Monthly Recap – August 2018

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Monthly Recap Image August 2018

July Buys And Sells…

As always, this is a recap of my trading activity from the previous month.

What a busy month (for me) July was – With 5 purchases and 9 sales as I had a bit of a clear out, in order of execution…

Bought into Warpaint London (W7L) on the 6th July. On a PER of 15, the EPS Growth of +55.8% (2018E) and +20.7% (2019E) together with ROCE of 16% and Operating Margin of 21% tipped the scales. Can also add in the fact there’s no Debt, there’s a small but well covered Dividend and recent Broker upgrades. It had also popped up on my Standard Tech Screen a couple of times. Kicker – Retra Holdings (acquired in November 2017) integrated well both operationally and from a sales perspective, order book for Christmas ahead of last year for both W7 and Retra brands.

Bought into Alpha FX (AFX) on the 11th July. This had been a regular on my Standard Tech Screen for a while and I was waiting for an update.  That came on the 11th July and confirmed Revenue up 50%+ and confidence in FY earnings to be in-line with expectations. On a PER of 23, forecasts (on Stockopedia) are EPS growth of +35.2% (2018E) and +16.9% (2019E), the ROCE and Operating Margin are great plus there’s Cash. CAGR for Revenue and EPS are both 50% or so. Kicker – Ability to improve internationally (on the Corporate side) and, following regulatory approval, expand into the Institutional side too.

MPAC (MPAC) had been on my Standard Tech Screen for a while. I had recently read a broker note on Research Tree which forecasts great EPS figures for the next 4 years, starting with 2018, of 9.9p, 14.1p, 18.2p and 22.9p (2021) – There’s also about £30m of Cash. Some active discussion on Twitter saw me buying in here on the 12th July. My purchase was short lived as a Trading Update on the 18th July confirmed FY Revenue would be in-line but FY Profits would be lower to the tune of £1.2m (an estimated 30% or so miss). Although the forecasts mentioned above were issued just 2 months ago I sold here on the 19th July – As I write price is down about another 20% since then.

Also on the 19th July, as mentioned above, I had a bit of a clear out, the 6 sales are as follows…

1 – Flowtech Fluidpower (FLO) – Read a broker note on Research Tree which showed EPS of 14.0p (2018A), 16.0p (2019E) and 17.6p (2020E). This looks fine to me (and there’s a reasonable Dividend) but with the market reaction being rather negative since the AGM statement I decided to sell up.

2 – Ramsdens Holdings (RFX) – The main reason I sold out here was based on forecasts. On a PER of 9.47 the EPS growth rates were +94.6% (2017A), +49.4% (2018A), +3.57% (2019E) and +8.64% (2020E), Revenue growth for 2019 and 2020 is forecast at about +10% each year. I still like the ROCE and Operating Margin here but the EPS forecasts reflect signs of a decent sized deceleration. Price was also over 20% down from it’s recent ATH.

3 – Fulcrum Utility Services (FCRM) – The main reason I sold out here again was based on forecasts. On a PER of 14.2 the EPS growth rates were +43.3% (2018A), +11.8% (2019E) and +1.11% (2020E), Revenue growth for 2019 and 2020 is forecast at about +30% and +5% or so respectively. I still like the ROCE and Operating Margin here but the EPS forecasts reflect signs of a decent sized deceleration.

4 – Focusrite (TUNE) – On a PER of 27.0 the EPS growth rates were +38.9% (2016A), +28.8% (2017A), +10.0% (2018E) and +5.52% (2019E), Revenue growth for 2018 and 2019 is forecast at about <10% each year. I still love the ROCE and Operating Margin here but the Revenue and EPS forecasts show a decent sized deceleration.

5 – ULS Technology (ULS) – As part of my general clear out I simply decided to sell here as price had drifted to just over 20% off it’s ATH. In addition to this, although EPS is forecast to grow 31.5% in 2019E it is forecast to grow just +5.88% in 2020. Revenue growth in both years is forecast to be <10%.

6 – SafeCharge International (SCH) – I sold out here because on forecast EPS Growth of +6.64% (2018E) and +10.5% (2019E), on a PER of 22.0, the prospect of a takeover was just not enough.

Still 2 more Purchases and 2 more Sales to go…

GetBusy (GETB) popped up on my Standard Tech Screen for the first time on the weekend of the 21st/22nd July. A statement regarding “Recent Share Price” movement on the 23rd July confirmed there was no reason for the movement as trading was in-line. I checked the latest broker note on Research Tree and decided that if trading is in-line, even after the big move this was still decent value. Kicker – Quite simple, forecasts look great and 80%+ of revenue is recurring.

As part of another clear out on the 25th July, albeit a much smaller one this time I sold out of Medica Group (MGP). Checking my notes I originally bought in here as it looked like recruitment had been sorted and EPS is forecast as +39% in 2018E and +14.1% the year after, ROCE and Operating Margin are great, there’s a small well covered Dividend and Net Debt is small. Chart was not pretty but seemed to have maybe “bottomed out”. On the 25th July the Trading Update For The 6 Months To End June 2018 seemed OK with recruitment momentum continued and FY to be in-line with market expectations. It just didn’t seem the market was believing here so after little movement on this update I decided to sell out.

The second sale on the 25th July was Huntsworth (HNT) – On the 24th July Interim Results For The 6 Months To End June 2018 indicated Revenue was up 8% to £102.2m with PBT up 9% to £11m, EPS up 11% and the Interim Dividend up 27%. Expecting to see a little more than this I was also a little wary of this statement “Board remains confident in the full year outcome” as it did not mention expectations at all. The Dividend increase seemed like a sweetener so I decided to sell out.

And finally! On the 26th July I bought into Kape Technologies (KAPE). Although Revenue growth will take a bump (-10% or so due to the sale of the Media division) in 2018E, growth in 2019E should be similar to 2017A (+20% or so). Annual EPS growth (2017A, 2018E and 2019E) is a consistent +40% or so. PER is about 30 but strip out the cash (about 30% of Mkt Cap) and we maybe call it 20. Kicker – Now focused on the growing Cyber Security sector.

I am now about 25% in Cash.

All comments as always, most welcome.

Buy Date Stock Code Buy Price Sell Price Sell Date % Movement
6-Jul-18 W7L 239.50
11-Jul-18 AFX 547.00
12-Jul-18 MPAC 195.00 150.30 19-Jul-18 -23%
17-Apr-18 FLO 174.95 162.78 19-Jul-18 -7%
3-Mar-17 RFX 109.00 161.50 19-Jul-18 48%
2-Aug-17 FCRM 52.95 64.15 19-Jul-18 21%
8-Mar-18 TUNE 370.00 457.00 19-Jul-18 24%
28-Apr-17 ULS 106.66 127.00 19-Jul-18 19%
5-Apr-17 SCH 259.41 325.70 19-Jul-18 26%
23-Jul-18 GETB 61.00
23-May-18 MGP 134.49 121.06 25-Jul-18 -10%
23-May-18 HNT 97.70 120.56 25-Jul-18 23%
26-Jul-18 KAPE 128.80
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