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

8th May '18 by Graham Neary

49 comments 18735 reads

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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runthejoules

8th May '18

Thanks @leoleo can you please ask Wey Education (LON:WEY) how teacher recruitment is going, if not covered?

Howard Adams

Hi

As mentioned in Mr Contrarian (post 4 of 7), Tern (LON:TERN) have done a placing.

Tern (LON:TERN) have not had much coverage on Stocko so far but the stock might be beginning to appear on momentum watchers screens, I picked up on it last week (I have very small holding now).

Here's a little of what I discovered.

Looking on Investigate.com Tern (LON:TERN) has had a substantial newsflow throughout 2017 (and in 2016) https://www.investegate.co.uk/Index.aspx?searchtype=3&words=TERN

In simple terms if you buy shares in Tern (LON:TERN) you are buying management expertise in the Internet of Things (IoT). Specifically then, interests in six of Tern (LON:TERN)s portfolio companies. Tern (LON:TERN) hold 100% of flexiOPS which owns 90% of Wyld Research http://www.flexiops.com/.

But the important interests lie in two other holdings. 56.8% in Device Authority https://www.deviceauthority.com/ Then 50% in InVMA https://www.invma.co.uk/.

Tern (LON:TERN) explain that they are setting out to glue together investors (eg these from San Fran. who have invested in Device Authority https://www.alsop-louie.com/), innovating companies and skilled management experience in the IoT.

Tern (LON:TERN)s recent RNSs (from March onwards) are indicating that both these (invested in) companies are making progress and that the integration of partnerships and customers is gaining speed.

The latest example being this update about InVMA https://www.investegate.co.uk/tern-plc--tern-/eqs/gce-healthcare-launches-platform-developed-by-i---/20180503070008EUDZJ/.

Tern (LON:TERN) added to their investment in InVMA 25/04/18 https://www.investegate.co.uk/tern-plc--tern-/eqs/additional-investment-in-invma/20180425070005ETRHC/

I found a lot more in my digging but have tried to pick out salient points. I started from their Shareholder Conference Call update and followed the trail from their presentation pack https://www.investegate.co.uk/tern-plc--tern-/eqs/update-following-the-shareholder-conference-call/20180430090441ELEBF/.

IMO Tern (LON:TERN) could interest those with quite a strong technical background, or those for an eye for following investment type/VCT type companies. In particular Tern (LON:TERN) seems to be focussing towards the industrial IoT technology based on 'Thingworx' from PTC https://www.ptc.com/en/about.

This placing suggests institutions are increasingly interested in Tern (LON:TERN). This is a positive flag from a Minervini investing perspective. To date, insiders hold 22.4% of shares (4 individuals and an institution). Plus, according to IC three other institutions hold 7.38%. This fits pretty well to the Stocko free float figure of 79.8%. This new placing adds to this 7.38% holding.

My apologies if this got too long-winded. As is often the case with these types of companies its a spiders web of connections, and I think that is part of the reason the price is spiking so much. Others are beginning to see the possibilities if some of these links develop. I've no idea if they will and would not put too much in this but it might interest a few on Stocko. Anyway Tern (LON:TERN) could fizzle out after this initial excitement. Who knows?

Regards
Howard

EDIT: Tamzin from PI World posted two vids July 2017 here https://www.stockopedia.com/co...

Wol

I would have liked to have come to the Wey Education (LON:WEY) investor evening today. I am in Austria this week enjoying the sunshine and beautiful countryside instead. Will you post a summary of your conclusions from the presentation? I would be very interested to read it. I don't have any specific questions to ask but would be interested in your assessment of:
* the appropriateness of all their adjustments to reported EPS - are they really exceptional / one off or just part of the cost of growing the business
* expected growth in the core UK online education business and how they will achieve this
* competitive advantage / barriers to entry
* the overall competence / naivety of the management team (c.f. Carcosa above).
Enjoy the evening. I hope they provide good canapés.

Meldrew

Education will continue to be mainly provided in traditional schools so I cannot see a huge market for WEY in the UK or anywhere else for that matter, except for a minority, niche, demand for people who cannot fit into schools. In any case, there are already other products out there so I am not surprised that WEY are not achieving their aims.

abtan

Thanks @leoleo
Re Wey Education (LON:WEY)

If you get a chance, and no-one else asks, would you mind asking what became of their marketing "experiments" in the last 6 months. Given how much they banged on about it at the time (advertising at London Waterloo) I would have thought they would have provided some some of feedback today.
Cheers

Albertos

Wey Education (LON:WEY)

This:-

"......and the higher than trend expenditure on marketing and other matters flagged up at the time of the November placing to substantially boost group revenues and underlying profits over the next three years (£143,000)."

is taking things too far.

Phil

daveinthelakes

Wey Education (LON:WEY)

Will they be able to compete abroad with Pearson (LON:PSON) . Extract from Pearson's website-

"We know online learning, and we know a thing or two about A level courses as well.

Pearson has been successfully delivering online courses to primary and secondary students in the US for over 15 years. We teach courses to 65,000 students a year in America and 48 other countries around the globe. We have applied our thousands of hours of online learning experience, combined with our expertise in A level teaching and learning materials, to develop something that’s right for UK students.

Whether you have one student, or 20 who might be interested in this service, we can help."

I have not compared the two online offers but sold WEY a few months back.

Zoiberg

I never bought in as I can't see how you can do an A level science practical online. I was also a bit bemused when it became flavour of the month!

Vsihv

Hi Graham et al,

Not a small cap request, but was wondering if you had any thoughts on the £VM CYBG (LON:CYBG) announcement.
Holder of VM - personally, I think CYBG are getting the better deal - buying in my opinion a better bank for a discount to their own valuation.

That said, challenger banks do need to consolidate or more scale to compete, and this, as far as deals go, seems to have strategic fit (if you believe what you read on £CYBG), hopefully less regulatory capital, cheaper funding and other cost reductions with potential for revenue synergies too - A real competitor focussed on the North of England?

Would value any thoughts time allowing given your expertise / interest in the sector?

TamzinPiworld

If your trying to understand the electric vehicle market, from an investor perspective, we're publishing 6 presentations given at a Redleaf Seminar. These will apprear over the next 6 days. The objective of the seminar was to inform the investor of what's going on from the different perspectives of the industry, and what the opportunities might be.

Here, we kick off with a presentation by Canalys, who research and analyse trends impacting the automotive sector. They outline the past, present and future of EVs. It gives great insight to how the EV market might evolve.

http://www.piworld.co.uk/2018/05/08/redleaf-ev-conference-1-canalys-the-automotive-revolution/

We filmed these purely for the benefit of the investor. Tim and I were interested to hear the 6 presentations, and we though a wider audience of investors might also appreciate the opportunity.

JohnEustace

I see Safestyle UK (LON:SFE) have appointed Mike Gallacher, a turnaround specialist, as CEO.
I worked with him years back, and he's not someone who will faff about. So for better or worse I expect we will see some decisive actions here.

https://www.investegate.co.uk/safestyle-uk-plc/rns/directorate-change/201805010700066544M/

Amanda Heron

£Treatt (LON:TET)

Another vote for Treatt. Very niche market but hints of being the supplier of flavourings to Fevertree lured me in. I have been a holder for three years and wondering if I should have bought more after its recent dip and consolidation.

Hi Leoleo,

I was planning on going, but I don't think I will be make it there on time, since it is kind of clashing with work, and they pay me to be here!

I imagine most of this will be covered but these are the questions I have (sorry, it does repeat some of the ones others and you have already detailed):

What is the driver for revenue being behind expectations - is it pricing or student numbers or both?
Why are they going into China / Nigeria when they are behind target on UK.
Why are they adjusting marketing expenses - what element of the £143k is above trend and where do they expect this to be as a % of revenue in next 3 years.
Does being in line with profit expectations rely on marketing expense being adjusted - and how do they identify what is above trend?
What kind of promoter scores are they getting from existing students and more importantly I think, parents?
Are there any subjects / demographics where they are performing better versus others (eg rich white males / Asian girls / Maths / German)
What would be cash requirements for international expansion - what is current cash burn / requirement over next three years?

FREng

There's an in-line update from Ideagen (LON:IDEA) today with some sensible-looking board changes. If the broker forecast is right, that means a big increase in normalised EPS.

Laughton

Thanks tomps3, an interesting 30 odd minutes. Will you be reminding us when subsequent presentations are posted?

Graham Neary

Totally agree, Phil. re: Wey Education (LON:WEY). "Marketing and other matters" is not a reasonable category for adjusted expenses.

Hi IG - yep, I think I'll be able to cover Treatt (LON:TET) shortly. G

barnetpeter

Tern..do remember that some (including lucky me!) were buying this at 1.88p in January this year. So although I have cashed in some, plenty like me are sitting on massive percentage profits of well over 1000 per cent on this stock. So the stock is likely to be very volatile. Previously it hit 30p from 0.88 before reversing all the way back.

I like the stock (lol) and it looks very promising if the "internet of things" is worth as much as some say....and I have seen valuations of over £4 by some interested parties.....but at this stage it really is gambling money only I think. I have been 90 per cent down and 1500 per cent up on various holdings of tern at various stages over the last few years so not for the nervous or stop losses.

1James1n1

Hi Graham, thanks for your comments on Bloomsbury Publishing (LON:BMY).

It may also be worth mentioning that on 19th March in a pre-close TU that the company said:

"Bloomsbury Publishing Plc is pleased to report that for the year ended 28 February 2018, while revenues are slightly ahead of expectations, profits will be well ahead of the Board's expectations.

In addition, the Group's net cash balance is now expected to be around £25m, significantly ahead of expectations."

The company is therefore currently on a positive trajectory and year end results should contain some nice highlights. Given that the company have traded within a range for the past 4 years, peaking more recently at the turn of the year, it will be interesting to see if it can break out convincingly of this range if the positive news can continue. (I currently am holding BMY).

snickers

I kept an eye on WEY's statistics on a free web traffic site. They've actually fallen in rankings (no idea if I have found an accurate source of data mind you) since last year. There was a bump in January (when they hired the big screen at Waterloo), but traffic halved in Feb.
I also was unimpressed by this firm - they seem to be a play on the govt's own education policy and educational methods, rather than having their own truly independent philosophy.

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

Wey Education (LON:WEY)

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Graham Neary

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