his goal is to "triple or quadruple" sales, to a run rate of £50m p.a., and that he's done this before, at a startup that was subsequently sold.
Product demos are key. CloudCall has a conversion rate of 43% from demo to sales. "Incredibly high". Therefore focus is on generating more sales leads & product demos, very simple! (Cleaver: "we need more sales, and quickly", CRO: "I hear you!")
Shareholder register is now 40% American investors. Not intending to move listing to USA (where valuations on tech cos are so much higher), but "Never say never"
Microsoft Teams integration (beta launch in August) is very important
Interesting product developments in pipeline - e.g. "we have 10 billion minutes of client data". If we could use AI and machine learning to interpret that data, and provide new services for clients (e.g. instant transcripts, measuring tone & sentiment of calls, etc.), this could open up new revenue streams
Cash burn remains high

There was lots more information, but those were…

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AndyCDC

23rd Jul '20

Cheers Glen

Research Tree are also pretty good

https://www.research-tree.com/newsfeed?keyAnnouncement=true&resultsTradingUpdate=true

Paul Scott

Great, thanks.

I've edited this bit, as I've just spoken to the CEO, and he clarified that the correct LTV/CAC figure is indeed 7, and not 10 ("I wish!!" he quipped).

Also, the video is being edited, to take out the technical glitch at the start, so it will be available later. I've asked them to let me know when it's up, and I'll put the correct link back into the article above.

I like the IMC platform, but found the slides too small to read comfortably, as they're surrounded by a large black border on my screen. Enlarging the browser view percentage actually made the slides smaller, and the border larger!

Apart from that, I think the IMC platform is pretty good. Minor technical glitches (like Mr Cleaver accidentally logging himself out for a few minutes at the start!) don't really matter when it's online, because we can do other stuff on our computer whilst we wait.

I'm really enjoying all these online meetings, including the ones from others, such as ED, PIWorld, etc. It makes the day so much more productive, although I do miss the free sandwiches & the occasional glass of wine from city lunchtime meetings!

EDIT - I've just realised it would be easier for us if I ask the company directly, so I've just emailed Simon Cleaver to ask if the correct LTV/CAC figure is 7 or 10. I'll report back, he usually replies quite quickly.

SundayTrader

Hi Paul,

Thank you for the commentary on Cloudcall (LON:CALL) - interesting growth share, though I don't hold. As I understand it, recruitment agencies are a major vertical for them, particularly in the UK - hence the sharp drop-off in revenues in the UK. The commentary in the TU goes into some depth on the increase in enquiries from the sector, as agencies have pivoted to homeworking, but need to upgrade their software to match. If true, possibly suggests employment prospects, at lease in in-demand skills, are not as bad as newspaper comment suggests. I worry about this stock that it has for some years been demonstrating profit-less growth - have they just been more honest than some in expensing customer acquisition sensibly?

Tommy H

Hi Mesb

My position in £KETL stop-lossed a while back protecting a small profit and I had been quietly watching about buying back as it yo-yo'd.

The company is doing what it says on the tin, increasing it's products and it has now confirmed that the new factory should be online August(ISH) 2021, yes wish I had bought back in at £1.82 but today's update has reinforced just buy and hold and (almost) forget.

Reasonable PER and Dividend, never going to 10 bag in the short term but a solid player to hold as part of the portfolio.

The only question is longer term and whether and when they are going to pay down the existing debt, and how much do they have out there owing on various Government schemes too which will unwind over the coming year(s).

Tommy

sharw

Paul - your link still works! I found the slides OK to read if you go into full screen mode by pressing the symbol under the bar:

Brilliant, thanks for your help sharw!

I didn't see the full screen symbol, as was sitting outside in bright sunshine on my laptop. I'll use that feature in future. Thanks again :-)

GloucesterBob

I also own Strix (LON:KETL), believe Graham did a write up on them and a SHARES tip of 2020.

My only concern is will either the UK or US anti chinese stand have any affect on the company being able to operate out of China. Will the Chinese Govt do something untoward.

Other than that it appears to be all good news and delivering on their expectations.

bryaz

i used investigate until for some reason it never published an rns for (lon ibpo) in fact it was the final results and last time i looked it was not in the archive

mesb

Thanks for taking the time to comment, Tommy and Bob. I’m an investor in KETL but I confess to being really quite disappointed by the update. Not so much in the content of the update, but more how the communication flow has been managed since March. At no stage do I think they have signalled such a big (21%) drop in sales. They might think they have spelt it out but (for example) the most recent AGM statement about a ‘solid start’ for me is disconnected to a 21% sales drop. To rub salt in the wounds, I’ve just watched the CEO interview today with Equity Development, not the most dynamic discussion ever seen. I don’t see why kettle sales have dropped so much during the lockdown, by all accounts they will have been used a lot more than before. Maybe there is disruption in the supply chain and customers have reduced stock levels to preserve cash. Who knows. Will try to brush this off.

shanklin100

Hi Paul

I think a checklist would be quite helpful given the ongoing tendency of companies not to mention whatever metric is going particularly badly for them in the latest period, be it revenue, profit, operating margin or whatever.

Not necessarily to share with us, but just so you don't miss anything important.... ....not that you normaly seem to anyway.

Best wishes and Kind Regards, Martin

davidjhill

Note : Cloudcall (LON:CALL) are rapidly diversifying from recruitment vertical. Can't remember the stats from the call offhand but they are now growing in a number of other verticals and the relative spread is much less recruitment weighted.

They pivoted strategy last year by raising money with a view of investing for a much bigger prize. Whether this is the right thing to do is a matter of personal opinion. I think it is the right thing to do but they are executing it on the wrong venue (ie AIM). The US market gives that strategy much more credence than the UK investors do. The difference is marked. We call it jam tomorrow and scoff at valuations and keep them low. The US are happy to pay for growth almost into perpetuity. I'm not saying that ultimately one is right and the other wrong but the US markets are up 400%+ since 2009 and the UK is down. It's a massive tech boom and Cloudcall (LON:CALL) are missing out. It frustrates me that the CEO doesn't seem to get this and has put a US type strategy in place whilst retaining a UK listing and exacerbated by the fact that they are integrating into Microsoft Teams and targeting sales growth in the US market. Just list there for heavens sake!! The new CRO clearly agrees with a US listing but the CEO appears to have his head in the sand. Which reminds me; as a shareholder I must write to him about it.

I suspect in the US this company would be trading at 4-5* its current UK value so I fear that a US investor will just buy it out at a fraction of what it could fetch. Possibly the saving grace against this is the tight insider and US institutional ownership.

Roger Baron

Big thanks Paul for drawing Gear 4 Music to our attention in march or april - bought then and taken excellent profit today. Hopefully price will fall back now and I will follow you back in. Cheers

Phil117

But Strix (LON:KETL) are not a B2C player but B2B. CEO explained that most kettles are manufactured in China, and said manufacturing was on hold at the peak of the crisis. Presumably with production lines halted the OEMs were not buying KETL's components. As manufacturing has resumed so have sales to OEMs. This has been the reality faced by most physical B2B component manufacturers during this crisis. The good news is that, as you say, B2C kettle demand has held up well, as opposed to big ticket items like planes. As an example just see today's update from Melrose for a much grimmer picture in automotive / aviation. Personally I think Strix (LON:KETL) has handled the crisis with aplomb. And despite the recent run-up the valuation remains compelling on a mid-term view.

Also suggest checking out the latest (free) research note on KETL at equitydevelopment.co.uk for their take

MightyPedro

Apologies my bad. minute 12...he corrects from 7.5 to what sounded to me like 10 but was 7. I´ll blame the broadband connection rather than admit to any incipient deafness ....though its quite hard to detect. Your multi-tasking better than my 100% focus.!

Believe Revolution Bars (LON:RBG) have just announced another 15m fund raising, or is this the previous one, fingers crossed but not hopeful

simoan

Believe Revolution Bars (LON:RBG) have just announced another 15m fund raising, or is this the previous one, fingers crossed but not hopeful

Well, if you'd spent 5 minutes checking before posting you'd realise it is the same £15m from the placing and open offer announced on 5th June. See:

https://www.investegate.co.uk/revolution-bars--rbg-/rns/fundraising--proposed-delisting--admission-to-aim/202006050700030558P/

Flipping 'eck... Si

Wimbledonsprinter

This is the previous one. This involved a switch to AIM and this evening’s RNS is part of that. If you look back at the RNS from 5 June announcing the fund raise, you have the timetable there.

I use them too but they typically arrive about 07:25 so if you are time conscious then just use the folio set up here and they come on the front page.
Then again just had some landed in my inbox after market close so that is why Unilever (LON:ULVR) and Sage (LON:SGE) were up so much,

PJBY

OPTI- to follow on from discussions on Monday

Some interesting articles below, for some balance and discussion, including a detailed contrast to Pauls review, one also being promoted via Shareprohets.

OptiBiotix Health plc (AIM: OPTI), a life sciences business developing compounds to tackle obesity, high cholesterol, diabetes and skin care announces it has extended the terms of its original manufacturing, supply and profit-sharing agreement with Agropur MSI, LLC (Agropur) as announced on 24 June 2019.....

https://lemminginvestors.blogspot.com/2020/07/optibiotix-health-wellbiome.html

On Monday 20th July Paul Scott put out another poorly researched hatchet job on OptiBiotix Health Plc (OPTI) and again today in what is nothing more than a rant at the company CEO. Stephen O'Hara - his crime? Having the brass neck to seek to assist Paul Scott in his understanding of the company and address non-factual errors by Paul Scott.

https://lemminginvestors.blogspot.com/2020/07/optibiotix-health-paul-scott-being-bitch.html

JohnEustace

No-one would bother floating a £30m cap company in the US. It would be privately funded until it was a much larger proposition. I would think it more likely that one of the US investors would take it private with a view to growing it to the stage it was worth listing.

Small Cap Value Report (Thu 23 July 2020) - CALL, G4M, DOTD, SBIZ, GETB, CHRT,

Cloudcall (LON:CALL)

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Paul Scott

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