“The rush to supposedly safer investments such as Government bonds has inadvertently created a bubble which could burst and set shares soaring.” Sunday Times
We wish you a prosperous New Year
Although I should be wiser I am chancing my arm by making some Small Cap Share TIPS for 2013 on www.Tradersown.co.uk. Notice of the TIPs date will be given next week.
Last year …
… the AIM All Share improved a pedestrian 3.14%, while the FTSE 100 climbed 11.63% higher, but the gold medal goes to the FTSE 250 which pole-vaulted an Olympian 27.2%. The European instability, UK recession, political uncertainty and lack of funds combined to adversely affect smaller cap companies that are more reliant on domestic growth.
This year …
… growth in the US is forecast at 2%, EU at an average of 0.5%, while UK is expected to continue to bounce along the bottom with GDP up mere 1%. Presently the key drivers of investor’s sentiment are; US Fiscal ruts and EU austerity both not going away and interest rates are likely to remain low. There may be creaks in China’s growth slowing to 8.6% from the usual double digits. We confidently predict Small Caps performance will improve, perhaps helped by increased M&A activity.
Coral Products (CRU) – £6.6m at 15.75p
Packing some Confidence
Injection moulded plastic media and food packaging supplier Coral Products reported a swing from loss to profit in the six months to October 2012. Revenues grew from £8.7m to £9.4m and a loss of £356k was turned into a profit of £480k Media packaging generated 46% of revenues, down from 71%. The main growth came from the food containers, Interpack as the product range continues to be extended following a strategic decision to diversify from the core media range which now accounts for less than 50% of turnover. Costs are being contained and should be reduced as the freehold of its Haydock manufacturing site was acquired for £1.75m which should generate savings of £250k a year. The purchase was financed by a £1.4m loan and £475k placing at 12.5p with MAM who own 9%.Profits for the year end to April 2013 are forecast at £1m for an EPS of 3p giving a prospective P/E of 5.25x.
Net debt was £3.3m at the end of September 2012 and the Directors are comfortable with cash flow and have stated the intention to pay a dividend at the full year, subject to business continuing to meet expectations.
I-Design (IDG) – £3.9m at 27.5p
Falling Ads reduce ROI
Finals to September 2012 from this provider of marketing services to Banks ATM networks showed a 113% increase in operating profits to £215k. Revenues fell by 6.8% to £3.28m due to reduced advertising sales, but this was compensated for, this year by record software licence sales. Joono is the ATM marketing solution software driving profitability, which increased 71% £258k with a 64% improvement in EPS to 1.8p for an historic P/E of 15.3x. Two major software contracts have been signed in the second half with a Canadian Bank and First Data this takes the estate of ATMS to 30,000. joono, broadened the original ATM Ad s by providing a comprehensive solution, handling all aspects of campaign management from booking, scheduling and distribution to feedback and reporting. This allows banks to reach customers more effectively. Joono has been up-graded with increased functionality allowing for a Favourite Transaction option making it a quicker and more personalised interactive experience. The increasing ATM estate seems to validate the core proposition for allowing banks to interact with customer but the fall in the advertising revenue causes a reduction in the banks ROI ( Return On Investment) so is likely to slow the further roll-out. Consequently PBT is forecast to fall back to £0.1k for the September 2013 year-end, but this does not relay on new contracts and gives a prospective P/E of 31.3x.
Net cash stood at £0.75m and Sigma Capital is exiting its venture capital business to refocus on its property activities and have a combined stake of 12.6%.
Nasstar (NASA) – £8.4m at 13.5
Recent share buying has increased the value of loss-making hosted desktop cloud computing services provider. Finals to September 2012 reported a marginal improvement in revenue from £2.26m to £2.39m, while the contribution from the lower margin Hosted Exchange email business fell from £740k to £240k. Losses increased from £140k to £383k partly as cost increased as the services are now hosted across two data centres which widens the market. Organisations can access software packages remotely which can reduce costs, improve flexibility and increase productivity. Awareness of cloud computing among small companies is still growing and Nasstar’s largest customer has a licence for 120 users. Sales are increasing from distribution partners, which slightly reduces gross margin. Late in the financial year Nasstar lost a contract with Allied Healthcare which was acquired by Saga and will slow growth of the current year. Even so, Nasstar hopes to be able to reach its target of 4,000 subscribers by September 2013 so should be profitable in 2014. An increased loss to £430k is being forecast for year-end Sept 2013.
Nasstar raised £880k at 11p a share at the beginning of December. There was net cash of £365k at the end of September 2012 but cash continues to flow out of the business as it is being built up. Nasstar has raised £5.4m since 2005.