Voyager RNS Log WC 28/01/2018
As ever, although I may get keen about a stock, what I put into print here is purely me sharing my rambling thought process and NOT INVESTMENT ADVICE to either buy or sell a particular stock.
A fairly short report this week and to be quite honest, that’s rather nice in a way as it makes life so easy and hopefully one can let time and quality tick along together and work their slow magic provided Mr Market is not in a terribly bad mood for weeks or months. I have to say that I am not a great share price watcher and if a stock is not the subject of an RNS, then a week could easily drift by between me looking at prices. Having said that, I always have a sort of alarm for non-noise movement but the serious reactions are usually RNS driven hence my focus on what’s going on with a business rather than what mood the punters are in.
Actually, for clarity in sharing my rambling thoughts, I am adding a key for the colouring of text:
Text in normal black: just my thoughts.
Text in blue italics: direct lifts or copy & paste from the RNS issues by the business.
Text in green: loosely, the investment principles that I feel comfortable with.
So, let’s have a look at any RNS affecting shares within the portfolio:
Well Monday, Tuesday and Wednesday came and went very quietly without any price action RNS for any of the portfolio shares.
Thursday 01/02/2018: Keywords Studios (KWS): Mkt Cap £918m: RNS offering a trading update:
Full year trading update
Strong financial performance- strengthening our market leading position
The Board is pleased to announce that it expects revenues to be not less than EUR150m (FY16: EUR96.6m) and adjusted PBT* of at least EUR22.5m (FY16: EUR14.9m), both of which are comfortably ahead of consensus market expectations. Strong organic growth remains a feature of the Group's performance and this has been supplemented by acquisitions as the Group continues to deliver on its strategy in order to become the "go to" supplier of technical services to the global video games industry. The Group is now comprised of seven globally managed service lines operating from 42 production studios in 20 countries, compared to four service lines operating from five production studios in five countries at the time of our IPO in July 2013.
During the year, we welcomed eleven businesses into the Group across all its existing service lines as well as its newly established Engineering service line. 2017 saw two of the Group's largest acquisitions to date, VMC and Sperasoft, which have further strengthened our service offerings and client penetration and extended our geographic reach and access to talent. Sperasoft enabled our entry into Co-Development, in which multiple services including game programming and art creation are delivered holistically in the game development phase, whilst VMC has bolstered our Engineering capabilities. These significant acquisitions represent yet further steps in the pursuit of our strategy and we are pleased with how smoothly they are being integrated with the rest of the Group.
The Group has invested net cash of EUR89.1m in the acquisitions described above, funded by the Group's strong cash generation, available debt facilities and a successful GBP75m equity placing in October 2017. The placing further demonstrated the support of our existing shareholders as well as enhancing our shareholder base through the addition of a number of new institutional investors. Following these acquisitions, the Group had EUR30.5m in cash at the year end and had utilised EUR18.3m of its EUR35m rolling credit facility, which leaves the Group well placed to complete further selective acquisitions in 2018.
My View: I continue to rather like my favourite Meccano company as it continues to grow both organically and by acquisition. Certainly, I look forward to the final results both this year and next year to get a feel for the year on year appreciation of the financial performance. As mentioned in earlier RNS Voyager notes a few months back I sold some shares in KWS equivalent in value to my cumulative purchases I had made over the past couple of years. The shares having so markedly increased in value means that the holding I still have remains as one of my highest portfolio percentages by retained value of stock. I see no reason to reduce my holding but due to its high valuation in conventional terms, I will keep a close watch on this special situation as if and when the markets turn sour, it could potentially be hit rather hard.
Thursday 01/02/2108: Spectra Systems (SPSY): Mkt Cap: £46m: RNS Trading Update
This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.
Spectra Systems Corporation, a leader in machine-readable high-speed banknote authentication and brand protection technologies, announces that it received confirmation yesterday from its licensee for covert materials supplied to 18 central banks that the royalty component of the licensee's payments will be higher than previously expected for 2017.
As a result, Spectra estimates that its profits for the year ended 31 December 2017 will exceed market expectations.
My View: well like KWS, one of my special situations and I gave the following thoughts on SPSY a couple of reports back in mid-January when they released the good news about Licencing Revenues and Revised expectations: “simply put, how beautiful as the work has been put in, the product delivered and it’s now almost as simple as counting the cash as it arrives from the customer. It’s not a big company and usually, I draw a line about having any more than one investment below a Market cap of £50m as such stocks can be very illiquid when you want to make an exit and sometimes only quote to very small normal market size. However, I really took a like to this one last October and nabbed a few for my special situations portfolio. Incidentally, for those who like the highly regarded Stock Ranks (SR) approach pioneered by Ed Croft’s Stockopedia team, SPCS has an excellent SR of a 95 and nicely gaining momentum. I am happy to continue to hold and should there be a little pull-back, which I expect there to be, add a few more”.
This TU nicely gives both confirmation and faith to continue to hold for hopefully further gains.
Friday 02/02/2018: No RNS for shares within portfolio.
Time for a Glad I Am Not There: that unbelievable crowd at Utilitywise (UTW) still can’t agree with the auditors/advisors what constitutes revenue recognition and dealing in the shares has now been temporarily suspended on AIM until such time that the accounts for the FY ending 31st July 2017 may be agreed and published. If UTW can’t really publish with market confidence what their revenue was then, however, can an investor make a serious investment judgement on the stock? Certainly, this one has been flagged as a major risk for a couple of years now and was I believe, first highlighted by the excellent Paul Scott as a serious risk when the share price was far higher than it’s current suspension price of 40p. Investors have had a lot of time to assess their position in this business over the last couple of years and I really hope that the majority of private investors managed to get away some time ago. If ever I remotely suspect something dodgy in a companies accounting practice, then I simply get out. Staying on that theme, Purple Bricks (PURP) put out an odd RNS on Friday 02/02/2018 contesting the findings of the Jefferies research report in which Jefferies rather questioned the validity of some of the PURP figures. It’s not a share that has seriously tempted me as I really don’t feel I could ascribe any valuation to the share with its share price rather built of management projections and hope of things to come. PURP is to me a rather odd one and this mornings RNS attacking a research note simply increases my resolve to steer well clear of the business; maybe I am missing a wonderful opportunity but I just don’t fancy the risk.
After last weeks away win for the Hatters at Grimsby, I penned an article titled “A Tale of Einstein & Chips By The Seaside”. It’s not only in football that suffers from what Einstein quoted “insanity is doing the same failing thing again and again and expecting a different result”; you see one of our perennial underperformers that the manager insists is “really good” failed yet again and actually got sent off after 30 minutes.
As ever, have a good weekend and happy investing.