Small Cap Value Report (Tue 26 Feb 2019) - XLM, 888, AIR, CMCX, TAP | Graham Neary

26th Feb '19 by Graham Neary

53 comments 13597 reads

Morning folks.

Today we have:

Non-Standard Finance (LON:NSF) / Provident Financial (LON:PFG) investigation by CMA, as expected
XLMedia (LON:XLM)
888 (LON:888)
Air Partner (LON:AIR)
CMC Markets (LON:CMCX) (from yesterday)
Taptica International (LON:TAP) (from yesterday)

Non-Standard Finance (LON:NSF) / Provident Financial (LON:PFG) - the Competition and Markets Authority has started investigating the proposed merger.

XLMedia (LON:XLM)

Share price: 53.6p (-31%)
No. of shares: 217 million
Market cap: £116 million

Strategic and trading update

Isn't it remarkable how things nearly always seems to go wrong with these Israeli tech companies?

You can see my historic coverage of this "performance marketing" business in the archives. I've always found XLM to be worth reviewing, and have been encouraged by its share buybacks. But I never pulled the trigger and put it in my own portfolio, because the category it's in is just so dangerous.

Strategic Update

more investment in its Publishing division (i.e. managing its own websites) going forward,
reduction in "non-core" Media activities, so there will be a "substantial reduction" in Media revenues.

XLM has never to my knowledge used the phrase "non-core" in relation to some of its Media actitivities, until today.

But it has previously reported the regulatory pressure on its Media revenues in various markets (e.g. bans on gambling advertising), and that its main focus is on growing its Publishing revenues instead. Media revenues collapsed by 31% in H1 2018, and contributed just 22% of total gross profit for the group.

So today's strategic update is not really a change in direction - it's more like an acceleration in the direction it was already going, if that makes sense.

XLM's investment in Publishing will create a "short-term impact on Group EBITDA", as the $7 million of internal spending will not be capitalised.

Current trading

2019 has started in line with expectations
expected $11 - $13 million impairment in acquired intangible assets as their associated activities cease.
FY 2019 revenues expected down by c. $30 million and EBITDA…

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MrContrarian

26th Feb '19

My morning smallcap tweet: XLM not excellent

Corero Network Security (LON:CNS), XLMedia (LON:XLM), LXB Retail Properties (LON:LXB)

Corero Network Security (CNS) wins orders totalling $1.6m.
XLMedia (XLM) 2019 has started in line with management's expectations but will cease involvement in much of its existing Media activities. $11-13m write off, guides FY rev cut by ~$30m, adj EBITDA by ~$6-7m.
LXB Retail Properties (LXB) FY. Guides final return of capital ~2p. "It has not yet been possible to conclude a final settlement with Highways England covering the road works completed in June 2017 and neither do we currently have an agreed final contract sum for the works required following the recent road safety audit. The delay is compounded by the public difficulties of the contractor, Interserve. As a consequence, the highways performance bond will need to be cash collateralised beyond the anticipated life of the Group." I hold.

danielbird193

Impressed with Dalata Hotel (LON:DAL) full results which show revenue up 11.8% and adjusted EPS up by almost the same. Net debt has increased but is still relatively modest at 2.3x EBITDA (and backed by freehold property assets). Full year dividend of 10 cents per share for a yield of around 2% and payout ratio of 25%. I for one am a very satisfied holder.

Michael Tee

Morning Graham,
Please could you look at Air Partner's trading update.
(I hold)

Thanks
Michael

timarr

Air Partner (LON:AIR) managed £5.8 million PBT before exceptionals last year and the trading statement today also states £5.8 million PBT. Assuming that's on a like for like basis it's not a bad result considering they forked out the best part of a million on the accounting review earlier in the year.

On another point, does anyone else find that Investegate is no longer capable of delivering morning RNS's in a timely manner? I checked at 7.30 and the AIR trading update wasn't there, along with a number of others. Does anyone have any alternatives that actually work?

Ned Kelly

Air Partner (LON:AIR) trading update , Result looks similar to previous year. Would be interested in your view. Are they finally getting over the previous accounting problems and able to grow again?

Thanks

fwyburd

I've noticed that too about Investegate. As an alternative, you can set up alerts on the London Stock exchange site for stocks you are watching and they'll send you an email.
cheers
Francis

Beginner

Investegate does seem to stutter rather more than it used to. Below is an alternative early morning browse:

https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html?&page=1

Carcosa

re Air Partner (LON:AIR) their RNS Trading Update says 'underlying profit' of not less than 5.8m so expect a lot of adjustments in that figure.

Meanwhile cost of Avation fuel will be going up a lot and customers tend not to like paying the full price of the increase. I see costs going up across the board and revenue largely coming down in 2019/20.

The Phoenix

XLMedia (LON:XLM) If you have a chance Graham, it looks like your words of avoiding overseas aim have been proved correct again even though cash must be real as div's paid, I guess also the fact despite the large recent daily buy backs the share price didn't hardly rise meant someone must to have been unloading in spades.
Any other learns you could flag up would be useful I think the real value of the daily reports are in you and Paul highlighting why you would avoid certain stocks.

Thanks Andy

back2value

Morning Carcosa,

Interesting points (and, indeed, thanks for your many contributions here...), but why do you think aviation fuel prices will increase when the oil price has been declining recently? In any case Air Partner is a broker so their main exposure is to the volume of business in the private air charter sector rather the actual cost of transportation - obviously a big recession would have an impact but at the same time, AIR seems to be growing both organically and through small acquisitions. Would be interested to hear your thoughts. I am a somewhat unconvinced holder of AIR, by the way, dissuaded from selling by the healthy dividends more than anything.

Best regards

B2V

jonno

Another vote for Air Partner (LON:AIR) please Graham. I have a similar view to Timarr. Despite overall profit before tax being flat year on year and a miss insofar as analyst expectations are concerned of around £6.1m, the company should be able put the accounting debacle of last year behind it and move forward. The shares remain inexpensive on several metrics, the company is financially robust and investing for future growth, so although earnings progression is likely to be slow for the next year or so I continue to hold.

I don't see air travel going out of fashion anytime soon and Air Partner (LON:AIR) has no direct competitor insofar as I am aware in the UK market

Mark Tughan

Morning all,

I would second the requests to cover XLMedia (LON:XLM) and Air Partner (LON:AIR) please! Also vaguely interested as a former holder of Corero Network Security (LON:CNS).

Kind Regards,
mark

andrea34

Please could you cover James Fisher and Sons (LON:FSJ) with final results out today showing good organic revenue growth of 12% and underlying profit growth of 19%? All divisions now seem to be doing very well. The Stocko picture is not great, though, but momentum is good and a PEG of 0.57 is promising.

Small Cap Value Report (Tue 26 Feb 2019) - XLM, 888, AIR, CMCX, TAP

XLMedia (LON:XLM)

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Graham Neary

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