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

Tuesday, Apr 10 2018 by

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.


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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D4t4 Solutions Plc, formerly IS Solutions Plc, is a United Kingdom-based company, which focuses on data solutions for its clients to provide end-to-end management of the entire data lifecycle, from its initial creation through the manipulation, analysis and management of the data all the way through to its eventual retirement into industry-compliant archives. Its segments include License sales, Project work and Recurring revenues. Its market focus areas include Data Collection, which captures data from any digital channel through its division, Celebrus Technologies; Data Management, which includes the secure storage and management of all forms of data, either in the cloud or on client premises, for presentation through multiple devices and applications; Data Analysis, which focuses on delivering value through analytics capabilities, and Data Solutions, which includes areas, such as Web and mobile application development, systems migrations and upgrades, and Software-as-a-Service. more »

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The Mission Marketing Group plc (the mission) is a United Kingdom-based marketing communications and advertising company. The Company's portfolio comprises integrated, multi-discipline, multi-sector agencies, specialists in specific marketing/communications activities and specialists in particular market sectors. The Company's segments include Branding, Advertising and Digital; Media; Events and Learning, and Public Relations. The mission includes a network of entrepreneurial marketing communications agencies in approximately 20 offices in the United Kingdom, as well as offices in Asia and San Francisco. Its subsidiaries include April Six Ltd, which is engaged in marketing communications and specializes in the technology sector; Big Dog Agency Ltd, which is engaged in Marketing communications, Speed Communications Agency Ltd, which is engaged in public relations, and Bray Leino Ltd, which is engaged in advertising, media buying, digital marketing, events and training, among others. more »

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  Is LON:D4T4 fundamentally strong or weak? Find out More »

57 Comments on this Article show/hide all

rpannell 10th Apr '18 18 of 57

I always enjoy your macro thoughts Paul and find them an interesting overview on investing. When you have some spare time, I would appreciate your wisdom on how to approach political events. For example yesterday was a large sell off of anything Russian due to Trump's words over the weekend. Should such a sell off be seen as short term fixable, so therefore a buying opportunity or seen as the start of a long term problem so a selling signal. Your wisdom on such event would be appreciated.

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shanklin100 10th Apr '18 19 of 57

We know Graham is much more interested than Paul in analyzing or investing in finance companies. Also Graham has (or had) a large position in H & T (LON:HAT), who operate in much the same space. So whilst I would be interested in an analysis of the Ramsdens Holdings (LON:RFX) TS, I would be happy to wait until Graham's report on Friday for this, unless he would like to do it earlier. :-)

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Reacher 10th Apr '18 20 of 57

In reply to post #351638

For what it's worth, the Balance Sheet of Mission Marketing (LON:TMMG) has a very high level of intangibles - £88m. Excluding these results in negative NTAV £(8m).

The company has grown through acquisition, but there is mention about organic growth coming through which is positive. However, there is mention of economic uncertainty which perhaps makes it difficult to forecast.

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Julianh 10th Apr '18 21 of 57

I would also be interested in £D4T4 . I bought in after the big director buys a few months ago but then got put of and sold out as the share price kept drifting lower. Today’s trading update seems to be telling us why the directors were buying but a clearer forecast would have been helpful. On the plus side, trading sounds good, orders are coming in and their products seem to be selling well. On the downside, it’s a bit worrying that their accounts team don’t seem to have (or be willing to share) a clearer picture of the results. I don’t hold. Like David (post 14) I would be tempted if the share price drifted back a bit over the next few days.
Plus maybe Graham can give us his thoughts on the Impax Asset Management (LON:IPX) assets under management figures issues today (not your bag, I understand Paul)

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grumpy5 10th Apr '18 22 of 57

Some thoughts on AIR:LN would be welcome. The price seems to be discounting another CVR-type episode.

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matylda 10th Apr '18 23 of 57

Sorry Paul.

Another request for me today if possible, a small letting agency stock you looked at briefly last year.

Asagi brought Belvoir Lettings (LON:BLV) to my attention and my comment is this,..

Not a sector I typically invest in but looks interesting enough - Quite tempting, I like to see the EPS has broken the 5 year (perhaps all time) high whereas price is way off the 5 year high - Plus the yield - Interesting enough...

Blog: Briefed Up
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andrea34l 10th Apr '18 24 of 57

In reply to post #351618

It could be that the down votes are because grout123 isn't using the £ sign before the epic code...?

Anyway, I reversed one of them, I'm also interested in Griffin Mining (LON:GFM) although as per comments on matylda's thread the muted response is probably down to the further delay in obtaining the license for Zone II and the absence of any dividend despite all of the cash they are churning out.

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Beginner 10th Apr '18 25 of 57

In reply to post #351668

A third reason for scepticism here is that every time the company seems to be going somewhere the management award themselves a huge chunk of options. Looking at their social media Mission Marketing (LON:TMMG) seems to be a jolly nice place run for the benefit of all the jolly nice chaps, chapesses and chaplettes. I write as a frustrated former holder.

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JASPERTHEDOG 10th Apr '18 26 of 57

Paul, I know you dealt with (LON:AIR) just the other day, but things seem to be going from bad to worse, and not a peep from the company. Against a t/o of ~£50m and operating margin of ~12% a 'non-cash' error of £3.3m, while bad, should not lead to a share price drop of 55%. Do you get the impression that the finances have been badly mismanaged and that the bad news is not yet over?

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willhampson 10th Apr '18 27 of 57

To me, on Air Partner (LON:AIR) it seems as if the market has latched on to the fact that the RNS explicitly states that the "investigation continues", leading to the fear that further bad news will follow, including likely the departures of certain execs. Perhaps insiders know something, but I have no evidence or real view on this.

Its obviously imperative to make your own investment decisions, but I would caution trying to catch the knife here. If it were me, I would rather miss the bottom (even if by 10-20%) and wait for hopefully positive news to come from the company, than get wiped out by a rights issue or something worse. Just my two cents. I have no position, but would reconsider depending on the next update. All the best!

Edit: forgot to click reply, sorry. That was in response to Jasper's post.

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dscollard 10th Apr '18 28 of 57

In reply to post #351628

Agreed though I suspect the momentum will remain to the upside; d4t4 was sold-off to reflect the half year and not full year results so I doubt many will sell on the expectation of the full-year results on 23 April which can only be better than the interims and are already signalled to be better than forecast. It is not unreasonable to expect to see the 170p+ level depending on how good the beat is (mgmt quote "record" revenue and profit figures in H2)

UK tech stocks were off over 30% ytd as of last week and martech particularly was clobbered on fears of regulation and the Facebook  negative halo effect. 

The result was a perfect storm for d4t4 hence the massive discount. 

 Perversely, regulation and the impact of GDPR is positive for d4t4 as they are already badged as compliant but I suspect it will take some time for the market to digest and internalise this. There is a real paucity of analyst coverage which is unhelpful.

I am very bullish on d4t4 based on the Celebrus technology and the growing order pipeline. Results on 23 April should give insight into the relative growth of recurring revenues and licensing which should help smooth revenue streams and hopefully reduce the impact of project lumpiness .

Today's announcement was a binary catalyst that the market needed, I'd be surprised if there is much of a pullback: the relatively high volume of buying on today's news supports this.

as an addendum, this is from FinnCap this am who are the house-brokers and forecast a 200p  target. They are  the only analyst covering d4t4 

D4T4 Solutions (D4T4): Corp
Deals deliver a strong H2 performance

It is a relief to hear that the data collection and management solutions provider has closed a number of major H2 deals to help deliver demanding FY 2017 earnings expectations and relieve pressure on the share price. The board remained confident on the FY numbers despite a slow H1 but the shares have been somewhat depressed since the YE, on investor nervousness. It now seems that management confidence was justified and H2 was a record six months for revenue and profit, on the back of a number of new contract wins from a strong pipeline of potential business. More detail should be available in the usual post YE trading update towards the end of the month, once the books have been closed. At this point, we retain our forecasts and we expect a share price recovery to around or above the 150p level on the back of relief and the exciting prospects such a strong second half performance suggests.

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davidjhill 10th Apr '18 29 of 57

In reply to post #351728

Thanks. that's very helpful. I bought a few at 130p. hopefully they can surpass the highs leading up to results in a couple of weeks. do look cheap as long as their next H1 number isn't expected to be lumpy again. Market does hate H2 weighted stocks.

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paraic84 10th Apr '18 30 of 57

In reply to post #351608

Paul doesn't cover resource companies. Looks like they've done well over the last year so congratulations if you've held during the period!

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paraic84 10th Apr '18 31 of 57

In reply to post #351703

Presumably the share price remains depressed due to the letting fees ban. Do you happen to know if Belvoir Lettings (LON:BLV) have spelt out the expected impact on them?

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grout123 10th Apr '18 32 of 57

In reply to post #351758

Thank you. Leopards and spots etc with Chinese firms but I am now feeling uneasy as the numbers are so stellar today but market reaction muted.

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matylda 10th Apr '18 33 of 57

In reply to post #351763

Presumably yes re: Belvoir Lettings (LON:BLV) as the market doesn't seem too keen at present. In answer to your question, that's a no and I cannot find any broker coverage other than small notes (sadly).

Blog: Briefed Up
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Aislabie 10th Apr '18 34 of 57

I appear to be alone in taking an interest in Boku Inc (LON:BOKU) today. As a blue sky/jam tomorrow stock I recognise that Paul has sworn off it but for those of us keeping a few wild outsiders in the portfolio the results today appear to confirm everything that you need to see in a company that has to grow towards profitability.
The revenue growth, reduced loss (disguised by flotation costs), increased engagement with key partners, presence in a growing market and, especially ,the control of costs suggest that they are on track. A target of cash positive results after 2019 is what we have to keep an eye on, probably no need to hurry in now but worth keeping on a watch list.

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murrb 10th Apr '18 35 of 57

In reply to post #351693

Hi Grumpy5, have you seen Paul's thoughts on #AIR on April 3rd?

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markpulsford 10th Apr '18 36 of 57

Over 60m shares just traded in GAME Digital (LON:GMD).

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Edward John Canham 10th Apr '18 37 of 57

In reply to post #351768

Griffin Mining (LON:GFM)

I also think the muted response revolves around no news on a dividend and the zone II licence.

However, currently, I cannot see anything to stop them duplicating their H2 performance in 2018 which would result in revenues of $148, PBT of $77m and PAT of $55m giving a forward PER of less than 7. The relevant metal prices are currently above their averages for H2 2017 as far as I'm aware.

I was disappointed there was no discussion of future dividends in the release, but I think they do need to conserve cash at the moment. Apart from the proposed development of zone II, if you look at the balance sheet they have current liabilities of $52m compared to current assets (including cash) of $37m giving a current ratio of only 0.7 which is on the low side. Although it would be easy to raise debt it would be a "u-turn" after their no debt announcement. Cash generation in the first 6 months will significantly improve the position and I suspect lead the way to a maiden dividend.


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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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