Below are the second two recommendations for our 2019 10 2 Double Opportunities. Both have been much more than twice the recommended price but have missed expectations. Yet….. we think the business opportunities are well worth a good doubling from here.
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CyanConnode (LSE: CYAN)
8.25p (8.1p-8.5p)
Mkt Cap: £15m
Next Results: Finals RNS April
CyanConnode have closed almost $20m of contracts as it commercialises its world leading technology. For the year to December, turnover is expected to be 400% higher and a further significant increase is anticipated for the current year. January’s Trading Statement, for the year-end to December 2018, anticipates revenue of £4.7m with a much-reduced loss. India and Sweden are performing well and have increasing pipelines.
Orders to the value of $18.9m have been received to date for its Omnimesh product with only around $4m delivered so far against these orders. The revenue from its first licensing deal, which was in China, will be recognized over the next two years and further deals seem likely. There are legislative changes in India supporting Smart metering and further orders seem likely in this substantial world market as smart meters reduce payment fraud. There is also a contract to provide its software to the UK Smart Metering Programme and rollout will gain momentum in the first half of 2019.
The business model includes revenues from hardware, software licensing support and maintenance. Additional revenue streams include royalty licensing (white label in own name) and licensing of hardware which would include a one-off upfront payment and ongoing royalty payments. Profit margins range from 30% on hardware sales to over 90% for licensing deals.
In October, £5.6m of equity was raised at 10p in which the management invested £1m. There is no debt and the management’s focus is on converting the sales pipeline into cashflow. The shares at below the placing price seems worth buying.
One Media IP Group (LSE: OMIP)
5p (4.8p -5.4p)
Mkt Cap: £7m
Next Results: Finals March
One Media P Group plc (LSE: OMIP) has around £8m available to pursue an acquisition strategy. The plan is to acquire publishing rights which can generate a robust earnings stream, from the expanding digital music and video streaming market. In December 2017 two heavyweight company directors; Lord Michael Grade and Ivan Dunleavy joined the board and in August 2018 raised £8m, comprising £2m in shares at 6p and a £6m loan facility from the BGF (British Growth Fund).
Ivan Dunleavy is 58 and has been operating in the media industry for more than 35 years, including 17 years as CEO of Pinewood, Europe’s largest provider of stage and studio space, which he and Lord Grade acquired from Rank in 2000 for £62m. Lord Grade of Yarmouth, aged 75, has a distinguished career as a television executive, businessman and Director of Charlton Athletic FC.
OMIP distribute high margin streaming music through over 600 digital stores, as well as through dominant content distributors such as Spotify, Amazon, Deezer and Apple. These big sites prefer to deal with fewer and more diligent suppliers such as OMIP, which is driving consolidation. OMIP have also developed a high quality and robust IT platform and process for content discovery and a new policing software service ‘Technical Copyright Analysis Tool’ (TCAT) for record companies, publishers and law firms searching information of artist and tracks on legitimate digital stores. This can be used to maximise the return from acquired rights
The interims to April reported a 43% increase in PBT to £213k on a mere 5.1% increase in turnover to £1.02m as streaming is higher margin. The directors have confirmed that momentum will have been maintained in the Finals to 31 October 2018, which are due to be reported in March. They recently announced the receipt of a signed contract to recoupable advance against future digital earnings in the amount of US$1m. In the meantime, the team are seeking earnings-enhancing acquisition. Buy at below the placing price and we hope you double your money!
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