Small Cap Value Report (Thur 7 June 2018) - Mello South, RFX, VLTY, CMCX, PLUS, INL | Graham Neary

7th Jun '18 by Graham Neary

54 comments 19593 reads

Good morning all,

Time for a quick public service announcement.

David has informed me that there are still a few tickets remaining for the Mello South conference which is taking place exactly one week from today (on Thursday, 14th June) in Hever, Kent.

Among the speakers will be Leon Boros, David Stredder and fund managers Mark Slater and Andy Brough. I will be there too, live-blogging the SCVR. And of course there will be a wide variety of quality companies for you to speak with.

It promises to be another hugely interesting Mello Event, this time in the south of England and for one day only. I recommend grabbing the last few tickets. Here's the link.

Ok, time for some analysis.

Today we had interesting announcements from:

Ramsdens Holdings (LON:RFX)

Veltyco (LON:VLTY)

CMC Markets (LON:CMCX)

Plus500 (LON:PLUS)

Inland Homes (LON:INL)

Ramsdens Holdings (LON:RFX)

(Formatting is broken, so I can't put the share price here - apologies.)

Great headline numbers from this diversified financial services provider, headquartered in Middlesbrough:

Foreign exchange is leading the way and profitability per customer has improved, so I'm guessing that people are using Ramsdens more frequently or for larger transactions - a great sign of customer satisfaction.

Margins in this segment have also improved (and it just goes to show how uncompetitive banks are at doing this, that a company can steal their market share so profitably.)

The number of FX customers is up 13%, but FX revenues are up 26%.

(As an aside, it might be worth noting that the vast majority - 86% - of Ramsdens' total customers are using the FX service. It's inevitably a lower-margin activity than pawnbroking and precious metal dealing.)

As with H & T (LON:HAT), the pawnbroker in which I hold shares, Ramsdens is also doing very well in jewellery. Sales in that segment are up 35% to £8 million. Up until a few years…

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andrea34

7th Jun '18

I'm interested in your opinion on Veltyco (LON:VLTY) too please, Graham, after the belatedly issued results.

TheWatchmaker

The figures for Impax Asset Management (LON:IPX) need unravelling a little due the the PAX acquisition which only affects the latter half of these Interim results. But the notes (3) in the RNS give some useful information.

From the date of acquisition, Impax LLC has contributed £4,840,000 of revenue and £964,000 of the adjusted operating profit of the Group. If the acquisition had taken place at the beginning of the year, revenue for the Group would have been £32,686,000 and the adjusted operating profit would have been £8,372,000

These figures look rather better than the quoted values in the RNS of

· Revenue: £25.7 million³ (H1, 2017: £13.9m)

· Profit before tax: £5.5 million (H1, 2017: £2.4m)

The full year figures should therefore be better than a simple x2 interim figures having 3 quarters contribution from the combined Impax-Pax entity.

The dividend increase is positive news with an increase plus a special dividend as a bonus.

davidjhill

Veltyco (LON:VLTY) : This is an interesting little play. Trading on a PE sub 10 now (9.5c eps full diluted) and growing at 60% in Q1. I reckon they could do close to €25m revenue this year and grown eps to circa 14c. Looks very cheap at 85p!

Trade receivables and cash was the key concern as they ballooned massively at y/e and would have been a big red flag for me. However, this appears to now be predominantly sorted. Post y/e TR have fallen to a much more reasonable level and net cash has effectively gone up £2.5m in last couple of months, with borrowings eliminated and €1.6m cash at bank.

A lot of upside too I think if they get their German sports betting arm, Bet90, functioning. Early signs look promising and of course a world cup year always helps too.

MGinvestor

Hi Graham,

Would be good to read your thoughts on Inspiration Healthcare (LON:IHC) announcement that a company they hold a 10% stake in NeuroproteXeon, will be considering an IPO for 2nd half of 2018. That 10% stake is valued at £111k on the books and NeuroproteXeon "is seeking a new money valuation significantly in excess of the $59 million achieved in its last round of financing, which completed in 2017" that should give some indication as to the value of that 10% stake.

https://www.investegate.co.uk/inspiration-health--ihc-/rns/potential-ipo-of-neuroprotexeon-limited/201806070700065742Q/

And

https://www.investegate.co.uk/neuroprotexeon/rns/announces-plan-for-initial-public-offering-on-aim/201806070700095761Q/

For those interested it's worth googling about the company neuroprotexeon and gauging the progress they've made and the potential of their product(s)

Disoclure: I hold, have added at times, and have declared it for a while over at twitter @mginvestor

Soundbuy

Ditto re: Inspiration Healthcare (LON:IHC), The IPO of NeuroproteXeon could unlock some 'hidden' value in IHC

InvestedGeordie

Hi Graham,

I'd be keen to hear your thoughts on Ramsdens Holdings (LON:RFX) PBT +60% really did wake me up this morning!

If you have time, certainly Inspiration Healthcare (LON:IHC) Alliance Pharma (LON:APH) Inland Homes (LON:INL) Sopheon (LON:SPE) have all released significant news this morning.

Thanks,

IG

Disclosure: I hold all companies mentioned

WarrantStar

Hi Is2g08.
Yes, Diclectin approval is a really big deal for Alliance Pharma. At the moment the share price is up about 6% today. So I have just topped up my holding.

abtan

I've just taken a quick peek at this for the first time (thanks for flagging!), including last year's North America sales for Diclectin and, given the success over there, I too am surprised by the lack of increase today.

This looks like a game changer for the company. Any idea why it's only up 6%?

ls2g08

I have also bought today. I saw them at the UK investor show, they were one of the few good companies there and I was quite impressed by them. Kept meaning to buy some but felt I needed to offload some stocks first. Missed out on circa 20% gains! Oh well.

Hi Abtan.
You ask why it's only up 6% today. Possibilities that I can see are:
1) Institutions are a bit slow to react to news due to their processes. I am hoping that this is the case because it would mean that the share price would continue to rise over a longer period of time.
2) Maybe the strong share price rise over the last 6 months has already taken into account the likelyhood of this approval taking place. I don't think this is what is going on because the value rank is only 42, so it's not expensive.
3) It's a fairly small company with a market cap of £430m, so might be too small for some of the bigger institutions to invest in.
Hope this helps.

Hardman and Co have some good research pieces on this stock (commissioned by the company). The piece on Dialectin suggests that revenue per annum could reach as much as £40M per year (circa £10M in the UK and £30M in the rest of europe), within three years if uptake mirrors that in the US, however profit from Dialectin in the first few years will be outweighed by marketing and set up costs according to Hardman and Co. Also Brexit will be a factor in this, at the UKIS they named this as their top risk.

http://www.hardmanandco.com/docs/default-source/company-docs/alliance-pharma-documents/25.01.17-potential-of-diclectin.pdf

Wol

Just wanting to second (third) the request for Impax Asset Management (LON:IPX) if you have time Graham. You have covered them before. The figures look great but what would be the like for like comparison:
1. New enlarged group vs the comparable figures from last year
2. or just the old Impax vs comparable from last year.
My initial impression is that the business and the acquisition are both going very well.
The risk as for any asset manager is that they can be a geared play on overall market sentiment. If the market goes down Impax Asset Management (LON:IPX) will suffer reduced revenues because assets under management (AUM) will fall due to
1. the decline in the market
2. customers selling out to avoid being caught in the crash
Having said this, Impax Asset Management (LON:IPX) coped really well with the last big recession. Many asset managers saw their share prices drop spectacularly whereas Impax Asset Management (LON:IPX) saw a relatively small decline and a quick recovery. At the recent presentation the directors said that this was because most of their customers are institutions rather than retail investors and that these institutions tend to be more 'sticky' - keeping their funds invested even through a recession. Let's hope they can deliver a similar performance when the next bear market turns up.
Disclosure - I am long Impax Asset Management (LON:IPX)

Graham Neary

That's a lot of news IG! Let's see how far I get.

HornBlower

Re Ramsdens (LON:RFX) EPS broker upgrade is way too low. revenue growth has been 15%+ in the last two years driven by FX and retail, management very confident of continued growth opportunity. if FY19 sees similar revenue growth with stable gross margin (has been for 4 years) and continued controlled expansion of overheads to support growth sees EPS of 23-24p or up 45%. Would support a 5% dividend 2.5x covered by earnings and 2.3x by cash. Rock solid balance sheet and highly cash generative. £13m cash v market cap £57m and must be reaching the point where a special div needs to be considered.

I own this and H&T.

Hiya, Veltyco (LON:VLTY) is in there now. Cheers! G

Yes, there was never any doubt I would cover £RFX! Cheers for the suggestion anyway. G

Brilliant Leader

A suggestion Graham. Friday is normally a quiet day in RNS land, why not carry a few over into tomorrow’s report? I would add to the requests for Impax Asset Management (LON:IPX) and Alliance Pharma (LON:APH) both of which I hold. I for one, would be happy to wait until tomorrow for these to be covered.

MarkOR

I understood this column was to debate the investment merits of shares. Whether you agree or not with the product being sold is for a different audience.

The Intention to List note from Amigo suggests that guarantor loans are very popular products. I am sure that the company would argue that guarantor loans are a smart way to deliver loans to consumers who wouldn’t otherwise be able to borrow OR can now borrow at a lower APR because of the existence of a guarantor. If any of the other companies in the UK now offering a copycat product to Amigo eg Non-Standard Finance (LON:NSF) is anything to go by, this note from Amigo is a valuable read across.

As it happens, you are misinformed about the owner of Amigo. James Benamor is a passionate investor in child education in the UK and one of the best entrepreneurs ever born here.

patrick00

Another request for Impax Asset Management (LON:IPX) please!

threeputt

I'd just like to thank Ed today for a great Webinar, been using Stockopedia for about 6 months now after the rec from the Naked Trader, it's one of the best written pieces of software I've seen

Small Cap Value Report (Thur 7 June 2018) - Mello South, RFX, VLTY, CMCX, PLUS, INL

Ramsdens Holdings (LON:RFX)

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Graham Neary

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