Small Cap Value Report (Wed 6 Dec 2017) - Bitcoin, IGE, EZH PLA, RHL, NUM, MAI

Tuesday, Dec 05 2017 by
74

Good morning! It's Paul here.

I have to complete this report much earlier than usual today, because I'm heading up to London for a lunchtime meeting with the Directors of Vianet (LON:VNET)

Please note that I finished yesterday's report in the evening, so it now covers: Vianet, FreeAgent, Character, Fulcrum Utility Services, and PCI-PAL. Here is the link to yesterday's completed report.



Bitcoin

Firstly, as it's a quiet day for interesting news, I have to comment on Bitcoin - surely the hottest topic in the financial world at the moment. People ask me if it's a currency, or a speculative bubble? Actually, I think it's both!

Currency? - as a friend pointed out to me recently, literally anything can become a currency if enough people decide to use it as a currency. If enough of us decide to use seashells as a currency, then seashells become a currency!

Bitcoin does seem to be gaining traction as an acceptable currency, although it's still very much on the margins as a niche thing. Also, I think a lot of the press articles about so and so accepting bitcoin, look like publicity stunts.

Why would anyone use Bitcoin? Possibly for experimental reasons, but mainly I think it seems to be a mechanism to by-pass the conventional financial system. Hence it is apparently the currency of choice for criminals, drug dealers, etc, seeking to launder their money. It may be the case that many, even most bitcoin transactions are legitimate. However, just using common sense suggests that a main motivating factor to use bitcoin is to bypass laws & regulations. Apparently it's popular in China as a way of hiving off money overseas, thus avoiding exchange controls.

This to me seems the obvious catalyst for bitcoin's eventual, inevitable collapse - that Governments are likely to ban, or regulate its use. It seems almost ridiculous to expect Governments to sit back and do nothing, whilst their control over the financial system slips away.

Only last week the UK Government announced that it was intending to regulate use of bitcoin. The UK might be insignificant overall to bitcoin, but it can only be a matter of time before big Asian economies like China and Japan also introduce regulation or outright bans on the use of bitcoin. The Chinese shut down a bitcoin…

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:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


Do you like this Post?
Yes
No
74 thumbs up
0 thumbs down
Share this post with friends



Image Scan Holdings plc is a United Kingdom-based company, which designs, manufactures and supplies portable and fixed x-ray security screening systems to governments, security organizations and law enforcement agencies. The Company also supplies non-destructive inspection systems to manufacturers of automotive emissions control systems. Its security products portfolio consists of portable systems, including FlatScan2-TPXi and FlatScan2-15, which offer real-time digital x-ray screening; conveyor systems, including AXIS-64 and AXIS-3D; vehicle screening, including SVXi and FlatScan Systems, and mail screening, including MailScan cabinet systems and AXIS conveyored systems. The Company offers industrial products under categories, such as production line systems, laboratory systems, portable systems, large item screening, x-ray components and bespoke systems. Its industrial products include MDXi, which is a cabinet x-ray system, and X-Line, which is a conveyed x-ray system. more »

LSE Price
8.38p
Change
9.8%
Mkt Cap (£m)
11.4
P/E (fwd)
20.0
Yield (fwd)
n/a

easyHotel plc is a United Kingdom-based owner, developer, operator and franchisor of branded hotels. The Company operates through two segments: Owned properties and Franchising. The Owned properties segment is involved in hotel operations carried out in the Company's owned hotels and properties. The Franchising segment includes its franchise hotel operations in connection with the license of the Company's brand name. The Company's owned hotels consist of approximately 390 rooms and has franchised approximately 20 hotels with over 1,490 rooms. The Company's owned hotels include Old Street (London), Glasgow and Croydon. Its franchise locations include Bulgaria (Sofia), Czech Republic (Prague), Germany (Berlin, Frankfurt), Hungary (Budapest), the Netherlands (Amsterdam, Rotterdam and The Hague), Switzerland (Basel, Zurich), the United Arab Emirates (Dubai) and the United Kingdom (Edinburgh, London Central and Heathrow, and Luton). The Company's subsidiary is easyHotel UK Limited. more »

LSE Price
116p
Change
 
Mkt Cap (£m)
116.6
P/E (fwd)
118.2
Yield (fwd)
0.3

Plastics Capital plc is a holding company. The Company is principally engaged in the manufacture of plastic products focused on products for various markets exporting to over 80 countries across the world. Its segments include Industrial, which consists of hydraulic hose consumables, packaging consumables and plastic rotating parts, and Films, which includes high strength film packaging. Its operations are based on the six operating businesses: BNL (UK) Limited, which makes plastics rotating parts; Palagan Limited, which makes high strength film packaging; C&T Matrix Limited, which makes the packaging consumable of creasing matrix; Bell Plastics Limited, which makes hydraulic hose consumables; Beijing Higher Shengli Printing Science and Technology Co Ltd, which also makes creasing matrix, and Flexipol Packaging Limited, which makes high strength film packaging and bags. It has over five factories in the United Kingdom, approximately two in China and over one in Thailand more »

LSE Price
119p
Change
 
Mkt Cap (£m)
46.4
P/E (fwd)
9.6
Yield (fwd)
1.7



  Is Image Scan Holdings fundamentally strong or weak? Find out More »


67 Comments on this Article show/hide all

smatthews1 Wed 2:58pm 47 of 67
2

In reply to Edinburgh Investor, post #23

An interesting question, initially I thought it wouldn't have a very big knock on effect to the market in general as it isn't directly tied to anything other than the spreadbetting providers. However it is tied to most currency's anyway, which leaves me pondering your original question (I am hoping somebody can help me answer this as well!?)

Thanks
Sean

| Link | Share
shauniekent Wed 3:50pm 48 of 67

I’m very bullish bitcoin. That said – I currently own none. It seems that many sensible and successful investors simply don’t understand the bull case. This isn’t a blanket argument against criticism of bitcoin – it’s simply stating that many of the arguments against bitcoin I see seem to be from people who don’t understand it. By all means criticise the current mania, but please argue from a point of understanding first.

Couple of quick rebuttals to Paul's points:

Currency - Euros, dollars and pounds are all used by criminals, bitcoin is no different.
Governments can try and ban but how would that work – I can’t see a global agreement between all major countries of the world to work in unison to ban. Also, imagine the outcry if governments tried to ban say, gold? But regulation…that is a good thing. Regulation means growing use, awareness and adoption of a technology – in this case Bitcoin. It’s no longer confined to the geeks – its moving closer to mainstream.

The point that’s missed here is actually that people are using and buying bitcoin as it’s better at being money, then traditional money. Think about that. It’s money taken to the next step improved using technology.


Blockchain technology – Bitcoin is the first ever inimitable digital asset. Think about this – the first ever digital asset that cannot be copied or duplicated. That’s why some people call it digital gold. Think about this as a useful and inherently trustworthy unit of exchange. I’d argue this has enormous intrinsic value.

The price of Bitcoin in Zimbabwe was at a premium to the prevailing rest of world price recently too – people couldn’t get enough Bitcoin. I agree people do switch to US Dollars in a crisis -but they haven’t always. What would people have sought beyond the last 100 years of human history? Did I mention bitcoin fulfils the properties of money better than US dollars

| Link | Share | 1 reply
shauniekent Wed 3:52pm 49 of 67
1

In reply to shauniekent, post #48

(part 2 of my comment)
Volatility – bitcoin has been volatile but that’s looking in the rear mirror. Can we imagine a price in the future which the market decides is fair value and volatility reduces?

Proliferation – Bitcoin in terms of development effort, computing power and community is so far ahead of any other crypto currency. It is a little like comparing Google to….. I don’t know ‘Ask Jeeves’. I’m sure they both did well in the dot com boom, but only one was ever worth owning.

Speculation – I agree Bitcoin has all the hallmarks of a bubble.

In summary, I totally understand people’s scepticism. It looks and feels like a bubble. But I really believe there is a bright future for Bitcoin as the first and best cryptocurrency in existence. It has a huge first mover and network advantage. It fulfils the ‘properties’ of money brilliantly.
It may crash from these prices, it may not, but I am a strong believer that Bitcoin is here to stay, it will only grow in adoption and awareness which ultimately is positive for a higher price. Don’t forget those people who quite earnestly and honestly argued in the 1980’s that the internet was of no use and wouldn’t amount to anything. For what it’s worth, I think Bitcoin and certainly the surviving crypto currencies are here to stay.

| Link | Share | 1 reply
Carey Blunt Wed 3:58pm 50 of 67

In reply to shauniekent, post #49

Great post, the point about Bitcoin being better at being money than existing currency is is a really important point. Thats why we don't use Seashells.

We are still making Simoan grumpy though by not posting in the seperate thread, feel free to repeat your post there if you can be bothered to!

| Link | Share
simoan Wed 4:01pm 51 of 67
4

In reply to Carey Blunt, post #43

Which is why we moved it to another thread.... https://www.stockopedia.com/content/the-bitcoin-and-blockchain-thread-pure-hype-vs-investment-opportunity-250178/ 

Great, thanks. You can all fill your boots on that thread safe in the knowledge I will not be reading! 

On Numis (LON:NUM). I guess it is one of lifes great ironies that a £327m market cap brokerage firm does not have any broker forecasts... Is that for real?

All the best, Si

| Link | Share | 2 replies
JamesrWilson1989 Wed 4:23pm 52 of 67
1

In reply to simoan, post #51

Doesn't strike me as odd:

- I'll assume they can't be a broker for themselves.
- The other brokers are their competitors - If they use another firm - arent they giving that company free advertising for their customers?

| Link | Share | 1 reply
simoan Wed 4:48pm 53 of 67
2

In reply to JamesrWilson1989, post #52

Doesn't strike me as odd:

Sorry, I thought I said it's ironic, not necessarily odd.  

Talking of odd things I see Walker Greenbank (LON:WGB) have had another mishap: https://www.investegate.co.uk/...  I bet their insurance broker are getting  fed up receiving claims forms from them!

All the best, Si

| Link | Share
fwyburd Wed 5:17pm 54 of 67
8

In reply to pbiom1, post #27

Re: IQE (LON:IQE)
I think it's alarming that one of their customers has sourced wafers from a different supplier because IGE didn't have enough capacity. This indicates that they might not be as unique as they suggest doesn't it?

Perhaps that's why the shorters increased again two days ago?https://shorttracker.co.uk/company/GB0009619924/

(I was long)
Francis

| Link | Share | 2 replies
tomps3 Wed 5:18pm 55 of 67
5

1pm (LON:OPM) gave a trading update today, here's an interview with Ian Smith CEO embellishing the RNS.

http://www.piworld.co.uk/2017/12/06/1pm-opm-h1-trading-update-december-2017/

c. 8mins

What can we expect with the interim results? – 00:21
Based on broker forecasts it looks like results are H2 weighted, is that the case? – 01:17
Can you explain the exceptional items – 01:48
Can you tell us more about the organic growth? – 02:23
How’s the integration of the acquisitions going? – 03:32
Are any of the divisions out performing? – 04:38
Are you concerned about interest rate rises? – 05:18
The new funding facility – 05:50
Can you tell us more about the use of FinTech – 06:36
What’s the outlook for 1pm going forward – 07:37

| Link | Share
Wimbledonsprinter Wed 6:08pm 56 of 67
2

In reply to simoan, post #51

Simoan. Another irony, as you mention in another post, you need to have a view on the equity issuance market for 2018 and beyond to invest in Numis (LON:NUM). But in its outlook statement, even Numis says “we cannot predict the direction of the market or the health of th equity issuance environment”. If they can’t who can? And I bet they don’t say that to their clients.

On a more serious point, while the future may be murky, the income statement etc numbers are super clean. No “adjusted” income lines. (i hold).

| Link | Share | 1 reply
Gromley Wed 7:06pm 57 of 67
7

In reply to fwyburd, post #54

Re: IQE (LON:IQE)
I think it's alarming that one of their customers [Lumentum] has sourced wafers from a different supplier [Epistar] because IGE didn't have enough capacity. This indicates that they might not be as unique as they suggest doesn't it?

Francis,

First off there is some debate about whether the story is actually true (Analysts at Stifel cast doubt on it  Quoted on Alphaville (scroll down to 11:57)

Bryce Elder at FT fanned the flames of this last week by citing "concerns" IQE may  lose the whole Apple deal - he cannot name anyone that actually had those concerns, but credit to him for somewhat correcting the situation by publishing the fuller Stifel response in the link above.

IQE had stated previously (November) that there were going to outsource some VCSEL wafer production to Epistar and that is most likely (imho) what this somewhat dubious story is actually about.

Even if the story has some veracity, then the backdrop is essentially  that demand for these wafers is so high that even running at full (current) capacity cannot keep up with current demand (and this is one customer - Apple - and one application).

I don't think that anyone believed that IQE are the only company capable of making these wafers ever, but (although I don't have the industry knowledge to test the view) there is a view that IQE are significantly ahead of the game in terms of quality & efficiency (and therefore cost).

My own discomfort comes from not being able to personally verify the extent of their market leadership (although I suspect with enough research maybe I could), but for me at the moment I am content to rely on the secondary evidence given what I see as the risk:reward balance.

There is a trading statement due from IQE in the next 3 weeks (potentially as early as next Tuesday) and I'd expect IQE will probably address some of the questions in that.

As to the slightly more medium term concern raised by pbiom1 of course, if you are a supplier to Apple (even one step removed as IQE are) there is a risk that they may "in-house" your activity at some point (  £IMG  is no doubt front and centre of people's minds) but I have three major thoughts on this :

1. The article pbiom1links to is not talking about the component that IQE support.

2. IQE provide the base component that another supplier use to provide components to Apple, how far do Apple's in-housing ambitions actually spread? Is now the time to short Silicon miners?

3. Apple are a big beast, no doubt, but there are other applications for IQE's product (going beyond obvious competitors to Apple) and whilst Apple is likely to be the IQE story for the next year or so, there is  a pretty decent chance that other significant stories will overtake this.

So personally I am not "alarmed" at all by the possible story of Epistar etc. but I do understand why it makes / made people nervous.

And in fact the "good news" (for me as I'm playing with some short term "sentiment trades" and possibly for you as someone who "was long") is that if you unravel the reason for the recent price fall in this way (and of course believe what I have written) then there is another opportunity to buy at "bargain prices". I know that sounds rampy, hence the quotes.

I don't wish to steer anyone in either direction on what could be a risky trade, but it does seem pretty clear to me that the last few days price action are a classic case of how the market can respond to "fake news".

Of course on the other hand you have to consider whether the massive rise in shareprice of IQE over the last couple of years is just a BIGGER fake news story.

As they say : you pays your money you takes your choice - I've done that, but with precautions.

Disclaimer : Long IQE (no really!!) in fact now my 3rd largest position.









| Link | Share
FREng Wed 7:45pm 58 of 67

There's a free lecture on "Will Bitcoin and the Blockchain change the way we live and work" at Gresham College (Museum of London, 6pm on 9 Jan, no booking required). Details here: https://www.gresham.ac.uk/lectures-and-events/will-bitcoin-and-the-block-chain-change-the-way-we-live-and-work. It will also be live streamed on the Gresham College Facebook page.

| Link | Share
Paul Scott Wed 9:19pm 59 of 67
6

In reply to fwyburd, post #54

Re: IQE (LON:IQE)
I think it's alarming that one of their customers has sourced wafers from a different supplier because IGE didn't have enough capacity. This indicates that they might not be as unique as they suggest doesn't it? 

Perhaps that's why the shorters increased again two days ago?https://shorttracker.co.uk/company/GB0009619924/

(I was long)
Francis


Yes, I had similar thoughts, so decided to bank my profits on IQE, and move on.

PP.

| Link | Share | 1 reply
Modform Wed 9:39pm 60 of 67

Ramridge, FYI I have a small holding in BTL but VELA has almost 3% stake in BTL in shares and warrants and is UK listed, no advice is intended.

| Link | Share | 1 reply
abtan Wed 11:35pm 61 of 67
2

Genuinely interesting thoughts on "currency" and its "legitimacy".

To add to those comments, and for anyone interested, there is an organisation called Positive Money, who are trying to educate people on how money is created. Here's a quotation that may interest some:

"The money that banks create isn’t the paper money that bears the logo of the government-owned Bank of England. It’s the electronic deposit money that flashes up on the screen when you check your balance at an ATM. Right now, this money (bank deposits) makes up over 97% of all the money in the economy. Only 3% of money is still in that old-fashioned form of cash that you can touch."

Some might also find the video at the top of the link below informative:
http://positivemoney.org/how-money-works/how-banks-create-money/

Finally here is a short highlights video of when the issue of money creation was debated in parliament a few years ago, which I personally found fascinating:
https://www.youtube.com/watch?v=s6a_0zJDsr8

Apologies for going off tangent; hopefully some will find the above interesting.

A

| Link | Share
dustyie Thu 1:20am 62 of 67

In reply to Ramridge, post #44

This might interest you, the links below are to a uk stock on block chain technology for diamond exchange
https://cedex.com/ own by techfinancials watch the youtube clip

https://www.stockopedia.com/content/tech-a-micro-cap-super-stock-now-in-profit-trading-with-brokers-across-the-world-249703/

personally I think the hackers will undermine bitcoin ,eventually they will succeed

| Link | Share | 1 reply
Ramridge Thu 6:57am 63 of 67

In reply to dustyie, post #62

Thanks dustyie. You will find the first reply in the stockopedia link you have provided has comments from me. :)

| Link | Share
Ramridge Thu 6:58am 64 of 67

In reply to Modform, post #60

Many thanks, Modform. I will follow up your lead.

| Link | Share
simoan Thu 11:18am 65 of 67
1

In reply to Wimbledonsprinter, post #56

Simoan. Another irony, as you mention in another post, you need to have a view on the equity issuance market for 2018 and beyond to invest in Numis (LON:NUM). But in its outlook statement, even Numis says “we cannot predict the direction of the market or the health of th equity issuance environment”. If they can’t who can? And I bet they don’t say that to their clients.

Hi WS,

I'd not read the RNS at the time I posted and had only looked at the StockReport. As you say this makes it doubly ironic - I presume they won't even be giving a broker forecast for their own company then :)

All the best, Si

| Link | Share
pbiom1 Thu 2:15pm 66 of 67

In reply to Paul Scott, post #59

Very interesting insights, thanks to all for responding.

| Link | Share

What's your view on this article? Log In to Comment Now

You can track all @StockoChat comments via Twitter

 Are Image Scan Holdings's fundamentals sound as an investment? Find out More »



About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

Follow



Stock Picking Tutorial Centre

Most Popular Now


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