Category Archives: The In & Out

Tech tiddlers

How to define a ‘tech tiddler’ has become increasingly difficult.  More than any other sector, this one is all about expectation, promise … and hope!  Traditional valuation methods are usually completely ignored.  But then, let’s face it, the same applies to a number of tech giants as recent IPO’s have exposed so dramatically.

So let’s try and keep it as simple as possible and just go by current market capitalization: The Footsie constituent ARM at £13bio would surely qualify as a ‘giant’. Who cares about the 54 P?E ratio?  And what does it mean, anyway?

Pinkers would like to suggest the following definition for the ‘tiddler’: market cap below £1bio.

There are three companies to be singled out that fulfill this criterion:  The first two are Chip maker Imagination Technologies capitalized at £665mio and video search engine Blinkx at £750mio. IMG used to be level playing field with ARM but then the latter took over the (Apple!) world… but Pinkers would never bet against IMG: a relatively small outfit with creative management and staff… they could just have that game changing card up their sleeve.  Pinkers would definitely buy on recent weakness – a good punt!

Less of a punt but really a ‘no-brainer’ is Blinkx.  Spun off from Autonomy in 2007, Blinkx is now the world’s largest video search engine.  Annual growth approaching 100% with impressive profits, it simply is the world’s leader in the field.  Again, a huge P/E ratio of 54, the same as ARM’s, but with MUCH greater potential.  Even after the recent surge in share price, it represents excellent value. Best of all: still rather under the radar… To quote Neil Collins in this w/e’s FT: “Blinkx and you missed it!”  Pinkers says: Dig in and enjoy the ride!  Last but not least, a great take-over target… Google must be watching closely or have they missed the trick?

Number 3 on the list is probably the best bet of all: still completely overlooked despite right at the cutting edge of its sector, Ubisense is capitalized at a mere £45mio.  The company provides detailed visibility into an organization never before thought possible. In relation to people, assets and service areas, Ubisense combines elements of business intelligence, process management and data visualization with GIS and advanced location software and hardware to offer Location Intelligence that operates in both online and offline environments. Ubisense provides location intelligence solutions for manufacturing, transit, telecommunications, and utilities. Read more about Ubisense.  In short: U BUY SENSE!

VERY IN and VERY OUT … for sure!

A post scriptum to the two previous entries dated 1 Nov:

Twitter has raised their IPO price range by 25% and Pinkers is hardly surprised. Even at this level it still considers the company undervalued. Twitter is as relevant a business model as Google. Forget Facebook et al.

Yesterday, The Times reports on page 24: “Alton Towers shuts new ride as wheels come off again”. The so-called ‘Smiler’, which opened in May and at £18mio is the resort’s biggest investment, was shut for the third time in four months yesterday. Pinkers may be a little superstitious… but surely this incident does seem rather ominous… But not so according to today’s Times business pages: Mr Dominic Walsh, writing for the Tempus column on page 51 urges investors to “believe in the magic”… Tempus has a brilliant track record and Pinkers hardly in the same league… but in this instance, sorry… Pinkers just does not believe in ‘magic’… always a trick up the sleeve!

Definitely IN!

Pinkers is NOT a fan or, indeed, follower of social networking sites. Facebook’s share price has done well, recently, due to what appears to be a successful ‘migration’ from desktop to mobile. But that’s a one-off. Anyway, the youngsters are deserting the site, embarrassed by their parents and… grandparents presence! It’s just not ‘cool’, anymore. More importantly, however: neither is it really essential, nor is it unique. Yes, there is a place for it but already the Google Android Army is muscling in quite successfully. The best case scenario for Facebook would be to emulate Google and Apple and turn itself into a ‘mature’ company with a healthy and consistent cash-flow: get into the Dow as quickly as you can so Warren Buffett might even be tempted to take a stake… just don’t do a ‘Tesco’… Warren got out of that one quite quickly and made sure his PR people did the best job possible to bury the boo-boo quickly and efficiently.

Linkedin being more business-orientated makes more sense but it, too, is quite vulnerable.

Pinkers, however, is quite excited about the forthcoming Twitter flotation. Why Twitter and not Facebook? After all, it will be much more difficult to generate hard cash from a business model that, in all fairness, can only be described as “one-dimensional”. But that, of course, is precisely the point: FOCUS and CONCENTRATION as opposed to (desperate!) diversification.

The proof, as ever, is in the pudding: Without Twitter, no ‘Arab spring’ et al… In fact, Twitter should not really carry the label ‘social networking site’. The company has very quickly evolved into an essential tool – indeed, indispensable tool: a bit like Super-Glue! A powerful instrument that binds people together and provides them with the means that were previously deemed unobtainable, unthinkable: going as far as toppling the dictatorships of this word! And… it’s NOT about fashion. So it cannot go OUT of fashion. Of course, it, too, will eventually face competition and, judging from recent press reports, Facebook are working away hard at it… what a compliment! But by having retained focus, Twitter remains unique and its user base will grow rapidly, exceeding all expectations – provided it does not lose sight of the ball.

And, last but not least, so far the indications are that the IPO will be reasonably priced (some say “cheap”) and the company itself is doing its best to downplay expectations and ‘cool’ the grey market – in stark contrast to the Facebook roadshow. Twitter appears to remain realistic with regards to its revenue and future profit potential.

Pinkers rates Twitter a FIRM BUY. This business model is powerful and it makes sense – the money will follow. Still, expect a highly volatile share price in the first few months. Not for widows and orphans.

… and definitely OUT

… and that’s entertainment the ‘Merlin’ way! Yes, what fun! What a brilliant idea! It’s a rainy day and why not take the whole family, toddlers and grandparents included, to Madame Tussaud’s and admire the Queen and David Beckham in the flesh… oh… sorry… in the wax! But surely, hardly any difference here?

Well… before getting carried away, Pinkers strongly advices a trip to the London Dungeon, also owned by Merlin Entertainments, and get really spooked out!

As opposed to Royal Mail, this is a business heavily relying on discretionary spending and with real incomes falling, a rather questionable proposition from a shareholder’s point of view. Thank God the stock hasn’t floated just yet… giving those tempted time to reflect.

Pinkers smells a rat: Private equity firms (main shareholders Kirkbi, Blackstone and CVC) flipping a business at the peak of the cycle. Never a good sign. Don’t go anywhere near it… or, if in danger of being seduced by the forthcoming IPO, check up on Wikipedia on another Merlin asset: Alton Towers: Under ‘Current seasonal attractions as of 2013′ it says: Terror of the Towers!