Small Cap Value Report (Wed 5 Jul 2017) - TAP, TPT, GYG, LAKE

5th Jul '17 by Paul Scott

23 comments 12657 reads

Good morning, Paul here!

It's a quick report here today, as I'm heading into London for a lunch meeting for a new IPO, called Quiz. It's in my sector, clothing retail, so should be interesting. I'll let you know if it's any good.

Talking of IPOs, I see that GYG has launched on the stock market today - it's a super yacht painting company. AIM admission RNS is here. I've not had a chance to look at it yet. It seems to be trading at about a 15% premium to the IPO price of 100p. Let's see where it ends up once the flippers have exited! First day premiums don't always last. Although we are in a bull market, so who knows? It looks a bit too niche, and cyclical for my liking.

I think super yachts are the pinnacle of vulgarity and are a way of the super-rich basically sticking 2 fingers up at the mass populace. History shows us that this type of thing is not a sensible way to behave, as it can ultimately trigger revolutions. Sensible rich people are a little more discreet about their wealth.

Taptica International (LON:TAP)

Share price: 376p (up 4.1% today)
No. shares: 60.6m
Market cap: £227.9m

Trading update - this is another Israeli marketing company (we looked at XLM yesterday) which keeps reporting positive trading. Taptica seems to focus on mobile advertising. It has issued a series of positive updates, driving a big rise in share price in the last year.

Today's update sounds very strong. It says that existing customers are spending more on advertising through its platform. Plus there is growth from new geographies, especially Asia-Pacific.

This has resulted in a successful H1;

...As a result, the Company expects to report H1 2017 revenue and adjusted EBITDA significantly ahead of the corresponding period in the prior year.

This is helpfully quantified;

Taptica expects H1 2017 revenue and EBITDA year-on-year growth of more than 25% and 40% respectively

It's great when companies give figures in RNSs, as that removes the usual guesswork. Clarity is always best, as investors can then make more informed decisions.

I'm less keen on the company using adjusted EBITDA as its default profit measure.

The market was already expecting quite big increases in revenues &…

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ricky65

5th Jul '17

Paul I think a lot of us will be interested on your thoughts on Quiz. Perhaps it could be another Boohoo.Com (LON:BOO) ? From what I've read the company is profitable.

iwright7

Steve,

Yes agree about Taptica International (LON:TAP) and the use of AI and machine learning to lever their customer mobile marketing campaigns is pretty impressive. Ian

andrea34

Thanks for TAP write up Paul, I'm on the move so catching snippets of market news.

I'll also be interested in your view on Quiz... because I'm a little surprised to see two comments here comparing it to Boohoo. To me they are very different, Quiz has a High? Street presence, is aimed at a slightly older market than Boohoo, is more of a glam girls-only offering... and often seems to have sale rails :-/ They have more recently expanded into consessions in department stores. On this basis, I see it as quite a different kettle of fish to BOO. From a quality point of view, I've bought just a couple of things from Quiz and been happy enough.

Nick Kocinski

Paul please could you possibly review OPM and FEN. One is a year end report today and the other a year end trading update. OPM is currently being tipped by Simon Thompson so it would be interesting to hear what you think of them. Thanks!

Retired Bear

Paul I was both disappointed and sorry when I read your comments regarding the owners of superyachts and your suggestion that it was their way of sticking two fingers to the mass populace. When an exotic item of any kind is purchased be it a multi million pound yacht or even a super car costing hundreds of thousand—the buyers do one thing knowingly or unknowingly, they create work, which in turn allows families to grow and survive. In many respects we are the parasites in simply investing in a market to make money and nothing else. I can think of few revolutions caused by the envy of the rich that have ended happily. Only the rich can help the poor and do in many ways, if you have nothing then you have nothing to give. Our tax system is living example of wealth in action, without the 1% that pay most of the tax we would be in a real mess and the markets that you and I enjoy so much would be defunct.
Ken

CliveBorg

Hi Ken,

Please could you tell me, what's the name of your yacht?

barnetpeter

Green was a very good example. The media ran pictures of him on his "100 million pound yacht" against a picture of an elderly "destitute" BHS pensioner. He was public enemy number one for a long time.

There are lots of sites such as Quiz....just looked at it and its nothing special. Easy to launch and as always its a very competitive mkt out there. Can it generate the vol of sales when so much is out there? Maybe.....I mentioned a similar type of offering coming to Aim next month on here before. Reversing into a former gold miner lol.

arfournier

Boohoo wasn't Boohoo right out of the gate. Everyone seems to forget the profit warning that occurred. More or less cutting the the share price in half. As a shareholder from the IPO I vividly remember that.

Quiz isn't growing as fast as Boohoo per "only" 21% growth in revenue from 2015 to 2017.
https://www.trustnet.com/Inves...

People might want to temper their expectations. After all a BooHoo type return isn't the norm.

I'll guess will know more once the Admission Document is posted.

peterthegreat

I would guess that sentiment for GYG wsa boosted by an emailed buy tip from Simon Thompson circulated to IC subscribers yesterday. I don't always agree with Simon but, disregarding any ethical concerns about conspicuous wealth, this company does appear to have a decent track record and growth prospects and should be fairly resistant to any economic slowdown as their billionaire (or at least very rich) clients are generally insulated by their wealth from economic reality. I also liked the fact that some of its businesses have been around for a very long time and senior management are quite experienced, although few in number. I know that wrapping is a potential competitor to painting of yachts but is not often used for superyachts so I hope would not compete too much with GYG's painting services. I will be interested to see how well management communicates with its much large shareholder base after the flotation so I have taken a very small position and will see how things develop.

vodathan

Is ken lowes really the (in)famous Ken M?

Chris.Brown

I was ready to buy some Taptica International (LON:TAP) a couple of months ago, however I simply couldn't verify the product as 'genuine'. It's a tech company right - online advertising. So if it's such a great product and they're doing loads of business there should be plenty of online reviews? I spent half an hour searching and came up with almost nothing, except a couple of terrible reviews on some really obscure messageboards.

It made me wonder whether this was the reason the company was on a low-PER of 13x, rather than it simply being Israeli.

If anyone can actually point me in the direction of something that verifies the product I'd be delighted. If it was a proper business located in the UK I'd expect a PER of 20+ in the current environment.

Samsgrandad

Ken I agree with most of what you wrote but calling our investment activies parasitic is wrong. We are part of the capital distribution that makes the system keep going. The angels who make early investments at a much riskier time sell to us by way of listing and hence raise money to start another company on its journey. We then own part of the company and provide liquidity for other buyers and sellers to join or leave the party when they wish. Part of the food chain but parasites? definitely not.

Steve Hill

Hi Chris
Taptica offers a service that allows advertising companies to maxamise the traffic to their clients web sites for the minimum cost by looking at the sites users have previously visited & displaying the advert that the user is most likely to click on & thereby maximising click through rates.
You have probably experienced this while browsing the internet.
Therefore end-users would not review the service as they do not know which company is responsible for the targeted advertising.
An ad agency is very unlikely to leave a review of a great service that maximises click through rates & saves their clients money as that is a competitive advantage that they do not want to tell their competitors about.
Their revenues & profits are growing very nicely, they have cash in the bank are accredited by some of the largest companies in the world & count others as their customers.
The foreign base will mean their share price will be discounted, however this hasn't stopped it increasing by 400%+ this year.
I can understand the intangible nature of what they do can put some investors off, but I'm sure Facebook & Twitter seemed like foreign based companies offering an intangible service once & I would call them proper companies now.
I think Finncaps broker note today did a reasonable job of trying to educate investors to exactly what they do & I would imagine that was one of the reasons they have been employed by Taptica i.e. educate investors & hopefully increase their share price to what they believe is a fairer PE.
It'll be interesting to see if they succeed.

Nick Entwisle

I have quite strong views on the 'ethics' behind superyachts. My Uncle (with whom I share the same name) was one of the original directors at Pinmar, before it became part of GYG so I know a fair amount about this company. I remember telling my Uncle once when I was quite young that I thought those who bought superyachts were horribly greedy people. I've never forgotten his response.

"if a wealthy person buys a Picasso, no one other than the auctioneers benefits. that is greedy. do you realise how many jobs are created when Abramovic orders a new boat? literally hundreds of people - if not thousands - of people get work; materials producers( e.g. for glass, steel, plastics etc) carpenters, painters, interior designers, technology companies, florists, boat crew, security (ex military), yacht insurers, catering..the list goes on and on".

It changed my opinion forever. These superyachts need servicing every year - and whenever they do, the amount of jobs it creates for people should not be underestimated.

purpleski

6th Jul '17

Hi Ken

I couldn't agree more.

KR

Michael

PS my super yacht sales nicely around my hot bath. :-)

Trident

Helicopters, superyachts, supercars... apparently the first happiest day is when you buy them, and the second is when you sell them...

8th Jul '17

I had to sell it to pay my tax bill

SAMs grandad. I agree with everything you say and I said the same when I was challenged and called a parasite many years ago. But it did make me think about my role in life. Nick put it far better in post 17. We as investors do have a purpose but to deride the holders of wealth that we are, in part, responsible for creating seems hypocritical. Plus we had enough of that in the last election. Ok I am out of order for this site so I will stop and desist.
Regards ken

Ken, I for one valued your opinion which you put very well with just the one point I disagreed on. I certainly don't want to silence different points of view and I hope you don't mean to stop posting completely. This line of your post was very true "Only the rich can help the poor and do in many ways, if you have nothing then you have nothing to give". My super yacht by the way was a 16foot racing dinghy until advancing years made it too difficult to turn it the right way up, I don't begrudge those with bigger ones, they can't take it with them and splashing it about is better than burying it. Better to follow Buffett and Gates down the philanthropy route though i think.
All the best.

9th Jul '17

International 14 single wire Derwent Reservoir, a very long time ago.

Small Cap Value Report (Wed 5 Jul 2017) - TAP, TPT, GYG, LAKE

Taptica International (LON:TAP)

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Paul Scott

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