Member Info for Monty9

The factor that I think is holding back investors' enthusiasm is the amortisation costs that turn excellent EBITDA profits to pre-tax (and post-tax) losses. That is the effect of cash flow that has happened in prior years but capitalised rather than expensed. This is correct treatment but when as material as it is for CNIC I think they should emphasise the amortisation more in the senior management's commentary, so the market has some guidance on its relevance over the next few years. There is an intangible asset of USD 270 million against a market cap of GBP 327 million. I see that in addition to the normal amortisation, impairment of USD 5 million was incurred in the year. Clearly the intangibles and amortisation thereon are higly relevant to this business and I find their continual emphasis on EBITDA irritating - almost as if they don't think amortisation and impairment are real - or wish their investors to think so!

Having said all that I see note 14 states there is an average of 5 years of amortisation left in the 2022 balance sheet. Assuming their subsidiaries hold, or increase, their value over that period the earnings will jump in 5 years time and the market will see it coming well before that (intangibles would have reduced to a relatively trivial amount). I think the investment case demands we believe these intangible values will have a long term life - its not the Daily Mirror! In the meantime we hope to see increasing operational gearing and economies of scale (are they the same thing?)

The latest results may have suffered a slight Peleton effect as consumers can again make choices in a shop as well as on line now. In that scenario their sales performance has been exemplary.

Finally, the initiative to pay a dividend and start a second share buyback indicates strong confidence in the cash flow. These and the simultaneous reduction of net debt suggest the balance sheet will strengthen quickly if they simply rely on generic business growth, even while they return some cash to investors.

It is not a crystal clear situation but for me the risk/reward ration is compelling - I remain a holder.

I doubt there is much cause for concern in the small extension - if it was serious it would be a much more open timescale. I imagine as a new audit, and a technically challenging operation too, the auditors are being very careful to document everything to death.

It is still a bad look though and heightens the management's reputation for over-optimism. They probably can't get to bolshie with KPMG at the moment, but they must be fuming.

Thank you for your analysis BlueRaphus, very helpful and I suspect on the money on most points.

The only one I don't quite buy is your guess at the reason for the CFO's departure. The delay was largely outside the company's control and is far from unusual these days. I can't see that as being the reason; the reputational damage to the company from that will be far worse than the delay itself. Similarly the typos are an embarrassment but smack more of things being done in a rush than a serious problem, certainly not the sacking of a senior officer. Possibly he had not been doing much for the company recently; not warning his colleagues of the possible delay in audit, not having a proof read results document might be symptoms of that. It would still make sense to manage his exit a few months later.

For that reason I worry there might be something more to it. If something does come out with the audit report such as uncertain inventory valuation (I have no inside knowledge at all but this might be a difficult aspect in their trade). If that is the case, it is better that the departure will have happened before whatever the issue is becomes public. That way the market can assess the effect and move on - no further actions needed that might muddy the waters.

Against that I can't see any such revelation making causing much of a knock against the remarkable growth and development reported to date.

Typing errors are embarrassing, indeed, it seems the whole reporting cycle was rather a rush. But these hardly change the result. Indeed, in most cases the corrections improve the figures a tad.

I bought Heiq for the same reason as you, albeit, in retrospect paying too much. But I don't believe 5X too much. I am up for buying some more but suspect there is not great rush.
A similar pattern emerged at Equals, although fintech rather that materials technology. I that case the reports were slightly disappointing but the underlying growth of the quality corporate business was visible. Nevertheless, the market knocked it from 116p to 25p, since when it has recovered in a fairly steady line from Jan 21 to now at 92p. Plenty of time to see the continued progress and market sentiment catching on.
I think Heiq has great potential and, because of the current lack of support, there should be time to see clear operational improvement before the market price increases significantly. In other words, one for the watchlist but probably no rush today.

A number of small cap stocks have jumped recently, mostly due to a combination of being very under-priced together with a lack of liquidity. CRL's market cap is £20M, so very small. However it is a well run company (apart from a recent glitch on a takeover) and has a good foothold in its market. Its product price points should also suit as we move into a recession. The price, even after recent rises is less than half that of a year ago.
My guess is that any serious buying interest has held off - waiting to see how low it would go. Once they feel the bottom has been reached they start to buy, but as the liquidity is so limited, the price soon rises to the point such investors feel it is the right price and they pause. Not too many shareholders who are still in will sell when the price appears to be finally rising, hence the steepness of the rise. Of course it can go back down in the next few weeks if no further buyers emerge; they we await news of continuing improvement at the next set of results.

I am equally non-plussed. I have some suspicion that the market is marking stocks down first thing to see whether there is buying support and if not down it goes for another day. In an illiquid small cap stock, if there is no ready support, this can cause a quite a dramatic fall (or buying opportunity!). A good example of this is Equals that was constantly marked down but eventually made a great recovery.

We don't know what the issue is but for an independent expert to be appointed there may have been a discovery of missing assets; books show an asset but it was not there when physically 'looked for'.
I always thought of Jarvis as extremely well run and efficient. I suppose it is possible that formal controls were not applied sufficiently rigorously - a bit too tough on the overhead.
IMV It is quite likely the issue was discovered by the management and reported to the FCA (hence they became aware!) and the "Skilled Person" (SP) agreed with them (probably a bit less expensive than PWC or KPMG). Clearly no-one will make any formal statements of what occurred until the SP reports. That is why the dividend may be under threat, depending on how much available liquid assets, if any, have been lost. If it turns out to be small, and control is easily implemented, the the FCA will likely allow it on the recommendation of the SP. If the loss is material, perhaps not this time.

For me it is disappointing, but a 40% drop looks too high unless the solvency of the whole business is under question. Even if it requires a new cash injection, there should be value in a business that has been producing such a large return on capital and healthy dividends over the years. But it would be a bad time in the cycle to be looking to refinance.

So I'm sitting tight and awaiting the outcome.

It feels very like Equals (EQLS) a fintech story stock. I bought in 2019 at about 116p as the growth, margin and emphasis on corporate (as opposed to retail) increased. I averaged down at 90p and again at 29p (after a very thorough read through latest annual reports and RNS's!). It has subsequently increased steadly from a low of 25p to 87p now and has almost reached profitability. On a CAGR of 34% (per Stockopedia) such profits can grow rapidly. Against a PE of about 19 in the year to March 22 that looks good value if admittedly not a screaming buy in today's market. In summary great, continuous, growth with a strong margin and operational gearing, which has just reached profitability.

AWE's growth, margins and operational gearing make EQLS look like kiddy time. Of course it is still early stage and not as established. But if you need their tech (and some very big players seem to) where else do you go to get it?

The short interest has almost halved since the start of May to 2.02%. If sentiment does change, or a positive trading update issued, even in this market the upside could be dramatic.

Got to say - impeccable timing!

It was clumsily worded imv; a "short" 1 week delay. The readership don't need to be told how long a week is! It sounds like they protest too much. The fact is that delayed results are normally bad news and in this case we have the added factor of a number of shorts trying for all they are worth to ditch the dirt. Added to which, we are in a bear market for tech stocks. So I am not at all surprised at the reaction although I would expect it to reverse quickly if all is well on 29th and the trading update is positive.

The fact is this will either be a multi-bagger (look at the growth rates and blue chip customer base) or a big disappointment. I am firmly with the bulls on this one. Given the potential growth rates I would also expect the shorts to be keeping a close eye on the exit door.

After an initial tick down to the placing price, I see the quote has largely recovered to the opening price.

I was particularly pleased to see they have introduced an open offer to shareholders, making the holdings of PI holdings rank parri passus with those of the institutions. I suspect this will encourage investor loyalty, certainly I have taken mine up. Bravo - fair play!

Thanks for your insta-analysis Rivaldo, looks on the money to me. This looks to be a well run business with organic growth of c. 20%, and being a small company growing EPS growth rates should continue well above the sales rate. It is also a business well suited to achieving critical mass by further acquisition; management have just demonstrated they are capable of that.

A profitable company, growing earnings at over 20% and a PE already down to 12 for the period to Sept 21 and a balance sheet that should easily support its ambitions. Looks cheap to me, I would expect the historic PE to be more like 20 but we live in strange times.

The 13% fall today looks like a fairly brain dead response to the expected EBITDA falling below forecast by a similar amount. The facts that the expected EBITDA is a remarkable achievement on last year and the positive current trading has been completely left out of the equation.

The very focussed and plausible RNS from DEC in response should, after a few days, lance the boil.

If the company was closed down, what do you think would be the effect on emissions from their assets? Nobody else would touch them. The virtue signalling Bloomberg team presumably want profits to be applied to closing wells faster rather than paying shareholders and managers. Well if that is done the operation will die and we are back to a worse situation.
A thoroughly obnoxious article that will achieve no good from an environmental perspective, the reverse in fact. In the short term it may do more damage to shareholders, of course. Lose, Lose! Thanks a bucket for the gutter journalism.

It had a long upwards ride on the back of tips from a couple of well respected commentators and encouraging results. Recently there has been almost nothing and the price has fallen a little over 20% from its high. A company with a £100M m/cap can easily fall like that from just a lack of interest. Most trades seem very much PI's, possibly getting bored and then worried respectively - it doesn't take a lot for the very small companies to get knocked downwards.
Of course the worry is there is bad news is out there that insiders have, but which that has not trickled down to the PI's. But the lack of large sales suggests not.
At this stage I continue to hold - and if the rate of the drop eases may buy more. The reason I bought was because the strategy looked good, the business had been transformed and the company was now in one of the more profitable areas of the market. At the time I bought I felt there could be 3 to 5 years of outperformance on offer.

It is beginning to look like more than a tip in Master Investor two weeks ago. It is illiquid, but for decades a move of over 15% after a rise in prior sessions has often resulted in a takeover bid or very positive RNS. Sadly in the current climate I suspect the former.

8 million shares sounds a lot but it is just under £150K in cash terms. I don't expect that to do much damage even if Gill is keen to sell.

Well, the valuation looks stretched on normal matric now. However they show mouth watering margins, recent rapid expansion which looks possibly sustainable and the manufacturing capacity to produce up to 10X their current levels (perhaps a tad less, I can't remember the presentation clearly) and of course now the capital to finance it all. The price may be volatile in the short term but it does have the look of a company with a great future.

I hate buying after a 15% rise but only did my research over the weekend. It looks to me to have the potential to multi-bag over the next few years against a limited small downside risk. It has the vibe of Judges Scientific at £6; not as good as £4 but still good!