These small caps could have very big futures... maybe.
I'm not on Facebook. I'm not on Twitter. My mobile phone is so primitive that I dare not let it be seen in polite society. The past may be a foreign country for L P Hartley, but the technological present is another planet for G A Chester.
And so to today's business: three small companies in the softwarey/mobileish/social-mediaified sector. You see, even a tech no-mark like me can't help speculating -- though, rarely in the financial sense, I hasten to add.
These three small caps might just have very big futures but, coming from me, don't take them too seriously!
What's in a name?
In the ordinary course of investing, I prefer companies to have solid, no-nonsense names -- names like British American Tobacco (LSE: BATS), James Halstead (LSE: JHD) and F W Thorpe (LSE: TFW).
I run a mile from quirky or 'impact' names and appendages that try to make companies sound fresh and dynamic: 'social', 'bang', 'glo', 'go' 'Go' 'GO' 'GO!' – that type of thing.
The three companies I'm going to be telling you about are:
All three companies are listed on AIM. Here are some of the basic numbers:
| Company | Share price | Market cap | Turnover | Pre-tax profit/(loss) |
|---|
| Globo | 24.4p | £72m | €30.9m | €4.9m |
| Bango | 143p | £55m | £19.3m | (£0.8m) |
| SocialGO | 0.9p | £4m | £0.7m | (£1.2m) |
Globo
Globo is the only company of the three currently making a profit. In fact, it's made a profit -- a growing profit, mark you -- for the past five years.
I actually wrote about Globo back in 2010, suggesting that at 10.25p it was a company brave contrarians might want to look at. Why brave contrarians? Well, Globo happens to be based in Greece.
Don't be too quick to scoff! Any company operating in Europe's pariah state and managing to grow its earnings right through the global recession has got to have something going for it. Furthermore, Globo is rapidly expanding internationally.
The company, which now describes itself as an 'international Mobile Solutions, S.a.a.S and IT group', announced in January that it expected its 2011 results (scheduled for release on 30 March) to exceed market expectations, reflecting strong growth in international sales.
The company has guided that international sales for the year will account for 48% of total group revenue of €45m and more than 75% of total gross profit. Consensus earnings estimates of three brokers put Globo on a price-to-earnings ratio of 6.3 for 2012, falling to 4.3 in 2013. Earnings growth is forecast to be in excess of 40% in both years.
Bango
Bango enables businesses to "collect payment for music, games, applications, videos and services sold to internet-connected mobile phone users". The company first caught my eye when it announced in December that it "has signed an agreement to provide services to Amazon. The terms of this agreement are not being disclosed. The Board believes it is too early in the relationship to accurately forecast the level of business which it may generate".
The shares, which had closed at 55p the day before the announcement, ended 2011 at 67p. That looked a fairly modest rise to me in the circumstances. However, the shares really took off in February, following another announcement in identical terms except for the replacement of the name 'Amazon' with 'Facebook'.
Bango's shares soared as high as 189p, but have given up some of their gains since a trading update at the start of this month. The directors declined to give any further details on the Amazon and Facebook deals, merely reiterating that it's too early to accurately forecast the level of business the relationships may generate.
You won't be surprised if I tell you that there are no broker forecasts for the company.
SocialGO
SocialGO was called 'Bright Things' before changing its name two years ago. The name change was "to allow for better alignment and association of the name of the Company with the internet-based social networking software service, SocialGO™, from which the Company's revenues are generated."
Some company name changes are an attempt to escape a bad odour that's become attached to the original name, but this one seems fair enough.
SocialGO's shares shot up from 0.95p to 1.6p on Monday this week, prompting the company to release a statement that it was not aware of any reason for the price movement. The shares fell back again on Wednesday after the company released its annual results. The market was apparently hoping for better, although there seems to be no broker coverage.
The company is looking to drive sales, marketing, promotion and partnerships in the coming year. Marquee signings for SocialGO to date are "the band Kasabian and rap star and producer Soulja Boy". Perhaps more interesting, in a Bango-Amazon-Facebook way, is a low-key mention in SocialGO's results of "promising discussions with a major US media group".
Will any of my three companies live up to their go-go potential? Or are they destined to be go-go gonners? You can let me know what you think, or tell me about your own favourite speculative tech shares, in the comments box below.
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More from G A Chester:
> G A Chester owns shares in James Halstead and F W Thorpe.
