12th Apr: Trader Tim’s Penny Stock Post – #MTFB #PROX #D4T4 #THAL #CYAN

@TraderTim5CYAN, D4T4, MTFB, PROX, THAL0 Comments

Trader Tim’s Penny Stock Post analyses key RNS releases every morning. Not all releases can be covered, priority will be based on liquidity, significance and demand. To receive Trader Tim’s Penny Stock Post direct to your email box at 10am each morning, click here.

Morning all!

I hope all are well.

Motif Bio hasn’t quite taken off yet, but I see today it has opened up 5%. It seems it is struggling to break through and hold 30p+. I am quite happy with my portfolio at the moment. I have re-jigged things a little to refocus my strategy – things were a bit all over the place. I am now targeting small cap stocks with long term potential and at present am happy with all my holdings, which is a rare thing for me. Often, I’ll have a stock or two that I regret or am having doubts about.

I think I forgot to mention that I sold Proxama at a major loss recently, something ridiculous like 75% loss. I always find selling major losers like this very liberating, despite the fact you’ve lost a tonne of cash. It’s odd. Anyway, it’s a reminder for me of how to invest my money better. I need to be more stringent with pressing the sell button once a company is ~25% down, rather than watch it grind lower and lower. I still like Proxama’s offering, but as an investor you have to accept there are things beyond your control. For example, Proxama entered into death spiral financing. It was at that point I should have sold. If you cling on to the fact that the company has potential, you lose sight real picture. This is simply lazy investing – focusing on what might happening, rather than what is actually happening. I was guilty of this with Proxama.

Elsewhere, Cyan, a stock I hold, announced has received a purchase order for approximately $150,000 from Innologix Consulting. A further contract in the Indian market, I really like the global appeal of Cyan’s business.

Anyway, on to some stocks…


D4T4 Solutions

Market Cap: £50.47m
Price: 133p
Spread: 2%

I hold a long position in this company.

D4T4 features in my penny stock portfolio. The shares fell back a bit recently to 130p, but I can not for life of me work out why? This wasn’t prompted by any news as far as I can tell. Nevertheless, the shares are now trading back at their previous levels after a trading update announced this morning.

Background

D4T4 Solutions – clue is in the name – deals in big data. This company was formerly known as IS Solutions with the ticker ISL. Naturally, given geopolitical events the Board took the sensible to decision to rebrand to D4T4 Solutions. The AIM stock has been around for a long time. However, the acquisition of Celebrus in 2015 has accelerated D4T4 Solutions’ bottom line. Having been listed since 1997, the rebrand probably dovetailed nicely with the the AIM company’s new focus to capture investor attention.

This is crux of D4T4’s business is software analytics, management and tracking tools to interpret this data. D4T4 also receives substantial revenue from consultancy projects.

An example of the work D4T4 do – they work with large UK bank to offer new loan or mortgage products based on browsing habits. They do similar things with retail clients. However, D4T4 services are also being using by financial companies to detect fraudulent transactions and tackle cyber-security issues. There is real breath in the appeal of D4T4’s offering.

Today

D4T4 announced this trading update today ahead of the final results for the financial year ended 31 March 2017 which are expected in the week commencing 26 June 2017.

The highlights section does much of the talking.

Bullet #1: “Profit (excluding the FX gain) expected to be ahead of current market expectations”.

Bullet #2: “Celebrus software product sales grew significantly year on year – accounting for over a quarter of Group sales”

They go on, but these are the key messages. Profit, again, is ahead of market expectation. D4T4 continues to deliver strong growth ahead of what analysts are expecting. Furthermore, the Celebrus software product – which has transformed the business – is growing “significantly”. This is good for revenue and for business operations. However, I also attribute a lot of praise for the management here. The board saw an opportunity, seized and, most importantly, are delivering this opportunity superbly. D4T4 reflect on “strong growth in software and recurring revenues” – group revenue for FY17 is expected to be c. £17.7m. Recurring revenues will be long-term success of the business, so it is very reassuring to see growth in this area.

D4T4 suggest that the projects revenue has slowed, which the board attribute to US Presidential Election. However, confidence appears to be returning following ‘the first 100 days’.

The AIM company has £5.1m in the bank.

Brexit

To date there has been no material impact from the UK’s Referendum decision to leave the EU, albeit this is subject to any items that might change in the coming 24 months as the Government negotiate the UK’s exit from the European Union

Outlook

Our strategy continues to deliver and is reflected in strong profit growth and increasing gross profit margins. The business enters the new financial year in robust shape and we are encouraged by the opportunities and outlook for the business in the coming year

Opinion

The dip that this share suffered recently was undervaluing it. D4T4 has, in recent times, consistently outperformed market expectation. These are the type of small cap growth stocks that I want to be involved in – ones that promise and most importantly deliver! They carry risk, but with risk comes potential upside. Data is quickly becoming the currency of the 21st Century.


Thalassa Holding

Market Cap: £14.17m
Price: 57p
Spread: 6%

Thalassa announces its final results for the year ending 31 December 2016. In truth, I am not going to cover them that fully. I am more interested in the Chairman’s statement. For those unaware, Thalassa Chairman, Duncan Soukup, provides a wonderfully frank account of the economic landscape which always makes for fascinating, if not enjoyable, reading.

The share price is down on the results and it’s pretty straight forward to see why. The AIM company has seen its revenues fall from $18.9 million to $14 million. Gross profit also has taken a $9.4 million to $8.1 million. However, if you want in depth analysis, you’re best to click through on the link and scan the results yourself.

The quote heading Soukup’s statement reads: “Plan for the worst, hope for the best and prepare to be surprised”.

It makes for a depressing read. Soukup suggests quantitative easing has delayed the “day of reckoning” – that being, the day when geo-politics “bring the financial markets to their knees”.
Moving on to US national debt, the topic turns to excessive debt and uncontrolled borrowing citing the CBO that “debt service will increase to more like 3% of GDP or $800 billion by 2024”.

Given the above, he says it would be “foolhardy to get too excited about the anaemic global recovery being trumpeted by politicians in both the US and Europe”.

Moving on to the oil price, Soukup reaffirms Thalassa’s stance stated in their last trading update: “The Board’s current view for 2017 is one of cautious (but unpredictable) optimism”. He remains cautious. Oil has seen a recovery, but this has been driven by “easy money”. As previously stated, “we are not impressed with global economic growth and the political arena is, frankly, nothing short of scary as hell”. Hahaha! I wonder how many times “scary as hell” has been used in an RNS…

He quotes an article called Four-dimensional Seismic In The Downturn by David H. Johnston from E&P magazine. This suggests exploration and production spending for major operators appears to continue its decline, despite the uptick in oil price in the last few months. Of those that begin increasing spending, will focus on onshore projects.

These sentiments, particularly the seismic downturn, are propped up to support the management’s cautious strategy regarding one of their holdings WGP. Nevertheless, the wider remarks paint a bleak, bearish picture. It’s not necessarily one that you’ll agree with or that I agree with, but it’s always beneficial to hear the alternative view.


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If there are companies that you want me to cover in the coming days or have significant news due imminently then let me know. My aim is to deliver value to readers, so I want to ensure I’m doing this as much as I can.

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