Profitable Micro-caps (Revenue greater than $10m)

[steve fleming]

Some might find this list interesting / uesful

Criteria=

1. market cap less than $20m
2. Revenue greater than $10m
3. PE of between 0 and 10


(sorry, tried posting all the financial information, but it turns out a real mess.
The tickers are sorted from lowest m/c to highest)


Ticker
Short Name
P/E
Market Cap
Revenue T12M
Price-1
Total Return YTD
EPS T12M


SKS AU Equity
RLA AU Equity
CLQ AU Equity
EFG AU Equity
RZR AU Equity
COM AU Equity
NLG AU Equity
COO AU Equity
MBD AU Equity
PTB AU Equity
TPC AU Equity
EPY AU Equity
REF AU Equity
KKT AU Equity
FRM AU Equity
HYO AU Equity
PHG AU Equity
CAJ AU Equity
EMB AU Equity
MNF AU Equity
TQH AU Equity
EBT AU Equity
OEC AU Equity
MHI AU Equity
VSC AU Equity
SNL AU Equity
WWM AU Equity
AXI AU Equity
CHR AU Equity
ELX AU Equity
AMB AU Equity
SOO AU Equity
GLE AU Equity

[shasta]

Steve

I see CLQ has announced a new project today, extracting uranium from water? Anyways i started a thread on them ages ago, interesting company

[Lizard]

Hi Steve,

I just wrote you a long reply and something happened to the thread while I was doing it, so it went into cyber-space and I couldn't locate it again!

I love this micro-cap zone. I used to use a $20m market cap as a benchmark for a growing company turning a first profit, but these post-GFC days there are some solid profitable stocks there at well below. Many of them just became so illiquid that they were sold to ridiculous lows and buyers have never found the courage to push them back to a price where liquidity could emerge again.

I've looked at 75% of these shares in the past 12 months. One I liked best was MBD. I'd also be happy enough to own EMB or SNL, but I can't see them doing a fast multibag. I have a mental note to re-look at CLQ, particularly after todays announcement and price action. GLE is in my net-net portfolio. RZR will do well if they can even announce one new sale - but the longer they drag on, the less likely that is looking! SOO interests me, but I've never bought - seems an uncertain area. PTB made it as far as my watchlist, but I haven't watched it very closely...

Otherwise, I'd squeeze in HIT if I could (cos I'm biased since I got them at 2.5cps and might want to sell them again one day!) - revenue is under $10m though. AMO (also a net-net) just squeezed under your $10m market cap on todays price too - and the buyback might keep it from falling much lower.

[buns]

Flemo - Is it hard to add another filter, removing dividend paying companies?

That is something I don't want from my micro caps.

[Corporate]

Thanks for the list Steve. I'm up to NLG which looks interesting...

[Lizard]

Flemo - Is it hard to add another filter, removing dividend paying companies?

That is something I don't want from my micro caps.

Why not? I would have thought that sometimes a dividend is the only thing that will get a neglected and illiquid share on the radar.

[buns]

KW/Liz - I understand where you are coming from, but right now only have a hole in my portfolio for a short/medium term bagger. In my mind, I don't see big div paying micro caps producing that. But very keen to have other stocks (and knowledge) in the bank when the time comes

In my experience, both investing and working I worry about small companies paying large dividends. The big thing is the strong hint from management towards maturity/unable to find NPV+ projects. Also, in many cases companies like this restricting their growth (by giving it back to shareholders), also restricts themselves building that economic moat, or competitive advantage. Because in time, (I think) these small companies will either get chipped away at or totally swallowed by a major (CLQ from China?) who have the advantage of more resources and scale.

This is quite theoretical thinking however. I need to follow more of these companies to see what can pan out. And also understand the shareholder bases of these companies to get an understanding on what they think of dividends.

[Lizard]

PEH not on the list yet, but maybe one to make it in the next 12 months.

Listed 2008 at 50cps and acquired environmental consultancy and software type businesses. Got themselves into financial difficulty, particularly after one acquisition supposed to double the size of the business, suddenly ended up in VA a few months later (during the GFC).

Have historically produced about $7m revenue and losses, but HY revenue up 20% to $4.6m, so may see them getting $9-$10m revenue this year. Also maiden HY profit of $154k, but would have been about $465k if litigation costs (associated with failed business) and share based payments were excluded. Market cap $10m at 10cps. Balance sheet now strengthened with support of major shareholders, leaving net debt of $1m at last tally.

Overall, can't decide if they are poor operators or just caught some bad-luck in timing their listing and acquisitions. They seem to employ a lot of bright staff and they should be in a good area with specialist emissions consulting. The bump up in first half profit could be interesting if momentum is maintained in second half.

[Lizard]

Would have to hope SAV could make it on the list this year. Market cap is $13m and they have just restructured the business, leaving only Savcor ART strand. With $80m revenue, would have to be some hope they can turn a profit... however, if they can't, the business has to be on the line. Furthermore, they still have a few tough EBIT covenants around debt, so it's a somewhat risky call, especially around December.

Either try to pick it off the chart or wait for the May agm when they should give some indication as to how the year is going.

[Catalyst]

Industry : Online advertising in Australia
Market Cap : A$9.1m (at A2c)
Revenue : Approx A$25m
EBITDA for FY2011 : A$3 - $3.25m (recent company guidance)
EBITDA for FY2012 : A$3.75 - $4m (recent company guidance)
Net debt : Approx A$5m
Other comment : The company have heavily restructured over the past couple of years and are about to undergo a rights issue to repay all debt. The rights issue is a pro-rata, non-renouceable issue and is underwritten by its largest shareholder. No details on price or entitlement yet.

[Lizard]

PEH not on the list yet, but maybe one to make it in the next 12 months.

Listed 2008 at 50cps and acquired environmental consultancy and software type businesses. Got themselves into financial difficulty, particularly after one acquisition supposed to double the size of the business, suddenly ended up in VA a few months later (during the GFC).

Have historically produced about $7m revenue and losses, but HY revenue up 20% to $4.6m, so may see them getting $9-$10m revenue this year. Also maiden HY profit of $154k, but would have been about $465k if litigation costs (associated with failed business) and share based payments were excluded. Market cap $10m at 10cps. Balance sheet now strengthened with support of major shareholders, leaving net debt of $1m at last tally.

Overall, can't decide if they are poor operators or just caught some bad-luck in timing their listing and acquisitions. They seem to employ a lot of bright staff and they should be in a good area with specialist emissions consulting. The bump up in first half profit could be interesting if momentum is maintained in second half.

The third quarter report wasn't too encouraging for PEH, with staff costs increasing and revenues down over the quiet holiday period. Has been barely traded, although someone sold a few recently at 4cps (market cap $3.9m). However, it is now well bid up to 6.2cps, with few sellers in sight. Today's announcement outlines the potential for the business to benefit from the implementation of a new carbon tax in Australia, where they are ideally placed.

Having said that, it is so illiquid that not likely to be of interest to most investors.

[Lizard]

Here's one that missed your list, Steve.

Market Cap - $8.3m (at 11.5cps)
Revenue FY10 - $10.4m
P/E - 14.7

Laserbond have been around since 1993 and listed at 20cps in 2007 in order to finance acquisition. They use thermal spraying and laser bonding processes to significantly extend the wear life of metal components.

The initial post-float acquisition and GFC caused some problems for the business, hence the share price has fallen as a result. It appears the acquisition issues may now have been dealt with and revenues/profits are on the rise. Could be cheap growth here. Based on last two six month periods, EV/EBIT is sitting at 5.7.

[Lizard]

PEH not on the list yet, but maybe one to make it in the next 12 months.

Have historically produced about $7m revenue and losses, but HY revenue up 20% to $4.6m, so may see them getting $9-$10m revenue this year. Also maiden HY profit of $154k, but would have been about $465k if litigation costs (associated with failed business) and share based payments were excluded.


PEH have just confirmed revenue at $9.35m for FY and EBITDA (excluding abnormals) of $900k, so looks like recovery is on track and should make the $10m revenue for this list over coming 12 months. Meanwhile, share price and market cap have fallen - last traded at 7.5cps, although not much on the sell for now. Still relatively expensive on an EV/EBITDA basis at around 9.9 though, so value reliant on continuing to achieve revenue growth from here.

[steve fleming]

ADG Global Supply – supporting the mining industry

m/c - $17m

provider of industrial products, supply chain and global procurement services to exploration, drilling, mining, oil and gas clients located in remote places. Approx half of revenues come from African based resources and energy clients.

Recently reported FY11 revenues of $52m, a 45% increase from FY10. Unaudited FY11 EBIT of $1.3m and estimated NPAT of $750k.

There is a growing demand for ADQ’s integrated product and service offering in the resource and energy markets, and a considerable pipeline of opportunities. Some major deals and contract wins have been announced in recent months. ADQ is expecting further uplift in revenue with an improved EBIT margin for FY12. I understand one broker has a FY12 NPAT estimate of $2.5m.

What i also really like about ADQ is its shareholder base – which includes key clients (Traverse Drilling), key suppliers (Magna Tyres Holland ) and some prominent small cap institutions that added to their positions in the recent placement.


With a m/c of $17m you are paying a bit for growth, but it does appear that it has the making of what realisticaly could become a very substantial (ie $100+m t/o) company within the next two years.

[steve fleming]

Another one to add to the list (missed the $20m cut off originally, but now sneaks in)

MNY – Money3 Corporation Limited


m/c = $19m (42.7m @ 44c)
Cash = $3m
EV = $16m

Today confirmed FY11 NPBT of $3.5m, so NPAT of $2.5m ish

Div Yield = 9%
EV/EBITDA = 4.5

Per Bell Potter Research Report:

“MNY is a profitable and ungeared participant in the micro-lending sector that should benefit from recent regulatory reform. With significant demand for microlending and barriers-to-entry for mainstream financial institutions, MNY is well placed to grow both its branch network and its product offering.

MNY is priced at a significant discount to its asset backing at 0.7x NTA or 0.5x book and remains firmly in single-digit P/E territory on 7x FY11f EPS.

The single-digit P/E comes with an attractive dividend yield of 9%. MNY is both small and illiquid and for that reason will be discounted relative to peers
but for investors comfortable with that profile, the risk is compensated by the opportunity to grow by a combination of branch roll-out, expanded product offering and acquisitions.

The company’s management team have successfully maintained profitability both before and after its October 2006 IPO while steadily growing both revenue and loan volumes.”

[Lizard]

Some interesting picks there Steve!

ADQ looks interesting, but maybe a little soon - although chart looks nice enough.

MNY - pity they are so illiquid, but maybe Bell Potter will cure that, given they picked up 7.9m or so via underwriting the last rights issue. Also interested that their annual revenue in fees and charges seems to exceed the amount out on loan - makes me feel queasy thinking about it. Though agree that it looks very cheap on metrics.

[Lizard]

Okay, forget PEH. Amazingly (given their recent update), they didn't file a 4C and are now suspended. Even worse, they haven't flied an explanation.

This is total D-grade behaviour and puts them on the "avoid for at least 2 years" list. That's presuming they re-list.

[steve fleming]

Some updates:




ADQ looks interesting, but maybe a little soon - although chart looks nice enough.


ADQ
Non core division sold.
Q1 revenues up 37% to $16m
A number of new growth initiatives have been flagged, to drive double digit EBIT margins
Management have confirmed no cap-raisings during FY12 (I query this)
Investor First has re-affirmed their 10c target again last week - currently at 5.5c






MNY - pity they are so illiquid, but maybe Bell Potter will cure that, given they picked up 7.9m or so via underwriting the last rights issue. Also interested that their annual revenue in fees and charges seems to exceed the amount out on loan - makes me feel queasy thinking about it. Though agree that it looks very cheap on metrics.

MNY - regulatory risk now reduced with all relevant parliamentary committees in agreement that a compromise with industry needs to be reached (as opposed to the unworkable measures initially presented). This has driven a pretty decent re-rate in CCV but yet to be`reflected in MNY

A handy acquisition of a Tasmanian personal finance company to grow MNY's suite of products, customer base and geographical coverage.

Both of these companies, IMO, have highly regarded Managment teams (I have met) and offer strong revenue growth and margin expansion.

[steve fleming]

Some might find this list interesting / uesful

Criteria=

1. market cap less than $20m
2. Revenue greater than $10m
3. PE of between 0 and 10


(sorry, tried posting all the financial information, but it turns out a real mess.
The tickers are sorted from lowest m/c to highest)


Ticker
Short Name
P/E
Market Cap
Revenue T12M
Price-1
Total Return YTD
EPS T12M


SKS AU Equity
RLA AU Equity
CLQ AU Equity
EFG AU Equity
RZR AU Equity
COM AU Equity
NLG AU Equity
COO AU Equity
MBD AU Equity
PTB AU Equity
TPC AU Equity
EPY AU Equity
REF AU Equity
KKT AU Equity
FRM AU Equity
HYO AU Equity
PHG AU Equity
CAJ AU Equity
EMB AU Equity
MNF AU Equity
TQH AU Equity
EBT AU Equity
OEC AU Equity
MHI AU Equity
VSC AU Equity
SNL AU Equity
WWM AU Equity
AXI AU Equity
CHR AU Equity
ELX AU Equity
AMB AU Equity
SOO AU Equity
GLE AU Equity


i need to run this screen again based on FY11 results, there look like there should be a number of new entrants......TTI, MNF, plus a number that Liz has mentioned

[steve fleming]

Ok update:

Screening is:

1)Market cap between 0 and $20m

2)Historical PE of between 0 and 20 (ie historically profitable, very few have forecasts published)

3)Revenues of greater than $10 million

4)Not currently suspended (ie AHJ )

List by market cap


Ticker Short Name Market Cap P/E
SOO AU Equity SOLCO LTD 17,965,230 6.0
SDI AU Equity SDI LTD 17,829,830 14.4
PFG AU Equity PRIME FINANCIAL 17,815,860 4.6

VSC AU Equity VITA LIFE SCIENC 17,356,200 3.6
ISS AU Equity ISS GROUP LTD 17,213,510 15.1
MNY AU Equity MONEY3 CORP LTD 16,863,180 5.3
GLE AU Equity GLG CORP LTD 16,672,500 6.3
ACK AU Equity AUSTOCK GROUP 16,071,410 3.0
EAL AU Equity E & A LTD 15,938,870 9.8
AIR AU Equity ASTIVITA RENEWAB 15,808,970 4.9
EMB AU Equity EMBELTON LTD 15,169,690 9.9
LBL AU Equity LASERBOND LTD 14,681,710 10.5
ITD AU Equity ITL LTD 14,480,990 15.3
TAG AU Equity TAG PACIFIC LTD 14,271,420 2.5
IPR AU Equity IPERNICA LTD 13,891,410 8.8
PNW AU Equity PACIFIC STAR NET 13,441,500 15.8
TQH AU Equity 3Q HOLDINGS LTD 13,266,120 7.2
OEC AU Equity ORBITAL CORP LTD 13,090,290 7.4
IAW AU Equity INTEGRATED LEGAL 12,754,310 8.9
JIN AU Equity JUMBO INTERACTIV 12,256,410 2.5
MHI AU Equity MERCHANT HOUSE 12,211,660 13.3
ADQ AU Equity ADG GLOBAL SUPP 12,201,720 10.0
HYO AU Equity HYRO LTD 11,582,280 0.9
AMB AU Equity AMBITION GROUP 11,419,060 6.3
JYC AU Equity JOYCE CORP LTD 11,082,880 2.6
HII AU Equity HIRE INTELLIGENC 10,014,280 5.5
AAU AU Equity ADCORP AUSTRALIA 10,011,640 7.3
EPY AU Equity E-PAY ASIA LTD 9,678,155 4.8
CAJ AU Equity CAPITOL HEALTH 9,415,531 9.8
MNF AU Equity MY NET FONE LTD 8,934,444 8.9
PGC AU Equity PARAGON CARE LTD 8,761,238 8.4
EBG AU Equity EUMUNDI GROUP LT 7,807,193 5.6
MBD AU Equity MARBLETREND GROU 7,582,783 6.9
PTB AU Equity PTB GROUP LTD 7,572,915 11.5
TTA AU Equity TTA HOLDINGS LTD 7,008,593 1.5
LMW AU Equity LANDMARK WHITE 6,897,195 11.2
AFT AU Equity AFT CORP LTD 6,715,195 3.8
COO AU Equity CORUM GROUP LTD 6,531,035 3.8
SRH AU Equity SAFEROADS HLDGS 5,590,000 7.6
EPL AU Equity EYECARE PARTNERS 5,318,647 6.0
OTI AU Equity ORIENTAL TECHNOL 5,054,444 12.7
MDG AU Equity MEDTECH GLOBAL L 5,012,403 15.5
CRW AU Equity CRW HOLDINGS LTD 4,657,365
QST AU Equity QUEST INVEST 3,791,501 5.6
REF AU Equity REVERSE CORP LTD 3,787,669 2.9
TTI AU Equity TRAFFIC TECHNOLO 3,522,447
COJ AU Equity COMMSTRAT LTD 3,441,363 4.6

[percy]

Thanks Steve.Plenty there to keep me out of trouble,or is it there is plenty there to get me into trouble!!!!!. I held TAG for a number of years,always a profit around the corner.!! I sold out at about 20cents then they floated medical software company Iso ??? and Tag shares went to about $1.20 six months after I sold.I note Lizard posted on the software company,within the last year.They ran into problems in UK and the shares fell out of bed.Don't think I would buy a Peter Wise company again.His cousin Gary Wisse was on the board.

[buns]

steve can you add on a filter showing ROE and net debt?

[steve fleming]

steve can you add on a filter showing ROE and net debt?

that should be possible....its easier if i email you it

[Lizard]

Another one to add to the list (missed the $20m cut off originally, but now sneaks in)

MNY – Money3 Corporation Limited


m/c = $19m (42.7m @ 44c)
Cash = $3m
EV = $16m

Today confirmed FY11 NPBT of $3.5m, so NPAT of $2.5m ish

Div Yield = 9%
EV/EBITDA = 4.5

Per Bell Potter Research Report:

“MNY is a profitable and ungeared participant in the micro-lending sector that should benefit from recent regulatory reform. With significant demand for microlending and barriers-to-entry for mainstream financial institutions, MNY is well placed to grow both its branch network and its product offering.

MNY is priced at a significant discount to its asset backing at 0.7x NTA or 0.5x book and remains firmly in single-digit P/E territory on 7x FY11f EPS.

The single-digit P/E comes with an attractive dividend yield of 9%. MNY is both small and illiquid and for that reason will be discounted relative to peers
but for investors comfortable with that profile, the risk is compensated by the opportunity to grow by a combination of branch roll-out, expanded product offering and acquisitions.

The company’s management team have successfully maintained profitability both before and after its October 2006 IPO while steadily growing both revenue and loan volumes.”

Had another look at this one the other day - now at 38cps. Comes out well on lots of metrics, although I can't quite bring myself to own shares in a loan shark. But my valuation was more than twice current s.p., assuming they're being straight up on provisioning for bad debts.

[Lizard]

ADG Global Supply – supporting the mining industry

m/c - $17m

provider of industrial products, supply chain and global procurement services to exploration, drilling, mining, oil and gas clients located in remote places. Approx half of revenues come from African based resources and energy clients.

Recently reported FY11 revenues of $52m, a 45% increase from FY10. Unaudited FY11 EBIT of $1.3m and estimated NPAT of $750k.

There is a growing demand for ADQ’s integrated product and service offering in the resource and energy markets, and a considerable pipeline of opportunities. Some major deals and contract wins have been announced in recent months. ADQ is expecting further uplift in revenue with an improved EBIT margin for FY12. I understand one broker has a FY12 NPAT estimate of $2.5m.

What i also really like about ADQ is its shareholder base – which includes key clients (Traverse Drilling), key suppliers (Magna Tyres Holland ) and some prominent small cap institutions that added to their positions in the recent placement.


With a m/c of $17m you are paying a bit for growth, but it does appear that it has the making of what realisticaly could become a very substantial (ie $100+m t/o) company within the next two years.

ADQ also reporting a good quarter and now sitting nicely going into first half. Spread is too wide to pick any up easily at the moment though - definitely wouldn't want to pay up, as under 6cps looks like a fair entry to me.

[Lizard]

Just took a look at Corum Group (COO) on your list. Has increased market cap quite a bit since you posted.

Is a software company in various eCommerce/Pharmacy software/Real Estate software and Real Estate training. Looks like they are on a positive track, with great cashflow for their size and just returning to growth. Had a few glitches in the past, but new management and issues regarding debt and litigation have all recently been resolved. Would think they will be in a position to pay divs in 2013 or to invest in growth.

Biggest downside is that between the top twenty shareholders and those with unmarketable parcels, there probably isn't much stock going to change hands.

Anyway, just thought I'd put a note on for the record.

[ob1kinobi]

Anyone here taken a ride on Jumbo Interactive Ltd?

This came up in SF's search in Dec, and since then its been flying.

MCap now 64mil, SP as of close yesterday $1.525

EPS 12.86, P/E 11.85

The trains already left the station but there was a profit upgrade anns yesterday too

[Lizard]

Didn't see this one on your list, Steve.

Market cap approx $2.4m (at offer of 4.0cps)
Revenue $15m
NPBT of $0.43m in 2011 (December year end)

Software business - Management seems a bit casual, as they have twice been suspended this year - once for not having enough independent directors and once for not filing the Annual Report on time.

Last quarterly suggests a rather disappointing start to the year - followed by some reassurance in the response to ASX query. However, announcement today that the founder retires next Friday, so could see some new blood make something of it.

One for the watchlist only at this point.

[steve fleming]

Didn't see this one on your list, Steve.

Market cap approx $2.4m (at offer of 4.0cps)
Revenue $15m
NPBT of $0.43m in 2011 (December year end)

Software business - Management seems a bit casual, as they have twice been suspended this year - once for not having enough independent directors and once for not filing the Annual Report on time.

Last quarterly suggests a rather disappointing start to the year - followed by some reassurance in the response to ASX query. However, announcement today that the founder retires next Friday, so could see some new blood make something of it.

One for the watchlist only at this point.

Hi Liz,

COM actually has its own thread

http://www.sharetrader.co.nz/showthread.php?8319-ComOps-Limited-%28-quot-COM-quot-%29-Profitable-Micro-cap&highlight=comops

I have sold since - I hope the new management team has more sucess than the previous. COM also has a history of a fair bit of accounting manipulation that makes kind of interesting reading if you want to go back over the 10 and 11 annual reports.

[Lizard]

COO now on a small run and price queried. Has been looking good, but too illiquid and I have enough illiquid micro-caps for now!

[Lizard]

Excellent quarterly for COO. Might have to start a thread for this one...

[steve fleming]

Update as of yesterday.

Filters:
- sub $20m m/cap
- revenue greater than $10m
- NPAT positive
- EBITDA greater than $1m

Pulse Health Limited (ASX:PHG)
Vesture Limited (ASX:VES)
Cougar Metals NL (ASX:CGM)
Gage Roads Brewing Co Limited (ASX:GRB)
Money3 Corporation Limited (ASX:MNY)
Australian Ethical Investment Ltd. (ASX:AEF)
E&A Limited (ASX:EAL)
Greencap Limited (ASX:GCG)
Embelton Ltd. (ASX:EMB)
Laserbond Limited (ASX:LBL)
CPT Global Limited (ASX:CGO)
ADG Global Supply Limited (ASX:ADQ)
Globe International Ltd. (ASX:GLB)
Empired Ltd. (ASX:EPD)
Merchant House International Ltd. (ASX:MHI)
e-pay Asia Limited (ASX:EPY)
PlatSearch NL (ASX:PTS)
OTOC Limited (ASX:OTC)
ipernica Ltd. (ASX:IPR)
SDI Ltd. (ASX:SDI)
Carbon Conscious Ltd. (ASX:CCF)
Integrated Legal Holdings Ltd. (ASX:IAW)
Adcorp Australia Ltd. (ASX:AAU)
Pacific Star Network Ltd. (ASX:PNW)
Ambition Group Ltd. (ASX:AMB)
FIRSTFOLIO Limited (ASX:FFF)
Buderim Ginger Ltd. (ASX:BUG)
Landmark White Ltd. (ASX:LMW)
AstiVita Renewables Limited (ASX:AIR)
Vietnam Industrial Investments Limited (DB:NJ4)
Hire Intelligence International Ltd. (ASX:HII)
Digital Performance Group Ltd (ASX:DIG)
CareersMultilist Limited (ASX:CGR)
TTA Holdings Limited (ASX:TTA)
Drill Torque Limited (ASX:DTQ)
Paragon Care Ltd. (ASX:PGC)
PTB Group Limited (ASX:PTB)
Marbletrend Group Limited (ASX:MBD)
Traffic Technologies Limited (ASX:TTI)
World Reach Limited (ASX:WRR)
Redbank Energy Limited (ASX:AEJ)
Oriental Technologies Investment (ASX:OTI)
Reverse Corp Limited (ASX:REF)

[steve fleming]

Ok update:

Screening is:

1)Market cap between 0 and $20m

2)Historical PE of between 0 and 20 (ie historically profitable, very few have forecasts published)

3)Revenues of greater than $10 million

4)Not currently suspended (ie AHJ )

List by market cap


Ticker Short Name Market Cap P/E
SOO AU Equity SOLCO LTD 17,965,230 6.0
SDI AU Equity SDI LTD 17,829,830 14.4
PFG AU Equity PRIME FINANCIAL 17,815,860 4.6

VSC AU Equity VITA LIFE SCIENC 17,356,200 3.6
ISS AU Equity ISS GROUP LTD 17,213,510 15.1
MNY AU Equity MONEY3 CORP LTD 16,863,180 5.3
GLE AU Equity GLG CORP LTD 16,672,500 6.3
ACK AU Equity AUSTOCK GROUP 16,071,410 3.0
EAL AU Equity E & A LTD 15,938,870 9.8
AIR AU Equity ASTIVITA RENEWAB 15,808,970 4.9
EMB AU Equity EMBELTON LTD 15,169,690 9.9
LBL AU Equity LASERBOND LTD 14,681,710 10.5
ITD AU Equity ITL LTD 14,480,990 15.3
TAG AU Equity TAG PACIFIC LTD 14,271,420 2.5
IPR AU Equity IPERNICA LTD 13,891,410 8.8
PNW AU Equity PACIFIC STAR NET 13,441,500 15.8
TQH AU Equity 3Q HOLDINGS LTD 13,266,120 7.2
OEC AU Equity ORBITAL CORP LTD 13,090,290 7.4
IAW AU Equity INTEGRATED LEGAL 12,754,310 8.9
JIN AU Equity JUMBO INTERACTIV 12,256,410 2.5
MHI AU Equity MERCHANT HOUSE 12,211,660 13.3
ADQ AU Equity ADG GLOBAL SUPP 12,201,720 10.0
HYO AU Equity HYRO LTD 11,582,280 0.9
AMB AU Equity AMBITION GROUP 11,419,060 6.3
JYC AU Equity JOYCE CORP LTD 11,082,880 2.6
HII AU Equity HIRE INTELLIGENC 10,014,280 5.5
AAU AU Equity ADCORP AUSTRALIA 10,011,640 7.3
EPY AU Equity E-PAY ASIA LTD 9,678,155 4.8
CAJ AU Equity CAPITOL HEALTH 9,415,531 9.8
MNF AU Equity MY NET FONE LTD 8,934,444 8.9
PGC AU Equity PARAGON CARE LTD 8,761,238 8.4
EBG AU Equity EUMUNDI GROUP LT 7,807,193 5.6
MBD AU Equity MARBLETREND GROU 7,582,783 6.9
PTB AU Equity PTB GROUP LTD 7,572,915 11.5
TTA AU Equity TTA HOLDINGS LTD 7,008,593 1.5
LMW AU Equity LANDMARK WHITE 6,897,195 11.2
AFT AU Equity AFT CORP LTD 6,715,195 3.8
COO AU Equity CORUM GROUP LTD 6,531,035 3.8
SRH AU Equity SAFEROADS HLDGS 5,590,000 7.6
EPL AU Equity EYECARE PARTNERS 5,318,647 6.0
OTI AU Equity ORIENTAL TECHNOL 5,054,444 12.7
MDG AU Equity MEDTECH GLOBAL L 5,012,403 15.5
CRW AU Equity CRW HOLDINGS LTD 4,657,365
QST AU Equity QUEST INVEST 3,791,501 5.6
REF AU Equity REVERSE CORP LTD 3,787,669 2.9
TTI AU Equity TRAFFIC TECHNOLO 3,522,447
COJ AU Equity COMMSTRAT LTD 3,441,363 4.6

Since the end of last year there have been some exceptional performances by many of these micro-caps, in a very tough market.


JIN up 350%
MNF up 300%
COO up 300%
CAJ up 100%
ISS up 70%

All these companies now have market caps greater than $20m and no longer make the updated list in the previous post above.


I truely believe there are some tremendous opportunities in this space, that will prosper irrespective of general market conditions.

[Corporate]

Thanks for this list SF, that gives me a lot of companies to work my way through.

Also, are you able to share how you came up with the list? Is there a website available for the average joe?


Update as of yesterday.

Filters:
- sub $20m m/cap
- revenue greater than $10m
- NPAT positive
- EBITDA greater than $1m

Pulse Health Limited (ASX:PHG)
Vesture Limited (ASX:VES)
Cougar Metals NL (ASX:CGM)
Gage Roads Brewing Co Limited (ASX:GRB)
Money3 Corporation Limited (ASX:MNY)
Australian Ethical Investment Ltd. (ASX:AEF)
E&A Limited (ASX:EAL)
Greencap Limited (ASX:GCG)
Embelton Ltd. (ASX:EMB)
Laserbond Limited (ASX:LBL)
CPT Global Limited (ASX:CGO)
ADG Global Supply Limited (ASX:ADQ)
Globe International Ltd. (ASX:GLB)
Empired Ltd. (ASX:EPD)
Merchant House International Ltd. (ASX:MHI)
e-pay Asia Limited (ASX:EPY)
PlatSearch NL (ASX:PTS)
OTOC Limited (ASX:OTC)
ipernica Ltd. (ASX:IPR)
SDI Ltd. (ASX:SDI)
Carbon Conscious Ltd. (ASX:CCF)
Integrated Legal Holdings Ltd. (ASX:IAW)
Adcorp Australia Ltd. (ASX:AAU)
Pacific Star Network Ltd. (ASX:PNW)
Ambition Group Ltd. (ASX:AMB)
FIRSTFOLIO Limited (ASX:FFF)
Buderim Ginger Ltd. (ASX:BUG)
Landmark White Ltd. (ASX:LMW)
AstiVita Renewables Limited (ASX:AIR)
Vietnam Industrial Investments Limited (DB:NJ4)
Hire Intelligence International Ltd. (ASX:HII)
Digital Performance Group Ltd (ASX:DIG)
CareersMultilist Limited (ASX:CGR)
TTA Holdings Limited (ASX:TTA)
Drill Torque Limited (ASX:DTQ)
Paragon Care Ltd. (ASX:PGC)
PTB Group Limited (ASX:PTB)
Marbletrend Group Limited (ASX:MBD)
Traffic Technologies Limited (ASX:TTI)
World Reach Limited (ASX:WRR)
Redbank Energy Limited (ASX:AEJ)
Oriental Technologies Investment (ASX:OTI)
Reverse Corp Limited (ASX:REF)

[percy]

Steve;Thank you for the list.Will enjoy doing some research.Two or three I have, two or three I know,but a good number of new ones.

[steve fleming]

Thanks for this list SF, that gives me a lot of companies to work my way through.

Also, are you able to share how you came up with the list? Is there a website available for the average joe?

Hi Corp, this is from CapitalIQ ( https://www.capitaliq.com/home.aspx ) however unfortunately it is subscription based.
It is useful in that there is literally hundreds of criteria (financial and non-financial) that you can screen by.
Í am happy to run some screens for you if you would like.

[Lizard]

Here's a freebie that can do a few things: http://asxiq.com/fundamentals/fundMainScreener.php

Not all the screens are working 100% though, so you'll have difficulty getting same results as Steve's search from it, but prices seem to be reasonably up to date. I've found it useful as a starter when trying to find shares from scratch. Click around the site and you find a goldmine of data.

[Lizard]

Looks like PEH will finally make it on the list, with revenue of $10.6m for 2012 - that's presuming they can manage another marginal profit. New CEO and Chairman this year, so will be interesting to see if they can generate growth while containing costs, but moving fairly slowly, so I don't see any hurry to buy them - maybe next year.

[Lizard]

Longreach Group (LRG) not quite sneaking in there this year, with revenues at $9.4m, but say they will produce a 5% NPBT profit margin ($300k NPAT?). Market cap $4.4m at 11cps.

Positive forecasts, but LRG record a bit patchy and very long-winded turnaround since Nightingale Partners took it on. However, looks possible for a trade at some stage - maybe in 6-12 months time.

[Lizard]

AZV - Azure Healthcare another one to add to the watchlist, Steve. Emerged from TSH after their main trading business went into liquidation. I think from memory this was the secondary business and my vague impression only has been that it is sound. Market cap $4.4m (at 2.6cps - nothing on offer till 3.5cps though). Revenue $8.7m at HY and just reported record sales in April-June. Were forecasting a loss of $0.4-$0.8m back in April, but seem to have turned that around to a $0.6-$0.8m profit, although that includes gains from liquidation.

[Lizard]

Hey, sorry AA. I was really just adding it for completeness of a list and didn't look at liquidity. There are very few on this thread that have much liquidity going for them anyway - that's the territory.

I have an interest in illiquid small caps - despite the boredom of nothing happening for a long time. However, I'm not the expert Steve is and I'm still figuring out the precise mix of secret ingredients needed to get them to rise. :)

[Lizard]

IAW result out today - maybe doesn't quite deserve a market cap under $10m... but the aggregation programme doesn't exactly seem to be adding value yet either. Jury still out on this legal services firm and perhaps short term value here, but I'd lean towards the view they may be heading off the rails in the medium term...though shows promise for eventual reform and possible success.

[steve fleming]

http://www.eurekareport.com.au/article/2012/8/1/shares/small-caps-take-out-gold

An interesting read given we are mid way through the reporting season.

Once the season is over, will be an interesting exercise looking at the top ranked EPS performers.

I saw ADQ report a 141% increase in EPS, BOL has reported a 246% trading NPAT increase

[steve fleming]

http://www.eurekareport.com.au/article/2012/8/1/shares/small-caps-take-out-gold

An interesting read given we are mid way through the reporting season.

Once the season is over, will be an interesting exercise looking at the top ranked EPS performers.



These companies recorded the largest increases in EPS between FY11 and FY12 (under 100m market cap)

First column is EPS growth (greater than 50% increase), second column is current market cap

Company Name Diluted EPS before Extra, 1 Yr Growth % [LTM] (%) Market Capitalization [Latest] (AUDmm, Historical rate)
Brierty Limited (ASX:BYL) 10,625.0 36.9
Noni B Limited (ASX:NBL) 1,094.0 25.5
Empired Limited (ASX:EPD) 531.1 16.1
Hughes Drilling Pty Limited (ASX:HDX) 529.4 51.1
Gage Roads Brewing Co Limited (ASX:GRB) 275.0 23.2
Mayne Pharma Group Limited (ASX:MYX) 265.5 59.3
Corum Group Limited (ASX:COO) 256.1 36.3
Carbon Conscious Ltd. (ASX:CCF) 241.2 7.14
Cryosite Limited (ASX:CTE) 210.0 14.0
My Net Fone Limited (ASX:MNF) 204.4 39.0
Konekt Limited (ASX:KKT) 191.5 4.53
Glg Corp Limited (ASX:GLE) 178.1 20.4
Maxsec Group Limited (ASX:MSP) 159.3 1.87
Bisalloy Steel Group Limited (ASX:BIS) 158.2 58.4
Saunders International Limited (ASX:SND) 137.5 41.7
BigAir Group Limited (ASX:BGL) 131.5 80.5
ITL Ltd. (ASX:ITD) 130.5 20.5
Swick Mining Services Limited (ASX:SWK) 127.6 60.4
ISS Group Limited (ASX:ISS) 122.0 25.2
MGM Wireless Ltd. (ASX:MWR) 117.6 4.0
Capitol Health Ltd. (ASX:CAJ) 117.3 23.4
Logicamms Limited (ASX:LCM) 109.3 72.1
Allmine Group Limited (ASX:AZG) 93.9 32.2
E&A Limited (ASX:EAL) 76.3 26.4
Pulse Health Limited (ASX:PHG) 71.5 22.8
Royalco Resources Limited (ASX:RCO) 70.7 24.8
SDI Ltd. (ASX:SDI) 70.0 25.6
ADG Global Supply Limited (ASX:ADQ) 67.3 11.8
Beyond International Limited (ASX:BYI) 65.9 50.3
Brisbane Broncos Limited (ASX:BBL) 61.2 22.5
Objective Corporation Limited (ASX:OCL) 60.6 50.4
Joyce Corp. Ltd. (ASX:JYC) 53.6 10.1

[Joshuatree]

Cheers Steve ; Im in to Brierty, Corum, and Capital Health all up nicely. How bout you?

[steve fleming]

Cheers Steve ; Im in to Brierty, Corum, and Capital Health all up nicely. How bout you?

Of those listed, MYX MNF CAJ & ADQ

Kicking myself I didn't pick up SDI at 10c in July (had a buy order that was n''t hit - now 24c)

Am looking at CTE

[OneUp]

Thanks for the list Steve Fleming.

EPD looks interesting - trading on a prospective PER of 6.5x post the recent acquisition, even assuming no improvement in the core business. That is, $17m market cap / $2.6m NPAT in FY13 (i.e. $1.3m NPAT from core business + ~$1.3m NPAT from Conducive based on stated $2m EBIT less 30% tax and assuming 6% interest on the first $3.2m tranche). If you assume some improvement in the core business (they delivered 500% NPAT growth in FY12 over FY11, albeit off a low base) then it could be on ~5x PER.

Listed peers aren't on very high multiples, so maybe a reasonable PER is 10x, although could argue these guys have stronger organic growth prospects. Plus consolidation opportunities of boutique IT service firms.

Impressive customer list of major resource companies as well as senior management (many of whom have jumped from the much larger ASG).

Looking back over ASG's history, they grew from an obscure small cap IT services firm to a much larger business within five years through organic growth and acquisition. Share price also rallied from 20c to $1.90 at their peak. (Obviously ASG well off those highs now....do hope EPD avoid making the mistakes ASG has).

Disclosure: stock acquired recently.

[mamos]

Mayne Pharma no longer under $100m MC now. Mayne Pharma to acquire Metrics, Inc. for US$105m plus up to US$15m in earn-out payments.

Mayne Pharma will fund the acquisition via a new US$48.5m2 debt facility (with an additional uncommitted US$15m accordion facility) and a A$65m equity raising

[steve fleming]

Many companies on the list did really well. It would be interesting to see if the screening tool can be refined to lock in on what made those companies successful compared to the dogs. Or perhaps a technical signal that would have green lit the price. We can't kiss all the girls, but some way to sort the pretty ones from the ugly ones would be great :-)

2012 has definitely been good for a number of small caps.

I haven't done any real analysis on this, but pretty sure the key driver of the successful companies versus the dogs is strong eps growth....and the one thing small caps can do well is deliver large eps growth as they scale up and leverage their fixed cost base.

[steve fleming]

So perhaps one of the screening factors should be % eps growth over 6 months, 12 months etc - then rank them by that?

OK, Filter is market cap less than $100m and CAGR EPS over last 2 years of + 20%. I found 2 years strong EPS growth to be the filter that best co-incides with strong share price appreciation. i.e. the market re-rates once strong sustainable growtth can be demonstrated

This filter picks up all the goodies (26 companies in total (out of 1800 odd less than $100m in m/c))....includes EPD, MNF, BGL, JIN, CAJ, COO, DDR, OCL

Company Name Exchange:Ticker Market Capitalization [Latest] (AUDmm, Historical rate) Diluted EPS before Extra, 2 Yr CAGR % [LTM] (%)
Cryosite Limited (ASX:CTE) ASX:CTE 13.1 1,388.0
Bisalloy Steel Group Limited (ASX:BIS) ASX:BIS 53.7 1,350.4
Empired Limited (ASX:EPD) ASX:EPD 27.2 424.6
Sietel Ltd. (ASX:SSL) ASX:SSL 24.8 229.4
Carbon Conscious Limited (ASX:CCF) ASX:CCF 6.9 162.9
Oriental Technologies Investment (ASX:OTI) ASX:OTI 5.05 153.5
Corum Group Limited (ASX:COO) ASX:COO 41.1 131.3
Brisbane Broncos Limited (ASX:BBL) ASX:BBL 23.5 105.1
Scantech Ltd. (ASX:SCD) ASX:SCD 7.02 96.2
Medical Developments International Limited (ASX:MVP) ASX:MVP 98.1 72.5
Runge Limited (ASX:RUL) ASX:RUL 55.2 66.7
Capitol Health Ltd. (ASX:CAJ) ASX:CAJ 36.2 65.5
Allmine Group Limited (ASX:AZG) ASX:AZG 49.9 56.8
Objective Corporation Limited (ASX:OCL) ASX:OCL 53.4 56.7
Resource Development Group Limited (ASX:RDG) ASX:RDG 16.9 47.1
Jumbo Interactive Limited (ASX:JIN) ASX:JIN 94.3 44.9
Merchant House International Ltd. (ASX:MHI) ASX:MHI 15.1 43.9
Supply Network Limited (ASX:SNL) ASX:SNL 42.1 39.8
Brierty Limited (ASX:BYL) ASX:BYL 35.2 37.5
Brand New Vintage Limited (ASX:BNV) ASX:BNV 3.17 36.3
CI Resources Limited (ASX:CII) ASX:CII 38.6 32.7
Dicker Data Limited (ASX:DDR) ASX:DDR 64.5 31.1
Beyond International Limited (ASX:BYI) ASX:BYI 61.0 30.9
BigAir Group Limited (ASX:BGL) ASX:BGL 93.6 27.8
Korvest Ltd. (ASX:KOV) ASX:KOV 60.7 24.4
My Net Fone Limited (ASX:MNF) ASX:MNF 59.9 20.8

[steve fleming]

OK, Filter is market cap less than $100m and CAGR EPS over last 2 years of + 20%. I found 2 years strong EPS growth to be the filter that best co-incides with strong share price appreciation. i.e. the market re-rates once strong sustainable growtth can be demonstrated

This filter picks up all the goodies (26 companies in total (out of 1800 odd less than $100m in m/c))....includes EPD, MNF, BGL, JIN, CAJ, COO, DDR, OCL

Though obviously if you wait until the growth has been delivered, you are likely to have missed out on much of the initial upside...thus to really maximise returns you need to get in pre-growth/ or when growth is small (in $ terms - say NPAT still under $2 million) such that the market does not yet pay attention.

[steve fleming]

Interesting column from Roger Montgomery today - THREE MICROCAPS TO CONSIDER



His selections are:

Supply Network Limited

Beyond International Ltd

My Net Fone Ltd

All of those three were picked up in the filtering exercise above.

In fact of the list of 26 , approximately 70% have been multi-baggers - I think that this is a very powerful screening tool.

[Corporate]

steve, are you using this site to screen

http://asxiq.com/fundamentals/fundMainScreener.php

or something else?

[steve fleming]

Hi Corporate,

this is from CapitalIQ ( https://www.capitaliq.com/home.aspx )

However it is subscription based.

[steve fleming]

It is really quite obvious, but per the following:

http://stocknessmonster.com/news-item?S=WAM&E=ASX&N=709129

"the greatest correlation between share prices and any other variable is EPS growth"

[steve fleming]

It is really quite obvious, but per the following:

http://stocknessmonster.com/news-item?S=WAM&E=ASX&N=709129

"the greatest correlation between share prices and any other variable is EPS growth"

Searching for EPS growth, here are some positive November AGM updates from various micro-caps mentioned before on this thread:

MNY
"Earned income for the quarter ending September 2012 is up 37% Profit before tax for the quarter is up 37%. Normalised profit before tax should be 30% up on last year."

ADQ
"ADG has established a global footprint, invested in systems and processes and assembled a skilled management team. The business is
well positioned to significantly grow revenue and profit in the medium
term." (Note: ADQ reported a 102% increase in EBIT in FY12 and net profit increased 140% to $1.75m in FY12)

CAJ
"Underlying Net profit Before Tax (NPBT) totalled $1.5 million for the four months to October-end FY2013 –an increase of 25% on the previous corresponding period of $1.1 million. Based on this strong ongoing financial performance and a positive operating outlook for FY2013, the Board of Directors maintain their current Dividend policy and expect to continue to pay dividends at both the half and full year."

EPD
"Revenue $44.7M, EBITDA up 103% to $2.61M, NPAT up 503% to $1.3M. Expecting organic growth in all key measures in FY13. Outstanding EPS growth opportunity" - that is Management's comment.

COO
"Based on current operations Shareholders may now expect the announcement of a distribution in conjunction with the release of
the Group’s Half Year Results in February 2013."

MNF
Was forecasting a 11% increase in NPAT, but this will be significantly higher following the two recent earnings accretive acquisitions

[Joshuatree]

Thanks for that Steve . A quick look at their charts shows all have had a great run up(in 6 months) except for ADQ. Heres to them continuing in 2013. Still holding COO and CAJ Maximas M:t_up:errimas

[Corporate]

Steve

ADQ is an interesting company. I have started putting together a spreadsheet to analysis their historic results. The first thing that jumps out is that in each of the last 6 month periods, EBITDA and NPBT has increased. However, operating and free cash flow are still very negative (even in the last quarterly cash flow). Essentially debt is blowing out to around $7-8m and all of the capital raised previously has been used.

So even though EPS are increasing, it isn't coverting into cash flow.

Would appreciate any thoughts you have

Cheers
C

[steve fleming]

Hi Corporate

Firstly, ADQ is not a mature dividend paying company generating lots of FCF growing EPS modestly each year.

It is in a significant expansionary phase growing revenues and profits at large double digit rates, and accordingly requiring large investment in working capital to fund this growth. The discrepancy between cash flow and EBITDA, while not ideal, is not a surprise nor is it far from uncommon.

One way of looking at it is rather than spending $x million in cash to acquire a company with an existing range of products in order to grow, they have decided to develop this range internally, thus incurring the cash flow shortfalls and increase in debt. But if they were to expand as aggressively as they have done, but by acquisition instead, similarly that would have resulted in an increase in debt levels. You don't grow revenues from $30m to $80m odd in no time without some increase in debt to fund the growth.

It is all about risk and reward. ADQ is cheap because in part of the issues you have raised. From my perspective, to date everything that Management have set out to achieve they have. ADQ has been a real success story. I have confidence that they will continue to progress their key near term goals ( CF positive and margin expansion) that is why I continue to hold.

But if you are after a high FCF yielding low risk stock, ADQ will not suit you.

[steve fleming]

The other thing to note is that when ADQ does mature and as the large investment in inventory ( and receivables) is converted to cash, and as they tighten their stock turns and inventory / debtors days, then you would expect some large positive cash flow numbers to be reported reflecting the release of the working capital.

Operating cash flow is simply just a combination of reported EBITDA plus/minus working capital movements.
Given its stage in the business cycle, working capital movements are going the wrong way for ADQ at the moment. That is why you are currently paying $13m for what could easily be a $50m plus business in 2 years time. I acknowledge that there may be a risk of a capital raise should the directors want to reduce gearing, but to date their bankers have been very supportive.

I am a big fan of the ADQ story, but agree that it is a reasonably high risk play - that's why it is cheap!!

To understand the ADQ story as it currently stands, though, does require an understanding of the concept/ nature of working capital ( and its impact on cash flows). The reported negative cash flows need to be considered in light of the working capital investment taking place to fund its rapid growth.

[Corporate]

Thanks Steve. I understand what you are saying. Out of interest, what price did you pick up your shares at?

I am keen to see the profitability of each of the three divisions. However, frustratingly and contrary to IFRS 8, the segment reporting note in the annual report does not disclose profit, ebit, or ebitda by division.

[cloggs]

I noticed that one thing the companies mentioned above (high EPS, small cap) have in common is that they are illiquid. Liked EPD enough to buy a bunch of them this morning though. Like ADQ story but a big difference between buy and sell and last sale and sell prices.

[steve fleming]

I acknowledge that there may be a risk of a capital raise should the directors want to reduce gearing, but to date their bankers have been very supportive.

Well here comes the capital raise, hopefully the upside from acquisition offsets downside from dilution.

--------------------------------------------------------

Perth-based ADG Global is seeking to raise $3 million with the help of Melbourne stockbroking firm Investorfirst Securities. The shares are being offered at 5.5¢ apiece.

ADG, which sells and distributes specialist equipment to the mining industry, plans to use the proceeds to fund the growth of its international supply chain and for an acquisition in Singapore.

The company has grown rapidly over the past two years and now has a presence on four continents and operates in over 40 countries. Its shares closed at 6.8¢.

[Joshuatree]

What do you reckon Steve. Will you be taking up a bunch? Down to 5.4c atp

[Corporate]

Not a big fan of companies that raise capital (below market) and then give a share part of the placement to directors.

[steve fleming]

To be fair to the Directors , they all supported the share price by buying significant amounts on market at below 5.5c in recent months, when everyone else also had the opportunity to buy below 5.5c, when it touched 4.3 cents a little while ago.

Nobody likes dilution, but I kind of step back a bit, and look at what ADQ are doing – they have pretty much from a limited going nowhere position, created a global $100m plus turnover company in a couple of years.
Yes, it has low margins at the moment / not cash flow positive, but where they can take the business from here is what excites me. Yes, it is early stage, but it is the early stage of what could potentially become a major scaleable multi-national business, providing logistics, distribution and equipment support services across the world, and with a current market cap of $15m. Now that they have developed their own product, and with this acquisition, can now provide engineering and maintenance services, they have become a one-stop parts and component supplier/distributor/logistics manager and equipment services provider to major mining and other projects, with a particular focus on the high growth region of Africa....and the associated opportunities to easily scale up from their current $100m plus revenues, plus increase their margins.... Revenue growth plus margin expansion can result in very large and quick step up in profit.

Conceptually, although very different businesses, I find parallels with what IPP are doing (ie laying the groundwork for a potentially major SCALEABLE multinational business)…but IPP have a market cap of $200m or so, notwithstanding IPP being EBIT/CF negative.
Ie ADQ, like IPP, are in the process of genuinely BUILDING a potentially globally significant business essentially from scratch, not just RUNNING a business....but are therefore are far riskier investment proposition.

Hopefully the short term hot copperites who generally are always very anti directors/dilution have now expressed their short term frustration by selling. This is different from a normal exploration capital raise which inevitably results in shareholder destruction Hopefully buyers will come back next week, as the Direcotrs/IF promote the story, and the institutions that missed out on their share in the oversubscribed placement buy on market and take out the 4,5m seller waiting at 6c.

And JT yes- I have another 250k bid waiting at 5.5 and will buy more if if falls lower.

[Joshuatree]

On behalf of many who have ADQ in the comp thanks Steve for your always concise , astute sharings. I was assuming youd be receiving an offer for sophs:). A vote of confidence, depending on ones risk/reward situ. cheers JT

[percy]

Anyone enjoying the fun I am having with LRG.Market cap has gone from approx $3.5mil to $13.5 mil in a few months after they announced they had sold their major operating division for $16mil.Also can receive extra earnout if the numbers add up over the next couple of years.Also have a fear stack of imputation credits avaliable.LRC have 6 months to try and buy another business or else they return the cash to shareholders.Dr.Jens Neiser of Neiser Capital has just joined the board.Googled him and he appears to be a mover and shaker.

[JBmurc]

ADQ down 20% ...?

[Joshuatree]

Look back a thread or two; cap raising but not for most .

[Lizard]

Antaria (ANO) maybe looking to join the profitable micro-caps in the next year. Market cap currently $9.9m at 1.7cps. Chart turned positive recently as some positive signs finally starting to appear that they may achieve scale for their Zinclear IM and Alusion ingredients (supplied for sunscreen and cosmetics). Will likely get a boost when/if they announce the hinted at contract with major US sunscreen manufacturer, although the hints have gone on for a number of years... just starting to sound more concrete.

[Ricky99]

Steve do you feel like doing a new extract to keep us all busy...

Screening is:

1)Market cap between 0 and $15m

2)Historical PE of between 0 and 20 (ie historically profitable, very few have forecasts published)

3)Revenues of greater than $2 million

4)Not currently suspended (ie AHJ )

Keen to look at the smaller end of the market, have done well out of MWR as they have turned the corner.

[steve fleming]

Steve do you feel like doing a new extract to keep us all busy...

Screening is:

1)Market cap between 0 and $15m

2)Historical PE of between 0 and 20 (ie historically profitable, very few have forecasts published)

3)Revenues of greater than $2 million

4)Not currently suspended (ie AHJ )

Keen to look at the smaller end of the market, have done well out of MWR as they have turned the corner.

Ricky - screening of your criteria as requested

Company Name
Market Capitalization [Latest] (AUDmm, Historical rate)
Total Revenue [LTM] (AUDmm, Historical rate)
P/LTM Diluted EPS Before Extra [Latest] (x)
Rectifier Technologies Limited (ASX:RFT)
ASX:RFT
1.07
9.08
250.0
CL Asset Holdings Limited (ASX:CLS)
ASX:CLS
5.73
23.7
31.0
Drill Torque Limited (ASX:DTQ)
ASX:DTQ
9.62
34.8
22.3
Azure Healthcare Limited (ASX:AZV)
ASX:AZV
9.47
18.2
21.7
CPT Global Limited (ASX:CGO)
ASX:CGO
12.1
39.5
19.9
Brand New Vintage Limited (ASX:BNV)
ASX:BNV
7.04
5.44
18.7
Landmark White Ltd. (ASX:LMW)
ASX:LMW
9.66
20.7
18.4
Techniche Ltd. (ASX:TCN)
ASX:TCN
8.5
6.85
16.5
Maxsec Group Limited (ASX:MSP)
ASX:MSP
3.73
4.59
16.2
Desane Group Holdings Ltd. (ASX:DGH)
ASX:DGH
14.8
2.88
14.5
Kip McGrath Education Centres Ltd. (ASX:KME)
ASX:KME
2.41
7.91
14.2
Laserbond Limited (ASX:LBL)
ASX:LBL
13.6
14.4
12.1
Pacific Star Network Ltd. (ASX:PNW)
ASX:PNW
9.4
14.6
11.9
Australian Pacific Coal Limited (ASX:AQC)
ASX:AQC
8.53
2.49
11.7
Ambition Group Ltd. (ASX:AMB)
ASX:AMB
11.7
92.2
11.7
MGM Wireless Limited (ASX:MWR)
ASX:MWR
6.6
2.61
10.8
Embelton Limited (ASX:EMB)
ASX:EMB
14.2
36.4
10.3
ILH Group Limited (ASX:IAW)
ASX:IAW
10.9
31.7
9.55
Tranzact Financial Services Ltd. (ASX:TFS)
ASX:TFS
10.4
9.31
9.47
Facilitate Digital Holdings Limited (ASX:FAC)
ASX:FAC
3.76
6.47
9.18
Cellnet Group Limited (ASX:CLT)
ASX:CLT
8.91
63.3
8.0
e-pay Asia Limited (ASX:EPY)
ASX:EPY
7.97
11.4
7.86
ADG Global Supply Limited (ASX:ADQ)
ASX:ADQ
13.9
83.7
7.63
CareersMultilist Limited (ASX:CGR)
ASX:CGR
7.18
72.0
7.49
Traffic Technologies Limited (ASX:TTI)
ASX:TTI
14.1
53.1
7.1
TTA Holdings Limited (ASX:TTA)
ASX:TTA
7.42
50.5
6.84
Rongtai International Group Holdings Limited (ASX:RIG)
ASX:RIG
13.9
164.2
6.67
3Q Holdings Limited (ASX:TQH)
ASX:TQH
13.2
24.0
6.38
Buderim Ginger Ltd. (ASX:BUG)
ASX:BUG
14.7
76.3
5.89
MBD Corporation Limited (ASX:MBD)
ASX:MBD
4.6
42.9
5.43
Richfield International Limited (ASX:RIS)
ASX:RIS
3.27
6.7
5.02
Adcorp Australia Limited (ASX:AAU)
ASX:AAU
7.28
28.6
4.67
Greencap Limited (ASX:GCG)
ASX:GCG
14.6
66.5
4.67
Scantech Ltd. (ASX:SCD)
ASX:SCD
7.9
15.4
4.66
Resource Development Group Limited (ASX:RDG)
ASX:RDG
14.3
36.4
4.28
Delecta Limited (ASX:DLC)
ASX:DLC
4.43
22.5

[steve fleming]

Just to clarify, the above picks up all profitable companies up to $15m m/c with revenues greater than $2m (ie not just limited to PEs less than 20)

[NZSilver]

Firstly, thanks Steve, much appreciated. secondly - Azv (second from top) looks interesting? Anyone done further research. Thought on others on the list? Growth potential?

[Lizard]

Firstly, thanks Steve, much appreciated. secondly - Azv (second from top) looks interesting? Anyone done further research. Thought on others on the list? Growth potential?

I am holding a few AZV. Has been very illiquid, but seems to be improving. Transformation from former TSH after losing TSV and now more focussed and will get the opportunity to prove themselves. Forecast is positive, but difficult to say how much... may be some upside from TSV liquidation and Sedco acquisition. Really need to prove themselves, but I figure there is potential value of 16-18cps here if they can continue to show growth and are able to improve margins and control expenses, so a punt on value and some positive signs.

[percy]

I am holding a few AZV. Has been very illiquid, but seems to be improving. Transformation from former TSH after losing TSV and now more focussed and will get the opportunity to prove themselves. Forecast is positive, but difficult to say how much... may be some upside from TSV liquidation and Sedco acquisition. Really need to prove themselves, but I figure there is potential value of 16-18cps here if they can continue to show growth and are able to improve margins and control expenses, so a punt on value and some positive signs.

You are not alone.!!! Brought a few after I saw you picked them in the competition.!!!!

[mark100]

Alan Kohler's weekend article had a list of small caps of which MNY was included (extract below). Most of the stocks mentioned are moving today. My problem with MNY so far is their high rates of headline growth are not converting into EPS growth (EPS flat the past 3 years). And even with the big headline forecast for this half, on a fully diluted basis, I don't expect much EPS growth. They are on my watchlist however.


Hugh’s Farewell Tips

Hugh Robertson is one of Australia’s best small cap stock-pickers (unlike your humble correspondent). Yesterday was the last day of independence before his firm, InvestorFirst, merges with Wilson HTM next week and he goes to work for them, so he wrote a final note to clients from InvestorFirst – before heading out to a long lunch – in which he lists his eight favourite stocks. Here they are, in no particular order.

Pro-Pac Packaging (PPG)

Price 48c
Target 75c

I think 2013 will be Pro-Pac Packaging’s year. The influence of Ruffy Geminder, its major shareholder, will become more focused on doing company-making deals, and I don’t have any doubts as to his grasp of the industry, and the company’s capacity to execute.

Collection House (CLH)

Price $1.43
Target $2.00

Banks keep lending credit card debt and consumers still keep getting into trouble. Management here are very cerebral and disciplined. Over time the register of Collection House will change as it becomes institutionalised – indeed Perpetual Trustees, one of Australia’s premier investment groups went substantial yesterday. If compared against Credit Corp, its bigger and better known competitor, Collection House looks dirt cheap.

Money3 (MNY)

Price 67c
Target $1.00

Another consumer finance stock, Money3 is coming on to the radar of lots more people. The management are good, honest and hard workers with big personal shareholdings – nearly always a good sign.

As the banks continue to flee the bottom end of the finance market, expect groups like Money3 to continue to prosper.

Dicker Data (DDR)

Price 73c
Target $1.10

Dicker Data is a wholesaler of IT hardware, and quietly announced pre-Christmas that:

1. It would increase dividends to 100% of earnings, and

2. It would start paying dividends quarterly.

It’s 90% owned by Mr Dicker which might put people off, but hey, what about Reece Australia! It hasn’t stopped them from being one of the best stocks in the last 20 years.

Jumbo Interactive (JIN)

Price $2.90
Target $4.50

Jumbo Interactive looks like, feels like, and I think will be like Webjet in terms of market sentiment. An online reseller of lottery tickets, it has done very well indeed domestically and has now expanded into North America. I don’t consider lotteries as gambling per se; even Methodists buy them.

AMA Group (AMA)

Price 38c
Target 60c

Possibly one of the most intriguing companies I have come across in 30 years, this mini-conglomerate of smash repairers, bull bar manufacturing and cabling is managed by one of the most extraordinary men I’ve met. He is all over his business and displays a passion and enthusiasm that is almost mesmeric. All his divisions have opportunities for enormous growth and I think Ray Malone will deliver in spades.

ADG Global Supply (ADQ)

Price 5.7c
Target 10c

John Mancini has done a great job with this little logistics and supply group, and in a recent placement we organised, it was significant to see that his wise chairman agreed and has spent $1 million buying shares along with other members of the management team. With a market cap of only $15 million odd, ADG Global Supply is still well below the radar, but me thinks not for much longer.

And finally,

Monadelphous (MND)

Price $26.00
Target $35.00

I’ve made plenty of mistakes over the past 30 years, none more so than selling this stock. Monadelphous is the gift that just keeps giving – beautiful management, superb discipline, great dividends.

Barring the ‘Black Swan’ belting us from abroad, it’s hard to see too much going wrong here.

Just so you know, the only one of those that I own is Monadelphous. I agree with Hugh’s comments, and I’m having a good look at the other seven.

[percy]

mark100
thanks for your post.

[percy]

MND looks to be pretty fully valued at the moment, and the price is currently at an all time high (bit odd since the mining boom was so last year, and most companies share price went down the toilet). I recently bought a few mining services companies that had been totally beaten down with P/Es of <8 - hopefully they will benefit from a lift in sentiment/economics more so than the companies that have already recovered (or never dropped in the first place).

I look forward to you sharing these little "gems" with us.!!!

[percy]

Not quite "gems" yet but hoping. Charts indicate a turn in trend, so waiting to see if they continue on to form a confirmed uptrend. The picks were BLY, MYE, EHL and NWH. I consider these "spec" stocks - ie. they were bought for a trading account, not a long term hold.

You are a true "gem" KW.
Thank you.

[steve fleming]

Hopefully buyers will come back next week, as the Direcotrs/IF promote the story, and the institutions that missed out on their share in the oversubscribed placement buy on market and take out the 4,5m seller waiting at 6c.

Very nice of Hugh Robertson/Alan Kohler to help clear the massive 5m road-block at 6c today!

[steve fleming]

Alan Kohler's weekend article had a list of small caps of which MNY was included (extract below). Most of the stocks mentioned are moving today. My problem with MNY so far is their high rates of headline growth are not converting into EPS growth (EPS flat the past 3 years). And even with the big headline forecast for this half, on a fully diluted basis, I don't expect much EPS growth. They are on my watchlist however.

Agree,
MNY has yet to secure any debt funding facility.

As a result, in order to fund growth, they have had to constantly undertake capital raises over the past 3 years, which is a very expensive form of funding and very dilutionary.
They had to cut their dividend last year as a result.
They really need to secure a decent funding facility to leverage their balance sheet, the same way that FSA has grown, to stop their reliance on equity funding.

[steve fleming]

Not quite "gems" yet but hoping. Charts indicate a turn in trend, so waiting to see if they continue on to form a confirmed uptrend. The picks were BLY, MYE, EHL and NWH. I consider these "spec" stocks - ie. they were bought for a trading account, not a long term hold.

I think HDX would have to be one of the cheapest, quality mining services companies going round. Absolutely blue chip customer base and dominating market share.

Trading on less than 4 times FY13 NPAT plus offering 35% + EPS growth over FY13/14.

Extract from a recent broker report:

"HDX was able to report in November that growth is being driven by displacement of competitors (the largest component of recent growth), net expansion of the requirements of
existing clients and opportunities in new pits. A stable blue-chip client base at long life
mines underpins this growth.


HDX’s recent positive earnings guidance for the current December half contrasts with
downgraded guidance from many mining service companies including Boart Longyear
(BLY), NRW Holdings (NWH), Mastermyne Group (MYE) and others. The outlooks for
these companies have been negatively impacted by lower capital expenditure expectations
from major companies, challenging market conditions for a number of junior miners and
generally lower guidance on EBITDA margins arising from a more competitive environment
for most contractors."

[NZSilver]

Cheers for that Steve, looks like a well run company, are you in?

[steve fleming]

Cheers for that Steve, looks like a well run company, are you in?

Yes.

Theres a couple of things to note though:
1) Given it is not forecast to pay any tax until FY15, unlikely there will be any dividends before then
2) 3 of the 4 broker reports i have read say there is a possibility of a future capital raising, given the growth they have experienced (debt funded to date)
3) It is obviously exposed to the coal sector, but as per the recent HDX presentation, Australian coal production is forecast to grow through to 2017 (and i assume beyond) , which bodes well for the growth opportunities for HDX.

[cloggs]

Hughes Drilling is easy to understand. Small area, stick to a niche market of coal mines in Australia. As long as coal is required as per their expectation they should do okay.

[Joshuatree]

Picked up some HDX yest. Lots to like.

Exclusively, essential pit production drilling,all surface i think for blue chip customers with long life low cost producers.

Looking forward to results.

[Corporate]

Picked up some HDX yest. Lots to like.

Exclusively, essential pit production drilling,all surface i think for blue chip customers with long life low cost producers.

Looking forward to results.

Same! and some ADQ

[steve fleming]

Agree,
MNY has yet to secure any debt funding facility.

As a result, in order to fund growth, they have had to constantly undertake capital raises over the past 3 years, which is a very expensive form of funding and very dilutionary.
They had to cut their dividend last year as a result.
They really need to secure a decent funding facility to leverage their balance sheet, the same way that FSA has grown, to stop their reliance on equity funding.

Looks like MNY has been listening to me:

"The Directors of Money3 Corporation Limited (Money3) are pleased to advise that Money3 has mandated Westpac Banking Corporation (Westpac) to establish a $20 million credit facility to expand its motor vehicle finance business "

Should put an end to all the equity raisings

http://stocknessmonster.com/news-item?S=MNY&E=ASX&N=385792

[Joshuatree]

MNY........ Missed an entry ; Too late to get in?

HDX........ CEO emailed me back straight away. Results announced in the last week of feb. May email back asking re whether a cap raise is being considered; worth a try. Any one else like to post the merits of HDX on H/C, be great to get the profile out there.

[Joshuatree]

HDX.... Take your point ....but...fundamentally disagree and with the results out shortly am expecting the s/p to rise to it and beyond.Just not many people aware of HDX let alone its merits.

[steve fleming]

HDX put out earnings guidance in Nov and it didnt move the share price. Since then, QLD flooding has closed a heap of coal mines in the Bowen/
Surat Basin where HDX operates. If anything, I'd be expecting a downgrade for the second half.
http://www.adelaidenow.com.au/miners-spared-but-queensland-storm-closes-rail-and-ports/story-e6frea6u-1226563790140

Spoke to the CFO about this - they budget for wet season closures - in any event HDX are contracted to recover their costs from having drills on site, irrespective of whether they are in operation.

Recent new contract wins should see continued revenue growth into H2.

CFO also said about recent share price weakness, likely due to unsophisticated ex EMS holders getting out and HDX being a relative new company to the ASX.

Also said recent investor presentation was very well recieved by institutions and brokers - kind of suggest a capital raise, which may not be a bad thing. Better the certainty of an improved b/s, than the uncertainty of a potential capital raise (ie ADQ / MNY - cap raise @40c in November, now 80c)

If it gets cheaper, I'll buy more.

[Joshuatree]

I must not repeat myself; I must not re.......

[Joshuatree]

Anyone got a recent top 20 on HDX.? Opinion varies between60.2% and 91.11% owned by management.Anywhichway it sure is tightly held.

[skeet]

One of the larger shareholders in HDX Craig Burton is busy buying up GGE atm. Got me confused as to why, possible T/O being thrown around as one idea...

[NZSilver]

Yeh interesting why he would be buying them up, all American projects.

Picked up some HDX last week.

[skeet]

Heard back from the MD at GGE


Craig is simply accumulating shares in what he believes is an undervalued stock. He is a long time supporter and previously held 12%, then diluted to 7% and now 16%.

Craig is an unlikely candidate for a takeover bid, not his style.

So nothing to report going by that...

[Joshuatree]

Thanks for checking that out skeet. Ive had no response from HDX , re asking if they could supply me with a Top 20 shareholder list atp.

[skeet]

Thanks for checking that out skeet. Ive had no response from HGD , re asking if they could supply me with a Top 20 shareholder list atp.

I take it you mean HDX?

A bit of a dump on HDX today, does someone know something in advance...

[steve fleming]

I take it you mean HDX?

A bit of a dump on HDX today, does someone know something in advance...

well the result turned out to be ahead of guidance and consensus estimates.

Strong EBITDA margin expansion (from 37% to 42%)
Huge market share expansion (from 40% to 47%)
Strong cash flow generation ($5.4m prior to P&E funding (growth))

Capital management plan (After a period of funding the immediate growth opportunities, then surplus cash to repay debt then to fund dividends (presumably when it starts paying tax again))makes sense.

With references to a ”a conservative balance sheet” and their explicitly stated capital management plans suggest that there will not be any imminent capital raising, which I suspect some may have been expecting.

Assume a little H2 growth, HDX should easily do $12m NPAT for FY13, so trading on a forward PE of about 4.

[steve fleming]

Yep, you are probably right, the recent share price behaviour certainly suggests there is some maneuvering for a cap raise.

They should be able to make their $750k monthly repayments from operating cash (the $5.3m you noted was for 6 months, and with $12m estimated 2H EBITDA, 2H cash flows should be higher), however where the market takes a view (often without fully understanding the intricacies of the business) that a balance sheet is over leveraged, it is often best to bite the bullet and de-gear the balance sheet.

Personally, with debt ($28m) less than 1.5x EBITDA ($22m) and with an ICR of over 8x (EBITDA $10.1m / interest of $1.2m) i would not consider HDX to be highly geared, quite the opposite in fact, but if that's the view of the market, I am not going to argue against it.

Its a classic growth funding quandary - do you debt fund growth and avoid dilution and maximise returns to equity holders? or do you equity fund growth with a more conservative balance sheet to appease the market, but which provides equity holders with a lower return?

Anyway, with announced revenue growth of 62%, EBITDA growth of 83% and NPAT growth of 162%, and a number of brokers clambering over HDX for a piece of the action, a cap raising shouldn't be too difficult to get away at a reasonable price!

[percy]

Yep, you are probably right, the recent share price behaviour certainly suggests there is some maneuvering for a cap raise.

They should be able to make their $750k monthly repayments from operating cash (the $5.3m you noted was for 6 months, and with $12m estimated 2H EBITDA, 2H cash flows should be higher), however where the market takes a view (often without fully understanding the intricacies of the business) that a balance sheet is over leveraged, it is often best to bite the bullet and de-gear the balance sheet.

Personally, with debt ($28m) less than 1.5x EBITDA ($22m) and with an ICR of over 8x (EBITDA $10.1m / interest of $1.2m) i would not consider HDX to be highly geared, quite the opposite in fact, but if that's the view of the market, I am not going to argue against it.

Its a classic growth funding quandary - do you debt fund growth and avoid dilution and maximise returns to equity holders? or do you equity fund growth with a more conservative balance sheet to appease the market, but which provides equity holders with a lower return?

Anyway, with announced revenue growth of 62%, EBITDA growth of 83% and NPAT growth of 162%, and a number of brokers clambering over HDX for a piece of the action, a cap raising shouldn't be too difficult to get away at a reasonable price!

Bit off the subject, but what why were you up in the middle of the night?

[steve fleming]

Bit off the subject, but what why were you up in the middle of the night?

Very observant of you Percy!

I'd like to say i'd just got home from a big Monday night out, but in reality, the baby woke up and refused to go back to sleep, so I was just staying awake with her!

[mark100]

On another note - MNY had a good earnings report too, with substantial growth. Another cap raising to expand further, in addition to the debt funding recently secured. Subscription price of $5.20. Any thoughts?

Think you mean SIV raising at $5.20? On SIV - good result and looks like a potential upgrade is possible later in the FY. Near $6 I view is as being a little pricy after such a strong run and with more shares to be issued at $5.20

On MNY - ROE is dismal, less than 10% I think. NPAT is growing due to an expanding equity base. The funding facility might be a game changer. I don't hold but it's worth watching

[mark100]

I bought in the little sell off a few weeks back but sold when it got into the $5.90's. So no share purchase plan for me which is a bumma

[OneUp]

EPD looks interesting - trading on a prospective PER of 6.5x post the recent acquisition, even assuming no improvement in the core business. That is, $17m market cap / $2.6m NPAT in FY13 (i.e. $1.3m NPAT from core business + ~$1.3m NPAT from Conducive based on stated $2m EBIT less 30% tax and assuming 6% interest on the first $3.2m tranche). If you assume some improvement in the core business (they delivered 500% NPAT growth in FY12 over FY11, albeit off a low base) then it could be on ~5x PER.



EPD delivered 1H13 NPAT of $1.2m (adjusted for one off acquisition costs) and off to a "strong start" so far in 2H13 and with expectations of "stronger second half earnings", so all looks on track. Part of this stronger outlook no doubt will come from the Conducive acquisition which is "running ahead of expectations", but only delivered EBIT of $0.5m in 1H13 compared to full year forecast of $2.0m at time of acquisition (note 1H13 only included 4 months trading from Conducive). They also talked up the likelihood of acquisitions to "accelerate growth" (perhaps accompanies by a capital raising?). Operating cashflows also improved significantly on prior periods.

FY13 prospective P/E ratio more like 10-13x now given EPD's doubled since initial post but still easy to see significant further upside.

[Lizard]

EPD delivered 1H13 NPAT of $1.2m (adjusted for one off acquisition costs) and off to a "strong start" so far in 2H13 and with expectations of "stronger second half earnings", so all looks on track. Part of this stronger outlook no doubt will come from the Conducive acquisition which is "running ahead of expectations", but only delivered EBIT of $0.5m in 1H13 compared to full year forecast of $2.0m at time of acquisition (note 1H13 only included 4 months trading from Conducive). They also talked up the likelihood of acquisitions to "accelerate growth" (perhaps accompanies by a capital raising?). Operating cashflows also improved significantly on prior periods.

FY13 prospective P/E ratio more like 10-13x now given EPD's doubled since initial post but still easy to see significant further upside.

Thanks OneUp and well picked! Think my only holding in this is via Pie Funds (and my choice for the "one from our newsletter" in their share picking comp). Keep meaning to take a closer look though. :cool:

[percy]

EPD delivered 1H13 NPAT of $1.2m (adjusted for one off acquisition costs) and off to a "strong start" so far in 2H13 and with expectations of "stronger second half earnings", so all looks on track. Part of this stronger outlook no doubt will come from the Conducive acquisition which is "running ahead of expectations", but only delivered EBIT of $0.5m in 1H13 compared to full year forecast of $2.0m at time of acquisition (note 1H13 only included 4 months trading from Conducive). They also talked up the likelihood of acquisitions to "accelerate growth" (perhaps accompanies by a capital raising?). Operating cashflows also improved significantly on prior periods.

FY13 prospective P/E ratio more like 10-13x now given EPD's doubled since initial post but still easy to see significant further upside.

Pleased I brought a few.Great result and very positive out look.Modest prospective PE.

[Lizard]

Good result out from AZV. Half year NPAT of $566k from continuing operations on market cap of $8.3m at current sp of 4.4cps. Appears to be a growth forecast and good growth apparent in the North American segment, with more to come after recent contract with Honeywell, Canada.

[percy]

Good result out from AZV. Half year NPAT of $566k from continuing operations on market cap of $8.3m at current sp of 4.4cps. Appears to be a growth forecast and good growth apparent in the North American segment, with more to come after recent contract with Honeywell, Canada.

Good result? No.
It was OUTSTANDING.!!! Well done.

[Joshuatree]

I see a research note on HDX is out with a target of 60c which looks realistically achievable. Nice to see Brokers focusing on this CoalDentist with clients lining up..

[Joshuatree]

also from Baillieu Holst a research note with a blended valn of 71c on HDX. PM me if you want a copy , cheers JT

[percy]

Nearly one million shares traded today.mostly at 5 and 5,2 cents,so market liked the result.A lot of shares for such an illiquid company.

[steve fleming]

ACG has been getting a fair bit of media profile recently, including in the Eureka Report:

AtCor Medical Holdings (ACG)A more obscure, but stronger, outperformer is blood pressure device maker AtCor.
The stock is so small (market capitalisation of $14 million) it doesn’t qualify to be included in the Small Industrials Index.
But the pocket rocket managed to beat the market by a 28.4% margin in the three days since February 21 when it announced a record interim net profit of $2.3 million compared with a loss of $900,000 for the same time last year.
Atcor has never made such a big profit, even for a full year, and it can thank strong demand for its device from US pharmaceutical and research companies as that bolstered its top line by 43 % to $5.4 million for the six months to end December.
AtCor has developed a better way to measure blood pressure as its non-invasive device also picks up early signs of cardiovascular problems.
While it has been proven countless times that the market doesn’t always want to buy the proverbial “better mouse trap”, especially when it comes to the highly conservative medical fraternity, confidence is growing that AtCor’s strategy to drive market adoption is working.
Management is looking to gain market acceptance for its device by targeting companies running clinical trials, as its technology allows clinicians to study the effects of new drugs on the heart.
If AtCor’s device gains enough traction in the laboratories, it could very well find its way into hospitals and doctors’ rooms.
AtCor is only suited for investors with a tolerance to risk, as it is hard to say what type of penetration rates it can eventually achieve.
But, at this early stage, there is plenty of room to grow given that the addressable market size for the clinical trial industry is estimated at around $100 million a year.
AtCor didn’t give an outlook, but assuming that management can continue to sustain sales momentum, the stock is looking very cheap given that it is trading on a price-earnings multiple of seven times just on its half-year profit number alone.
On the downside though there is little scope for recurring sales as there are no consumables for the device, which looks like an ADSL modem connected to a wrist band.

[Lizard]

I see Pacific Environment Holdings (PEH) has finally achieved a rolling year $10m revenue with the latest result ($6.7m for the half year). They also reported nearly $700k profit. Share price jumped from 3.2cps to 5.0cps for a market cap of $4.9m.

I looked at these a couple of years ago and bought a small number at 10cps! Have tried to average down since, but only ended up catching a few rats and mice due to lack of liquidity. May try to top up again if sellers return. I like the consultancy-style business model in a specialist field where there is likely to be ongoing demand.

Be aware that one director has a convertible note, although terms are not onerous.

[NZSilver]

JT requested i try and post this HDX report - cheers.

http://www.sharetrader.co.nz/?attid=0.1.3&pid=gmail&thid=13d1f9898d1d0fa1&url=https%3A%2F%2Fmail.google.com%2Fmail%2Fu%2F0%2 F%3Fui%3D2%26ik%3Dbdaac3a3b2%26view%3Datt%26th%3D1 3d1f9898d1d0fa1%26attid%3D0.1.3%26disp%3Dsafe%26zw&docid=3be10e29a555200c94531bbdc8c2f9bd%7C183b7dab5 ef8271a8e502b70015f3a2d&a=bi&pagenumber=3&w=671
Hughes Drilling

[NZSilver]

sorry JT didnt work

[Corporate]

good listen on HDX

http://www.brrmedia.com/event/110421

[Joshuatree]

Yes all good Corp. Also liked the increasing Hydraulics operations.For 6 months rev was 5% and ebitda 10%. Longterm growth target of 25% of operations.
Demand exceeding supply continues....... GROWTH< GROWTH and GROWTH.

Any comments steve? cheers ps new holders continue to appear . ops Thanks NZ SILVER anyway. .If anyone still wants the research report PM me.

[percy]

Yes all good Corp. Also liked the increasing Hydraulics operations.For 6 months rev was 5% and ebitda 10%. Longterm growth target of 25% of operations.
Demand exceeding supply continues....... GROWTH< GROWTH and GROWTH.

Any comments steve? cheers ps new holders continue to appear . ops Thanks NZ SILVER anyway. .If anyone still wants the research report PM me.

Joshuatree.
Thank you for sending me the report.Reading that, the interim report ,and the interim report presentation kept me busy.I was very pleased to see current assets now exceed current liabilities.The increase of 25.9% ie 34 up from 27 rigs in the last 6 months was most impressive.The out look for the revenue and nett profit to nearly double over the next two years sent me directly to the phone!! Now a shareholder too at 38.5cents.!!!!!

[percy]

HDX Trading Halt;"share sale and purchase agreement?"
Well every trading halt lately has been good for me.

[Corporate]

Thanks Percy - I wonder what this entails?

[Joshuatree]

Maybe buy out of minority holder of subsidiary Express Hydraulics?

[steve fleming]

Maybe buy out of minority holder of subsidiary Express Hydraulics?

Express Hydraulics is 100% owned by HDX.

It was a strangely worded announcement - all of HDX's subsidiaries are 100% owned so but strange that they referred to its "majority held subsidiary". In fact on my first reading of the announcement I thought that it might be referring to a third party acquiring assets of HDX...anyway, the good thing is the interest/price increase leading up to the annoucement - for the first time in weeks buy depth has exceeded sell depth.

[Joshuatree]

" the good thing is the interest/price increase leading up to the annoucement - for the first time in weeks buy depth has exceeded sell depth."[/QUOTE] Thanks Steve may be whatever this is it will be the impetus for the s/p, cheers

[macduffy]

I reckon it's about time HDX had its own thread.

From today's Aussie press:

"
Queensland-based mining contractor Hughes Drilling is seeking to raise $17.5 million through Baillieu Holst.

The company is looking to sell 54.7 million shares in a placement to institutional investors at 32¢ each. The offer was priced at a 17.9 per cent discount to the stock’s last close and a 13.1 per cent discount to the 30-day volume weighted average price.

It was structured as a two-tranche placement. The first tranche was for 30.6 million shares.

Hughes Drilling was expected to offer existing shareholders new stock on the same terms through a share purchase plan.

The raising comes a fortnight after Hughes Drilling released profit before tax up 78.2 per cent on the prior year, and above the company’s guidance.

Potential investors were told Hughes Drilling had not experienced a slowdown in demand for its services, despite a slowdown in the wider mining services sector.

Hughes Drilling’s largest shareholder is Learob Pty Ltd, owned by the company’s founder and managing director Robert Hughes. "

I hold a (very) few HDX, a legacy of an optimistic buy in the horribly-named Every Day Mine Services (EDS) which was backed into Hughes, suffered a ten for one consolidation - or should that be one for ten? - but now has some prospect of returning at least some of my investment.

:mellow:

[mark100]

I don't follow HDX closely but thought I would post this note as it was released today from WHTM. A bit odd considering the results were out over 2 weeks ago and a raising has already been announced and yet is wasn't even mentioned in the note. Ceasing coverage after only initiating coverage late last year. Maybe they are p!ssed they didn't get to handle the raising. This analyst had a buy on ABC Learning right up until it's death and a sell on Flight Centre at $4.50 in the GFC so I wouldn't place much weight on what he writes.

"Hughes Drilling Limited announced an interim profit of $5.5m which is in line with company guidance and our forecasts. The result benefited from an increase in the number of rigs over the period. At period end the company had 34 drill and blast rigs compared to 27 at June 30. The company has continued to purchase new rigs and has clearly breached its current bank covenants again. An equity raising (est $10-15m) is needed in the near term to significantly strengthen the balance sheet. The accounts have a qualified conclusion. The business is probably sound but there is a lot of work to do before this company is investment grade. Ceasing coverage"

[steve fleming]

Sounded like a number of brokers (Wilsons, Cannacord, Ballieu) were all trying to position themselves to get the cap raising....therefore pretty surprising and disappointing that 32c is the best they could do.

The other thing is given how cheap HDX is trading, I don't know how earnings accretive an acquisition is going to be, unless they can get something at less than 2x EBITDA, which seems highly unlikely.

[steve fleming]

Sounded like a number of brokers (Wilsons, Cannacord, Ballieu) were all trying to position themselves to get the cap raising....therefore pretty surprising and disappointing that 32c is the best they could do.

The other thing is given how cheap HDX is trading, I don't know how earnings accretive an acquisition is going to be, unless they can get something at less than 2x EBITDA, which seems highly unlikely.


Hughes Drilling’s institutional placement closed over-subscribed on Wednesday night, with the company raising $17.5 million through Baillieu Holst. The book was due to close at 2pm on Thursday, but it is understood the deal was closed early after receiving adequate demand. The company was looking to sell about 54.7 million new shares at 32¢ each. It was a 17.9 per cent discount to the last close and 13.1 per cent discount to the 30-day volume weighted average price. The offer was to pay for the acquisition of ReichDrill, a supplier of production rigs. Hughes Drilling agreed to pay $US8.9 million for the purchase, which was equivalent to about 10 per cent of Hughes’ market capitalisation.

----------------------------------------------------------------------------------------------------------------------------------
Interesting - HDX is buying out its sole supplier/manufacturer of drilling equipment. Vertical integration to drive margins I guess. Will also diversify HDX's revenue streams, reducing reliance on NSW/QLD coal.

[steve fleming]

As there are only 122 million shares on issue, that's almost a 50% increase in the number of shares - I thought you needed shareholder approval to issue more than 15% of issued capital?

two tranches to be issued, with tranche 2 subject to shareholder approval.

[Joshuatree]

Cheers Steve.

[percy]

The proforma figures look good to me,with current assets at 33,807 far exceding current liabilities of 21,752.
$7.5 mil of cap raised to be used to buy more riggs.Forecast revenue to increase 83%,and I think with an equity ratio of 53% the company is "well positioned'.Looks as though I will be on the register in time to take up the $5000 worth of shares at 32cents.

[NZSilver]

Hi, I didn't know there was a $5000 offer at 32cents, when does this come through?

[Joshuatree]

Re the 19th march on you or your broker should get the offer if you owned shares on the 14th. If you own shares, im surprised you havnt been reading announcements. I check the ASX website thru out the day and NZX too.

[percy]

Hi, I didn't know there was a $5000 offer at 32cents, when does this come through?

Announcement 15/3/13.Share Purchase Plan.Must be on record 7pm 14/3/13.Info sent to shareholders 19/3/13.Closes 17th april.
Can buy $5,000 at 32cents.

[NZSilver]

Cheers fellas, yeh I usually do, be a bit busy lately,32cents, I think I will take 5k worth!

[NZSilver]

Is there any way you can accept the extra HDX shares online?

[Joshuatree]

Dont know , my broker does it for me. Maybe B/pay ? HDX has its own thread now.

[mark100]

Another capital raising for MNY just 4 months since the last. They better have a good reason. Not holding, just patiently watching...

[NZSilver]

Has anyone done research on Universal Biosensors asx UBI, just looking at this stock today, looks a bit un-loved but there is potential!

[Joshuatree]

I cant read the update announcement on ADQ ( im a technophobe). Any one witha summary appreciated cheers JT

[percy]

I cant read the update announcement on ADQ ( im a technophobe). Any one witha summary appreciated cheers JT

$3.1 mil capital rising concluded.
Aquisition."The due diiigence on this purchase has identified a non-finalised legal matter which may lead to a material impact on the prospective company's balance sheet."
"Based on this,the Board of ADG has decided to delay the purchase until this mkatter is resolved."

[Joshuatree]

Hi Percy, thanks.I need to upgrade my system i think. Is that why ADQ s/p dropping away. Good to know they have standards and are being thorough. Still watching and waiting for a poss entry although i have enough riskier exposure atm mainly in ever suffering"are we there yet" Goldies. You in with a longterm time frame percy and steve i guess. cheers JT

[percy]

Hi Percy, thanks.I need to upgrade my system i think. Is that why ADQ s/p dropping away. Good to know they have standards and are being thorough. Still watching and waiting for a poss entry although i have enough riskier exposure atm mainly in ever suffering"are we there yet" Goldies. You in with a longterm time frame percy and steve i guess. cheers JT


I think the rewards more than cover the risks.I try to have small amounts in a number of these small cap companies.A lot have good balance sheets and are growing earnings very quickly.I tend to buy for the long term.If they do something I really like I add to my holding,otherwise I just sit.
I have made the mistake of selling half my holding to have a free ride.Better to let profits run.

[Ricky99]

Pie Funds moving on AZV is a good sign that they are checked it out and are happy with it.

[percy]

Pie Funds moving on AZV is a good sign that they are checked it out and are happy with it.

SP has moved from just under 5 cents in early May to finish at 9 cents yesterday.

[percy]

Been quite happy with Nomad. Bought in at 5c - seems to be holding at 6 and 6.5c for the time being.

only a small holding dollar wise, just a wee flutter in the portfolio.

Judgement day [the result announcement] is near the end of August,so not long before we know our fate.!

[steve fleming]

Hi Percy, thanks.I need to upgrade my system i think. Is that why ADQ s/p dropping away. Good to know they have standards and are being thorough. Still watching and waiting for a poss entry although i have enough riskier exposure atm mainly in ever suffering"are we there yet" Goldies. You in with a longterm time frame percy and steve i guess. cheers JT

Unfortunately for ADQ, macro conditions have conspired against it.

“It has been unfortunate timing for the Company that at a time of significant investment into our strategy, we have been faced with subdued market conditions.”

The one positive thing for ADQ is they managed to get their capital raising away, before the sh*t hit the fan. Be very difficult to raise given current conditions.
The other thing is they have finally become cash flow positive, as their working capital requirements have unwound with the slow down.

Though, can’t really see a catalyst to drive the share price in the near term.

[NZSilver]

Hi can you guys recommend a asx small cap advisory prescription. There seems to be a few out there but I would like some advice. Cheers

[Joshuatree]

"Paid Research Investment/letters" Thread there are some mentioned

[Lizard]

AZV - contract to upgrade nursecall systems at 100 US hospitals... bidders at 10cps, sellers at 12cps... maybe time we gave AZV a thread, as not far off hitting the $20m market cap. :t_up:

[Joshuatree]

LCM EBITDA up 25% to $14.1 mill
Cashflow up 49%
NPAT up 4% to $11.1 mill
Rev up 5%
Full year div 9c up 6%,final div 4.5c payout ratio 56%
Overall strong outlook

[Ricky99]

Not sure how lcm gets into a micro cap thread?

[Joshuatree]

Theres a bunch of micro cap lists on this thread Ricky. LCM on post 48 , i think, sub $100 mill stocks. LCM prob over that now.Im re 26% up atp, bought @$1.20.

[Ricky99]

Thought original criteria was sub 20mil market cap but each to their own

[Jay]

This was the original critieria:
Criteria=

1. market cap less than $20m
2. Revenue greater than $10m
3. PE of between 0 and 10


However some of course have grown since, but started life fitting in, not that I have (had) any unfortunately :(

Read this thread out of interest and to learn

[Joshuatree]

Yes its a fantastic thread and has evolved to include re 3 groups

1/ mkt less than $20 mil

2/ Sub $100 million mkt cap post 48, Steve

3/ Rickys request post 79 , mkt cap less than $15 mill plus other screens

[Lizard]

Has anybody on this thread looked at WRR? VERY micro-cap ($2m m/cap at current 17cps) and illiquid still - was on the list in 2012, but probably fallen back off due to lack of profits. Probably still need to raise more capital and some queries over ongoing Telstra and China revenues. But still forecasting good growth at last report (most detail in the "going concern" part of the notes to accounts!). Quite a few convertible notes that convert at 20cps and above. Has had a bit of a Board refresh in last 12 months although MD is unchanged and forecasting record maybe not quite up to scratch. Revenue growth has been pretty good though in recent years.

[NZSilver]

Hi, I'm not sure how you guys make the lists but it would be much appreciated to see a sub 25 million micro-cap companies that have profits with and without divs, also healthcare sector stocks. I'm really looking for some nice growth stocks. Cheers

[Ricky99]

Steve Fleming normally does a good job of producing the lists but I can recommend azv, tcn and mwr as ones to look at.

[baller18]

Hey KW,

Which one would you put more money into right at this moment, PHG or INA? Many thanks

[baller18]

Thanks heaps KW!

[steve fleming]

SF - now that the FY13 books are closed, perhaps you could run your stock screen again and see what is new on the list? The old one has been very lucrative :-)

Market cap less than $100m and year on year EPS growth greater than 25%



Company Name

Diluted EPS before Extra, 1 Yr Growth % [LTM] (%)

Market Capitalization [Latest] (AUDmm, Historical rate)



Lindsay Australia Limited (ASX:LAU)

28,363.5

59.7



Macquarie Radio Network Limited (ASX:MRN)

326.0

81.7



Centuria Capital Limited (ASX:CNI)

279.0

63.3



Australian Ethical Investment Ltd. (ASX:AEF)

159.8

27.6



E&A Limited (ASX:EAL)

140.3

81.3



eBet Limited (ASX:EBT)

137.1

45.2



SDI Limited (ASX:SDI)

135.7

76.1



Azure Healthcare Limited (ASX:AZV)

121.7

45.4



Pulse Health Limited (ASX:PHG)

116.5

47.8



Vita Life Sciences Limited (ASX:VSC)

93.9

85.3



Kresta Holdings Ltd. (ASX:KRS)

93.2

26.1



e-pay Asia Limited (ASX:EPY)

86.0

39.3



Techniche Ltd. (ASX:TCN)

85.3

16.1



Scantech Ltd. (ASX:SCD)

83.7

16.2



CMI Ltd. (ASX:CMI)

82.5

58.7



Kip McGrath Education Centres Ltd. (ASX:KME)

75.3

7.07



Gage Roads Brewing Co Limited (ASX:GRB)

64.7

95.0



TTA Holdings Limited (ASX:TTA)

64.2

9.21



Traffic Technologies Limited (ASX:TTI)

62.6

16.8



PPK Group Limited (ASX:PPK)

60.9

32.9



Prophecy International Holdings Ltd. (ASX:PRO)

56.9

32.1



Fiducian Portfolio Services Ltd. (ASX:FPS)

47.5

39.6



HFA Holdings Limited (ASX:HFA)

47.0

86.1



Clime Investment Management Limited (ASX:CIW)

45.0

35.3



Clover Corporation Limited (ASX:CLV)

39.1

87.5



Desane Group Holdings Ltd. (ASX:DGH)

38.4

19.8



Landmark White Ltd. (ASX:LMW)

36.8

13.2



FFI Holdings Limited (ASX:FFI)

35.8

37.1



Capilano Honey Limited (ASX:CZZ)

34.8

36.6



Academies Australasia Group Limited (ASX:AKG)

28.9

57.5



Saunders International Limited (ASX:SND)

28.7

73.1



My Net Fone Limited (ASX:MNF)

26.8

95.6

[Dej]

Market cap less than $100m and year on year EPS growth greater than 25%



Company Name
Diluted EPS before Extra, 1 Yr Growth % [LTM] (%)
Market Capitalization [Latest] (AUDmm, Historical rate)


Lindsay Australia Limited (ASX:LAU)
28,363.5
59.7


Macquarie Radio Network Limited (ASX:MRN)
326.0
81.7


Centuria Capital Limited (ASX:CNI)
279.0
63.3


Australian Ethical Investment Ltd. (ASX:AEF)
159.8
27.6


E&A Limited (ASX:EAL)
140.3
81.3


eBet Limited (ASX:EBT)
137.1
45.2


SDI Limited (ASX:SDI)
135.7
76.1


Azure Healthcare Limited (ASX:AZV)
121.7
45.4


Pulse Health Limited (ASX:PHG)
116.5
47.8


Vita Life Sciences Limited (ASX:VSC)
93.9
85.3


Kresta Holdings Ltd. (ASX:KRS)
93.2
26.1


e-pay Asia Limited (ASX:EPY)
86.0
39.3


Techniche Ltd. (ASX:TCN)
85.3
16.1


Scantech Ltd. (ASX:SCD)
83.7
16.2


CMI Ltd. (ASX:CMI)
82.5
58.7


Kip McGrath Education Centres Ltd. (ASX:KME)
75.3
7.07


Gage Roads Brewing Co Limited (ASX:GRB)
64.7
95.0


TTA Holdings Limited (ASX:TTA)
64.2
9.21


Traffic Technologies Limited (ASX:TTI)
62.6
16.8


PPK Group Limited (ASX:PPK)
60.9
32.9


Prophecy International Holdings Ltd. (ASX:PRO)
56.9
32.1


Fiducian Portfolio Services Ltd. (ASX:FPS)
47.5
39.6


HFA Holdings Limited (ASX:HFA)
47.0
86.1


Clime Investment Management Limited (ASX:CIW)
45.0
35.3


Clover Corporation Limited (ASX:CLV)
39.1
87.5


Desane Group Holdings Ltd. (ASX:DGH)
38.4
19.8


Landmark White Ltd. (ASX:LMW)
36.8
13.2


FFI Holdings Limited (ASX:FFI)
35.8
37.1


Capilano Honey Limited (ASX:CZZ)
34.8
36.6


Academies Australasia Group Limited (ASX:AKG)
28.9
57.5


Saunders International Limited (ASX:SND)
28.7
73.1


My Net Fone Limited (ASX:MNF)
26.8
95.6




Thanks Steve, interesting list with a few companies I have been looking at. Any ones that tickle any of your guys fancy??

[steve fleming]

Thanks Steve, interesting list with a few companies I have been looking at. Any ones that tickle any of your guys fancy??

Well KME looks very interesting

m/c of $7m, did $1.2m EBITDA last year

Very strong earnings growth momentum and now a tie up with Google to do global online tutoring

[mark100]

I have 5 from that list at present. Several more on the watchlist

[Lizard]

Re-visited EGL today - long time since I'd looked at it. They have put wastewater and mining services into liquidation, but kept the profitable air treatment arm. Now effectively backdoor listing a larger environmental-based business, Baltec, based in Indonesia.

After years of contract-woes and falling revenue, the company trades at just 5.5cps and a market cap of $10m. Air treatment revenues were $14m in 2013 and continuing operations showed a small profit. The Baltec transaction has generated some market interest, so has risen from lows of 5.5cps. Might be worth watching, although I'd be suspicious as to the forward workload for the existing air treatment business when projecting returns.

[Lizard]

Also glanced over Reverse Corp today - REF - and maybe belongs on here too eventually, although revenue doesn't yet make the original $10m minimum. I've looked at this a few times and never quite seen the point of the business model involving reverse calling charges. However, signs are that they are managing to maintain profitability and looking to expand into less mature business segments. Though, "Oz Contacts (https://www.ozcontacts.com.au)" is not especially inspiring, at just $7m market cap (7.5cps) and profitable, they may be able to generate some funds from the mature reverse calling market to fund something more interesting...

[The Big Ease]

Stunning that they have not been able to deploy what were once enormous cashflows into new and proftable businesses....until it's almost too late.
They are in the telco space and yet even with the emergence of mobile, they have not been able to come up with any ideas until now...ozcontacts!
Like you said, it's hardly inspiring but they have managed to generate 1m in the first year. That's a start.

Despite the apparently high calibre business people on the board, they have been poor custodians of this business with very little foresight. From 6 dollars to 7 cents! Year after year, month after month of declining reverse charges and they never managed to invest in new businesses. I think the chairman was content to collect his dividend cheques and the board probably thought international expansion through the GFC would pay off on the other end...but it hasn't worked out that way.

Let's see how ozcontacts works out. No real competitive advantage. Just a webpage with a checkout.

[Wolf]

5 for me too now. Just picked up AKG and EBT this week. Looking at a couple of others as well. Its great when Steve's list intersects with my list :-)

KW, did you use TA to time these entrys?

[born2invest]

CLV- Clover Corporation

What are everyones thoughts on this one?

[NZSilver]

Hi born2invest - looks solid, div and growing eps. Also in the baby formula market - which is a bit of a boomer and in fashion at the moment. Seem there main product is omega-3 sourced from tuna oil that is in a special form that is added into products. They mention sales will take a small temporary dive after the foterra botulism scare - but no biggy. After a brief look I couldn't work out if they own a manafacturing site themselves. Would be interested to know others thoughts.

[NZSilver]

Business Description:
Clover Corporation Limited (CLV) is involved in the refining and sale of omega-3 oils and encapsulated bioactive ingredients for infant formula, children’s foods, supplements and medical foods. CLV operates its businesses from five sites: a headquarter in Sydney; a manufacturing plant for tuna oils and related products in Altona; a product development R&D facility, technical support and marketing in Brisbane; the finance and IT departments in Gladstone Park; and a logistic and customer service office in the UK.

[percy]

CLV- Clover Corporation

What are everyones thoughts on this one?

With sales expected to be down 20% to 30% the PE at 13.79 looks very high.ROE is very good at either 19.2% or 25.2% [they use both].Yield is modest at 3.85%. Concerns me that their market cap is $85.894mil,yet sales last year were only $44.1mil and going to be a lot less this year.

[born2invest]

With sales expected to be down 20% to 30% the PE at 13.79 looks very high.ROE is very good at either 19.2% or 25.2% [they use both].Yield is modest at 3.85%. Concerns me that their market cap is $85.894mil,yet sales last year were only $44.1mil and going to be a lot less this year.

Yes intention is to wait until they release their half yearly report in March with the drop of 20-30% sales. People will over-react (as they always do thinking short term) and the stock price will drop. You will notice in October 10th when the company released a notice of the Fonterra milk powder scandal and on October 30 when they released their full year results which again mentioned the Fonterra milk scandal that the stock price went from around the mid 50's to around the mid 40's. This may not sound big but it was a drop of around 20% in one month.

The long term picture of Asia buying more milk powder is strong and I think this will cause the sales to bounce back again next year to their normal upwards trend.

I've read over the past 14 years of annual reports this week and think the management is fairly straightforward to shareholders. The ROE is good as you mentioned. With little debt too. They have moved past their initial start up phase with a few failed ventures into soy products, etc and have found their niche of fish oils into milk powders.
The research is out there now about the numerous health benefits which wasn't there 10 years ago.

You mention market cap 85 million and sales 44 million as a concern. Other companies you have commented on in the recent past SUM, HNZ, etc have market caps more than triple sales/income so would appreciate if you can explain this a little further so I can understand your knowledge on the sales/market cap ratio.

[percy]

Yes I agree it would pay to hold off until half year result announcement.
Price to sales ratio.Only to be used comparing companies in the same sector.
Should you google Market Analysts and down load an old newletter you will see he uses it.page 2.
www.stockmarket.co.nz
Divide market cap by revenue.
Tech stocks are trading up to 10 times revenue.??
Whether you use it or not is up to you,however I use it all the time.

[Lizard]

Has anybody on this thread looked at WRR? VERY micro-cap ($2m m/cap at current 17cps) and illiquid still - was on the list in 2012, but probably fallen back off due to lack of profits. Probably still need to raise more capital and some queries over ongoing Telstra and China revenues. But still forecasting good growth at last report (most detail in the "going concern" part of the notes to accounts!). Quite a few convertible notes that convert at 20cps and above. Has had a bit of a Board refresh in last 12 months although MD is unchanged and forecasting record maybe not quite up to scratch. Revenue growth has been pretty good though in recent years.

Probably not a great year for WRR given lower revenues from Telstra and China and costs incurred towards Iridium sales, but managed to find a Hong Kong investor willing to put money in - $438k at 15cps while sp sits at 8cps. Second half 2014 might be more interesting as the Iridium sales start.

[Lizard]

Probably not a great year for WRR given lower revenues from Telstra and China and costs incurred towards Iridium sales, but managed to find a Hong Kong investor willing to put money in - $438k at 15cps while sp sits at 8cps. Second half 2014 might be more interesting as the Iridium sales start.

Actually, that wasn't a bad quarterly for WRR all things considered... maybe in another 6 months (and after I've been nuts enough to buy some) they will be worth a write-up?

[Lizard]

Actually, that wasn't a bad quarterly for WRR all things considered... maybe in another 6 months (and after I've been nuts enough to buy some) they will be worth a write-up?
WRR may even be on to something here with the Iridium product - minimum $3m sales in first year could be light?
http://finance.yahoo.com/news/iridium-revolutionizes-personal-communications-industrys-180000213.html
http://www.usatoday.com/story/tech/columnist/baig/2014/02/04/iridium-go-satellite-internet/5191049/

[catbert]

Hi KW, love your work, especially in this thread which I am following with interest. However, regarding AKG, I see the 200-day EMA at quite a different level to you, apparently. The highest level the average reached was 0.94, and the stock price broke below it on April 10th; it is now trading well below that level. Definitely not a "bouncing off" situation. Are you seeing something different?

[mark100]

I use incredible charts. They have the 200 day SMA at 96.5c and the 200 day EMA at 94c

[catbert]

I checked WebIress and StockDoctor. Both put the peak of the 200-day EMA at 94c, it is now trending slightly lower (93.6 at yesterday's close).

One complication could be that there are quite a few days with zero volume. There are differing opinions on how prices for those days should be treated when calculating a moving average - perhaps that explains the discrepancies?

[Lizard]

Has anybody on this thread looked at WRR? VERY micro-cap ($2m m/cap at current 17cps) and illiquid still - was on the list in 2012, but probably fallen back off due to lack of profits. Probably still need to raise more capital and some queries over ongoing Telstra and China revenues. But still forecasting good growth at last report (most detail in the "going concern" part of the notes to accounts!). Quite a few convertible notes that convert at 20cps and above. Has had a bit of a Board refresh in last 12 months although MD is unchanged and forecasting record maybe not quite up to scratch. Revenue growth has been pretty good though in recent years.


Actually, that wasn't a bad quarterly for WRR all things considered... maybe in another 6 months (and after I've been nuts enough to buy some) they will be worth a write-up?


WRR may even be on to something here with the Iridium product - minimum $3m sales in first year could be light?
http://finance.yahoo.com/news/iridium-revolutionizes-personal-communications-industrys-180000213.html
http://www.usatoday.com/story/tech/columnist/baig/2014/02/04/iridium-go-satellite-internet/5191049/

Starting to come together now for WRR... announcement of $350-$450k NPAT this financial year and still only at $2.2m market cap. More detailed update expected tomorrow. Closed at 15cps.

[Joshuatree]

Whoah 43% gain today:drool:

[mark100]

Starting to come together now for WRR... announcement of $350-$450k NPAT this financial year and still only at $2.2m market cap. More detailed update expected tomorrow. Closed at 15cps.

Hi Lizard, at 15c I have the fully diluted market cap as $5.2m (34.9m shares). The convertible notes convert into quite a few shares it appears. Looks interesting though, I would have bought a few this afternoon if their had been some for sale

[Joshuatree]

WOW up another 5c ,33% today phenomenal congrats to holders

[Lizard]

Hi Lizard, at 15c I have the fully diluted market cap as $5.2m (34.9m shares). The convertible notes convert into quite a few shares it appears. Looks interesting though, I would have bought a few this afternoon if their had been some for sale

Yes, I probably should have mentioned those - had them down as converting at 20cps, but forgot that changed with the most recent placement and increased the possible amount/put them in the money. Still think there is value here, but the gap definitely closed a bit today for WRR with the 70% gain to close at 25.5cps

[Lizard]

WRR closed at 33cps. Think they may be getting a lift from Proactive Investors??

Been my "share of the week" again this week. :)

[duncan22]

Some might find this list interesting / uesful

Criteria=

1. market cap less than $20m
2. Revenue greater than $10m
3. PE of between 0 and 10


(sorry, tried posting all the financial information, but it turns out a real mess.
The tickers are sorted from lowest m/c to highest)


Ticker
Short Name
P/E
Market Cap
Revenue T12M
Price-1
Total Return YTD
EPS T12M


SKS AU Equity
RLA AU Equity
CLQ AU Equity
EFG AU Equity
RZR AU Equity
COM AU Equity
NLG AU Equity
COO AU Equity
MBD AU Equity
PTB AU Equity
TPC AU Equity
EPY AU Equity
REF AU Equity
KKT AU Equity
FRM AU Equity
HYO AU Equity
PHG AU Equity
CAJ AU Equity
EMB AU Equity
MNF AU Equity
TQH AU Equity
EBT AU Equity
OEC AU Equity
MHI AU Equity
VSC AU Equity
SNL AU Equity
WWM AU Equity
AXI AU Equity
CHR AU Equity
ELX AU Equity
AMB AU Equity
SOO AU Equity
GLE AU Equity


Hey Steve,

Just wondering how you generated this list and if you have time any chance you could do a new scan?? Also the less than $100m scan you did back in December - it has an impressive win rate looking back!

Thanks,
-Duncan

[Lizard]

I am going to put VIE (Viento Group) on my watchlist... can't quite decide about them, but they should report revenue over $100m this year, setting them up for perhaps $140m next year (based on annualising the second half). However, they must have about $26m in debt and the convertible notes (converting 30-36cps) give them a fully diluted market cap of around $27m (including options) at 22cps. Although they are forecasting EBITDA of $10 - $12m, I would think no more than about $3.5m in NPAT (not expecting to pay tax). The growth and profit may interest the market, but it is still not super cheap for mining services, particularly given the chequered history of VIE as WRF/VGL and their poor investment decisions. Then again, new management and new acquisitions now making up the bulk of the company, with legacy assets conservatively written down.

It's too early to tell whether this is a potential recovery stock or just another iteration of enthusiastic investment that ends in tears, but could be worth a punt on the next result. However, for now, the sell side looks well stacked and liquidity is low, so I am thinking maybe just one to watch...

[Lizard]

I am going to put VIE (Viento Group) on my watchlist... can't quite decide about them, but they should report revenue over $100m this year, setting them up for perhaps $140m next year (based on annualising the second half). However, they must have about $26m in debt and the convertible notes (converting 30-36cps) give them a fully diluted market cap of around $27m (including options) at 22cps. Although they are forecasting EBITDA of $10 - $12m, I would think no more than about $3.5m in NPAT (not expecting to pay tax). The growth and profit may interest the market, but it is still not super cheap for mining services, particularly given the chequered history of VIE as WRF/VGL and their poor investment decisions. Then again, new management and new acquisitions now making up the bulk of the company, with legacy assets conservatively written down.

It's too early to tell whether this is a potential recovery stock or just another iteration of enthusiastic investment that ends in tears, but could be worth a punt on the next result. However, for now, the sell side looks well stacked and liquidity is low, so I am thinking maybe just one to watch...

Well the analysis on Viento was mostly right, except the depreciation and amortisation charges were well up there, plus I haven't yet unravelled the minority interests, so reported profit of $0.63m didn't quite make the mark. Depending on how the minority interests stack up on closer look, they may be on to something once the acquisitions bed in for a full year, as mostly reporting 3-6 months of revenue/profits from these. However, the sudden departure of a director last night (who I think came from one of those larger acquisitions at the start of the year) would have to leave a bit of a question mark over this one for a bit longer.

[Trigger]

This seems like the best thread for this question. Several of you refer to the usefulness of EPS data in your screens. I have a subscription to Market Analysis (James Cornell) and use its datasets to screen most of my stock picks for the NZX. Because the NZX is relatively small, when I run screens there are very few candidates to undertake further research on, and EPS is straightforward to calculate manually.


I have invested in the ASX only spasmodically in the past, and the opportunity cost of that decision is becoming harder to ignore as I read the various forums. I want to have a good look at companies with a market cap up to AU$100M. Problem is, those same screens that return only a few companies from the NZX return dozens of candidates from the ASX to overlay EPS data with.


My question is, is there a dataset that can be accessed which provides EPS data, or do you simply have to roll the sleeves up and work through each company manually?

Thanks

Trigger

[Joshuatree]

Good question Trigger. One which i have is "Smart Investor" I buy the magazine once a month ($10) and the tables at the back have EPS for every ASX co plus other info. You have to hunt around bookshops to find it .. If you paid a sub www.afrsmartinvestor.com.au for online but it costs more.

[winner69]

Try this page if you want free stuff

Files galore in different formats and EPS and EPS growth in many of them

Prob source of what Joshua reads

http://www.afr.com/share_tables/

[Trigger]

Thanks team. Quality responses from two advanced members and a legend. Can't ask for much better than that.

[NZSilver]

Good question Trigger. One which i have is "Smart Investor" I buy the magazine once a month ($10) and the tables at the back have EPS for every ASX co plus other info. You have to hunt around bookshops to find it .. If you paid a sub www.afrsmartinvestor.com.au (http://www.afrsmartinvestor.com.au) for online but it costs more.

Hi JT, where in NZ have you found the magazine?

[Joshuatree]

One bookshop in tauranga has it.

[Lizard]

asxiq.com - best screen ever, but they now want a subscription.... however, I've found a few goodies just by manipulating the limited freebies from the custom screener and never actually pay up. :ohmy: Probably similar price to what I remember James Cornell was? (I had problems with the quality of data maintenance there). The afr tables are okay, but need a fair degree of manipulation.

I would suggest just screening the Market Analysis picks with a few more screens - e.g. p/s and pr/nta combined can sometimes throw up a few interesting ones. Or add a tech screen like relative strength.

[tosspot]

SBB, probably the best micro cap on the ASX

PE 2.56
mc $42mil
cash $30mil
debt only $4mil
revenue $85+mil
profit $13+mil
Assets 9.3c

[cloggs]

ASX:SBB - just when your are wondering where Chinese men buy the clothes they wear, (a definite recognisable style). Now you know, SBB wholesales to 400 outlets in China as well as running their own stores, about 30 of them at the moment. For your 9 ct share you're buying about 6.5 cts cash. Worth a look.

[Sideshow Bob]

SBBs own thread

http://www.sharetrader.co.nz/showthread.php?9852-SBB-400-stores-in-china-mens-fashion-profits-and-Divs-Escrow-dump-buy-OP

[Corporate]

ASX:SBB - just when your are wondering where Chinese men buy the clothes they wear, (a definite recognisable style). Now you know, SBB wholesales to 400 outlets in China as well as running their own stores, about 30 of them at the moment. For your 9 ct share you're buying about 6.5 cts cash. Worth a look.

SBB looks cheap but be very careful. Chinese company listed on the ASX - why? Pre IPO investors selling for a reason. CFO just resigned. Apparently building an office building, but no significant capex in the accounts - also questionable as to why they need a office building. Very high margins in a intensively competitive industry. Security deposits of $1.8m placed with supplies, yet inventory is only $4.7m (likewise payables). Security deposits are only demanded when a supplier has concerns over the counterparties credit worthiness - I can't see why this would be the case with the profitability of SBB and the cash balance of $30m.

[Lizard]

Well the analysis on Viento was mostly right, except the depreciation and amortisation charges were well up there, plus I haven't yet unravelled the minority interests, so reported profit of $0.63m didn't quite make the mark. Depending on how the minority interests stack up on closer look, they may be on to something once the acquisitions bed in for a full year, as mostly reporting 3-6 months of revenue/profits from these. However, the sudden departure of a director last night (who I think came from one of those larger acquisitions at the start of the year) would have to leave a bit of a question mark over this one for a bit longer.

Well the HVLV acquisition turned a bit thorny for VIE and they are now forecasting a first half loss, although still returning to profit in second half. At least they managed to drastically re-write the terms. They've also hit a bump on the Powins acquisition, falling out with the minority shareholders who have applied for liquidation. VIE in turn seem to have worked with CBA to get KordaMentha appointed as receivers who are looking to sell off Powins as a going concern again. All in all, a rather mixed up looking picture. So have therefore been somewhat surprised to see the price re-rate from a low of 3cps all the way back to 12 cps in just 7 trading days!

I bought a few in the middle of that range, but not without some trepidation. Still on track for about $120m in revenue, so still a low P/S of 0.10, but with little visibility on future work. Not sure if my investment will turn out to be dead, diluted or delighting....:confused:

[vici]

Re-vitalising this thread. Given how expensive the larger caps are at the moment in general, trying to hunt for value in profitable growing Micro cap and small caps.

[Joshuatree]

What have you found so far vici?

[NZSilver]

interesting i havtn been in any small guys lately - i still have a holding in CNW - CF+ this month and XTD (which Sh*t itself) - i also have a few $$ in DMX asset mngmt - kinda my exposure to this sector

[percy]

interesting i havtn been in any small guys lately - i still have a holding in CNW - CF+ this month and XTD (which Sh*t itself) - i also have a few $$ in DMX asset mngmt - kinda my exposure to this sector

I follow www.dmxam.com.au too,as like the companies they invest in.I enjoy their newsletters, and always find their comments are spot on.
I also have a few CNW,and a few others,one or two of which may end up surprising me.?
AZV,DTZ,KNM,M7T,MDR,MSG,RGP,RNT,SDV,SRH,and TBH.
Also MMI.FGR, and SPQ, who are miners, are showing signs of life again.Recently added to MMI, and will take up my SPQ rights.

[vici]

Wide range and variety of sizes with no particular pattern on the initial screening:
RFG, RXP, LHP, PPS, KKT.

Haven't crunched the numbers on them past an initial glance

[Joshuatree]

Posted in 2013


Market cap less than $100m and year on year EPS growth greater than 25%



Company Name
Diluted EPS before Extra, 1 Yr Growth % [LTM] (%)
Market Capitalization [Latest] (AUDmm, Historical rate)


Lindsay Australia Limited (ASX:LAU)
28,363.5
59.7 NOW$109.2M


Macquarie Radio Network Limited (ASX:MRN)
326.0
81.7 TAKEOVER BY NINE NETWORK


Centuria Capital Limited (ASX:CNI)
279.0
63.3 NOW $893 mil


Australian Ethical Investment Ltd. (ASX:AEF)
159.8
27.6 NOW $1.02 BILLION!


E&A Limited (ASX:EAL)
140.3
81.3 Vol admin


eBet Limited (ASX:EBT)
137.1
45.2 unlisted


SDI Limited (ASX:SDI)
135.7
76.1 now $83.8 mill


Azure Healthcare Limited (ASX:AZV)
121.7
45.4 now$20.46mill


Pulse Health Limited (ASX:PHG)
116.5
47.8 In Admin


Vita Life Sciences Limited (ASX:VSC)
93.9
85.3 now VLS $30 mill


Kresta Holdings Ltd. (ASX:KRS)
93.2
26.1 now $7.21


e-pay Asia Limited (ASX:EPY)
86.0
39.3 takeover


Techniche Ltd. (ASX:TCN)
85.3
16.1 now $7.16 m


Scantech Ltd. (ASX:SCD)
83.7
16.2 Delisted


CMI Ltd. (ASX:CMI)
82.5
58.7 now ECL $36 mill


Kip McGrath Education Centres Ltd. (ASX:KME)
75.3
7.07 now $53 mill


Gage Roads Brewing Co Limited (ASX:GRB)
64.7
95.0 now $70.7m


TTA Holdings Limited (ASX:TTA)
64.2
9.21 now $1.237m


Traffic Technologies Limited (ASX:TTI)
62.6
16.8 now $6.27 m


PPK Group Limited (ASX:PPK)
60.9
32.9 now $323.6 mill!


Prophecy International Holdings Ltd. (ASX:PRO)
56.9
32.1 now $44mi


Fiducian Portfolio Services Ltd. (ASX:FPS)
47.5
39.6 takeover by FID


HFA Holdings Limited (ASX:HFA)
47.0
86.1 now NGI $200mill


Clime Investment Management Limited (ASX:CIW)
45.0
35.3 now $34.6 mill


Clover Corporation Limited (ASX:CLV)
39.1
87.5 now $382.5mill


Desane Group Holdings Ltd. (ASX:DGH)
38.4
19.8 now $50 mill


Landmark White Ltd. (ASX:LMW)
36.8
13.2 now AC $14 mill


FFI Holdings Limited (ASX:FFI)
35.8
37.1 now $52 mill


Capilano Honey Limited (ASX:CZZ)
34.8
36.6 Takeover


Academies Australasia Group Limited (ASX:AKG)
28.9
57.5 now $32 mill


Saunders International Limited (ASX:SND)
28.7
73.1 now $45 mill


My Net Fone Limited (ASX:MNF)
26.8
95.6 now $483 mill




Wet day , thought id check how steves screenings are doing now. Have added latest mkt caps right hand side in Steves post. Re 8 multi baggers, 4 takeovers 4 in admin.9 worth less now.

[younga]

If I am right, that's double your money in 7 years if I don't include takeovers .... Nice

[kiora]

If I am right, that's double your money in 7 years if I don't include takeovers .... Nice

Not that great
Only 10% compounding return