Small Cap Value Report (Tue 10 Oct 2017) - ITQ, RBG, FREE, SRT, REDS
Good afternoon! It's Paul here. I've got the whole afternoon free, so will be updating this article gradually until teatime.
Interquest (LON:ITQ)
Share price: 28p (down 1.8% - back from temporary suspension)
No. shares: 38.7m
Market cap: £10.8m
Appointment of NOMAD and broker - this announcement is particularly important, because Interquest's shares had been suspended due to the company firing its NOMAD. Moreover, management (through a vehicle called Chisbridge Ltd) had attempted to buy out the company's minority shareholders through an offer at 42p. The offer failed to secure enough acceptances to allow the company to delist.
Yet Interquest then announced here on 6 Sep 2017 that it had given 1 month notice to sack its NOMAD on 10 Aug 2017! So this vital information was withheld from the market until just a few days before the 1 month notice was due to expire. This issue has arisen before, with other companies. It seems to me that giving notice to sack your NOMAD is very clearly price sensitive information under AIM rule 11;
So there's no question that the sacking of a company's NOMAD, leading to the suspension of its shares, is very significantly price sensitive. So a breach of AIM rule 11 has obviously happened, in my view. What will happen - nothing of course, there are rarely any consequences for breaching AIM rules. It only has a very thin veneer of regulation, which are often flouted, unfortunately.
It very much looked as if Interquest was deliberately trying to de-list by the back door, by firing its NOMAD. However, rather suprisingly the company has today announced the appointment of a new NOMAD, Allenby. The shares have therefore come back from suspension, and can be traded once again, as from noon today.
Today's announcement is worth reading, and covers the following points;
A relationship agreement has been enterered into between Interquest & Chisbridge, in order to ensure that Interquest is managed in the interests of all shareholders. I imagine that the NOMAD and broker probably insisted on this before taking on the roles.
A further NED (independent of Chisbridge) is to be appointed. Remember that during the attempted takeover, the only independent Director opposed the deal. I can't help feeling that having to put independent…
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28 Comments on this Article show/hide all
Hi Paul,
Can you look at Premier Asset Management's (PAM) Q4 trading update? It follows from Impax's strong Q4 AUM update on Monday that Graham wrote about.
Hi Paul, thanks for your thoughts on RBG this afternoon. I sold half my holding at 210p and await news. I expect a pull back on no cash bid from Deltic and the Stonegate offer being rebuffed. There may be an opportunity to rebuy at that point. Agree with you though that 203p would not be the end of the world in any event. Cheers, Foz
Not sure I understand why the Revolution Bars (LON:RBG) share price would drop 20-25% (or more) in the event of Stonegate walking away.
Surely, if majority shareholders currently value the shares significantly greater than 203p, and recent results have been good, the lowest price the shares will fall back to will be...203p?
In reply to post #227078
Surely, if majority shareholders currently value the shares significantly greater than 203p, and recent results have been good, the lowest price the shares will fall back to will be...203p?
On the basis that I don't recall the large shareholders backing up the truck when the share price cratered to 105p I thought I was being conservative with my 20-25% drop on Stonegate walking away. It's pretty clear there's no other game in town and I expect the Stonegate bid to win the day even if they have to up their offer slightly to get the deal over the line with Artemis at al.
All the best, Si
In reply to post #227083
Hi Si
It's an interesting one. No-one was backing up the truck when the shares tanked, and, as far as I know, no-one is jumping for joy (except the directors) with recent developments either.
I guess we'll know more soon.
Should have mentioned this before, if it wasn't obvious already, but I hold a long position in Revolution Bars (LON:RBG).
Cheers
In reply to post #227013
Thanks Paul... have dumped FREE; I don't have enough confidence in them based on the small numbers and economical information they provide; happy with my gains today in RWS and RWA :-)
With regard to Interquest (LON:ITQ) as Paul said:
"As usual, there's a sting in the tail - Directors making it clear that they won't give up trying to de-list, they just need to find a way to do it"
Underneath the bit he highlighted they say:
"Shareholders are reminded of the Resolutions approved at the Company's annual general meeting on 23 May 2017".
I can only assume that refers to the dis-application of pre-emption rights so they could issue an additional 5% of shares to Chisbridge without any comeback and thus move towards the 75% they need to delist.
In reply to post #227058
Re Interquest (LON:ITQ): Blacklisted directors duly noted with thanks. I'm not a shareholder (have no position) and have no intention of being, but I did complain to AIM Regulation about this outrage.
Regards,
Ed
Re Revolution Bars (LON:RBG)
https://www.investegate.co.uk/...
"The Deltic Group Limited and its holding company Ranimul 1 Limited ("Ranimul or" and, together with Deltic Group Limited, "Deltic") confirm that they do not intend to make a cash offer or merger proposal for Revolution Bars Group plc ("Revolution")."
So with no other suitors on the scene, it looks like the only chance of an improved price is if the Stonegate proposal is rejected in the vote (or looks to be going that way beforehand), and they then come back with an improved offer.
Disclosure: I sold out yesterday, more by luck than judgement, after I re-evaluated the possible outcomes, but good luck to those still in. I want you to do well, as RBG is clearly worth more. If Stonegate fail & RBG remains independent, I hope to buy back in.
Re SRT:
Your comment is spot on. "The achilles hell (sic!) of this business is lack of revenue visibility". Was it a typo or intentional?
I think we can't Deltic as the dog that didn't bark. Hardly much credibility in their position of coming back if events change.
The only thing i can say in their favour was at least they put more pressure on Stongetate than RB's management seem to have done.
I do hope you get time to look at REDS. The issue for me is that it involved in an area ,that whilst I can understand reports of, I do not have a feel for...and I'm a shareholder !
Valid points about the uselessness of AIM regulation. It's all very well having rules but someone has to enforce them. How we ever ended up with Stuttard in charge beggars belief.
Paul, any thoughts on CCT?
TRU US is touted as 3% of sales, and 8% of the group as a whole, but little likelihood there is actually a sizeable impact from that in my opinion. CCT have also had their Peppa Pig licence extended again in recent days which was a risk (if only a small one) so that event has passed too.
We know CCT will post EPS of 54p ish in December for the year just gone, so its going to get to the point where if this stays where it is it is on less than 7x historic earnings with cash exd out with pokemon growth next year in for free. Special divi or acquisition in the distance?
In reply to post #227178
Slightly naughty, Character (LON:CCT) slipped out a market update at 8.00am this morning (rather than the usual 7.00am). Some will have missed it. Para on 2018 expectations seems remarkably downbeat ....
Gus.
-----------
The Character Group plc
("Group" or the "Company")
designers, developers and international distributors of toys, games and giftware
Trading update
LONDON: Wednesday, 11 October 2017: The Board of The Character Group plc (AIM: symbol: CCT.L), provides the following trading update.
As reported in the Trading statement issued by the Company on 19 September 2017, conditions in the Group's markets remain challenging. The Board notes, however, that the portfolio of brands serviced from our UK base continue to trade well, with domestic sales holding up at levels comparable to the same period last year and against the year to date trends of the toy industry as a whole.
Our international and "FOB" sales have been adversely effected by a combination of several factors, not least of which is one of the world's largest toy retailers entering into Chapter 11 bankruptcy protection in the US and Canada, which has had subsequent knock-on repercussions in every market where it trades (including the UK). Our international customers are also taking a very conservative approach to purchases.
At this early stage of the Group's new financial year the Board consider that, based on the latest sales and market data available to them, the Group's performance for the year ending 31 August 2018 is now expected to be significantly below current market estimates. Nevertheless, the Directors believe this to be a temporary downturn and that the Group anticipates returning to its previous growth pattern during the second half of the 2018 calendar year, and this ultimately is expected to be reflected in the financial performance for the year ending 31 August 2019.
The single biggest factor underpinning our optimism is that during 2018 we shall be introducing exceptionally exciting new products, many developed in-house which, together with the current product portfolio will, the Directors believe, give the Group its strongest ever product line up.
Additionally, even in these tough trading conditions, we expect our cash flow to remain positive, our reserves to grow, and our Christmas stocks to remain under control.
Furthermore, we are committed to maintaining our progressive dividend policy and continuing our share buy-back programme, as and when considered appropriate.
2017 financial results
As reported in September, the business has had a solid finish to the 2017 financial year. Accordingly, the Directors anticipate that, Group underlying pre-tax profits for the year ended 31 August 2017 are projected to meet current market estimates. The Group's balance sheet remains strong.
The Character Group will be updating the market further when the Company announces its preliminary results during the week commencing 4 December 2017.
Paul with regard to REDS do you have any insight into the contradictory statements relating to AP Systems "initial approach" to the for the company on Thurs 28 Sept. REDS subsequently stated on Fri 29th Sept that no such approach had been made.How those two positions can be reconciled is beyond me.One must be untrue though further clarification has not been forthcoming from either side.
In reply to post #227218
Not the first time Character (LON:CCT) have put out a statement at an unconventional time.
I'm sure each occasion can be explained away.
In reply to post #227238
Graham covered Redstoneconnect (LON:REDS) and that approach on the 29th Sept here https://www.stockopedia.com/content/small-cap-value-report-fri-29-sep-2017-purp-apgn-pier-itm-223788/?comment=40#40
In reply to post #227278
Thanks fwyburd I missed Graham's response. I use the Hargreaves Lansdown trading platform and on the dealing page for REDS there is a "bid situation" comment though no further clarification, so H/L presumably see the bid situation as "live", it is that which prompted the question.
With regards RBG, how do we (shareholders) vote on the Stonegate offer?