Team Internet Share Discussion Threads

[ryandj2222] 20/12/2011 21:23

Also was tipped by the naked trader as one to watch for 2012.

[breliz] 15/12/2011 08:58

Excellent new US Deals should nudge us further north ...

... 20p by end of week would be nice - then onward and upward.

[mechanical trader] 12/12/2011 08:14

Stock to Watch: The Innovation Group
By Edmond Jackson | Fri, 09/12/2011 - 00:00

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

A compelling aspect of stockpicking is that no matter how bad the business news, there is always some company somewhere, able to prosper. Industries change and technology drives fresh demand. You still need to pay attention to the economic outlook and apply tests for value, but turning a blind eye to shares will mean missed opportunities.

So it is interesting to note how the 6 December prelims (to end-September) from the Innovation Group (TIG), a FTSE SmallCap provider of outsourcing services and software to the global insurance industry, delivered a 54% advance in adjusted pre-tax profit to £15.1 million on revenue up 9% to £175.9 million. Operating cash inflow jumped 119% to £16.9 million. Management says the group is "positioned for continued growth in 2012".

The city consensus as shown by Company REFS expects normalised pre-tax profit to rise about 20% in the current financial year, for a similar rate of earnings growth, compared with a forward price-earnings multiple (P/E) of 15 times with the shares at 18p. A legacy of 940 million shares in issue means it doesn't take much price movement to affect the P/E, even for a firm capitalised at £170 million. There is also no dividend, having only been a fleeting payout of 0.45p a share for the 2007/08 year, which was axed to 0.05p then eliminated. So there are a couple of issues in TIG's financial profile telling you there is some history here.

Yet the outlook message is: "We feel strongly that we have now moved from being a turnaround business to a business delivering sustainable and profitable growth." One broker report after meeting the management post-results cites a revenue pipeline more than twice improved, year-on-year, and the software element increasing, hence better margins.

"Top-down" it looks as if insurance companies will need to continue deriving economies from outsourcing; the group's revenues comprise £152.8 million "business process outsourcing" and £23.1 million software. TIG's Insurer Claims version 7.0 software is described as well-received and expected to build revenue through 2012. Yet the 2008 financial crisis and its aftermath showed how care is needed towards the insurance industry lest the eurozone debt crisis spirals. Profits were hit by "financial turbulence and customer contract delays" despite good progress extending the brand internationally. This coincided with TIG needing to make its own changes towards better efficiency: while 2007/08 revenues grew 27% near £140 million, a £3.8 million pre-tax loss prompted a restructuring also changes among principal board members.

The company also needed beefing up financially to be able to meet the requirements of large insurance companies. TIG's large number of shares issued partly results from untimely offers: after the price dropped from a 30p range to low single figures with the 2008 financial crisis, in May 2009 TIG needed to raise £5 million via a placing at 8p a share and at end-2009 a further £21 million via a placing/offer at 10p.

At least this has helped put the balance sheet in a pretty strong position: at end-September debt was a low £10.4 million, if mainly short term, and outweighed by £43.1 million cash such that the net interest charge was £0.3 million against £10.1 million operating profit. Within £107.9 million net assets, £94.2 million represent goodwill and intangibles, although this is fairly typical of a business involved in software and acquisitions.

Customers are well diversified across global insurance markets, fleet and lease management firms, also in financial services. TIG is not directly exposed to consumers cutting back (renewing) insurance policies because they can't afford them during a recession. Nor should motor insurance reduce unless people are willing to break the law. Accidents and claims will continue and are probably less sensitive to the economy. So TIG's services have an essential aspect, dealing with over five million claims a year.

So this company ought to be reasonably recession resilient now it is restructured and the new management has shown what it can deliver. It is going to need a European catastrophe affecting the wider world to knock this company now, but in a stagnant environment it can prosper.

Brokers have remained supportive despite the post-summer price drop, and following prelims Panmure Gordon has upgraded its 2011/12 earnings per share target from 1.4p to 1.5p also its target share price from 27p to 29p. Given this implies a P/E multiple over 19 times I suspect it will be difficult to achieve in the 2012 environment, although TIG's risk/reward profile looks to weigh on the upside.

There may also be takeover prospects in the current time window before TIG's earnings track record gets better established and its shares return to the dividend list. A profile of operational momentum, good cash generation and aspects of earnings dependability ought to be attractive to an industry buyer.

With the results, a £13 million acquisition of Claims Services Australia was announced, providing similar outsourced motor and property claims management services for Australian insurers. This being the leading specialist outsourced claims management company in Australia, it is hoped that synergies will arise with TIG's current operation by offering insurers the benefit of a broader service offering also sales volume to the target's infrastructure. This kind of acquisition is likely to typify future deals, to enhance earnings.

The overall sense of a relatively attractive share is affirmed by some substantial trades on the prevailing offer price of 18p on 7 December: 1.8 million shares and four other trades of just less than one million shares each. There has not been any directors' buying as the shares retreated from 23p, although the chief executive owns nearly 2.6 million shares, the chairman 1.2 million and the finance director 0.7 million.

In conclusion TIG cannot be described as a truly defensive share while black clouds of the eurozone crisis hang over, but if a major storm can be avoided then it is one to follow in the weak economic environment.

For more information see www.innovation-group.com, and for more stocks to watch visit Edmond's archive.

[leopold555] 08/12/2011 14:16

added a few

[rustle2] 07/12/2011 13:23

Well I'm no great one for charting but it does seem to have broken out from the downward trend which is reassuring. Longer term holder.

[leopold555] 07/12/2011 12:21

Nice start :-)

[jaws6] 07/12/2011 12:16

23p target by broker note

[breliz] 06/12/2011 17:44

MC1's tea leaf predictions fail yet again - ah well, I'm sure they'll come good one day. In the meantime, the fundamentals have improved with the aforementioned Results, so maybe a gentle nudge northward.

[breliz] 06/12/2011 09:08

Incredible results given the current economic climate:

Adjusted profit increased 54% year on year, solutions selling well, new sales records achieved.

"I am delighted to report that 2011 was a year of excellent progress in which The Innovation Group has delivered to expectations."

"Our goal for the year, following a period of restructuring, was to deliver a year of growth and progress in each of our strategic areas, namely technology-enabled Business Process Outsourcing (BPO) and software solutions. We have made great progress in both these areas, with significant contract wins secured during the year for both BPO and software solutions, including with RBS Insurance in the UK, our largest contract ever."

"This year has been one of real progress and we are confident that the Group is positioned for continued growth in 2012." ....

.... Hopefully this will kick start the SP, which has been disappointing for quite some time now.

Who knows MC1's prediction of a 23p close on December 6th may prove accurate.

[mechanical trader] 06/12/2011 08:40

Very solid results today. Plus another acquisition

[jaws6] 05/12/2011 07:13

Wonder how much money they will save from this new deal news today.

[breliz] 16/11/2011 16:27

At least MC1's predictions are consistently wrong, so can be used to good effect if you do the opposite of what he recommends.

Henderson's have obviously been reading his bullish comments on this BB and promptly dumped 1.3 million.

[petersinthemarket] 16/11/2011 16:11

It is true that I am impatient - I invest to make money and right now that is extremely difficult to do as the market appears to see most things, even profits, in a negative light.

Regarding charts - I believe that in a reasonably active and balanced market that charts can sometimes give some useful pointers to anyone interested but in the current flacid and distorted market where even a 50% improvement in PBT can result in a falling share price on results day the charts are really not helpful.

Posting predictions on here at the moment is pointless and, worse than that, a continuing track record of inaccurate predictions is tedious.

[b1ggles] 15/11/2011 13:31

'You are impatient' means 'Just wait until one of my continual random and meaningless predictions turns out to be right, it must happen one day if only to compensate for all the others that are proven wrong time and again'.

[bubbleandleek] 15/11/2011 11:17

ON WHAT TIMEFRAME ARE YOU LOOKING AT YOUR STOCHASTICS?

[mckenzie one] 15/11/2011 09:33

20/12/9 Stochastic has turned up this morning

so we should see some movment this week.


And you my friend are a little impaitent.

[petersinthemarket] 14/11/2011 14:18

mck - ''it will continue up Monday''

When you say ''continue'', what do you mean exactly?

sp has been cycling downwards for months now.

Monday 14th 02:15pm - not much sign of ''up'' yet.

You, my friend, give chartists a bad name.

[mckenzie one] 11/11/2011 16:26

Its pulled back because it passed an open gap,

gaps are pausing points, it will continue up Monday

[mckenzie one] 11/11/2011 15:02

Every one should be happy.

A LARGE ENGULFING DAY, for anybody that knows about candle sticks,

A VERY BULLISH START,

WE ARE OFF.

[mckenzie one] 08/11/2011 13:44

There is one thing for sure the share price

on 6th December will be 23p.

so a steady rise till then.