Small Cap Value Report (Wed 2 Jan 2019) - SPSY, URU, CTEA

Wednesday, Jan 02 2019 by
77

Happy new year!

News is very thin today, so I'm struggling to come up with ideas to discuss in today's report. I'm also learning to type "2019" in all of the places where I used to type "2018".

Several readers have requested a look at Spectra Systems (LON:SPSY), which I note has a StockRank of 92:

5c2ca69f5900cSPSY_20190112.PNG



Spectra Systems (LON:SPSY)

  • Share price: 119p (+13%)
  • No. of shares: 45 million
  • Market cap: £54 million ($68 million)

First Orders for TruBrand in China

This US-based company currently describes itself as:

a leader in machine-readable high speed banknote authentication, brand protection technologies, and gaming security software

It's based in Providence, Rhode Island (East Coast).

Today's announcement relates to orders from China for its TruBrand™ product. Nice to see robust trading between the US and China!

TruBrand enables the authentication of high-value products - such as cigarettes.

Today's order is from "Zhejiang Tobacco" which I understand is a reference to "China Tobacco Zhejiang Industrial Co.", one of the main provincial tobacco companies in China, 

Unfortunately, Zhejiang Tobacco's own website is not working today - even when I use a proxy server based in Hangzhou.

Spectra reports that the order is for Zhejiang's Liquan Yundun Series, which I have identified is probably the Liqun Leisure Cloud, whose official price is 100 yuan for a small box.

Fake products are a fact of life in China. Official methods for checking the authenticity of cigarettes consist of looking at the stamping and printing on the box and cigarettes - this is the old-fashioned way. With Spectra's method, you take the human error out of it.

CEO comment:

We are optimistic that this first launch with one of the highest value cigarette brands in China will lead to the adoption of TruBrandTM across larger volume product lines, that could downstream result in over a billion units annually from this supplier alone."

This looks like a trial to me - Zhejiang will try out the product on between six and eight million packs of the Liqun Leisure Cloud. If it works then it will be continued and could be rolled out to other product lines.

Valuation

No numbers are given today in terms…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way

Disclaimer:  

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

Do you like this Post?
Yes
No
78 thumbs up
1 thumb down
Share this post with friends



Spectra Systems Corporation provides technology-based security solutions. The Company operates in three segments: Authentication Systems Group, which captures the hardware, software and materials related to banknote, tax stamp and other high value goods; Secure Software Transactions Group, which provides an internal control system (ICS) software offering to the lottery and gaming industries, and Banknote Cleaning Group, which captures the technology related to cleaning soiled banknotes. ICS provides tools for fraud detection, money laundering, match fixing and statistical analysis. The Company develops and sells integrated optical systems across a spectrum of markets, including currency manufacturing and cleaning, branded products, industrial logistics and other highly sensitive documents. The Company's solutions include engineered materials, sensors and quality control equipment. The Company's materials are available in several forms, including particles, threads, inks and coatings. more »

LSE Price
124.6p
Change
1.7%
Mkt Cap (£m)
56.2
P/E (fwd)
16.5
Yield (fwd)
5.1

URU Metals Limited is engaged in exploration and development of mineral properties in South Africa and Sweden. The Company's segments include Exploration and Corporate office. The Exploration segments include obtaining licenses and exploring these license areas. The Company's projects include Zebediela Nickel Project, The Narke Oil-Uranium Project and Nueltin Lake Gold-Uranium Project. The Zebediela Nickel Project is located in the Limpopo Province of South Africa close to the platinum mining town of Mokopane. The Narke Oil-Uranium Project is located approximately 150 kilometers west-south-west of Stockholm. The exploration licenses cover approximately 7,087 hectares of land overlying prospective Alum Shale outcrops. The Nueltin Lake Gold-Uranium Project is located in the Kivalliq Region of the Territory of Nunavut, Canada. The Nueltin Project consists of 34 mineral claims and a mineral lease covering a combined area of approximately 27,279 hectares. more »

LSE Price
250p
Change
 
Mkt Cap (£m)
2.0
P/E (fwd)
n/a
Yield (fwd)
n/a

Catenae Innovation PLC, formerly Milestone Group PLC, is a digital media and technology company. The Company’s product and services includes Trust in Media, commercial solutions, Disorder and mobile solutions. Trust in Media provides solutions for creative rights owners and media content creators. Its Commercial solutions provide digital payment solutions for employers, banks and businesses. Disorder is its media platform, which focuses on music, fashion, film, design and the personal concerns of an audience. Its mobile solutions consist of cloud-based scheduling and reporting tools that provides clients a consolidated view of their resources in real time. more »

LSE Price
0.041p
Change
-13.7%
Mkt Cap (£m)
1.5
P/E (fwd)
n/a
Yield (fwd)
n/a



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


30 Comments on this Article show/hide all

sharmvr 2nd Jan 11 of 30
4

Hi Graham, Stockopedia et al,

A very happy new year to all and also thanks for the fantastic work in 2018. Great summary to end 2018 Graham - especially the lessons included against the not so great picks.
Brief question - is there a loss % before you consider a stock a failure ( £BAT comes to mind as a fail, but closed with not worked out "yet" )

And since it is the first day back with not much happening, www.johnlewispartnership.co.uk/content/cws/financials/weekly-figures/latest.html

John Lewis weekly sales figures are out and seems they had a great week to 29th Dec, at the expense of the week to 22nd Dec (especially at Waitrose).
Sales perhaps a little better than I thought given media, but I would get the impression that margins are not that great - savvy shoppers indeed.

I sold out of a number of value retail stocks with great pain over 2018 - only Ted Baker (LON:TED) , Walker Greenbank (LON:WGB) , Portmeirion (LON:PMP) which I consider to be much better quality. Also very small position in GAME Digital (LON:GMD)
My lesson to apply in 2019 - I would not buy excrement just because it was on sale or free - same applies to companies!!

Good luck for 2019 all - I think there are some good opportunities around

| Link | Share
barnetpeter 2nd Jan 12 of 30

I mentioned I was too tempted by FOOT in the last small cap report at 25. Plenty of reports the stores are busy and a nice rally this morning. Potential offer for Ophr too. Are we near the lows in the market for the moment? Some real bargains around I must say!! Time for me to put some cash in....carefully.

| Link | Share
ACounsell 2nd Jan 13 of 30

In reply to post #431518

Yes this is correct and AJ Bell have advised me after lengthy discussions that the Somero Enterprises Inc (LON:SOM) issue has now been sorted out and there should not be any similar delays in the future. We shall see!

| Link | Share
dustyie 2nd Jan 14 of 30
1

Just a thought on spectra systems Spectra Systems (LON:SPSY) , is this business is vulnerable to the spread of contactless cards etc. . at some time in the future, cash will be a thing of past . when is the question . Just a thought .

| Link | Share
Graham Neary 2nd Jan 15 of 30
4

In reply to post #431493

Hi IG, I've done my best re: £SPSY!

Cheers,

G

| Link | Share
Graham Neary 2nd Jan 16 of 30
3

In reply to post #431508

Cheers Julian, Francis & Leo, I've had a bash at Spectra Systems (LON:SPSY). Hopefully you find the various links and resources I've shared to be of some interest. Cheers. G

| Link | Share | 2 replies
Howard Adams 2nd Jan 17 of 30

In reply to post #431658

Hi Graham

Thanks for the research on Spectra Systems (LON:SPSY) that's very useful commentary.

Regards
Howard

| Link | Share
purpleski 2nd Jan 18 of 30

In reply to post #431498

Hi leoleo73

There was mention of of Somero Enterprises Inc (LON:SOM) ‘s late payment of the divi in another report a couple of weeks back. This caused me to check my account with II and the divis were received in to the SIPP and ISA on exactly the right date; this even though II’s SIPP is administered by AJ Bell.

Odd that for some brokers it seems difficult to cash US cheques!

I am long Somero Enterprises Inc (LON:SOM), it is my 6th largest holding.

| Link | Share | 1 reply
jonesj 2nd Jan 19 of 30
1

A cynic might consider the risk of a small order for Spectra Systems (LON:SPSY) followed a few months later by some knock off equivalent from a local company.

| Link | Share | 1 reply
timarr 2nd Jan 20 of 30
7

In reply to post #431673

This caused me to check my account with II and the divis were received in to the SIPP and ISA on exactly the right date; this even though II’s SIPP is administered by AJ Bell.

I keep track of exactly when my dividends are received so I know it was over 5 weeks after the payment date. But the date shown on my account is, also, exactly the right date. Fake news is everywhere ...

timarr

| Link | Share | 1 reply
Graham Neary 2nd Jan 21 of 30
1

In reply to post #431678

Very cynical!!

| Link | Share
ACounsell 2nd Jan 22 of 30
4

Hi Graham,

In terms of companies trying to sneak out bad news in the holiday period I would put Xaar (LON:XAR) pretty near the top of the list! This was there pretty awful trading update on Friday 28th December:

https://www.stockopedia.com/share-prices/xaar-LON:XAR/news/xaar-plc-trading-update-urn:newsml:reuters.com:20181228:nRSb6159La/

Clearly trading to hide yet more bad news for a share which traded at over £11.00 five years ago! The business would seem to be in terminal decline with no sign of any success to deliver improvement. Any thoughts welcome.

| Link | Share | 1 reply
sharmvr 2nd Jan 23 of 30
2

In reply to post #431728

Bagir (LON:BAGR) an Israeli textile company, manufacturing out of Ethiopia might compete with Xaar (LON:XAR) .
https://www.stockopedia.com/share-prices/bagir-LON:BAGR/news/bagir-group-ltd-trading-update-and-directorate-change-urn:newsml:reuters.com:20181231:nRSe7755La/

On 31 December:
Trading in line - Chinese company that will own 53% completion delayed to May 2019 (including $13m of $16m funding for new shares) and the CFO resigned.
Last 3 years: share count increased 500% and book value per share fell 80%

Held previously - one of the on sale excrement companies I referred to earlier!!!

| Link | Share
Julianh 2nd Jan 24 of 30

In reply to post #431658

Thanks Graham. They do seem to be something of a black box company and that does make it difficult to come to any clear conclusions. And especially thanks for the link to that enjoyable little film from one of Spectra Systems (LON:SPSY) 's competitors.

| Link | Share
nickjd 3rd Jan 25 of 30
3

In reply to post #431683

Well, my Somero Enterprises Inc (LON:SOM) dividends paid into my ii ISA account arrive promptly, or at least that due on 17 October last did.  It was shown as received on 17 Oct and paid out the same day by BACS to my bank current account.  That could of course have been back-dated by ii - except for the fact that my bank statement shows that my bank received it on 19 October.

I'm not quite sure how that happens if Somero pay divis by cheque unless they send cheques out in advance. However, well done ii and Somero as far as I am concerned!

| Link | Share | 1 reply
peterg 3rd Jan 26 of 30

In reply to post #431788

A lot of brokers credit divs on the payment date, or soon after, rather than wait for the funds to clear, presumably ii is happy to transfer funds credited on that basis. AJB seems to be alone (or at least rare) in waiting for final clearance before crediting accounts. My Somero Enterprises Inc (LON:SOM) div turned up 2-3 days after the payment date in Selftrade. No idea exactly what that delay was due to - could be when they or their bank got the cheque, or due to admin working out which accounts got what.

| Link | Share
bobsandy12 3rd Jan 27 of 30

HNY and thanks for very useful comments on Spectra which I wil start following now.
Is there any chance that you could comment on Accesso Technologies following the 50-60% price drop on “ red October “ and two pretty scathing analysts reports suggesting Accesso are being misleading in reporting growth? Is this just shorting activity or???

Thanks Bob

| Link | Share
smilingmickey 3rd Jan 28 of 30

The new business win at the Chinese Cigarette manufacturer should come as no surprise to Spectra followers given the previous comments in recent reports issued by the Company. It has been listed as one of their key targets for some time. Given the nature of Spectra's bank security business, multiple patent holding and significant royalty revenue it would maybe be reasonable to assume that the deal struck with the cigarette company covers IP protection. I would hazard a guess that the main payments to Spectra will be royalty payments based on sales volumes of cigarettes sold for the period of the patent life.

| Link | Share | 1 reply
smilingmickey 12th Feb 30 of 30
2

I note that Spectra share price has moved upwards strongly in the past couple of days. No news releases. Maybe they are preparing their accounts, who knows!

The Company have previously said that they would beat market expectations for 2018. I'm not really sure what those expectations were but I would hazard a guess at higher than 2017, which was in itself a bumper year

Their web site seems to have had a make over and for those wondering how they will make their money in the future there is a list of patents that they own with an invitation to third parties interested in their technology to enter into collaborations with them.

I'm something of a novice on these boards but maybe this post will stimulate a response.

| Link | Share

Please subscribe to submit a comment



 Are LON:SPSY's fundamentals sound as an investment? Find out More »



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 »

Follow



Stock Picking Tutorial Centre



Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis