Small Cap Value Report - Wed 26 Jul 2017 - LOOP, MYSL, QTX, VTU, JOUL

26th Jul '17 by Paul Scott

24 comments 12467 reads

Good afternoon, it's Paul here.

I woke up with a stinking cold, so am running late today. Therefore, this article will gradually take shape throughout this afternoon.

LoopUp (LON:LOOP)

Share price: 175p (up 8.4% today)
No. shares: 41.0m
Market cap: £71.8m

Trading update - this is a SaaS company, which provides conference calling software/telephony. It's an excellent product, which I have tried out myself. It allows a greater level of control, and enhanced features, compared with conventional conference calling systems.

Today's update covers the 6 months to 30 Jun 2017. These are the highlights;

That's impressive stuff. Gross profit being up 50%, through organic growth, is really excellent, and justifies a premium rating for this share.

One complaint is that the company only presents EBITDA. That's annoying, because it now means that I have to check what development costs the company is capitalising, to arrive at a more meaningful view of profit. EBITDA is of interest, but it is absolutely not the only measure of profit that companies should give us. I very much dislike the current trend to steer investors towards EBITDA only.

Checking the accounts for y/e 31 Dec 2016, it turns out that EBITDA was £2.1m, yet operating profit was only £0.4m. So EBITDA certainly seems a misleading number here. The reconciling items were £246k in depreciation, and £1,419k in amortisation of intangibles.

In 2016, the company capitalised £3.2m into intangible assets. I've checked note 15 of the 2016 Annual Report, trying to find more detail on the intangible assets, but nothing more is given. So I can only presume that this is capitalised development spending.

Outlook - this also sounds positive;

"Looking ahead into the second half of 2017, we continue to see strong demand for the LoopUp product and we remain confident in our ability to deliver future growth."

The company seems to have settled at an organic top line growth rate of c.40% p.a.. Combine that with very high gross margins, and there is very powerful operational gearing here.

My opinion - this is a very nice company. I visited their Shoreditch HQ last year, and was really impressed. The people & the place had a real buzz to it. It's a young company,…

Unlock with Facebook

Unlock with Google

or Unlock with your email

andrea34l

26th Jul '17

Results out today from JOUL look great (price only marginally up though at 303.5):

* Group revenue increased 19.6% to £157.0 million (18.6% constant currency)
* International revenue increased by 36.2% (now 11.5% of Group revenue), UK sales increased 17.8% to £139.0m
* Underlying PBT £10.1m + 34%
* Underlying basic EPS 9.2p + 33.3%
* Retail sales increased 19.4%
* E-commerce sales up 29.4% - 34.8% of total retail sales
* Store sales up 17.5% - supported by 11 net new store openings
* Wholesale sales increased 20.3% (17.6% constant currency) - reflecting the growing appeal of the Joules brand...
* Active4 customers increased by 14% to 907,000

There's no mention of LFL, which is a bit disappointing; the fairly small currency hit seems reassuring. Personally I only went into a store once, and although it looked quite smart and cheery, I thought the women's clothes seemed quite expensive for what they were and there were far too many striped items.

gsbmba99

I saw the LoopUp (LON:LOOP) CEO present earlier this year at a conference. He presented something he called "negative net churn" or words to that effect of 6% which sounded rather a lot like subscriber growth of 6%. Does anyone understand the business well enough to say if my interpretation is correct and, if so, how a company generates 40%+ revenue growth on a subscriber base growing in single digits? I have a theory but wanted to canvas first.

Also, how does a company with about 50% of revenue coming from the US not report a constant currency growth rate? Other companies like StatPro (LON:SOG) or Quartix Holdings (LON:QTX) give you the equation for revenue and the growth of each of the individual variables.

tic_tac_toe

although (LON:MARS) also put out an RNS today and this hit the price by 3% IIRC.

herbie47

I would generally agree, however recently after large founding directors sales, some shares how shot up, for example: IQE (LON:IQE), Purplebricks (LON:PURP), Fevertree Drinks (LON:FEVR), accesso Technology (LON:ACSO). I did sell after accesso Technology (LON:ACSO) sales ' 950p, since then the share price doubled.

bestace

They might not be on the same level as Fullers, but a lot of the Revolution Bars (LON:RBG) sites do have outdoor space.

A quick google search turns up plenty of pictorial evidence e.g. Richmond, Cambridge, Aberdeen, Bristol, Manchester, Battersea and Huddersfield.

Targeting sites with outdoor space is a stated part of their expansion strategy, so you would expect them to see some benefit from the good weather:

...in keeping with its historical focus on tailoring each of its bars to the characteristics of the building, the Group will look for sites with distinguishing features, including outdoor areas, as the ideal targets of its planned expansion.

The Marston's (LON:MARS) update today also mentions the weather as being the main reason behind their 2.4% growth over the last 12 weeks.

Paul, Bioquell (LON:BQE) half year report is out today, profits are well up, it's one you thought looked interesting last year, shares are up 14% today.

FREng

Thank, Paul. I have decided follow your example in BMUS and move this investment to IQE (which I already hold and have added following the Trading Statement on Thursday). Israeli companies on AIM make me nervous ...

guyrendell

Any thoughts on Quartix Holdings, Paul, in light of their interims?

unwise2

Paul

I have to agree with Herbie, one of the founders of Fevertree sold £73m worth of shares @ 1625p in May, look where the price is now. How many companies have net cash and are growing profits at 40%+ on a P/E of 13.5?

Laughton

Surely that must be a typo (Fevertree on a P?E of 13.5%).

I was referring to Taptica

dahokolomoki

Guys and girls, I don't think Paul is saying that a big insider sale is the 100% certainty that the share price will fall. Just that it is a negative signal that needs to be taken in consideration with the hundreds of other signals.

Paul just happens to place alot of weight on that signal.

paraic84

Paul - I agree with your comments on MySale (LON:MYSL). The last broker estimates I saw a couple of months ago put it on 1.9p EPS for 2019 - so you're paying a lot today for pretty modest growth for an internet business. Like you, I held but sold earlier in the year. In the UK its competitor Brand Alley has much better marketing visibility (at least in London) and I have wondered whether this whole discounted online sales business will be continually low margin as brands play competitors off against each other to get the best deal? It's also had at least one abortive attempt to develop its own fashion label.

I'd like them to be a bit clearer with what they plan to do with their shed load of cash. That's the bit worth keeping an eye on in case they develop a new, more exciting, venture.

AnonymousUser39518

Cheers for updating on MySale, Paul. Get better soon

Gromley

My moist recent notes

Ooo, erm, err, no sorry , I can't think of anything to say that wouldn't lower the tone.

Paul Scott

27th Jul '17

Gromley,

LOL - someone messaged me about my unfortunate typo, which I've now corrected!

Regards, Paul.

sminers

Paul, best wishes in the world you are not the demographic for Joules lol

Jeremy Grime

Please can we have a picture of you in a Joules polo shirt and one in a Primark polo shirt. ?

Edward Croft

Grime is in the house :-) Welcome !!!

Dieselhead2

28th Jul '17

Good morning Paul, I wondered whether you had seen Staffline's interim results for Wednesday? Naturally the Brexit effect is probably weighing down the share price. Any chance you could take a quick look?
Many thanks.
Dieselhead2.

-1

Small Cap Value Report - Wed 26 Jul 2017 - LOOP, MYSL, QTX, VTU, JOUL

LoopUp (LON:LOOP)

Unlock the rest of this Article in 15 seconds

About the Author

Paul Scott

24 comments

Unlock this StockReport™ in 15 seconds

Unlock this StockReport™ in 15 seconds