Small Cap Report - CUP, IND, RGO, ACL, HVN

I see that online dating group, Cupid (LON:CUP) has called a general meeting to authorise buying back 10% of its own shares - a good sign. I really must find some room in my portfolio for Cupid, I've liked the company for a long time, and it is fairly rare in providing both strong growth and a low valuation (fwd PER is only 9). I suppose that's saying the market is unsure whether growth is sustainable, otherwise the rating would be much higher. There is also the issue that Cupid's FD cashed in £1.2m of share options recently at 202p, which has dented confidence. The price is now 180p.

My friend "MrContrarian" has just Tweeted about a new free web page he's created which sorts & highlights the morning's RNSs. I've had a quick look, and it looks excellent, and I'll be using it from now on to help me home in on the most interesting results & announcements (which are highlighted in yellow). Check it out here; http://www.freesharedata.com/rns

Indigovision (LON:IND) dividends totalling 75p should be paid today. Amazing to think that I paid about half that for my original shares about 7 or 8 years ago. Reinforces my opinion that to make the really big gains from a share (hundreds or thousands of percent gains) you need to take a 5 year+ view.

The company have decided against talking to private shareholders openly, as bulletin board postings have damaged the business - competitors have abused them in competitive pitches. So I'm not able to report back in detail on my latest chat with the company. However, my general impression is very positive - the company's strategy seems absolutely spot-on to me, and with new management in place for almost a year now, many improvements have been made across all aspects of the business.

Management are fully aware that they need to get on with it & deliver growth now, and I think there's a good chance that will happen. It's all about delivery now, they've got the product right & resolved all other issues. Customers,  integrators, and employees are all happy, so should be all systems go hopefully.

2Ergo (RGO) shares have been a disaster, with the company's original business model not really working. They had to do a disastrous Placing not long ago, at a near-75% discount to the prevailing share price, which at the time I thought was scandalous (especially as Directors took a large chunk of the Placing shares themselves). But as was later pointed out to me, chances are everyone else had said no, so this was their only option. Surely in this day & age we should be able to have an electronic system, whereby Listed companies can do Placings with all shareholders simultaneously? Or at least professional investors could pre-register for possible Placings, and then do them electronically with the shares suspended for say 7 days whilst the deal is done? It seems crazy that existing shareholders can be diluted out of sight in such a Placing, without even being given a chance to participate.

2Ergo results this morning are predictably grim, but the 2 products they are persevering with and have launched, actually look really interesting. They have enough cash to last more than another year by the looks of it, so the £6m mkt cap is really an all or nothing bet on these new products succeeding.

Their product is a small device which plugs into a retailer's till, which allows people who have a mobile phone electronic coupon (e.g. money off voucher sent by the retailer to them) to wave their phone at the device, which then redeems their coupon at the till point. Clever!

Mobile is completely where it's at, in many areas, so if this product does take off, then I could see 2Ergo shares at multiples of the current mkt cap. They have partnering arrangements with 25 EPoS system providers. It's very high risk, but I couldn't resist a small flutter, and have bought a small amount this morning for fun money. Well, everyone needs a little excitement in their portfolio!

Electronics company Acal (ACL) announces interims which look fairly weak, with turnover down 18%, but they misrepresent this by showing it as down 13% in the headline section. The excuse is that growth is shown as "CER growth" with a footnote explaining that this is at constant exchange rates. This is misleading. By all means show the CER growth to one side, but speaking as an accountant, the % change figure next to 2 numbers should always be the actual percentage change of those 2 numbers, not an adjusted figure to make it look better. Show any adjusted figures in addition, not instead of the actual percentage change please.

Underlying diluted EPS is down 15% (and not 9% as shown in the RNS!) to 8.2p, and the interim divi of 2.5p is maintained. So doesn't look horrendous, but the market has taken fright & marked the shares down 14% to 140p. That gives it a reasonably attractive PER of about 9, and the outlook sounds OK. So might be worth a further look? Very nice strong balance sheet too, this looks quite interesting, although it's a low margin business.

Finally, I note that recruitment company Harvey Nash (LON:HVN) has put out a surprisingly strong IMS - saying that full year profit before tax is likely to be 10% higher than expected. It's been a while since we've seen statements like that! Their shares look good value, on a low PER, although it should be noted they have net debt of around 30% of mkt cap.

Have a good day & a lovely weekend y'all!

Regards, Paul Scott.