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

[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