Stockopedia StockSlam - July 2018

Monday, Jul 30 2018 by
31

After a very positive response to the very first StockSlam, in June, we decided to squeeze a second event in before everyone left for the summer. So last Thursday a predominantly new crowd assembled in Central London for ten short but interesting pitches. Personally I thought that all of the presenters did an excellent job getting their thoughts across in 5 minutes, or less, before the audience came up with some very sensible questions.

To give everyone who couldn't make it a flavour of the event Keelan Cooper, an intern at Stockopedia, transcribed an audio recording of the event. This is no easy task and I'd like to thank him for turning this around in less than 24 hours. For the sake of brevity I've edited this transcript to bring out the key points for each presentation. If this proves interesting, and perhaps encourages you to consider pitching at the next StockSlam, then I'll consider the effort worthwhile!

Medica (LON:MGP)

  • IT services company in teleradiology where remote radiologists consult on CAT scans, MRI scans and X-rays
  • at night they can turn these around within an hour, typically within 25 minutes. This service, NightHawk, accounts for 50% of revenues
  • daytime service, 1 or 2-day turnaround, accounts for the other 50% of revenues
  • company has only been listed just over a year or so and IPO'd at around 180p
  • profit warning before the final results due to capacity constraints and lower demand
  • risks associated with the NHS, their main/only customer
  • recruiting radiologists is also difficult as you need good people who want to work remotely
  • despite low value and momentum ranks, the company has high quality metrics with ROCE more than 15%, PEG 0.5-0.6 and they are reducing debt using great cash flows
  • recent trading update cause huge spike in the share price as the company confirmed that it would be trading in-line with expectations
  • Q: Who are their competitors and how much market share does the company have? A: The company does reference the competitors in their annual report but do not specify their market share
  • Q: What is the company going to do about recent reviews which have said automated systems reading scans do it better than doctors can? A: The company has said in its reports that they are looking at AI and doing research on that front, to automate some of the scans and not put radiologists out of service but…

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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. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. 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.


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Medica Group PLC is a United Kingdom-based company, which is engaged in the provision of teleradiology services. The Company offers an information technology (IT) platform that provides linkage between a hospital's radiology information system (RIS) and consultant radiologists who contract with the Company. The Company operates through Teleradiology reporting segment. The Company offers three services to hospital radiology departments: NightHawk, Routine cross-sectional (Routine CS) and Routine plain film (Routine PF). The Company's NightHawk service is an out of hours service to hospital emergency departments, offering always on support around the clock. NightHawk provides reporting on Computerized Tomography (CT) scans. Its Routine CS and Routine PF are both designed to assist hospitals in managing their daytime capacity and turnaround times. It provides Teleradiology services to NHS hospitals, private hospital groups and diagnostic imaging businesses. more »

LSE Price
142p
Change
1.4%
Mkt Cap (£m)
157.8
P/E (fwd)
16.7
Yield (fwd)
1.8

Frontier Developments plc is engaged in developing non-game applications and video games for the entertainment sector. The Company's segments include self-published and external publishers. The self-published segment is engaged in sales of the game and digital in-game. The Company has completed work for external publishers, including Screamride and Tales from Deep Space. Its games are developed using its COBRA cross-platform technology, allowing code and resources developed on personal computer (PC) to be compiled and run on XBox360, PS3, iPhone operating system (iOS) and Nintendo WiiU. The Company offers Elite Dangerous game on PC, Mac and Xbox One. The Company is engaged in developing games of the strategy/simulation genre, including RollerCoaster Tycoon 3 for PC and Zoo Tycoon for Xbox. The Company also offers Planet Coaster, its self-published franchise. more »

LSE Price
1115p
Change
-0.9%
Mkt Cap (£m)
432
P/E (fwd)
32.1
Yield (fwd)
n/a

Volta Finance Limited is a closed-ended investment company. The Company's investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis. The assets that the Company may invest in either directly or indirectly include corporate credits; sovereign and quasi-sovereign debt; residential mortgage loans; commercial mortgage loans; automobile loans; student loans; credit card receivables; leases, and debt and equity interests in infrastructure projects. Its approach to investment is through vehicles and arrangements that provide leveraged exposure to portfolios of such underlying assets. The Company concentrates on asset classes, such as collateralized loan obligation (CLO), synthetic corporate credit, cash corporate credit and asset-backed security (ABS). AXA Investment Managers Paris serves as an investment manager to the Company. more »

LSE Price
€7.01
Change
0.1%
Mkt Cap (£m)
226.3
P/E (fwd)
n/a
Yield (fwd)
n/a



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15 Comments on this Article show/hide all

jonthetourist 29th Jul 1 of 15
2

Brilliant. Much appreciated, Damien and Keelan.

Jon

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mrosbiston 30th Jul 2 of 15

thanks for the write-up Damien and Keelan - brilliant event

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Johnny2509 30th Jul 3 of 15

Nice one!

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garbetklb 30th Jul 4 of 15

Thanks a lot - some v interesting commentary. One I hold, another I'm going to take a good look at.
Andy

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mrgrowthvalue 30th Jul 5 of 15

Great event! Thanks all.

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BlueFrew 3rd Aug 6 of 15
2

Thanks for organising a great event. A really good and interesting selection of companies we're presented.

I should correct some fake news. BP actually own 5% of Serica, not 3%. Silly mistake on my part.

Really good deal announced this morning which means Serica Energy (LON:SQZ) will own more of the BK assets they will (hopefully) be buying from BP. I do enjoy paying for things from money we didn't know we had.

It does mean the share price now has further to fall in the (in my opinion) unlikely event the BKR transaction doesn't go through.

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mrosbiston 3rd Aug 7 of 15
1

In reply to post #387849

thanks for the presentation on Serica Energy (LON:SQZ) , after the talk i went and did some of my own research on the name - i concluded it was a significant opportunity and asymmetric risk (50% loss to gain 200-400% potentially) - so i opened a position based on the research.

So thanks very much for bringing this to my (our) attention

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BlueFrew 3rd Aug 8 of 15
2

In reply to post #387889

I'm glad somebody found the presentation useful. Or at least I will be if the BKR deal goes through. :-)

Today's news gives a bit more upside, but doesn't really change the downside. It does show that management is absolutely committed to this deal. They've spent so much time and effort and there is no other game in town for them.

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willhampson 3rd Aug 9 of 15
1

Great read - thanks for providing this. Only minor thing I would flag is that re Frontier Developments (LON:FDEV) Tencent didn't pay £17.70 for its 9% stake last year. Unless I am being a colossal idiot, I thought it was £5.23 they paid. Thanks again!

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BlueFrew 9th Oct 10 of 15
2

Well, it took a little longer than I thought, but I hope all Serica Energy (LON:SQZ) holders enjoy today. I think I will.

https://www.investegate.co.uk/...

I hope nobody sold yesterday, although it looks like some people did. Ouch.

(Long Serica Energy (LON:SQZ) )

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pgs501 10th Oct 11 of 15
1

In reply to post #405704

Hi Blue,

Firstly thank you for highlighting this share to me and the others at the event, and thank you to Stockopedia for arranging it. Following the event I did some further research and bought quite a few Serica Energy (LON:SQZ) shares so yesterday was a good day.

Following reading the update it appears to me that the deal's last major obstacle has now been passed (I do not view the openning of an escrow account for the IOC part as a major hurdle) and the completion date has been agreed as 30 November.

I am at this point confused as to why the share price has not risen significantly more. The PE is forecast at 3 currently and due to the nature of the deal we know that both revenues and profits will increase substantially as Serica's revenue % share increases. How is this share this price?

I am currently on the fence as to whether to add more, am I missing something?

Pete

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BlueFrew 10th Oct 12 of 15
1

In reply to post #406419

Hi Pete,

I'm pleased some people found my spiel useful and have made some money. Personally, I added yesterday when I saw the price action in the morning (the best thing about risk management rules is breaking them). The escrow account setup has been used before. In fact the Government had to change the law last time, to allow it. But there are no such issues this time.

Perhaps people are worried (unduly in my opinion) about the escrow account. Or perhaps they haven't been following the story and don't realise that the transactions are backdated to 1st January meaning they aren't aware just how much cash Serica Energy (LON:SQZ) are due on completion.

Whatever the reason, I think there is still upside from here. Clearly not as much as before. But I do think once the deal completes and the final cash terms are announced then there could be a nice kick up in the share price.

Malcolm

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mrosbiston 10th Oct 13 of 15
2

In reply to post #406419

i don't believe PE is a appropriate measure for Serica Energy (LON:SQZ) due to the finality of the assets - absolute best case for Rhun is 2027, Bruce and Keith have significantly less useful lives, however we would expect significant amounts of cash to be generated in this time.

more appropriate is DCF, which is always difficult to make a valuation due to the sensitivity. The best investment cases i have seen imply as DCF price of between 140p and 200p.

I believe the reason the share price is not around these levels is there is still a bit of future uncertainty due to the license only being extended by 12 months (although this can be increased subject to meeting the terms - e.g no change in operations). There is always going to be a bit of risk as long as the IOC are involved, but every chance the share price creeps up to between 140p and 200p over the next 12 months.

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pgs501 10th Oct 14 of 15

In reply to post #406539

Thank you for adding that mrosbiton, a little dense of me there. May I ask where you found your DCF examples and if they are publicly available?

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mrosbiston 10th Oct 15 of 15
1

In reply to post #406579

posted on the Serica Energy (LON:SQZ) thread last thursday - will repost in full (there are also broker forecasts on research tree)

interesting pitch deck on Serica Energy (LON:SQZ) and outcomes of the OFAC decision (e.g there are alternative plans in place).

the research expects the BK transaction to close in 2018 regardless and outlines the options available in the event of no license.
- use of non-US specialists to run/maintain the rig (thereby not triggering IOC sanctions)
- shutting down the field (Rhum) for 1-3 years
- obtaining a license at some point in 2019 instead

the main risk is the BP have the option to cancel the transaction in the event of no license - the argument against this is how far along the process BP are and committed, through the transfer of employees, opening a new office

https://seekingalpha.com/article/4209579-serica-energy-upside-potential-driven-acquisitions

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About Damian Cannon

Damian Cannon

Ex-rocket scientist, computer programmer, urban cyclist, calmer parenting advocate, high yield investor, yoga apprentice, genealogist and explorer of the outer bounds

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