I Read The News Today Oh Boy! 21-Dec-2017

21st Dec '17 by matylda

20 comments 4692 reads

Morning All!

After finding nothing yesterday, I found just the one today (which was hardly worth getting up for!)...

Concurrent Technologies ( Concurrent Technologies (LON:CNC) ) – 85p – £61.8m – PER 12.0

Trading Update For The 12 Months To End December 2017 – In-line and “expects to continue the practice of paying a further interim dividend”.

Still quite like this. Fundamentals look OK especially the ROCE and Operating Margin. It’s also got Cash and a modest, slowly growing Dividend (currently about 2.5%) which is well covered. However, on a PER of 12 that Revenue, Profit and EPS CAGRs <=3.5% are rather poor. Just seems to be a lack of ambition here and it’s enough to put me off.

A Bit Of Fun…

Yesterday 43 people voted in the FTSE 2018 poll.

The majority (68%) are Bullish for 2018.

The majority (38%) expect the FTSE to be up 5%+ (but less than 10%) at the end of 2018.

Have a great day!

NOTE: Also tagged Veltyco (LON:VLTY), comment from Ramridge and others below

Unlock with Email

Unlock with Google

Already have an account?
Login here

MrContrarian

21st Dec '17

My morning smallcap tweet:

Styles and Wood (LON:STY), Corero Network Security (LON:CNS), Bloomsbury Publishing (LON:BMY), CityFibre Infrastructure Holdings (LON:CITY)

Styles & Wood Group (STY) gets rec cash offer of 465p, a 24% premium. I hold.
Corero Network Security (CNS) warns FY rev only $8.5 to $9m due to "delays in world-wide implementation schedules for a large digital enterprise customer win in Q3 2017 and an existing customer's ongoing deployment." EBITDA -$4.8 to $5.3m. Net cash down to $1m, plans debt financing in H1.
Bloomsbury Publishing (BMY) FD resigns and "following her twelve month notice period will join Euromoney Institutional Investor." The Board has begun a search new FD. If she serves her 12 months I will eat my wizard's hat.
CityFibre Infrastructure (CITY) wins £15.7m order over 19 years to extend its existing Gigabit City network in Glasgow to 506 Council sites. ""This will be the largest public-sector project in our history and makes us the leading digital infrastructure provider to the public sector in Scotland."

Ramridge

Hi matylda - re. Veltyco (LON:VLTY)
This company put out an RNS this morning titled "Blockchain and Cryptocurrency". Apparently they have started talks with technology suppliers to start offering crypto wallets to their customers.

That by itself is not remarkable.

But what is , is the current lunatic situation where if a company mentions interest in "cryptocurrency" or "bitcoin" or "blockchain" , the share price rockets.
So I am in with the lunatics for the ride and bought a position this morning. Hopefully planning to get off the escalator before I entirely lose my marbles (and my money).

Health warning - a punt only for the braves

Asagi

Connect (LON:CNCT) announced disposal of their loss making books division:

for a total cash consideration of up to £11.6m. Under the terms of the agreement, £10.6m will become payable at completion and up to £1.05m will be payable on the successful recovery of certain third party debt receivables and certain tax refunds...

The net cash proceeds of the disposal will be used to reduce the Group's borrowings....

Connect Books' EBIT for the 12 months to 31 August 2017 reported a £2.0m... Net Book Value was £15.0m

also confirms a trading statement for January 23rd.

https://www.investegate.co.uk/connect-group-plc--cnct-/rns/disposal-of-books-division/201712210700040040A/

Asagi (long CNCT)

JohnEustace

At best that Veltyco (LON:VLTY) initiative strikes me as a portal for the bitcoin mania to leak across into the real world and at worst as an attractive route to launder money.
As such I would imagine profit potential and the regulatory risk are both considerable.

nicobos

Ramridge, Veltyco (LON:VLTY) is definitely for the brave ! I exited a couple of days ago following the ESMA ruling which suggested they would ban 'binary options'.

The Company's exposure to binary options in Europe is a little opaque but seems to be mentioned a lot in their RNS's. I took a look through the admission doc to try and deduce the impact however it's very difficult as they don't really split out (in terms of revenue / profit %). The bits I have found are below:

"Option888 is an online binary option platform. Binary option traders speculate on short term movements in volatile underlying assets or indices...The Option888 brand was launched in early 2015, focussing initially on the Swedish and German markets. Through Novox Capital Ltd, the Option888 platform is offered in three different languages (English, German and Swedish)"

"Binary options has seen strong growth in popularity in two of Sheltyco’s main markets; Italy and Germany. The Sheltyco Group intends to become a leading provider of marketing and promotion services in the binary option market and will seek to launch into other markets in Scandinavia such as Norway, Denmark and Finland."

"As a CySEC regulated business Novox can only carry out marketing activities and provide binary options services in certain jurisdictions. If Novox could no longer operate in a jurisdiction in which it currently operates, or in which it plans to operate, this will have a detrimental effect on its revenue and, consequently, on the Group’s business, financial condition, results or future operations."

The Company did not issue an RNS however has responded to an email I sent over as follows:

"Veltyco is fully aware of the ESMA statement which focuses on CFD and binary options trading in Europe. Veltyco is an online marketing company for various partners and verticals, including online casinos and sportsbook betting, online lotteries and online trading. As recently announced, the Board of Veltyco believes that full year 2017 revenues and EBITDA for the group will be significantly ahead of market expectations, as we continue to enjoy strong growth across all verticals of operation in the Group.

Veltyco does not disclose analysis of its revenues per industry vertical where it operates. The Board anticipated the announcement from ESMA, and it will closely monitor further developments in this matter, and will issue a statement if the need arises."

The way I read that statement is that there is no impact on the 2017 revenues (which I would not expect anyway), hence they are not required to issue an official regulatory statement.

However, there could be an impact on future revenues, but until they know more about the ESMA plans they cannot comment on the impact. My view is that there is a high risk of an outlook comment in the update which warns on uncertainty of future profits. I want to see them address the issue head on and unfortunately their comment raises more questions than answers.

Cleverly though, as a distraction from ESMA, they have issued an RNS with the magic words "Blockchain" / "Cryptocurrency" and the share price bounces! No mention of commerciality or impact on profit etc. Reminds me of companies adding ".Com" to their name or adding "Internet of Things" to an RNS to boost the share price ! (or am I just being cynical !?)

I now find myself debating whether to take a short-term trading position in Veltyco (LON:VLTY) to ride what may be a hype wave upwards with an eye to exit before a trading update is announced !

Hi nicobos - My position is purely a short-term trade to take advantage of the lunatic stockmarket world we currently live in.
Last month a US company RIOT added to its name the word "blockchain", became Riot Blockchain Inc. The share price went up by a factor of 3. There are other similar instances too.

I only sized my stake to what I can afford to lose completely.

andrea34

Announcement from IQE (LON:IQE) for any holders:

IQE Group expands IP portfolio with the purchase of Quasi Photonic Crystal Patents

IQE plc, the leading global supplier of advanced wafer products and wafer services to the semiconductor industry, announces that its wholly owned subsidiary, NanoGaN Limited, has secured the purchase and assignment of a portfolio of patents from Taiwan based Luxtaltek Corporation.

The portfolio of 54 patents cover a range of novel technologies and applications based mainly on Quasi Photonic Crystals (QPC). This advanced materials technology complements the Group's organic development of NanoImprint Lithography ("NIL"), and broadens the potential application of NIL beyond IQE's current focus on advanced DFB lasers. Indeed, the patents acquired have applications in Optical components including VCSEL and edge emitting lasers,modulators, silicon photonics, fibre optic systems, micro LED displays, image sensors including Diffractive Optical Elements (DOE) and biosensors.

NanoGan Limited has agreed a one-off payment of US$500,000 for the purchase. The IQE Board believes that the Group is well positioned to commercialise this new technology thanks to its existing in-house NIL capability.

IQE Chief Executive, Dr Drew Nelson said:

"Over the last few years, IQE has developed an exciting and strong IP portfolio, which, coupled with the expertise and manufacturing capability to commercialise these new materials technologies have uniquely positioned IQE as the clear global leader in providing advanced compound semiconductor technology solutions.

This significant addition to our IP portfolio provides the Group with additional competitive advantages that will secure our entry and maintain our leadership across a range of new and emerging technology applications, and offer our customers access to a unique portfolio of materials expertise."

The word 'broadly' in the phrase ''...the Company confirms that it expects its trading for 2017 to be broadly in line with market expectations" is more than enough to put me off; they have disappointed before.

Very sensible Ramridge - I may take the same gamble!

It has got me thinking, is there a way to set up automated alerts to be notified of any RNS containing keywords such as 'blockchain' ?

It would be good to know if there's a way to get in early on the mania before it reaches manic proportions!

Thanks

N

vik2001

A lot of talk regarding shorters bringing down IQE’s price, but i don't think thats the case, the valuation would worry me. The price rise P/E multiple for the full year of 44 ,and while there’s a predicted 30% rise in earnings per share for 2018, that would drop the P/E only as far as 33, which to me would make me grit my teeth a little.

For me this share is a 50/50, there could be further drops in the price to come before it goes back up. A lot of the predicted good news for me is already in the price, and they going to need something spectacular for it to go further up past the 200p mark.
Im no longer a holder,and the above is only my opinion..

GrahamF

Andrea, this is a bit confusing, what company are you referring to in your post #8?

matylda

Thanks for the updates on Veltyco (LON:VLTY) and Connect (LON:CNCT) - I have since tagged Veltyco (LON:VLTY) in the post for future reference for all.

Apologies, that is in the update from Concurrent Technologies (LON:CNC) :

Based on its unaudited management accounts for the year to date, the Company confirms that it expects its trading for 2017 to be broadly in line with market expectations.

I don't like 'broadly' :-( (It won't let me update that now, as there is a reply).

'vik'

"The price rise P/E multiple for the full year of 44 ,and while there’s a predicted 30% rise in earnings per share for 2018, that would drop the P/E only as far as 33, which to me would make me grit my teeth a little."

Unfortunately, IQE (LON:IQE) is not a share that is valued in this manor - it is more valued on future hope of a massive deal... hinted to be Apple. Based on this type of valuation method, a P/E of 33 relative to a growth of 30% in eps seems reasonable... BUT as per my post from yesterday on IQE, I think the profit figure will be dented a LOT by exceptionals. Note, I don't hold at present, though have done.

Andrea

On the one hand, I see the point of view about Veltyco (LON:VLTY) joining the bandwagon with its crypto-currency... but on the other hand does it not make a lot of sense from a company point of view that it's clients/customers can deposit their money in one place and trade/play across multiple platforms with ease?

I think IQE (LON:IQE) is one of those growth companies that attracts speculators making the share price more volatile. The technical nature of what they do may exacerbate this as it is clear from what is written in many places that many writers have a rather sketchy understanding of what the company does and so tend to over react either positively or negatively to any news, swinging from over exuberance to undue pessimism. The recent fall on the publication of the trading update is a good example. It contained no bad news and demonstrated that the company management have forecast pretty well what the company’s financial performance is going to be. But there are plenty of twitchy holders who expected the company management to be unable to forecast so closely and that the results would be much better. So, they are disappointed and the price falls. A recipe for volatility. So, if you’re not able to tolerate such volatility it’s probably not a good stock to be in.

As regards P/E ratios, much has been written about the relative usefulness of this ratio as a guide to whether or not a share price is relatively high or low. From my limited understanding of what I’ve read it certainly has limitations even for mature companies. And there seems to be a view that this ratio is significantly less useful in assessing small growth companies which are investing substantial amounts to support their high growth. So, I’m not terribly concerned if the company looks expensive on a P/E basis on a time horizon of a year or so.

As I see it the longer term prospects for IQE in multiple innovative markets look very good. There are a significant number of niches that they can serve in high growth markets that can give high growth for the next few years for a company of their size. I listen carefully to the counter arguments that a fair number of years ago management over promised (but they are meeting their promises now). Equally, I understand the argument that compound semiconductor technologies have been under development for a number of years and not shown any sign of displacing silicon in mass markets (but the niches where silicon is limited are more than large enough for cs tech to grow from where it is today and the sales figures back that up).

I don’t have a view on what the shorters are doing other than to observe that much of their positions were taken out when the s.p.was around the current level or lower, so despite the recent price fall they are overall probably still under water. The trading update didn’t demonstrate that the shorters know anything special about the company’s ability to meet expectations.

So, I view IQE as a good growth company for the next few years. As such, I hold a long position which I’m unlikely to close for at least a couple of years unless there is significant bad news (right now the news continues to be good). A further reason for staying in rather than trading in and out is the volatility means it is impossible to time getting back in before the next substantial move up.

Nick Ray

The 1-year volatility of IQE (LON:IQE) is 55% according to Stocko. (I make it about 63% using my own version of volatility). Either way - that is very high. In particular with a 1-year volatility of 55%-65% you can expect daily fluctuations of +/- 5% as a matter of course and fluctuations of 10% or so are going to be completely normal. If this sort of daily variation is a worry for anyone then IQE (LON:IQE) is not the kind of stock they should buy. I say that regardless of whether IQE (LON:IQE) is a good or a bad proposition.

[Personal disclosure: I do not hold IQE (LON:IQE) very largely because I was not comfortable with the size of the volatility.]

@Graham Ford
I completely agree with that. I'm tucking mine away and leaving them alone - an opportunity to practice patience, the lack of which is one of my behavioural weak spots.

Agreed Nick. IQE (LON:IQE) is rather too volatile for the shorter term. For me, however, on this occasion that’s not a problem as the future prospects are good enough that I can plan to hold long term and ride out the volatility.

Howard Marx

"Long Island Iced Tea Corp. To Rebrand As "Long Blockchain Corp."

Share price today up 210%

Getting involved in blockchain is as easy as changing your name...

I Read The News Today Oh Boy! 21-Dec-2017

Unlock the rest of this article with a 14 day trial

About the Author

Matylda

20 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...