Small Cap Value Report (Tue 19 June 2018) - CTP, TAP, IDP, FOOT, BON

19th Jun '18 by Graham Neary

44 comments 14844 reads

Morning!

Updates I've noticed today (with your help in the comments!) are as follows:

Castleton Technology (LON:CTP) - final results
Taptica International (LON:TAP) - trading update
Innovaderma (LON:IDP) - trading statement
Footasylum (LON:FOOT) - full year results
Bonmarche Holdings (LON:BON) - preliminary results

I will be writing through the afternoon, due to other demands on my time this morning - please check back soon.

Best,

Graham

Castleton Technology (LON:CTP)

Share price: 82.75p (unch.)
No. of shares: 79 million
Market cap: £65 million

Final Results

Acquisition of Financial Modelling Platform IP

This is a new one for me.

Checking the archives, Paul has covered it twice previously.

Most recently, in November 2017, he was not overly excited by it.

Having a listen to the management interview published at PIworld this morning, the CEO describes the company as "a complete one stop shop when it comes to providing basically all the key solutions that a housing association would require to deliver business functions to the tenants".

In the UK, its target market is the 700 housing associations with over one thousand properties. It also has a small Australian business.

Nearly all of the large UK housing associations are already customers. So for growth, it is looking to cross-sell to these HAs its entire range of software and services products. 40% of its customers used more than one product in the latest financial year, up from 35% last year.

The government is looking to reduce the net rents charged by HAs to their tenants every year. While that should motivate some HAs to increase efficiency using Castleton's products, doesn't it also negatively affect their budgets for spending on support services?

In general, you want your company's customers to be getting richer and having more money to spend, not the opposite! So I can't see why rent reductions are necessarily positive for the investment case.

The positive features of this stock on my initial view are:

Strong cash conversion, enabling settlement of defcon (deferred consideration) and debt reduction
Very well positioned among its customer base.
Good forward visibility on sales…

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Howard Marx

19th Jun '18

Camtab

What runthejoules means is that the ADVFN poster 'superg1' is a leading authority on both Iofina (LON:IOF) & Versarien (LON:VRS) . His book cost on Iofina (LON:IOF) is higher than the current price ('underwater'), yet he contines to hold.

The comment has no direct implication regarding Versarien (LON:VRS) .

Vader

Hi Graham,

When you look at Taptica International (LON:TAP) could you explain the RNS notifications for the Price Monitoring please?

Thanks,

davidjhill

Hi - Next (LON:NXT) have no effective net debt. They are cash positive. The net debt numbers in the balance sheet all relates to their financing book (ie. where they finance a customers purchases at an apt APR), which is both highly profitable and more than covered by customers debt balances owed to the company.

andyfwwrench

Versarien (LON:VRS) is simply the new Iofina (LON:IOF) - expertly and persuasively ramped despite having no tangible business. It will be labelled a sucker stock by Stockopedia until it can show at a minimum compounding revenue growth. How the business develops is at this time a coin toss, though statistics, for example the graph posted elsewhere in these comments, tell us most small listed companies fail. We don't recognise that because share listings have a structural survivorship bias. That doesn't mean it is guaranteed to go the same way; I have the same insight into the medium term future as everyone else, which is to say none at all.

douglas

Hi folks.

I'm not sure it has been widely reported yet but there is a world wide shortage of CO2.
I know this sounds ridiculous as we are trying to cut CO2 emissions but food grade CO2 is in very
short supply just now.
I am a publican and when placing my order today with Heineken was told that they are unable to supply
John Smiths or Amstel for this very reason.
My brother is a large scale brewer and has confirmed that the shortage is starting to bite. He is worried.

This will not only affect the beer industry but also the soft drinks market.

When this becomes publicised I would expect the relevant shares may take a downwards blip.
You may wish to check your portfolios or maybe open a couple of shorts?

https://www.gasworld.com/breaking-news-co2-supply-crisis-hits-europe/2014944.article

Kind regards
Douglas

Graham Neary

Hi Dave, thanks for that - Castleton Technology (LON:CTP) done. G

mojomogoz

Comment on Innovaderma (LON:IDP) - https://www.stockopedia.com/content/innovaderma-figures-disappoint-but-laid-groundwork-for-growth-376214/?comment=1#1

Interested in views why I'm wrong.

nicobos

Good chart DS !

I'm not surprised by the AIM line which would include a lot of blue sky 'story stocks', heavy loss-makers, Chinese frauds and speculative resource stocks taking a cheap listing on the junior market.

It would be interesting to see what the chart looks like with only profitable and growing businesses included and how many end up doing a Footasylum (LON:FOOT) or Accrol Group (LON:ACRL) by issuing a profit warning in their first set of results.

My gut feeling is that IPOs which are used for growth (i.e. not to cash out existing shareholders), have a decent track record of growing revenues, are profitable and get through their first set of results with a clean bill of health, can be decent hunting ground for overlooked opportunities.

timarr

It's the bad 'uns that people remember. But £WKG and Rathbone Brothers (LON:RAT) among others have done very well recently. Long established businesses with good track records and managements that retain a decent stake are good signs, as is having one of the better nomads.

None of that is rocket science - a good track record shows that that there's a real business, presumably one that's making money, and a good advisor can help a company through the culture shock that comes with the relative transparency of listing. And committed managements are obviously a generally positive thing, although if the CEO is proprietorial about "his" company then that can be an issue.

There's actually some (now quite old) research into AIM stocks that shows this. If I remember correctly about a third of stocks delist within 5 years, although a few of those through getting taken over or moving to the main market. It's a bit of a casino, frankly, but you can weight the odds in your favour if you're careful.

timarr

Great comment re: Innovaderma (LON:IDP). All to play for. I'm intrigued by the possibility it could still come good..

Boon

A short on Fevertree Drinks (LON:FEVR) springs to mind as a good candidate!

Hi - I did that re: Price Monitoring Extensions. I hope it makes sense now! G

Hi Peter

re: Innovaderma (LON:IDP). It's include in the report. Feedback always welcome! G

Hi Camtab. Which announcement? G

Hi john - I do cover intention to float notices when I have time and when I spot something interesting. Was there one in particular you wanted coverage of? G

runthejoules

Camtab, for more information please re-read.

portugull

Any chance of a comment on FLYBE who released Full Year Results today.

rpannell

Thanks for the write-ups as always Graham. Some interesting thoughts on Taptica International (LON:TAP) and Bonmarche Holdings (LON:BON) - two opposite ends of an interesting spectrum but both struggling to increase their share price.

john652

Hi Graham, no specific RNS, more that a quick overview of what’s been released/coming up is useful. If you already filter out what looks interesting and update on that, ideal. Thanks

rhomboid1

20th Jun '18

Re Thalassa Holdings (LON:THAL) ..are they still leasing at vast expense a stately home owned by Mr Soukup?

Small Cap Value Report (Tue 19 June 2018) - CTP, TAP, IDP, FOOT, BON

Castleton Technology (LON:CTP)

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Graham Neary

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