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

Tuesday, Jun 19 2018 by
68

Morning!

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

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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Disclaimer:  

All my own views. I am not regulated by the FSA. No advice.

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Castleton Technology plc, formerly Redstone PLC, is an investment holding company. The Company is engaged in providing software and managed services to the public and not-for-profit sectors, mainly the social housing sector. Its segments include Managed Services, which consists of Castleton Managed Services Limited and Keylogic Limited, and Software Solutions, which consists of the results of Castleton Software Solutions Limited, Kypera Limited and Kypera Pty. It offers KYPERA FINANCIALS, a finance solution, which uses a single ledger format; EDRM, which is an electronic document and records management system that allows organization to manage its documents and supporting information; P2P, which manages repairs and non-repairs processes and integrates finance and repairs system; AGILE, OPUS SERVICE CHARGES and MANAGED SERVICES. Its subsidiaries include Castleton Technology Intermediate Holding Company Limited, Castleton Group Holdings Limited and Castleton Information Group Limited. more »

LSE Price
96p
Change
1.6%
Mkt Cap (£m)
76.9
P/E (fwd)
15.2
Yield (fwd)
1.4

Taptica International Ltd offers data-focused marketing solutions that drive execution and brand insight in mobile, leveraging video, native, and display to reach the users for every application, service, and brand. The Company’s technology is based on artificial intelligence and machine learning at big data scale. The Company works with more than 450 advertisers, including Amazon, Disney, Facebook, Twitter, OpenTable, Expedia, and Zynga, and more than 50,000 supply and publishing partners worldwide. more »

LSE Price
310p
Change
-1.1%
Mkt Cap (£m)
213.4
P/E (fwd)
8.0
Yield (fwd)
1.8

InnovaDerma PLC is a holding company. The Company develops a range of male and female at-home and clinically proven treatments for hair loss, hair care, self-tanning and skin rejuvenation. It operates through hair and beauty division. Its products include Leimov Personal Hair Laser Starter Kit, Leimov Hair Treatment Pack, Leimov Bio Cleansing Shampoo, Leimov Thickening Conditioner, Leimov Scalp Therapy Day Treatment, Leimov Scalp Serum Night Treatment, Leimov Deep Cleansing Scalp and Body, Leimov Hair Treatment Pack for Her, Leimov Personal Hair Laser Starter Kit for Her, Leimov Vitality Shampoo, Leimov Follicle Boost Therapy, Leimov BioPlex Scalp Serum, Leimov Scalp and Body Exfoliating Spa, Leimo Instant Hair Introductory Pack, Leimo Instant Hair Regular Pack, Leimo Instant Hair Building Fiber, Skinny Tan-Ab Shader, Skinny Tan-Dermabrasion Pre-tan Primer, and Tan and Glow. It operates in the United Kingdom, the United States, Australia, New Zealand, the Philippines and South Africa. more »

LSE Price
92p
Change
8.9%
Mkt Cap (£m)
12.2
P/E (fwd)
9.1
Yield (fwd)
n/a



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


44 Comments on this Article show/hide all

Nick Ray 19th Jun 25 of 44
3

In reply to post #376029

The clue to Footasylum (LON:FOOT) 's drop seems to be here:

https://www.stockopedia.com/sh...

** UK retailer Footasylum FOOT.L slumps by 46 percent
after backtracking on its growth targets, just eight months
after IPO
** Reports in-line FY18 but downgrades guidance for FY19 by
around 25 pct on a PBT basis, citing higher investment costs and
a weak UK consumer
** Broker Peel Hunt says the guidance is "a major surprise
for a company so recently floated"; downgrades to "reduce" from
"hold"
** "Yes, this is an investment phase but that's not what
investors signed up for at float," broker adds, saying the
arguments for a growth multiple are "in tatters"
** Liberum, the broker that helped list the company, says
the 25 pct cut is "clearly disappointing"
** Easily worst day on record for stock since IPO in early
November 2017
| Link | Share | 2 replies
Whitbourne 19th Jun 26 of 44

In reply to post #376004

it hasn't disappeared ...second button in , choose quote

Ah yes, there it is - thank you dscollard!

| Link | Share
mojomogoz 19th Jun 27 of 44
2

Bonmarche Holdings (LON:BON) -

Ageing people pottering around secondary and tertiary metro centres is a secular growth area. What does Bonmarche need to do to become a glamour GARP stock? By all means have a bit of online going on but the growth market is defo old biddies pottering.

I've looked but don't hold as can't see the picture from them...they ain't grasping the oppo well enough and playing it too safe which means they might get outplayed by someone else. Plus I own SCS (LON:SCS) which was brought to market by same PE company (Sun Partners) a few years back which retains large stake in both so don't want to double up plus SCS is the much better managed business with clear strategy/identity and upside of at least 1x from current share price over coming years with high divi

| Link | Share
MrContrarian 19th Jun 28 of 44
10

In reply to post #376029

Why the big fall?
"increased investment in our consumer offering" = cut prices.
I hate this PR nonsense.

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dscollard 19th Jun 29 of 44
6

re Footasylum (LON:FOOT) : the under-performance in years 1 to 2 of IPOs is almost a predicable pattern and presumably is linked to some extent with large equity holders exiting within that period. even Boohoo.Com (LON:BOO) suffered a similar fate after an IPO in the high 60s it tanked to 24p within a year on a profit warning...of course the rest is history. $FB IPO'd around $46 and then dropped to $18 within Year 1 ..the rest is again history

Here's an article from the FT in 2015 based on research on IPOs: there may well be a tradeable/investable edge in catching good growth stocks in the the early nadir of their developing "story": I guess the trick is to have sufficient domain/sector/market expertise in that area to understand their offerings and longer term GARPishness: or maybe to just watch and wait and then take a position on the emergence following the doldrums

The structural destruction of retail by technology and shifting consumer habits doesn't help as omni-channel is still nearly as unintelligent as it sounds.


Chart that tells a story — IPOs





Website: runprofits.com
| Link | Share | 2 replies
veganvader 19th Jun 30 of 44
2

Hi Graham,

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

Thanks,

| Link | Share | 1 reply
davidjhill 19th Jun 31 of 44
2

In reply to post #375989

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.

| Link | Share
andyfwwrench 19th Jun 32 of 44
4

In reply to post #375939

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.

| Link | Share
douglas 19th Jun 33 of 44
17

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

| Link | Share | 1 reply
Graham Neary 19th Jun 34 of 44
1

In reply to post #375984

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

| Link | Share
nicobos 19th Jun 36 of 44
3

In reply to post #376144

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.

| Link | Share | 1 reply
dahokolomoki 19th Jun 37 of 44
2

In reply to post #376219

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

| Link | Share
Graham Neary 19th Jun 38 of 44
2

In reply to post #376174

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

| Link | Share
Graham Neary 19th Jun 39 of 44

In reply to post #376054

Hi Peter

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

| Link | Share
Graham Neary 19th Jun 40 of 44

In reply to post #376019

Hi Camtab. Which announcement? G

| Link | Share
Graham Neary 19th Jun 41 of 44
1

In reply to post #375999

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

| Link | Share | 1 reply
tony mchale 19th Jun 42 of 44

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

| Link | Share
rpannell 19th Jun 43 of 44

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.

| Link | Share
rhomboid1 20th Jun 44 of 44

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

| Link | Share

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About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »

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