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The OMG newsletter recommends at least 15 companies each month, using the writers’ experience of small caps to give you a winning edge. Last week they wrote about Rosslyn Data Management, Kromek Group and Gately. Read about these Opportunities 4 Material Gains!
Mid-week Tip
Limiting Bureaucracy
Cenkos, the mid cap broker raised Rosslyn Data Management (LSE: RDT) £7.3 m in May 2020 at 5p which, at the time, was a 5.3% premium to the price. The funds were to increase the sales and marketing effort to accelerate the growth of sales pipeline of the SMDM (Supplier Master Data Management) which with post Brixit longer supply chains was set to be in strong demand. Progress halted with an EBITDA loss of £0.2m and an increased Loss Before Tax £2.5m which included the impact of £1.1m write down on an acquisition. Consequently 2021 turned into a year of transition with a new FD, CEO and new auditors appointed. Paul Watts was appointed CEO in April 2021 having lead Sales growth strategies for 25 years’ and building international B2B software business with large multinational client base. After a thorough review of the business, it accelerated it product development, sales and marketing strategies. In December the Customs CloudTM software solution was (at last) released and is designed to speed up the new custom procedures. A Rapid procurement software product is also set to be released shortly. RDT are cashflow positive and after of debt there was £6.3m cash at the finals should be sufficient funds to build a scalable business to transform its growth prospects. A buy at 3.8p
Results Preview
Wrong Test
Kromek Group (LSE: KMK) 15.625p (15.5p-15.75p) KMK supplies containment detection technology focusing on the medical, security screening and nuclear markets. Its finals to April 2021 reported a sharply reduced loss to a still worrying £6.3m but from £16.6m while revenue fell to £10.4m. The supporters of the oversubscribed £13m fund raising at 15p last February were attracted by the prospects of its Covid airborne bio-test that started field trials in schools, airports and other locations. Its pilot results were reported to be extremely encouraging for testing the biological-threat Covid detection solution although there has been little further news perhaps as better ventilation is an adequate solution in most situations. Cash and cash equivalents at 30 April 2021 were £15.6m should be enough for 12 months. These interims should show improvement but the slow pace of contract winning and progress with it Covid testing system has reduced our enthusiasm. Hold
An investment opportunity ?
There are only two companies with finals this week; On Wednesday GATELY (LSE: GTLY) at 219p with a MKT Cap of £262m, could be worth some attention. As this legal and professional services group has a 4% yield and on a P/E of 14x with net cash. These attractive indicators are set to improve as it reported a 23% revenue increase at the Interims and momentum seems to be continuing. As November Trading Update reported that revenues for the year to Oct 21, should be around £62m+ with a PBT of £8m+, compared to £7.5m. The ability to combine the range of services as ‘one-team’ is accelerating organic growth and GTLY may seek acquisitions. Seems an worthy investment… which we may review next week.
Reviews
CNC – 85p – All set for contract wins
7DIG – 0.55p – Getting nearer to profit
CIZ – 2.9p – Disappointing
DBOX – 12p – Another upgrade
SRC – 98.5p – Quarry acquisition
MWE – 75p – Exchange rate affect
MERC – 39.75p – Disposal gain
SEE – 10.82p – Partners progress
AMYT – 162p – AIM departure
- – 30p – Share trading suspended
Finally:
We are not excited by the shorter-term economic prospects …. but we are (excited) for selected small caps.
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