Small Cap Value Report (Tue 8 May 2018) - WEY, CAMB, IDE, BMY, TET, TERN

Tuesday, May 08 2018 by
71

Morning!

A few updates which have caught my eye:

  • Wey Education (LON:WEY) - interim results. "...we remain on track to meet our expectations for adjusted profitability for the year although this is likely to be achieved on lower than previously planned revenues."
  • Cambria Automobiles (LON:CAMB) - interim results. "The Board remains confident that Cambria will maintain its momentum in the second half and deliver a financial performance in line with market expectations for the year as a whole."
  • IDE Group (LON:IDE) - final results for 2017. "Profitability in 2018 is expected to be significantly lower than 2017, but is expected to improve steadily throughout 2018 and beyond following implementation of the operational review."
  • Bloomsbury Publishing (LON:BMY) - Bloomsbury and Spotify announce audio storytelling partnership.

Thanks for your requests, specifically Treatt (LON:TET) and Tern (LON:TERN). I will cover them if I have time.



Wey Education (LON:WEY)

  • Share price: 20.5p (-25%)
  • No. of shares: 126 million
  • Market cap: £26 million

Interim Results

A strongly negative reaction to this interim report, despite the company reiterating that it would meet expectations for adjusted profitability for the full-year.

Wey is an educational provider which runs an online secondary school and provides teaching materials to schools. It made a UK acquisition last year ("Academy 21", or "A21") and is now planning to expand its international activities.

The bad news today can be summarised as: UK growth not as high as originally hoped, lots of costs anticipated from international activities, and an operating loss after all is said and done.

"Core" revenues (i.e. excluding the acquisition) are up 23% year-on-year. Not bad, but it is difficult to support a market cap of £30 million+ with trailing twelve month sales in the region of £3 million.

Investors are asked to be patient:

In accordance with the strategy adopted at the time of the Company's £5 million placing in November 2017, emphasis has been put on development of the Company's business for the medium term at some short-term cost.

There's nothing wrong with that, but I think that investors had already shown a…

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Disclaimer:  

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

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Wey Education plc is a holding company. The Company, through InterHigh Education Limited (InterHigh), operates online independent secondary school in the United Kingdom, offering The International General Certificate of Secondary Education (IGCSE), AS Levels and A Levels. The Company's subsidiaries include Wey ecademy Limited, Wey (Newco 1) Limited, Wey (Newco 2) Limited, Wey (Newco 3) Limited and Wey (Newco 4) Limited. more »

LSE Price
16p
Change
 
Mkt Cap (£m)
20.8
P/E (fwd)
9.5
Yield (fwd)
n/a

Cambria Automobiles plc is a motor dealer, which is engaged in the sale and servicing of motor vehicles. The Company is engaged in the provision of car vehicle sales, vehicle servicing and related services. It is a retailer of new and used cars, commercial vehicles and motorbikes. It operates on a dealership-by-dealership basis. It operates from approximately 30 sites with a total of over 50 dealer franchises. It operates dealerships across England, from the North West through the Midlands, down to Kent in the Southeast and across Exeter in the South West, trading under local brand names, such as Dees, Doves, Grange, Invicta, Motorparks and Pure Triumph. Its brand portfolio comprises Abarth, Alfa Romeo, Aston Martin, Dacia, Ford, Fiat, Honda, Jaguar, Jeep, Land Rover, Mazda, Nissan, Renault, Seat, Triumph, Vauxhall and Volvo. It also provides ancillary services. It offers finance and insurance for the execution of the transaction along with service plans to maintain the vehicle. more »

LSE Price
59p
Change
 
Mkt Cap (£m)
59.0
P/E (fwd)
7.6
Yield (fwd)
1.8

IDE Group Holdings PLC, formerly Coretx Holdings PLC, is a United Kingdom-based specialist managed service provider. The Company provides a broad portfolio of information technology (IT) services and technology solutions. Its services include cloud and hosting, network and connectivity, collaboration, cyber-security, managed services and device management. Its cloud and hosting services include co-location, private cloud, public cloud, hybrid cloud and cloud migration. Network and connectivity services include multiprotocol label switching (MPLS) network, cloud connectivity and wireless. Collaboration services include hosted telephony and unified communications. Cyber security services include security operations center, endpoint and threat protection. Managed services include remote monitoring, systems management and engineer field services. Device management services include procurement, build, deploy, manage, refresh, redeploy and retire. more »

LSE Price
7p
Change
 
Mkt Cap (£m)
14.1
P/E (fwd)
4.1
Yield (fwd)
n/a



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


49 Comments on this Article show/hide all

barnetpeter 8th May 30 of 49
3

Wey...Looks like the short term lows have been broken and I can now see a fall to about 13p....which would be about 15m mkt cap. That still might be too high if the UK is ex growth. Holding from 21p but can see plenty of red flags after today

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Howard Adams 8th May 31 of 49

In reply to post #361758

Hi barnetpeter

Many thanks for the response about Tern (LON:TERN) ..... I have no idea why someone has given you a thumbs down though .....

I think your comments are enlightening and useful.

I would have thought you flagging up the way the Tern (LON:TERN) stock behaves would be useful particularly given that it is a relatively new stock to the market and to the Stocko community.

I am expecting the price to fall for a bit as this new issue is out at 30% below the price (the other day). But, on a plus side (IMO) it is adding another quite committed institutional investor to the mix so I think there could be some upside to the overall evolution of Tern (LON:TERN) in the medium term as I assume that buyer had quite a lot of insight into forward prospects.

That all said, I concur with your insights that is likely to be a rather bouncy holding - its an investment company, its technology, its small, its a bouncy market.

Regards
Howard

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leoleo73 8th May 32 of 49
1

In reply to post #361748

Regarding Wey Education (LON:WEY) 's exceptional marketing costs, I think possibly this could be justified if the said marketing was a big failure. In those circumstances it is never to be repeated and more like a write-down than a marketing cost.

I will try to ask all the questions that have been raised, including about the success (or otherwise) of the Waterloo advertising and also their Net Promoter Scores which should give some guidance about future advertising requirements.

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tomps3 8th May 33 of 49

In reply to post #361738

Laughton, yes I'll post a note here to say what's been posted. Basically there will be one EV seminar presentation posted a day. They are good. Chargemaster was especially interesting. They run a network of charging points. (Presentation 5).

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shine66 8th May 34 of 49
4

Glad Graham felt able to take a swing at Wey Education (LON:WEY), even though it is one of Paul's BMUS holdings.

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Beginner 8th May 35 of 49
1

I have a little knowledge of on-line learning, having worked in the area for a few years. I would NEVER invest in any company in this field, other than those which supply the software packages used. Wey Education (LON:WEY) offers various levels of qualification, through providing resourses and instruction on-line. The problem is that many US universities, and some in the UK, offer comparable courses and qualifications for free. These offerings will only increase as institutions seek to attract students and to justify their educational mission. Vocational training is a different matter, but the academic field really is something worth avoiding.

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DJCP 8th May 36 of 49
1

In reply to post #361803

tomps3,

Your mention of Chargemaster jogged my (vague?) memory.

IIRC, they nearly listed, and I contacted their FD for further details and updates, with the eventual outcome that BMW (?) invested in them, so they didn't need an IPO to raise funds for their roll-out. If it is the same company, I should go back over their accounts and see how they've progressed since, for that 'if only I could have invested' moment :o)

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abtan 9th May 37 of 49
1

In reply to post #361768

Interesting to hear that a free traffic site has, seemingly quite accurately, followed the trend one would expect from Wey Education (LON:WEY) over the last few months.

I've tried in the past to use those kind of sites to predict web traffic, but things never quite tallied up...until I read this blog post

Long story short for those who don't have the time to click through, EVERY web traffic tracker reported significantly varied traffic vs actual traffic (the top 2 trackers respectively over- and under-estimated by 17% actual web traffic numbers). 

So it's probably worth using those services alongside a healthy dose of scepticism.

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tomps3 9th May 38 of 49

In reply to post #361833

DJCP - wasn't aware Chargemaster were formerly IIRC. The presentation is on Chargemaster's view of the charging infrastructure, based on their experience. Tom's a great speaker, and has much insight. It wasn't on the company, or their history.

We're just about to post the second Electric Vehicle presentation (in the next hour): 2.The evolution of battery technology. By Stephen Irish, MD, Commercial, Hyperdrive Innovation. Hyperdrive Innovation designs and builds lithium-ion battery systems for powering electric cars, off-highway vehicles, autonomous vehicles and home energy storage.

I'll post on today's SCVR (9.5.18) when it's published.

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goldenvision 9th May 39 of 49

In reply to post #361893

Tomps3 Re post 38 - think he means IIRC - if I recall correctly

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tomps3 9th May 40 of 49
2

Here's the next Electric Vehicles – the opportunities and challenges for the investor

2. The evolution of battery technology
By Stephen Irish, MD, Commercial, Hyperdrive Innovation

Hyperdrive Innovation designs and builds lithium-ion battery systems for powering electric cars, off-highway vehicles, autonomous vehicles and home energy storage. They work in collaboration with Nissan and others to design & develop innovative battery systems that it aims to commercialise in the near term. Stephen follows on neatly from Chris Jones’s presentation, to indicate how developments are playing out for suppliers to the industry.

http://www.piworld.co.uk/2018/05/09/redleaf-ev-conference-2-hyperdrive-innovation-the-evolution-of-battery-technology/

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meganxmas 9th May 41 of 49
2

Regarding Tern ... and I have to admit I have a reasonably sized holding ... I think you have to do a little bit of research to understand where the stock has come from, where it is and where it might be heading.

The management team are very strong and experienced (Ian Ritchie of Iomart is the Chairman and Al Sisto who has huge experience in technology is the CEO).

They are NOT hugely cash burning nor admittedly cash generative. The £1.75m raise will allow them to invest further in InVma and also new opportunities. Unlike several similar organisations they are NOT paying excessive salaries or options packages.

So why valued at £40m (approx raise value) to £50m (approx current price) ?

Main reason is their main underlying investment ... Device Authority in which they have the controlling interest. Google it alongside names such as Microsoft Azure, Comodo, Intel, Thales, Gemalto, and research Device Authority's website. Essentially DA looks to have become the defacto standard for the authentication of devices that are linked to the internet. Like many companies before they have gone teething issues such as time to market / time to integrate with customers / funding issues ... but really dig deep I think they could be on the verge of something very special indeed. Look at the areas they are involved in ... medical, industrial, consumer, smart cities, the list goes on. I'm not going to attempt valuations because these are always wrong !

Their other main investments InVMA (recent deal / collaboration with GEC for medical device authentication and security) and Wyld (Mesh networking technologies) have the potential to be massive also.

DYOR though but it is worth the time. Superficial analysis can sometimes be dangerous !

But as I said at start I would say all of this as I hold a good few shares ...

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meganxmas 9th May 42 of 49

Regarding Tern ... and I have to admit I have a reasonably sized holding ... I think you have to do a little bit of research to understand where the stock has come from, where it is and where it might be heading.

The management team are very strong and experienced (Ian Ritchie of Iomart is the Chairman and Al Sisto who has huge experience in technology is the CEO).

They are NOT hugely cash burning nor admittedly cash generative. The £1.75m raise will allow them to invest further in InVma and also new opportunities. Unlike several similar organisations they are NOT paying excessive salaries or options packages.

So why valued at £40m (approx raise value) to £50m (approx current price) ?

Main reason is their main underlying investment ... Device Authority in which they have the controlling interest. Google it alongside names such as Microsoft Azure, Comodo, Intel, Thales, Gemalto, and research Device Authority's website. Essentially DA looks to have become the defacto standard for the authentication of devices that are linked to the internet. Like many companies before they have gone teething issues such as time to market / time to integrate with customers / funding issues ... but really dig deep I think they could be on the verge of something very special indeed. Look at the areas they are involved in ... medical, industrial, consumer, smart cities, the list goes on. I'm not going to attempt valuations because these are always wrong !

Their other main investments InVMA (recent deal / collaboration with GEC for medical device authentication and security) and Wyld (Mesh networking technologies) have the potential to be massive also.

DYOR though but it is worth the time. Superficial analysis can sometimes be dangerous !

But as I said at start I would say all of this as I hold a good few shares ...

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Howard Adams 9th May 43 of 49
1

In reply to post #361958

Hi meganxmas

I completely agree with your advice about Tern (LON:TERN) that it requires quite a lot of digging to begin to gain an insight into the potential. (I bought in last week, but fully expect a very bouncy ride).

If anyone's interest has been pricked, below are some things I encountered during my analysis.

I think this is one of the Tern (LON:TERN) initiatives which is generating some of the buzz.

https://www.invma.co.uk/case-studies/gce-healthcare

This is GCE
http://www.gcegroup.com/en/about

I guess if this inVMA/GCE project goes well, then GCE may extend the inVMA relationship.

These are other inVMA case studies you might like to browse into
https://www.invma.co.uk/case-studies

We have all seen a buzz from an emerging IT technology before, so no point in getting too excited.

But, that noted, Tern (LON:TERN) are in effect beginning to tap into a technology called 'Thingworx' which is technology to support the industrial 'Internet of Things (IoT)'.

These links provide some background to this technological development.

PTC Inc is the company behind Thingworx
https://www.stockopedia.com/share-prices/ptc-inc-NSQ:PTC/

https://www.ptc.com/en/about

Should you be interested this Vid offers a description of Thingworx and the industrial IoT
https://www.youtube.com/watch?v=f2lB9uvP_B4

Of course this could be jam tomorrow, but as meganxmas has pointed out some of the people involved are highly experienced in this field. The ecosystem of technologies and companies is substantial.

Thus, the perceived value is all about evolving connectivity across a multiplicity of 'things', technologies, organisations, processes and industrial sectors. Therefore scalability is present. If that occurs then (IMO) I sense an interesting investment potential (but not for the less risk averse I would suggest - see barnetpeter's post #27 above).

Regards
Howard

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leoleo73 9th May 44 of 49
4

Wey Education (LON:WEY) - I have written up some answers to questions raised in yesterday's investors meeting here: https://www.stockopedia.com/content/wey-education-private-investor-evening-may-2018-362148/

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Graham N 9th May 45 of 49

In reply to post #362153

Thanks Leo.

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dahokolomoki 9th May 46 of 49

On Wey Education (LON:WEY), someone mentioned low barriers to entry to teach TEFL in China.

Yes, there are many TEFL providers. But from my reading, it looks like Wey is doing something different - and they should call it out - they are using UK based teachers. Native speakers. so this is a premium service, and not easily replicated by TEFL providers based in China - it is a high barrier to entry, as those China-based TEFL providers will have to create an operation in the UK, just to recruit local native English speakers.

I can see affluent Chinese parents paying a premium for their son or daughter (only child policy!) to learn "proper" English, along with the right accent.


However, I still feel that management have made a complete hash of the recent results, not fessed up about loads of things (marketing spend, InterHigh, etc) and just looks like they have contempt for investors. Why bother investing here with such type of management?

Website: Best Commands
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sharmvr 9th May 47 of 49
2

In reply to post #362173

I was at the investor event yesterday as was leo - very nice to meet you Leo.
I certainly would not characterise mgt as trying to pull the wool over the eyes. Refreshingly transparent I thought, who admitted to mistakes.
Whether you want to forgive / punish mistakes is your decision as an investor.
Obviously we can have different views, but I enjoyed meeting with them. Would be more comfortable with less fluff type mgt, but for me that is less indication of competence, more indication of personality.
No change to position here

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Graham N 10th May 48 of 49
2

In reply to post #362173

Hi dahokolomoki,

I think I need to question the view that using native speakers to teach TEFL is a premium service.

I spent a year in China and as far as I can tell, the place is awash with native English speakers teaching English. Teaching English is the standard job which everyone from the UK, US, Australia, etc. can do and immediately earn more than the average local salary. In general, teaching English is considered equivalent to flipping burgers in terms of its prestige for a Westerner in China. It is absolutely standard.

If you are a Chinese parent sending your child to a decent school, you expect your child to be taught by a native English speaker. Some schools do skimp on costs and hire European-looking non-natives, but in general it is normal to have a couple of native English speakers in any good school.

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herbie47 10th May 49 of 49
1

In reply to post #362473

Not sure about this, I have been to many countries in SE asia and there does seem to be a demand for English speakers, in particular from the UK. Many local teachers can't pronounce some words correctly. I think there will be demand from the ex-pat community especially from British parents who prefer an English accent to a local or American/Australian one. Countries such as Thailand could be one where there is demand as English is not widely spoken there. Good schools cost a lot of money?

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About Graham N

Graham N

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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