Small Cap Value Report (Wed 19 June) - DUKE, QTX, MUL, BOOM, SAGA | Graham Neary

19th Jun '19 by Graham Neary

28 comments 9920 reads

Good morning!

What's on the agenda today:

Duke Royalty (LON:DUKE)
Quartix Holdings (LON:QTX)
Mulberry (LON:MUL)
Audioboom (LON:BOOM)
Saga (LON:SAGA)

Duke Royalty (LON:DUKE)

Share price: 47.85p (+2%)
No. of shares: 200 million
Market cap: £96 million

Dividend Declaration

(Please note that I have a long position in DUKE.)

Duke keeps its quarterly dividend flat at 0.7p. This will be the fifth consecutive payment at this level.

Based on 200 million shares outstanding, this comes at a cost of £1.4 million annually.

For context, Duke generated operating cash flow of £1.3 million in H1 this year, from £1.8 million of royalty receipts.

At Mello, I again expressed the view to Neil Johnson (CEO) that compounding wealth inside Duke would be the best way to grow shareholder wealth. So I am happy for Duke to keep the dividends flat, even if it could afford to be more aggressive with them at this early stage.

The trailing yield based on these flat quarterly dividends is 6%. Some shareholders think that this yield should compress as the business model proves itself over time and diversifies. The share price should gradually increase to bring the yield down to 5%, for example.

If we get an increase in quarterly dividends (which should be affordable, in due course) and a compression in yield, that would be a double whammy for the share price.

I plan to wait and see what the company achieves over the next year or two, before making any change to my current position.

One of Duke's brokers recently forecast that the dividend per share for the current financial year would be 3.6p. For this to be achieved, I think the next dividend would need to be increased. 3.6p per share represents a forward yield of 7.5%.

An adventurous financial stock carrying significant risks, but I'm optimistic about this one.

Quartix Holdings (LON:QTX)

Share price: 277p (+9%)
No. of shares: 48 million
Market cap: £133 million

Trading Update

The market loves this update.

H1 is running ahead of expectations and Quartix says it will make at least £25 million…

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MrContrarian

19th Jun '19

My morning smallcap tweet: Brave Bison business boosting blather

Blue Prism (LON:PRSM), Quartix Holdings (LON:QTX), Bagir (LON:BAGR), ECSC (LON:ECSC), Brave Bison (LON:BBSN), Myanmar Investments International (LON:MIL), Randall & Quilter Investment Holdings (LON:RQIH)

Blue Prism Group (PRSM) acquires Thoughtonomy for £80m, 8.1x rev. Thoughtonomy is a SaaS based product and cloud services business that combines Blue Prism's robotic process automation (RPA) platform alongside additional embedded and integrated AI and cloud capabilities. It lost £3.6m in last FY.
Quartix (QTX) H1 trading. Guides FY rev £25m and adj EBITDA and FCF at least meeting market expectations. States F/C rev £24.1m, adj EBITDA £6.7m, FCF £5.4m.
Bagir Group (BAGR) rolls over and agrees long extension to Shandong Ruyi's paying overdue $13.2m for shares. Strong start to 2019, more cost cuts, means BAGR believes it has sufficient resources to support its day-to-day activities. Will they launch a hair shirt range from the Ethiopian factory?
ECSC Group (ECSC) AGM stmt: YTD rev flat, guides FY rev broadly in line with market expectations, positive EBITDA (excluding the impact of share-based payments). FY F/C rev up 21%. Agrees £500k invoice discounting facility.
Brave Bison (BBSN) AGM stmt: newish CEO says "My aim is to make positive changes which will strengthen our business." Positive! Good. Rebranding Facebook pages: "We will concentrate on delivering content which exudes originality and exclusivity to resonate with the needs of their followers." What need will the Daily Viral Stories page meet? To while away those tedious hours at work while the boss isn't looking? *
Myanmar Investments (MIL) over half of holders support board's rejection of bid approach as it significantly undervalues the Company.
Randall & Quilter (RQIH) CEO resigns but will remain Executive Chairman. Alan Quilter and Dr Roger Sellek are to be appointed Joint CEOs.

* Seen a very funny tweet from Rhomboid https://twitter.com/rhomboid1M...

rmillaree

Brave Bison (LON:BBSN)
Interesting company name.
How they see themselves per their last annual report.

Ranked as the '7th Biggest Media and Entertainment Publisher in the World 2018' by Tubular Labs Video Aces Award for digital publishers

How stockopedia sees them

Enterprise Value£3.58m

Reminds me of the winner takes it all catchphrase - certainly more than a slight difference of opinion here between those two viewpoints. I guess bison are perhaps the 10-1 outsiders pick.

To be fair to the company they do have turnover of over £20 mill - so for your el cheapo enterprise value you are at least getting something real for your money - presuming the income doesn't dry up.

Stocky seems to have no current year estimates.

Howard Adams

Hi

Future (LON:FUTR) now grown beyond the normal scope of SCVR, has fallen over 23% since 17/06.

I cannot see any reasons for this. Does anyone have an insight to share?

I have held for a while, and keen to continue to do so as I like the business.

Regards
Howard

brucepackard

Hi, I'm interested in ULS Technology (LON:ULS) - the one thing that doesn't quite make sense to me is that they have paid a £2,934,000 earnout in July 2018. AND another earnout of £2,337,000 for the same acquisition is going to be paid in July this year. But the outlook statement talks about a difficult market, and the group underlying profits and revenue are down slightly.

Does that imply, excluding the acquisition of Conveyancing Alliance, that ULS group performance would have gone backwards and lost market share on an organic basis?

jwebster

Duke Royalty (LON:DUKE)

I would add strong institutional support. Share placement in July oversubscribed. The business model has legs to grow, while the concept is already established in the USA it's fairly new in Europe.

I hold

I don't see Duke doing anything spectacular but appreciate a strong yield grinding up over time.

seadoc

Howard, StockViews have put out a report on Future (LON:FUTR) and see 60% fall, claims there has been historical over-reporting due to a warped management remuneration scheme and no doubt they have taken out a stonking short.

Regards,
Seadoc

Hi seadoc

Many thanks.

Regards
Howard

Graham Neary

You coincidentally share a name with DUKE's CIO! Thanks for the feedback. G

Small Cap Value Report (Wed 19 June) - DUKE, QTX, MUL, BOOM, SAGA

Duke Royalty (LON:DUKE)

Quartix Holdings (LON:QTX)

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Graham Neary

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