Why have the shares crashed?

Fusionex shareholders who hadn’t already switched off for the Bank Holiday weekend received a nasty shock after the market closed on Friday. The company made an announcement at 5.30 p.m. titled ‘Proposed cancellation of trading on AIM‘.

The board said that it intends to hold an EGM in Malaysia on 15 June to seek the approval of shareholders to delist from the AIM market. It said that for the delisting to go ahead it will require 75% of the votes cast to be in favour and that directors holding 41.93% of the shares have given irrevocable undertakings to vote in favour.

The reasons given for seeking to delist include the directors’ belief that the share price over the past 15 months hasn’t adequately reflected the value of the company and that the costs of remaining listed are disproportionate to the current benefits to the company. Presumably, the directors — led by chief executive Ivan Teh, who holds 40.13% of the company’s shares — are confident of securing enough votes to delist.

Private investors are naturally upset and angry about this turn of events. In a further announcement this morning, the company said that its non-executive chairman John Croft (whose role includes representing minority shareholder interests) and joint broker Peel Hunt have both resigned as a result of the delisting proposal.

A falling knife to catch?

Fusionex’s shares are trading at 46.5p, as I’m writing, making the company’s market capitalisation £25.3m. On the face of it, this is cheap for a fast-growing company that last year generated revenue of 94.6m Malaysian Ringgit (RM) — £17.2m at current exchange rates — and had net cash of RM74.7m (£13.6m) on its balance sheet at year-end.

However, I’ve written before about some disconcerting features of Fusionex’s accounts and I believe these are part of the reason why the market hasn’t valued the company as highly as the directors say it should have been.

Personally, I’ll be avoiding this falling knife, but investors considering catching it — and existing shareholders — should satisfy themselves about a number of things. Namely, that the accounts are robust, that the directors have minority shareholders’ interests at heart (despite appearances to the contrary) and that either the delisting vote will fail (and the share price recover) or that holding shares in a private company is an attractive proposition.

On the latter subject, the board said in the announcement on Friday that if the delisting goes ahead, it “intends” to put a matched bargain facility in place for trading shares, which it rightly acknowledges “is likely to offer a substantially lesser degree of liquidity and potentially less attractive share prices” than on AIM.

The post Is Fusionex International plc a falling knife to catch after falling 65% today? appeared first on The Motley Fool UK.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Fusionex’s trading update covers the year to 30 September. It shows that the company has continued to deliver on its strategy and has made strong progress following a positive first half of the year. In particular, Fusionex has successfully launched the next generation of its proprietary Big Data Analytics (BDA) platform, GIANT 2016. It has also provided blue-chip enterprise organisations with BDA software, with GIANT 2016 opening up a new addressable market across small and medium-sized businesses.

As a result, Fusionex believes that while revenue will be in line with market expectations, EBITDA (earnings before interest, tax, depreciation and amortisation) will be significantly ahead of market expectations. This has significantly boosted investor sentiment in Fusionex and has sent its shares 17% higher today.

Looking ahead, more capital gains could be on the horizon. Fusionex expects the positive momentum of 2016 to continue into 2017, which could mean further improvements in its financial performance. Therefore, buying it now for the long term could be a sound move.

Of course, Fusionex is a relatively small business which, while profitable at the EBITDA level, isn’t due to record a black bottom line over the next couple of years. In fact, its pre-tax loss is forecast to be £0.6m in the current year. As such, Fusionex remains relatively risky compared to a number of its sector peers.

Less risk?

For example, information solutions provider Fidessa (LSE: FDSA) is expected to grow its bottom line by 8% in the current year and by a further 7% next year. This is slightly ahead of the expected growth rate for the wider market and when combined with Fidessa’s relatively stable and consistent business model, means that the company has long-term appeal.

Furthermore, Fidessa has a yield of 3.7%. This is much higher than Fusionex’s 0.7% yield. Although Fidessa’s dividend is set to be covered just 1.1 times by profit next year, the robust nature of its financial performance in recent years shows that its dividend should be relatively secure. That’s especially the case as Fidessa’s profit growth prospects mean its dividend headroom should increase over the medium term.

However, Fidessa lacks the long-term growth potential of Fusionex. Therefore, investors who are less risk-averse and who are seeking high potential rewards may prefer to buy Fusionex. But for many investors the relative stability, superior income visibility and high yield make Fidessa the better option for the long term. That’s especially the case since the outlook for the global economy remains uncertain, which could make the market more risk-averse and favour more stable companies such as Fidessa.

The post Will this growth stock soar after profit beats expectations? appeared first on The Motley Fool UK.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Fidessa. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

What’s the big deal?

Put simply, big data refers to the vast amount of information that businesses generate on a day-to-day basis from transactions, social media and/or machines they own. This data may come in a variety of formats, from standard numeric data to unstructured documents, email, audio and video. The fact that so much potentially valuable information is now produced from so many different sources means it needs to be organised and processed as soon as possible.

Analysed appropriately, big data can improve decision-making and strategy. It can make businesses more efficient by helping to reduce costs and time spent doing ineffective work. It can determine why a product may be defective or a service may be failing and even detect things like fraudulent behaviour. Big data can assist with product development, ensuring that a business offers exactly what its customers need. It can also tap into buying habits, allowing a company to offer incentives to encourage customers to keep returning. Given this, it’s no wonder that governments, banks, manufacturers, retailers and healthcare providers are so keen to harness its potential.  

Big potential?

Along with cybersecurity and robotics, it seems likely that big data will be a key investment theme for the future, especially as developments such as the Internet of Things gather pace. As such, investors may want to investigate two companies that look likely to benefit from the surge of interest in this area.

With a market cap of just £82m, multi-award-winning analytics specialist, Fusionex International (LSE: FXI) is unlikely to be on many institutional investors’ radars, despite boasting clients such as Royal Dutch Shell, Ford and American Airlines. Back in June, the company launched Giant 2016, its software-as-a-service model. Significantly cheaper than its original Giant offering, it’s hoped that the former will appeal to small and medium-sized organisations.

If Fusionex continues to secure clients despite intense competition (at least two multi-million dollar contracts have been signed since Giant 2016’s launch), its shares could see a significant rerating when results for the full year are released in Janurary. Although a return to profit isn’t expected until 2018 (explaining why its share price has remained in the doldrums since early 2016), I remain positive on the company’s massive growth potential.

What consumers are thinking

An alternative to Fusionex could be YouGov (LSE: GOV). The £243m cap market researcher’s flagship intelligence service allows businesses to understand what consumers think of their brands and their rivals. This is plainly useful for any company but particularly for one that operates in a highly competitive industry. Last week’s annual results highlighted a 16% growth in revenue and a 27% jump in operating profits, allowing the company to hike its dividend by a stonking 40%.  

In the last year, YouGov’s shares have done extremely well, rising 69% from 137p to today’s price of just over 231p, easily eclipsing the last peak of 203p way back in 2007. Unfortunately, this leaves its shares trading on a forecast price-to-earnings (P/E) ratio of 27.  For some, this may be too expensive. Given the expected growth ahead, I’m not so sure. As mentioned here, even highly valued shares can turn out to be bargains over the long term.

The post Big Data, big profits? appeared first on The Motley Fool UK.

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Paul Summers owns shares in Fusionex. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

AFC Energy

AFC Energy made excellent progress last year on its 11-step project to prove its low-cost fuel cell system on an industrial scale at a gas plant in Germany. News on the final milestone — full commissioning — is expected by the end of next week.

AFC recently raised £3.6m for working capital via a subscription and shareholder offer. Shareholders were supportive, with the company confirming this week that the offer was 3.8 times oversubscribed, and announcing today that subscribers will receive 26.38% of the number of shares applied for.

The share price of AFC probably got a bit ahead of itself last summer, rising to a high of 58p, as investor excitement built with the successful completion of the early milestones in Germany, and news of interest and early-stage agreements with potential adopters of AFC’s system in Asia and the Middle East.

However, the market has since taken a more realistic view of the value of a company which still has a good way to go to commercialisation and profits. The shares are currently trading at 25p, giving AFC a market capitalisation of £77m. If the full-commissioning trial is as successful as the previous development milestones, the company could come to be worth a significant multiple of its current value. As such, AFC could prove a good buy for investors looking for a higher risk/higher reward opportunity.

Fusionex

The buzzwords of Big Data and Internet of Things give Fusionex an added aura of growth potential; and, indeed, growth dominated the company’s annual results yesterday, which were ahead of expectations.

Fusionex reported revenue growth of 35% and earnings growth of 28%. And the company said it anticipates the growth trend accelerating, with chief executive Ivan Teh commenting: “The new financial year has started on a very strong note … the outlook for 2016 and beyond is very positive and exciting for Fusionex”.

Fusionex’s shares dived 36% on the day from 330p to 212.5p! And this despite house broker Panmure Gordon reiterating its buy recommendation and increasing its target price to 744p!

There were several features of Fusionex’s results, which we’ve seen in a number of car-crash companies over the past year — particularly off-shore-domiciled overseas firms. These may have been behind the market giving a big thumbs down to Jersey-registered Malaysian Fusionex yesterday.

The financial statements showed a massive 250% rise in trade and other receivables. Development costs not charged against profits also increased markedly by 50%. Meanwhile, net cash flow was actually negative. Also, it might be noted, that, somewhat bizarrely, despite having substantial cash on the balance sheet, Fusionex also has a stack of borrowings.

Today, the company released a statement, reiterating that the increase in trade receivables was “as a result of the business moving increasingly to channel partners”, and adding that 82% of the year-end receivables have since been collected. However, the shares have recovered a mere 1% to 215p following this statement. The market remains sceptical, and so do I, despite what looks on first sight an attractive P/E of 25 for a company growing earnings at 28%.

The post Should You Buy AFC Energy plc And Fusionex International PLC On Today’s News? appeared first on The Motley Fool UK.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

However, with Bango experiencing faster than expected growth in developing markets, its end user spend margin was lower at 1.8%. The company expects further growth in end user spend during 2016 from its newer markets, where smartphone adoption is still increasing. And with its switch to recurring fees from upfront platform fees likely to have a positive impact on end user spend, it appears to be relatively well-positioned to continue its growth.

With Bango having a low fixed cost base, it has the capacity to process in excess of 10 times the current end user spend. It believes that it has a clear path to profitability and while it could prove to be a strong long-term performer, it looks set to remain highly volatile and risky during an uncertain period for the wider market.

Giant leap

Meanwhile, software specialist Fusionex (LSE: FXI) is also down by 16% today despite releasing results that are ahead of expectations. For example, revenue leapt by 35% versus the prior year, while net profit jumped by 28% versus the prior period. A key reason for such strong growth is the expansion of its partner network, with over 30% of its revenue coming from this space. And with Fusionex also reporting better than expected performance from its flagship big data product GIANT, as well as further investment in the product, it remains highly confident in its long-term future.

With Fusionex expected to grow its bottom line by 11% in the current year, it continues to offer upbeat near-term prospects. However, when the company’s valuation is taken into account, it appears as though its growth potential is already factored into its share price. For example, Fusionex trades on a price-to-earnings growth (PEG) ratio of 3.7, which indicates that it lacks appeal at the present time.

Improving operations

Also reporting today is software and hardware provider Servelec (LSE: SERV). It finished 2015 with a strong order book, improving pipeline and increased cash position versus the prior year, with its performance being relatively resilient despite challenges in the oil and gas markets. In fact, its health and social care division helped to offset softer performance from its automation unit, which experienced a slower than expected increase in sales for the year.

Looking ahead, Servelec expects the delayed projects in the oil and gas space from 2015 to boost its automation division’s performance this year, while its health and social care unit continues to offer a robust outlook. This is set to lead to a rise in earnings of 11% in the current year and with Servelec trading on a PEG ratio of just 1.5, it appears to be a relatively appealing buy for the long term.

Clearly, its shares are likely to be volatile due to the company’s exposure to the oil and gas industry. But for long term, less risk-averse investors Servelec could hold significant appeal.

The post 3 Small-Cap Tech Stocks To Beat The Market Crash? Bango plc, Fusionex International PLC And Servelec Group PLC appeared first on The Motley Fool UK.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Furthermore, demand for its GIANT solution remains high, with a combination of a sound market position in Asia as well as further investment in R&D aiding its long term outlook. And, crucially for investors, it expects full year results to be ahead of market expectations, which is perhaps the key reason for its double-digit share price rise today.

Such are Fusionex’s growth prospects that it has also announced a placing which has been oversubscribed and has raised £14m to be used for growth opportunities. And, with the company’s bottom line forecast to rise at a double-digit rate in each of the next two years, its shares could continue the momentum which has seen them rise by 32% in the last year.

Meanwhile, Sirius Minerals (LSE: SXX) continues to await the final decision from the North York Moors National Park Authority regarding its proposed potash mine. Clearly, the company has huge long term potential to become a major supplier of polyhalite and it has vast growth potential due to the positive results which have been found in crop studies recently undertaken.

However, before it reaches that status there are a number of hoops for the company to jump through, one of which is obtaining the required approvals for the mine to go ahead. Then there is the issue of financing. With resources companies having taken such a large hit in recent months the appetite among investors for early-stage mining plays may be somewhat smaller than it was a year or two ago. So, while Sirius Minerals certainly has the potential to soar, relatively high risks remain and less risk averse investors may wish to wait until there is greater clarity regarding its long term future.

The last three months have been hugely disappointing for investors in Trinidad-based oil producer LGO Energy (LSE: LGO). Its shares have lost 68% of their value in that time, with a key reason for this being a placing of £1m to be used to speed up the development of its Goudron sandstone programme.

Clearly, the falling oil price has hurt investor sentiment in LGO, but it remains a very appealing long term play. For example, its first sandstone well exceeded management’s expectations and a further drilling programme is now being planned in the current year. In addition, LGO’s financial performance is on the up and its Goudron field could prove to be highly profitable over the medium to long term. So, while its shares are likely to remain volatile and further placings could realistically lie ahead, it has the potential to reverse its share price falls in 2016 and beyond.

The post Are Sirius Minerals PLC, Fusionex International PLC And LGO Energy PLC Set To Soar? appeared first on The Motley Fool UK.

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• Decided not to bother with a Stocks and Shares ISA? You might be missing these 3 things!
• Why is everyone buying GSK shares?
• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.