Member Info for rivaldo

New interview with the CEO, emphasising that INSE with only a 13% market share as the market leader have lots of room for growth in a fragmented market and with many competitors looking for exits on 3-4 times multiples from ageing vendors etc. They expect to do 4-5 acquisitions a year:

Https://www.proactiveinvestors.co.uk/companies/news/902203/inspired-energy-boss-shoots-for-further-market-reach-902203.html

The year end trading statement will be on 5th November. There will also be a big accompanying Capital Markets Day presentation and site visit.

Hopefully the CMD is a further sign alongside all the positive trading statements that things continue to go well:

Https://www.investegate.co.uk/watkin-jones-plc--wjg-/rns/notice-of-capital-markets-day-and-fy-pre-close/201909060700034220L/

KWS set to "skyrocket" according to this given the explosion in 5G:

Https://uk.finance.yahoo.com/news/believe-5g-stocks-set-sky-065202324.html

"Brilliant software

Keywords Studios (LSE: KWS) is a technical service provider to the video game industry and could be a very wise investment when it comes to 5G. The developments 5G will bring include improved network speeds that will increase the appeal of already popular mobile gaming still further. Gaming will be more accessible than ever and Keywords Studios should reap the rewards of this popularity.

Gaming has exploded in recent years with huge technological advances and the rise of gaming ‘influencers’ encouraging more young people to play. This has benefitted Keywords Studios with its value soaring a huge 600% since 2016. Furthermore, the insane popularity of Fortnite helped boost the company’s pre-tax profit last year by 65% — a strong example of the direct correlation the popularity of gaming has on the company.

Keywords Studios’ annual earnings per share have risen a huge 49% for the past three years and I think that this figure could be even more impressive after the launch of 5G."

Big new note out - very encouraging reading:
https://www.hardmanandco.com/wp-content/uploads/2019/09/Surface-Transforms-Rapid-acceleration-%E2%80%93-%E2%80%9Cgame-change%E2%80%9D-announcements-05.09.19.pdf
Summary:

"Rapid acceleration – “game-change” announcements

Surface Transforms manufactures and sells carbon ceramic brake discs. The last three-month period of contract awards since the financial year-end has been transformational in the development of the company. It now has multi-year, multi-
million, recurring income contracts from European-based global OEMs. These will support cash breakeven during 2020, moving to EBITDA-positive (post-tax credit)in fiscal 2021 and profitability in 2022. Long-term contracts collectively bring
lifetime revenues of over £20m. The overwhelming significance is that this follows many years’ client-testing, and this product-endorsement opens the path to order-of-magnitude sales expansion.

Surface Transforms’ potential is clearly set:
.
It is set to win a large share in a carbon ceramic market that is currently worth ca.£150m p.a. Potential is £2bn p.a.
measured against the real competitor – traditional iron discs. This realistic £2bn market equates to ca.4.5m discs, which is near 10% of total European auto sales.

A clear road to transformative growth:
.
Carbon ceramic brakes bring performance and safety benefits and, importantly, weigh less, last longer and (a current big issue for the customers) produce less environmentally-unfriendly brake pad dust. Indeed, they have a number of environmentally-positive attributes, supported by legislation.

Capacity allocation model:
.
Surface Transforms’ current capacity is £17m sales p.a. This gives much scope for expansion, and – typically in new automotive components – as volumes rise, production efficiencies also rise and prices fall, expanding market demand further.

Risks:
.
Surface Transforms has invested ahead of these firm orders, and so is well ahead in terms of capital investment. These contracts benefit from set pricing and highly predicable timings of off-take, with the start of production date set. Only
one competitor exists, and no more are envisaged for many years.

Investment case:
.
This is a large, growing market, 99%-supplied by one, highly-profitable player. This single supply was a most anomalous position for an auto OEM market – now Surface Transforms also supplies. June/July contract wins de-risk the business, and both open and expand the target market. The path to Surface Transforms’ discs being designed-in to many more models is clear."

Looks like Shore Capital are impressed too:
Https://www.sharecast.com/news/aim-bulletin/inspired-energy-profit-rockets-after-corporate-division-revenues-leap--6990730.html
Extract:

"Analysts from Shore Capital said the "impressive" interim results confirmed the strength of client service provided by Inspired Energy and lent credence to its strategy of controlled organic development and disciplined acquisition activity."

LordofBurnley, I'm happy to wait and collect the dividends until the market realises that INSE are largely Brexit-proof, recession-proof and a nice safe haven in these markets as well as able to ride on the wave of environmentalism/energy efficiency etc.

We already know that H1 results will be in line with forecast 12.6c EPS for the year.

This report from the business aviation sector in the U.S., Canada and the Caribbean is interesting. We already know that overall the sector was mixed in H1, but it's good to see that GMAA were the market leaders, and business is expected to improve markedly in H2:

Https://www.ainonline.com/aviation-news/business-aviation/2019-08-26/argus-sees-ops-growth-after-mixed-first-half

"Gama Aviation Signature logged the most hours of the 135 carriers in the first half at 42,020, which was down from the 43,974 in the first half of 2018. The next closest in terms of flight hours was Executive Jet Management at 31,053 hours, followed by XOJet (23,209), Delta Private Jets (20,314), and Solairus Aviation (15,581).

Argus anticipates that business aviation will be up 2 percent year-over-year in the second half, with September and December expected to bring the strongest gains in this period. Argus forecasts a 4.6 percent increase in September and 3.3 percent in December. Bolstering this is that returns for July surpassed initial expectations of a 1 percent rise; it actually logged a 2.4 percent increase."

Someone was keen yesterday afternoon - 125,000 shares were bought in five 25k tranches in 20 minutes. And the 25k buyer is still going - another buy just now at 25.7p has moved the bid price up nicely.

INSE get a nice feature in the Times today, with Peel Hunt noting that the H1 results were ahead of expectations:

Https://www.thetimes.co.uk/edition/business/public-spending-fears-take-shine-off-kainos-group-0lx8nzpp6

"Energy adviser’s inspired choice

Shares in Inspired Energy rose 5 per cent as the energy consultancy and brokerage reported improved first-half results. Revenues rose 22 per cent to £21.6 million while pre-tax profits were up 55 per cent at £3.2 million, aided by the acquisition of Inprova Finance, an energy procurement company.

Inspired Energy, officially a third-party intermediary for the utilities sector, is based in Kirkham in Lancashire and listed on Aim in 2011.

It negotiates gas, electricity and water contracts and offers advice on energy use. It has been expanding and last month said it was buying 40 per cent of Ignite Energy, which offers management services.

Mark Dickinson, chief executive, said: “Concluding 2018 with the Inprova acquisition was a significant strategic milestone for the group.”

Inspired Energy said its order book had increased to £55.4 million as of the end of June, from £53 million at the end of December.

The broker Peel Hunt said the results were slightly better than expected. The company had “a number of new notable blue-chip wins” and clients were diversified, ranging from Nandos to KPMG. The shares closed up ¾p at 15¾p."

....and moving up nicely now. On healthy volumes too.

I've reluctantly sold, concluding today. The commercial construction data yesterday was absolutely awful:

Https://www.constructionnews.co.uk/data/new-construction-orders-lowest-since-2009-03-09-2019/

CTO is a very, very well-run, high quality company. But in the current climate, even if CTO manages to maintain its order book, I can only see investor sentiment towards the sector and the company worsening, despite the (currently) very low P/E. In which case there's limited if any upside, whereas the downside could yet again be back to 80p-85p or so.

It's also nice to have more cash in the bank in reserve given all the market shenanigans at present!

Good luck all. I may well be wrong/back soon!

Currently I can only buy a maximum 15k at 23.96p, whilst I an sell 75k at a good premium at 22.65p.

Peel Hunt reiterate their Buy and 25p target after today's results:
Https://investing.thisismoney.co.uk/broker-views/

I assume their forecasts are unchanged. As a reminder, these were:
this year: 1.85p EPS, 0.71p dividend
next year: 2.01p EPS, 0.8p dividend

At 16.5p that's a forward P/E of 8.2 and a 4.8% divi yield. Much too cheap imho.

Good, strong results and a very confident outlook.

And the announcement of another acquisition for £0.5m cash - Waterwatch UK Limited, accelerating the Group's Optimisation Services division's growth.

The main point is that the Corporate Order Book looks very good at over £55m, giving security and visibility going forward.

Underlying cash flows improved nicely, but understandably given the M&A there were a number of exceptionals.

With 0.84p basic EPS for H1 I'd have thought the forecast of 1.85p EPS for the year is perfectly achievable given the integration of the acquisitions etc.

The outlook is extremely bullish - and there may be more acquisitions on the cards:

"Outlook

Our excellent performance in the first half of 2019, underpinned by strong organic growth, provides a strong operational and financial platform for the full year. The Group is well placed to deliver another set of record results, as we continue to benefit from further organic growth and contribution from the 2018 and 2019 acquisitions.

The Group's established acquisition strategy has delivered strong results, as demonstrated by the success achieved from the value enhancing acquisitions made in 2018, and 2019 year to date. In addition to our continued focus on delivering organic growth, we continue to evaluate varied acquisition opportunities in the sector which provides an attractive opportunity for market consolidation."

"With the antipodean country having suffered one of its worst heatwaves at the start of this year, that doesn't seem like an inaccurate assessment.

Mottech has also gained a foothold in the Chinese market, inking a $3million deal that was its largest contract to date.

The group believes the People's Republic has the potential to become Mottech's biggest market over the coming years.

Following the group's results for its first half, the market is currently expecting that the group to deliver an adjusted pre-tax profit of around £3.6million for 2019, a year-on-year increase of 36 per cent, which will then rise to about £4.2million in 2020.

With a cash balance estimated to be £5.2million in 2019 and £5.9million in 2020, this could support progressive increases of the dividend.

MTI's shares are seen as having a fair value of around 38p, around 65 per cent higher than the shares close price of 23p on August 30.

These estimates may change, however, as Borovitz has hinted that results for the full-year could beat current expectations.

He cites the recent weakness of sterling against the company's reporting currency, US dollars, as 'it will likely increase the profitability relative to the UK pound'.

The weaker pound has also put the firm's dividend yield at an attractive 7.5 per cent for 2019 and 9.3 per cent on current projections for 2020.

The CEO is also positive about ongoing market tends, with rising global demand for broadband internet, increasing national defence budgets and the need for water management solutions all serving to fuel opportunities for its three markets.

'We are very positive about the outlook for the business', Borovitz said."

Https://www.thisismoney.co.uk/money/markets/article-7422805/Small-cap-ideas-MTI-Wireless-Edge-positions-forefront-5G-upsurge.html

"SMALL CAP IDEAS: MTI Wireless Edge positions itself at forefront of 5G upsurge

MTI Wireless Edge is looking well placed to benefit from the latest revolution in 5G internet.

Most people's smartphones have access to a 4G mobile internet connection, a development that has allowed you to use apps such as Spotify and browse the web on your phone without needing a WiFi connection.

5G is the next stage of development.

It is expected to be multiple times faster than its predecessors, with download speeds of over 1 gigabit per second (1Gbps) soon to be the norm.

By comparison, the maximum download speed of 4G is around 150 megabits per second (Mbps), meaning 5G will be at least six times faster.

All of this is good news for MTI, which in its first-half results in August said it was seeing 'substantial demand' for a new range of 5G antennas it is currently developing.

MTI's bread and butter are high-quality antennas for the commercial and military markets.

The group also develops equipment for radio-frequency identification (RFID), a technology that can automatically identify and track tags attached to objects.

RFID technology can be attached to cash, clothing and other possession to keep track of its location, with the market itself predicted to be worth $13.2billion by 2020 compared to $8.8billion in 2013.

5G, meanwhile, is predicted to have a massive impact on the infrastructure for the next generation of communications technology, with some reports estimating that by 2026 the market could be worth as much as $3.4trillion, with MTI aiming to take its own slice of the pie.

Another strand of MTI's business is its distribution and consulting arm, where contracts have included integrating radio frequency and microwave technology into weather balloons and border control systems.

So far this year the group has seen plenty of success, with a 67 per cent surge in pre-tax profits to $1.4million for its first half while revenues also climbed 12 per cent to $19.1million.

MTI's chief executive, Moni Borovitz, said that the company was also 'converting this growth into operating cash flow', with management 'very positive' in its outlook for the business.

And the company's investors have seen benefits emerge recently, with MTI's shares having risen around 12 per cent in the last six months.

The group also has a subsidiary, Mottech, which provides water management solutions for agricultural irrigation.

While it isn't the main focus of the firm, MTI has made moves this year to shore up the Mottech business, buying a 50 per cent stake in 'value added' Mottech reseller Parkland Australia for around £440,000 in June.

At the time, MTI said the purchase would increase recurring revenue from Mottech, with the firm expecting demand for its services in Australia to expand."

It's not true that interested parties stake will build up to 3% prior to any bid - a number of my stocks have been taken over recently with the share price having shown absolutely no sign of prior buying (PTSG, EUSP, SND, SCH were all holdings of mine).

I think the Board have concluded that with the hiatus in growth whilst they integrate the various platforms, and with the pound at such an attractive level for buyers in terms of UK takeovers, they figure that this might be an advantageous time for disappointed shareholders to profit following the decline from 3000p. It's possible they've come under some pressure from their shareholder base, which after all is these days almost entirely institutional.

I still believe a takeover price will be at 1750p-2000p per share at minimum. There must be a large number of potential acquirors, and most of those are large enough to have very substantial pockets indeed.

And almost all of them will be based abroad, so will be particularly incentivised to buy at current exchange rates.

A company like ACSO with such high recurring income and earnings, and blue sky potential in a number of areas, must be a very attractive target. The short-term earnings blip due to increased investment shouldn't be of concern to them since (1) by the time the acquisition completes much of it will already have taken place, and (2) it only increases the medium/long-term attractiveness of the company. With a bidding war the price may even return to 3000p.

Interesting article from last week with comment from Peel Hunt:

https://www.proactiveinvestors.co.uk/companies/news/217440/accesso-technology-on-track-to-meet-full-year-target-after-strong-start-to-the-year-217440.html
Extract:
"Following accesso’s announcement about putting itself up for sale, Peel Hunt repeated a ‘buy’ rating and raised its target price to 1,435p from 1,145p.

Peel Hunt said the sharp rise in the share price after the news showed “investors feelings about its true value”.“It removed most of the negatives discount on it and hit our previous price target,” it said.

“For us, the true value of accesso is in the potential it has once it goes through its current re-platforming. “Cross sell will be much easier and already being cried out for by the likes of Merlin.
'
First step: solve this issue. We believe the market now sees that value, hence we increase our target price to 1435p (3.5x CY20 sales).

“Second step: realise that the eventual buyer could in fact create the company we thought it was and envisioned it to be when we initiated back in Mar 2018 at 3,100p.”

...and Canada is thriving too:

Https://obj.ca/techopia-ottawa-snowed-in-studios-doubles-headcount

Extracts:

"Ottawa’s Snowed In Studios doubles headcount one year after acquisition

A year after his company was acquired, Jean-Sylvain Sormany’s studio has doubled its headcount – and his biggest problem is that it’s not growing fast enough.

Snowed In Studios, an Ottawa-based game development studio founded by Sormany and his partners more than a decade ago, was acquired last year by Irish gaming giant Keywords Studios in a $4-million deal. At the time, the local firm had just under 30 employees to its name; today it’s nearing a headcount of 60.

Having access to Keywords’ network – the billion-dollar company has worked with nearly every major gaming studio around the world – has meant a flood of business opportunities for Snowed In, which became the larger firm’s engineering division in Canada. Sormany says Snowed In is fielding multimillion-dollar contract offers every month – but he hasn’t been able to take on as many as he would like...

....He says he expects his studio will hit 85 employees by the end of the year, with another 40 to come in 2020. Sormany says Snowed In should hit “maturity” with a couple hundred employees in a few years’ time."

New article noting RNWH as a stock which should thrive even after a no-deal Brexit:

Https://www.ii.co.uk/analysis-commentary/these-small-caps-could-thrive-after-brexit-ii509083

"I recently wrote about engineering services provider Renew Holdings (LSE:RNWH), pointing out that it generates most of its revenues from regular, ongoing maintenance spending in sectors such as water, rail and nuclear.

This spending will need to continue, whereas larger projects, such as HS2, could be stopped or delayed after Brexit. The Renew share price has drifted down to 389p since the previous article, so the shares are trading on less than 10 times prospective earnings."

Nice feature on Citywire this morning re Octopus' stake increase:

Https://citywire.co.uk/funds-insider/news/five-shares-the-pros-are-buying-and-selling/a1263568?ref=citywire-money-latest-news-list#i=4

"IG Design (IGRI)

Who’s trading? Citywire AAA-rated Richard Power

The trade: Octopus’ micro-cap expert upped his stake in in greeting card and gift wrap maker IG Design Group from 9.2% of the shares to just over 10% worth £46 million at a share price of 589p

How have the shares performed? The stock is 146% higher over the last three years and is just off an all-time record high of 620p.

What does the company say? Power has rapidly upped his exposure as the share price has climbed this year, as an ambitious foray into North America created the world’s largest gift wrapping business and helped deliver a 37% increase in revenue. Earnings per share climbed 33% last year.

What’s the outlook? City brokers have rapidly revised their forecasts higher over the last year as overseas acquisitions helped boost organic revenue growth of almost 10%, with the median target price rising from 520p to 740p. Despite the speed of this year’s appreciation that means a further 26% rerating is predicted."