Small Cap Value Report (Tue 10 Apr 2018) - D4T4, TMMG

10th Apr '18 by Paul Scott

57 comments 17117 reads

Good morning, it's Paul here!

Let's hope the technical gremlins at LSE have been fixed, and that we get our 7am announcements on time today, instead of nearly 1.5 hours late yesterday. I don't understand why the market opened, given that the news feed was not working properly. They should have suspended market trading until full information had been released (and given us an hour to read the news).

Let's hope small caps continue perking up - there have been some good rebounds already in oversold small caps, which is pleasing. I'm certainly rummaging around for bargains at the moment. In a way I enjoy market sell-offs, as the good shares tend to be thrown out with the bad, thus creating some buying opportunities in stocks that I'd like to hold, but declined to pay the lofty prices being demanded late last year.

I'm wondering if some selling might have been tax year end related? After all, if a share is showing a hefty loss, then ditching it before the tax year end reduces our tax charge on other, profitable disposals during the year.

Mello Derby, 26-27 April

Not long to go now, for this terrific event - organised by investors (David Stredder & his team), for investors. There are no spivvy junior resource stocks at this event, just good quality small caps that want to meet investors. Plus, an outstanding line-up of speakers.

I can't stress enough what a great community feel that David's Mello events have. Being smaller than the London conferences, they attract serious investors, who are prepared to pay a modest entry fee. This gives excellent access to companies & management, and will also greatly broaden your social network of sensible investors, if you hang out in the bar after hours especially!

Anyway, do come along if you can, it's going to be brilliant. Graham & I will be there, and are really looking forward to meeting more readers & comments contributors from here.

D4T4

Share price: 132.5p (up 23.8% today, at 12:31)
No. shares: 38.0m
Market cap: £50.4m

Trading update & contract wins

D4t4 Solutions Plc (AIM: D4T4), the AIM-listed data solutions provider...

The company is today updating us on performance for the year ended 31 Mar 2018.

To refresh our memories, here is my…

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1milby30

10th Apr '18

For those following the ITM Power (LON:ITM) story, this morning they won a fuel contract with the Metropolitan Police to provide hydrogen fuel for a new fleet of fuel cell electric vehicles. In addition to this, I found an alleged company with $8 billion in hydrogen HGV truck preorders. I know there were some hydrogen bears out there, but the industry really seems to be gaining traction. My worst case scenario here is Royal Dutch Shell (LON:RDSA) buy up the refuelling/distribution technology on the cheap. (I hold).

I also noticed some large buys going through for Revolution Bars (LON:RBG) over past few days. A BB member pointed out that the time limit has lapsed for bid offers exceeding 210p, so I wonder if this was opportunist buying or potentially someone building a position ahead of an offer. (I hold)

Joe

gsbmba99

Property Franchise (LON:TPFG) who also reported results today have included the following in their results announcement:

"Tenant Fee Ban

The Government has provided a degree of clarity on its intention to ban tenant fees in England & Wales. A ban in Scotland has been in existence since 2012.

The intention appears to be an outright ban, rather than a cap, on landlords and their letting agents charging any type of pre-tenancy fee. It's not clear whether certain in-tenancy fees will be allowed.

The timing of the implementation of the ban appears to be Q1 2019 which means that the Group's trading for 2018 would be unaffected by the ban. The Group is already taking action to mitigate the effects of the ban which is expected to put at risk 16% of our franchisees' lettings revenue, and at a Group level 9% of total revenue, if annualised*. Mitigation factors include; through organic means and by acquisition, accelerating the size of the tenanted managed portfolio, developing income from financial services & conveyancing referrals. The Group will continue to closely monitor any developments associated with the Tenant Fee Ban and the associated potential impact."

*Both percentages quoted based on 2017 trading

John Gibson

Re: TMMG,
As mentioned above, everytime it does well the management take a chunk of options.
A previous SCVR laid out the options to be paid once the share price reached a certain level, 60 or 70pence, from memory.
The cynic in me thinks that the ‘unusual’ way of structuring the recent acquisition is a way of boosting the metrics that will trigger a rise in TMMG’s share price before the market realises that the giant share of what the business owners are expecting, is actually going to what Paul calls “very high” performance targets and dilution through management options.
But I’m not a cynic, so I would never say the spread is horrible, liquidity sucks, and upside is absolutely limited - to the greedy enrichment of management.

fwyburd

Hi Paul
Thanks for today's report.

RE: Mission Marketing (LON:TMMG)

A few thoughts and a correction

Firstly, the correction. This group is not in the PR business. Whilst all marketing & communication disciplines (Branding, Advertising, PR, Digital, Direct Marketing, Sales Promotion, Sponsorship etc) fall under the category of "Promotion" (one of the Marketing P's), the agencies who perform these roles operate differently. As a consequence, the nature of their client relationships are different as are their earnings and vulnerability to economic cycles.

TMMG is new to me but they seem to own 15 individually branded agencies (16 including Krow) in different disciplines spanning the marketing services spectrum including two PR agencies. There seems little sector focus across these businesses. With 1000 staff and revenues of £70m, the agencies average 65 people each and have average turnover of £4.5m. So each agency is a relatively small, independent businesses operating in different markets with differing exposures to a downturn based on what they do and the client sectors they operate in.

This is also a weakness as they don't have a unified brand, culture or sectoral focus so cross selling opportunities across the agencies will be limited (and anyway, agency people all want to own the client relationship and aren't good at sharing!).

I think the PER is relatively low at TMMG because of these factors despite TMMG clients being unusually loyal. The broad rule of thumb is that smaller agencies are valued at around 5 X PBT which happens to be close to TMMG's market cap.

And yes, I think groups of agencies like this can become a takeover target especially if they can build a global group. However the lack of integration between the agencies may make TMMG less attractive.
cheers
Francis

Wimbledonsprinter

Re Air Partner (LON:AIR) ,as the price has fallen on reasonably large volume,that means there have been both large buyers and sellers since the 3 April announcement. So there intuitively appears to be a large holder who has bailed out/is bailing out. I would expect to see disclosures shortly. A large institutional holder on seeing the announcement would, I imagine, have been straight on the phone to the CFO to find out more background. Presumably they did not like the answers they got back. To me the 2 most pressing questions to ask would be 1) how “preliminary” has the investigation been so far (ie how likely are more problems to be uncovered?) and 2) how was this misreporting discovered (ie how good are current financial controls)?

Re Filta Group (LON:FLTA)
As a recent Minervini reader, I wonder if others have noticed that the SP seems to have crossed above its 50 100, 200 day MA today on no news at all. I've had them on my watchlist for a while but have failed to grasp the nettle. Am I right to think they are in the process of re-rating?
cheers
Francis

mrosbiston

Filta Group (LON:FLTA)

a true Minervini setup would probably look for a VCP around the pivot at 220-225p

agreed it is one to watch.

SCISYS (LON:SSY) had a VCP breakout today, i am also watching £JDG

Howard Adams

Hi Francis

Filta Group (LON:FLTA) an Interesting spot.

Their 07/02/17 TU RNS states .... 'The Group expects to report its 2017 results on 17 April 2018.'

The TU was upbeat
https://www.investegate.co.uk/filta-group-holdings--flta-/rns/pre-close-trading-update/201802070700029776D/

Looking at >3% shareholders though, insiders hold 71.1% of shares. Then three institutions hold a further 18.5%. Suggesting that only about 10% are in the market.
https://filtaplc.com/investor-relations/securities-information/

Based on Hargreaves Lansdown buy/sell the spread is 5%.

This looks like it could be a bit illiquid, which might be a consideration.

Graham quite liked it in September SCVR.

If liquidity is not too concerning it looks interesting.

Regards
Howard

herbie47

How about EKF Diagnostics Holdings (LON:EKF) that has broken out?

£K3C and Everyman Media (LON:EMAN) also.

I have been watching Judges Scientific (LON:JDG)

Hi Herbie (& mrobistan & fwyburb)

Continuing to evolve my appreciation of Minervini's strategies.

I bought into EKF Diagnostics Holdings (LON:EKF) and £K3C a few days ago. Topped up on £K3C again today.

Will look closely at Judges Scientific (LON:JDG) and SCISYS (LON:SSY).

For what its worth, if you were interested these are on my current Minervini screen (which I'm sure differs to some extent from yours). Also, options can enter and fall off the screens daily depending on price changes, so this is simply today's listing.

Large UK caps - Coca Cola HBC AG (LON:CCH), Dechra Pharmaceuticals (LON:DPH), Fevertree Drinks (LON:FEVR), NEX (LON:NXG) - I hold Dechra Pharmaceuticals (LON:DPH) & Fevertree Drinks (LON:FEVR). NEX (LON:NXG) is a bid situation so I ignore (as bid distorts MAs). I'm looking at Coca Cola HBC AG (LON:CCH) a bit longer.

Mid caps - Avon Rubber (LON:AVON), Fenner (LON:FENR) (bid so ignore), Ibstock (LON:IBST), Keywords Studios (LON:KWS), On The Beach (LON:OTB), Plus500 (LON:PLUS), Robert Walters (LON:RWA), YouGov (LON:YOU). I already hold Avon Rubber (LON:AVON), On The Beach (LON:OTB), Plus500 (LON:PLUS), Robert Walters (LON:RWA). Will be looking at others.

Small caps - Dewhurst (LON:DWHT) (liquidity might be a constraint here), EKF Diagnostics Holdings (LON:EKF), LoopUp (LON:LOOP), Mortgage Advice Bureau (can't use the £sign as it inserts wrong stock) - I already hold EKF Diagnostics Holdings (LON:EKF), LoopUp (LON:LOOP). Will look more into others.

Micro caps - Instem (LON:INS), Symphony Environmental Technologies (LON:SYM) - I hold both.

I know you read and comment on the CAN-SLIM thread and thought these might interest you in contrast to your own lists.

Regards
Howard

psin

thanks for the SCISYS (LON:SSY) update.
I often think that for the benefit of further education and understanding, we MM fans should get together online.

-1

Howard, thanks for that info. It maybe best to continue this on the Camslip thread I don't want to derail the Small Cap Value report.

Herbie

Ok.

I'll pick it up when next set of postings emerge on that thread.

Regards
Howard

grumpy5

Yes.

ricky65

I agree that Filta Group (LON:FLTA) meets the Trend Template. I'm a Minervini trader and it's on my watchlist too. It also meets Minervini's criteria for revenue and earnings per share growth.

I'm going to wait for the results next Tuesday (17th) and I'll be looking for a positive reaction from the market. I don't like to hold through earnings unless I have a profit cushion. As Minervini says, you always trust a bit to luck holding through results.

Well spotted. SCISYS (LON:SSY) is a textbook VCP breakout (higher lows in the base and multiple days of increasing volume).

11th Apr '18

Thanks Howard. Where do I find the Can-Slim thread? (I sense there's a joke response to this but it's too early in the morning)
cheers
Francis

yeah agreed with all those...

i do hold £K3C , unfortunately i talked myself out of Everyman Media (LON:EMAN) and £EFK - definitely seems like the market is buying the names that held up

Hi Francis

This is the CAN-SLIM thread

https://www.stockopedia.com/content/can-i-can-slim-16-no-subtitle-this-week-350853/?comment=5#5

Regards
Howard

Many thanks Howard

Small Cap Value Report (Tue 10 Apr 2018) - D4T4, TMMG

Mello Derby, 26-27 April

D4T4

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Paul Scott

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