Small Cap Value Report (4 Dec 2014) - AMO, SEE, PRV, TPO, BVM

Good morning! I've been up since 4am, getting all the previous reports for this week up-to-date and complete, so here are the links;

Monday's report - new sections added this morning on accesso Technology (LON:ACSO) and Bonmarche Holdings (LON:BON)

Tuesday's report - completely new this morning

Wednesday's report - unchanged from yesterday

So, now that we're up-to-date, let's have another cup of tea and crack on with today's (Thursday's) report!

Amino Technologies (LON:AMO)

Share price: 121.5p
No. shares: 53.7m
Market Cap: 65.2m

Trading update - this reads very well. The company says that turnover for the year ended 30 Nov 2014 is in line with expectations, but that profit is ahead of expectations.

Cash conversion has been strong, with net cash having risen to £20.8m (or 40p per share), despite £3.3m of divis & share buybacks. So a third of the market cap is net cash - a very comfortable buffer.

My opinion - I've never quite known how to assess the company's prospects, as set top boxes is not really a market I understand. However, there seems a more positive change in tone in today's update, which sounds much more upbeat about new products, and the sales pipeline. Therefore I'm surprised the market has only marked up the shares by 4.5p at the time of writing - I'd say there's scope for them to rise further perhaps? Although they have had a good run already since dipping to 80p in Oct 2014.

Seeing Machines (LON:SEE)

Share price: 5.62p
No. shares: 827.6m
Market Cap: £46.5m

Placing & Open Offer - It's very surprising that this Australian technology company has come back to the market for more cash, so soon after raising more than it apparently needed just under a year ago.

Today's announcement explains why - it reads very positively, with "more than 10" automotive OEMs interested in potentially developing products using Seeing Machines eye and face tracking equipment to detect & alert when driver fatigue occurs.

There's no doubt that widespread adoption of this technology will be a wonderful thing, saving many lives on the roads. The technology is already proven in the mining trucks sector, and is now likely to find its way into trucks, coaches, and cars. Insurance companies might play a part in accelerating its adoption.

So an exciting company & opportunity. However in the meantime, the company is cash burning, so the shares are clearly quite speculative still at this stage.

It seems to be 103m Placing shares at 5.5p, and another 18.2m Open Offer shares also at 5.5p. The discount to the market price is minimal, and the Placing was over-subscribed. This represents an enlargement of the share capital by about 14.6%, which looks fine to me. That can be done without an EGM, as there is existing authority to allot up to 15% of additional shares.

My opinion - although this fundraising has raised many eyebrows, I think on balance it's the right thing to do. This company is the world leader in this technology, so they have an opportunity to really go for it, and that is the right thing to do. History is littered with companies that had a great technology, and a lead over the competition, but squandered the opportunity through being too cautious. So personally, for what it's worth, I am supportive of Seeing Machines' strategy to grasp the opportunity they have.

It's almost impossible to value the company at this stage. Given the size of the opportunity globally, I don't see the market cap as being excessive at this level.

Porvair (LON:PRV)

I commented here on Monday that the valuation was looking stretched, particularly in view of some one-off big contracts ending. However, on a more positive note, the company has today announced a big new contract win >$10m in China. Sounds encouraging.

The Peoples Operator (TPO)

This is an IPO announced today. I've had a look at it, and it looks quite bizarre to me. The valuation is £100m at 130p per share, yet the company is little more than a start-up. The concept is to build a mobile phone company where a proportion of the bill goes to charity. Nice idea. The plan is to build it through viral marketing online, to reduce costs.

I think the reason it has got away at such a bonkers valuation is because one of the founders is Jimmy Wales of Wikipedia fame. Let's hope this company doesn't need to start emailing its customers for regular donations to keep going!

It will be interesting to see if the public take up the concept, but I suspect the marketing budget is likely to be insufficient to gain significant customer numbers. Why pay £100m up-front for an unproven idea? That looks a crazy valuation to me.

Redhall (LON:RHL)

A series of announcements this morning suggest that the company might just survive after all - the bank, HSBC, has backed its recovery plan with renewed facilities.

That said, the Balance Sheet is still shot to bits, and there are more exceptional costs, so it's totally uninvestable as far as I'm concerned.

It is astonishing how lenient the banks are being towards Listed companies in this cycle.

Belgravium Technologies (LON:BVM)

Oh dear, it's a profit warning from this micro cap electronics company.

A contract delay has slipped into 2015. The announcement is here.

I gave up on this company a while back, because it's too illiquid to get rid of even a small number of shares when you want to sell. Also, I think the company is too small to be Listed, and profits are too lumpy & unpredictable.

Somebody needs to come along and bundle together a lot of these tiny companies, into one, more liquid group, and strip out all the separate listing costs & unnecessary Non-Execs, etc, then give each company autonomy in running itself. That would make a lot more sense than having hundreds of tiny companies with separate, completely illiquid markets.

On that bombshell I shall sign off for the day. See you tomorrow!

Regards, Paul.

(of the companies mentioned today, Paul has a long position in SEE, and no short positions.

A fund management company with which Paul is associated may hold positions in companies mentioned)