That’s a decent five-month return for shareholders, but my guess is that many were well down from their original buying prices because the firm has been something of a serial disappointer over the years.

Reducing losses

Given the history of loss-making, I reckon timing a purchase to catch that gain would have been difficult. Yet the share-price action suggests that some investors were buying. Indeed, there’s a turnaround under way in the underlying operations.

The firm tells us in its news releases that it aims to be the leading global electronic invoicing and purchase order transactions network. However, despite providing such services for an impressive list of massive customer organisations, it has failed to turn a profit… so far.

In today’s full-year results report for the trading year to 30 April, we can see that continuing revenue increased by just over 6% compared to the year before, to around £33m. The operating loss came in at £2.6m. Imagine having your own business and you worked hard all year to turnover £33m, only to find at the end of the year you were £2.6m worse off than before you started the year’s trading – that’s the harsh reality of loss-making businesses.

An optimist would point out that the operating loss has fallen from £10.5m the year before and is, therefore, heading in the right direction. But the net cash figure on the balance sheet depleted by 55% to £2.6m in the period. In other words, it looks like it cost more than £3m to keep things running. Tungsten is in a race against time before the money runs out, and we could see further capital-raising and shareholder dilution ahead.

A brighter future?

But executive chairman Tony Bromovsky thinks the future looks brighter. He said in the report that the directors “have confidence in the Tungsten suite of solutions and offerings.” He reckons the business is “well positioned, following a period of transformation, to achieve future growth and profitability.”

However, I reckon there’s a problem for shareholders. The market capitalisation stands at almost £62m, which is near twice the level of revenue reported. Given that the firm appears to work in a low-margin sector, a high, growth valuation seems inappropriate. The advances in revenue are unimpressive to me, and the company has after all, so far, been unable to turn a profit. My guess is that when profits do finally emerge from the enterprise in future periods, the potential reality of their small size could prompt a valuation de-rating, which could see the shares plunge.

Tungsten has been busy cutting costs and restructuring, but we need to see worthwhile and profitable growth kicking in if the stock is to continue its rise. Given the company’s long history of struggle, I think that’s a tall order, and any annual earnings advances could be modest. So I’m avoiding the stock for now because I don’t think it’s about to shoot the lights out and it could move south instead.

The post Is this tempting small-cap about to shoot the lights out? appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any share 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.

Here, I’m looking at whether fallen FTSE 250 angel Dignity could now be the turnaround buy of the year, and whether AIM-listed Tungsten could also be set to fly.

Below expectations

Dignity’s shares, which reached an all-time high of over 2,800p in autumn 2016, fell as much as 8% in early trading today, hitting a new multi-year low of 624p. This came after the company released a first-quarter update with underlying operating profit down 42% on 15% lower underlying revenue — an operating performance “below the Board’s expectations.”

However, this was primarily the result of a “significantly lower than expected number of deaths” during the period (12% to be precise). Below- or above-trend quarters can occur, but the company reminded us that historical data over the last 20 years indicates the final volume will likely be within 3% of the previous year.

Transformation

Faced with a trend of demand for lower-cost funerals, and a Competition and Markets Authority investigation into the industry, Dignity is in the midst of a transformation plan that includes a margin-sapping, if modestly market-share-gaining, re-pricing strategy.

Clearly with a margin reset, and future profits growth being at a more sustainable (lower) level than in the past (when boosted by regular hefty price rises), Dignity is a less valuable business than it one appeared. Nevertheless, I see this as an attractively defensive business with a credible turnaround strategy.

The shares have recovered some ground since this morning, and are trading at 640p, as I’m writing. I’m looking at 10 times earnings and a 3.8% dividend yield on my expectations for the current year. And I reckon earnings should begin their return to growth next year. As such, I think this former FTSE 250 stock could be a strong turnaround story from this level, and I rate it a ‘buy’.

Fundamental change

You’d have thought a firm whose clients include 74% of FTSE 100 companies and 71% of Fortune 500 companies — and which processed transactions worth over £164bn last year — would be able to turn a profit. Unfortunately, Tungsten never has. Multiple boardroom and strategy changes, since its flotation at 225p a share in 2013, have so far come to naught. The shares are trading at 39p as I’m writing.

The company, having “completely reconstituted our board,” during the last six months, is “undergoing a period of fundamental change in regard to strategy, operations, governance and culture.” A fortnight ago, it announced the initial results of an operating review, and a raft of new initiatives.

I’ve been rather scathing of Tungsten over the years. And given its history of failed promises of profits just round the corner, and analyst forecasts of continuing losses for the foreseeable future, I find it hard to get excited by the latest round of change. Maybe something will come of it this time, but it’s a stock I’m continuing to avoid for the time being.

The post Is this fallen FTSE 250 angel now the turnaround buy of the year? appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the 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.

All about cash flow

In a trading update today, for its financial year ended 30 April, Tungsten said it processed transactions worth over £160bn and generated record revenue. However, compared with the value of the transactions, revenue was tiny at £33.7m. A 9% increase (at constant exchange rates) on the prior year is not particularly impressive and it was below expectations of £35.5m.

Historically, the company has been lossmaking and a serial disappointer, even on its favoured and most generous measure of profitability, EBITDA, which it defines as “operating loss from continuing operations before other income, depreciation, amortisation, share-based payments charge, and exceptional items.” It said it expects its EBITDA loss to narrow to £4.6m from £11.8m, adding that EBITDA turned positive for the final four months of its financial year. It didn’t enlighten us as to cash flow in those final four months but said net cash outflow for the whole year was £11.1m.

Tungsten has taken to capitalising development costs in the last couple of years. This practice has a positive effect on paper earnings but not on net cash flow. The company capitalised £3.6m in fiscal 2017 and £2m in H1 fiscal 2018. We’ll have to wait for the full results in July to get a real picture of how the cash flowed and an idea of whether remaining cash of £6.4m at 30 April provides the business with adequate resources. For the time being, I’m minded to avoid this AIM-listed stock, whose shares are currently trading 3.3% down at 53p, following today’s update.

Improving outlook

GlaxoSmithKline’s shares were trading at 1,350p near the start of the year when I saw great value in the stock. At that time, the forward 12-month price-to-earnings (P/E) ratio was 12.3 and the prospective dividend yield was 6%. The shares have climbed to a current 1,530p with the P/E up to 14.1 and the yield down to 5.2%. Nevertheless, as the P/E is around the level of the historical average for the FTSE 100 as a whole and the yield is above average, I still see value here and continue to rate the stock a ‘buy’.

In its annual results released in February, Glaxo reported improvements in sales, margins and cash flow in 2017. All three of its businesses — Pharmaceuticals, Vaccines and Consumer Healthcare — delivered sales growth. There was similar across-the-board growth (at constant exchange rates) reported for Q1 this year in April.

I was also encouraged that the company declined to bid for the consumer health business of Pfizer at a mooted $20bn and instead struck a $13bn deal with Novartis to buy the 36.5% stake in their consumer health joint venture that it didn’t already own. This transaction has just completed and will boost Glaxo’s future cash generation and support the group’s main priority of strengthening its Pharmaceuticals business and R&D pipeline. I believe investors can look forward to a new phase of good earnings and dividend growth over the medium-to-long term.

The post Why I’d still buy FTSE 100 giant GlaxoSmithKline but avoid this growth stock appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.

Missing numbers

Purplebricks never tells us how many properties it actually sold in any period. Previously, various figures it gave made it possible to at least estimate the number. My calculations of the average sale price suggested that either the company was cornering the market in trailer park homes sales or that a rather large proportion of instructions weren’t being converted to completions. Obviously, if you’re charging a fixed fee but fail to complete the sale in too many cases, you’re not going to have a sustainable business in the longer term.

In its latest results, Purplebricks omitted two numbers it had routinely published previously that enabled the aforementioned estimate of average sale price. Conversion from instruction to sale agreed (which had been climbing and reached 83% in the last full year) was entirely absent from the recent H1 results. As was a corresponding figure for the full-year: “Sale agreed in the UK every 9 minutes 24/7.”

Sustainability and valuation

In addition to the omitted information in the latest results, the table below — based on numbers Purplebricks does give — adds to my concern about the sustainability of its business model.

* Based on FY guidance of £84m in H1 results

As you can see, the company is having to increase marketing spend quite dramatically, while revenue growth is decelerating, also quite dramatically. For me, this trend appears ominous for the market’s future top- and bottom-line growth expectations, with the shares trading at over six times forecast revenue and 160 times forecast earnings for the company’s 2018/19 financial year.

Due to the eye-watering valuation, my doubts about the long-term sustainability of the business model and a number of other issues, I rate the stock a ‘sell’. And on that same note…

Serial disappointer

Tungsten (LSE: TUNG) bought a near-bust e-invoicing firm for over £100m in 2013 with a view to using its large database of clients to create a lucrative invoice discounting business. Four years on, in its half-year results earlier this month, the company reported less than £17m revenue from e-invoicing and just £167,000 from invoice discounting. It posted a loss before tax of over £9m and has also missed its target “to achieve monthly EBITDA breakeven in calendar 2017”.

Even if Tungsten manages EBITDA breakeven next year, cash flow is another matter. An improvement in cash outflow from operations in the last financial year — down to £12.3m from £18.1m — was helped by it capitalising software development costs for the first time in its history (£3.6m). Similarly, a reduction in the outflow in the latest H1 results to £4.5m from £6.3m came with £2m of capitalised costs. Positive free cash flow remains only a distant possibility in my eyes. As such, I rate this serial disappointer a ‘sell’.

The post Purplebricks Group plc isn’t the only ‘game-changer’ stock I’d sell today appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the 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.

The company, which describes itself as “the largest online bingo-led operator in the world,” posted strong growth in revenue (13%) and adjusted EBITDA (15%) for the six months to 30 June. And there was an impressive acceleration of growth in Q2, with revenue increasing by 17% and adjusted EBITDA by 28%.

Despite the strong performance and the shares trading at a new high of 680p, a company-commissioned research report published this morning suggested “the stock trades at a significant discount to peers” and advised “we would expect a re-rating as the market regains confidence in the business.”

Lack of confidence

On the face of it, a forecast P/E of 7.1, falling to 6.1 next year, is dirt-cheap. So, what’s behind the market’s lack of confidence?

It may be lingering doubts about Jackpotjoy’s antecedents as Intertain when it came under attack in a report by short-sellers Spruce Point. An independent committee appointed by Intertain dismissed most of Spruce Point’s allegations but the upshot was a major boardroom overhaul and a decision to change the company’s name to Jackpotjoy and move its listing to London.

Chief financial officer Keith Laslop survived the purge, having also previously emerged little scathed as a director and chief operating officer of the somewhat notorious Gerova Financial. He had rubbed shoulders (as a defendant in a civil lawsuit but not in a subsequent criminal trial) with Gerova fraudsters Jason Galanis and Gary Hirst.

Then again, perhaps some investors are concerned by Jackpotjoy’s still-high level of debt, its lossmaking statutory profit numbers or simply the business dynamics of online bingo. At any rate, I see the company as sufficiently problematic to put it on my list of stocks to avoid.

Cunning plan

At a current price of 59p, shares of Tungsten (LSE: TUNG) are 85% down from their September 2014 high of 400p, despite the company’s revenue having increased threefold in the intervening period.

Tungsten was founded by City financier Edi Truell and raised £160m in 2013. It bought a long-time lossmaking and near insolvent US e-invoicing firm for £101m. The firm as it stood was worth next to nothing — Tungsten booked £98.7m as goodwill — but Truell had a cunning plan to use its large database of buyers and suppliers to create a lucrative invoice discounting business, offering early payment facilities to suppliers. To which end Tungsten also acquired a subsidiary of an Israeli bank for £30m.

In search of a profit

To cut a long story short, Truell subsequently departed, the company sold the bank in favour of third-party financing and the financing business still hasn’t taken off, with Tungsten reporting revenue of just £152,000 in its latest financial year.

New management has had some success in bumping up prices in the e-invoicing business and flogging customers add-ons such as spend analytics. A decreased EBITDA loss to £11.8m from £16.2m was hailed as progress but it was helped by the company capitalising software development costs (£3.6m) for the first time in its history.

Tungsten remains a company in search of a way to make a profit and an impairment of that £98.7m goodwill is surely overdue. It remains firmly on my list of stocks to avoid.

The post 2 cheap growth stocks I wouldn’t touch with a bargepole appeared first on The Twelfth Magpie.

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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.

There’s an accounting matter — a perennial concern for some investors — that I’ll come to shortly, but let me say at the outset that I believe YouGov is a quality business with tremendous growth prospects.

Credible adjusted earnings?

Revenue for the year came in at £88m, 16% ahead of last year. Growth at the group’s higher margin data products and services businesses is racing ahead of the traditional market research division, and adjusted operating profit climbed 27% to £10.9m.

Adjusted earnings per share (EPS) increased 26% to 8.8p, but statutory EPS was just 3.3p. Behind this wide difference lies the accounting matter I referred to. To cut a long story short, YouGov’s always-elevated adjusted EPS reflects a high level of capitalisation of internally-generated intangible assets (an area open to manipulation), which may indicate over-aggressive or even fraudulent accounting in some cases.

However, in YouGov’s case, management is fairly transparent about its intangibles, I see no other ‘red flags’ to give me cause for concern, and I’m happy with the acid test of cash generation. For example, since YouGov started paying dividends during 2013, it’s distributed £2.9m in cash to shareholders, while cash on the balance sheet has more than doubled from £6.7m to £15.5m.

As such, I’m satisfied that valuing YouGov on its adjusted EPS is credible, and that the price-to-earnings ratio of 24.2 makes this an attractive buy for the level of growth on offer.

An undertaking of great advantage?

Shareholders of YouGov have enjoyed a rise in the company’s value from around £70m to £222m over the last three years. Investors in Tungsten (LSE: TUNG) have suffered almost the exact opposite.

Tungsten was founded in 2012 “to identify and acquire a company, business or asset within the financial services sector which could be grown into a business with a significant market presence in a segment with potential for sustainable long-term cash generation, return on equity and growth.”

A bit vague but nowhere near as vague as the enterprise which, during the South Sea Bubble of 1720, famously advertised itself to investors as “a company for carrying out an undertaking of great advantage, but nobody to know what it is.” Tungsten — by the time of its stock market flotation in 2013 — had at least lined up acquisitions of a lossmaking e-invoicing firm and a small bank, with the idea of transforming the former by offering invoice discounting through the latter.

Things haven’t gone well and the market value of the company has fallen from £225m at flotation to £68m at a current share price of 54p. Tungsten says it processes annual transactions worth over £133bn, including invoices for 70% of the FTSE 100. But it generated revenue of just £26m last year, of which a mere £194,000 came from invoice discounting. It made a loss of £28m for the second year running.

Unfortunately, in the absence of evidence that Tungsten is carrying out an undertaking of any greater advantage (to investors) than we’ve seen so far, I can only rate the shares a sell.

The post Why I would buy YouGov plc but sell Tungsten Corp plc appeared first on The Twelfth Magpie.

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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.

Despite processing invoices of £140bn, including 70% of the FTSE 100 and 72% of the Fortune 500, Tungsten generated revenue of just £26.1m and made an EBITDA loss of £18.7m. Net operating cash burn was £21.6m, deteriorating from £9.3m in H1 to £12.3m in H2.

Tungsten reckoned in May that it could “become cash flow positive by the end of FY17”. However, today it said it’s “committed to achieving monthly EBITDA breakeven during calendar 2017,“ (my emphasis).

While there’s no immediate threat of a cash crunch (the board expects to have “cash in excess of £20m” at 30 April 2017), a share price of 44p, giving a market cap of £55m, looks too rich to me for a company where cash break-even is a relatively distant and uncertain prospect.

Profitable and cash-generative

UK brickmaker Michelmersh Brick (LSE: MBH) is a similar sized company to Tungsten — having a market value of £46m at a share price of 57p. It generates a similar level of revenue, being £29m for the trailing 12 months (TTM), following half-year results released today.

There the similarities end. Michelmersh is profitable and cash-generative. Statutory operating profit works out at £4.6m (TTM), with net operating cash flow also £4.6m. Earnings per share (EPS) is 4.54p, giving a reasonably attractive price-to-earnings (P/E) ratio of 12.6. And with a 1p annual dividend expected to rise to 1.2p this year, the forward dividend yield is a useful 2.1%.

The Brexit result has created some uncertainty, and housebuilders may become more cautious in building. However, with a chronic under-supply of housing, and brick imports falling as sterling has weakened, I rate Michelmersh a buy.

Growth and income

Vodafone (LSE: VOD) released an encouraging Q1 trading update on Friday with organic service revenue up 2.2%, ahead of the analyst consensus of 1.9%.

This result was achieved despite a 3.2% negative drag in the UK, where teething problems with a new IT system carried on from the previous quarter, leading to continuing problems with customers’ bills and a flood of complaints. However, the situation is already improving and the company reiterated its financial outlook for the full year to March 2017.

Analysts expect EPS to rise 30%, giving a P/E of 36 at a share price of 236p. That’s a high multiple, but the price-to-earnings growth (PEG) ratio is a reasonable 1.2. Furthermore, the dividend yield is forecast to be comfortably above 5%, and could be boosted when translated back to sterling because Vodafone is switching to euros as its reporting currency this year.

I’m not concerned that the dividend isn’t covered by ‘paper’ earnings, because free cash flow is on the rise after a period of heavy investment. Indeed, Vodafone has guided on free cash flow of “at least €4.0bn” (before M&A, spectrum and restructuring costs), while a modestly increased dividend will cost €3.9bn.

Vodafone looks set for a period of strong growth, and with the add-on of a highly attractive dividend yield, I rate the shares a buy.

The post Are these 3 shares ‘screaming buys’ after the latest news? appeared first on The Twelfth Magpie.

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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.

Watchstone

Watchstone — formerly called Quindell — was left with a rag-bag of loss-making businesses after selling most of its assets to Australian firm Slater & Gordon last year. The deal saved Watchstone from blowing up for lack of cash, but has been disastrous for the Aussie group whose share price has collapse from $8.00 to just $0.28.

Watchstone has already offloaded some of its retained businesses — an insulation business in January and a telecoms software business in February — and an announcement today of a management incentive scheme appears to envisage the remainder of the businesses ultimately being disposed of in one way or another. Cash bonuses for directors “will only be triggered upon value-crystallising events (including, inter alia, a takeover of the Group or disposals of individual divisions) in excess of base values”.

Watchstone is still the subject of a Serious Fraud Office (SFO) investigation into events of the Quindell era and faces potential legal action from disgruntled shareholders. However, with a cash balance of £95m at the last reckoning (equivalent to its current market capitalisation), former directors likely to bear the brunt of any penalties arising from the SFO investigation, and with a letter of claim from disgruntled shareholders only currently standing at up to £9.4m, Watchstone no longer appears to be the ticking time-bomb it once was.

Tungsten

Troubled e-invoicing firm Tungsten today announced the departure from the board of founder Edi Truell. Although Tungsten “serves 56% of the Fortune 500 and 67% of the FTSE 100”, and processed transactions worth over $187bn last year, it’s not making any profit.

Add-ons are where the profit is in e-invoicing. However, the company said in December that while its analytics product had been demonstrated or trialled by more than 50% of its customers, and while feedback had been generally positive, “at the initial pricing levels quoted none agreed to purchase the product”.

Alongside today’s announcement of the departure of Edi Truell, the company said it had received various proposals from him to combine Tungsten with other assets in which he has an interest. The board found these various proposals to be “universally without merit for shareholders”.

Whether Tungsten has a business that will ever be profitable remains to be seen. There are no immediate cash concerns, so there’s a long fuse on this ticking time-bomb, but many ifs and buts as to whether it can be defused.

Igas

Igas’s results for the nine months ended 31 December, released last week, showed that the company was only able to deliver net cash from operations of £1m. That was at an average price of $58.9 a barrel, but the current oil price is now around $40.

Moreover, Igas is weighed down with debt, the results showing cash of £29m, but £85m of secured bonds maturing March 2018, and £18m of unsecured bonds maturing December 2018. The company said that based on its current forecasts it is projected to breach certain of its bond covenants in the second half of 2016.

Asset sales, a dilutive equity raising or persuading bondholders to modify or temporarily waive the covenants are options the board could pursue. However, the secured bonds are trading at just 46 cents in the dollar, which tells you that equity holders are in the extremely precarious position of sitting on a ticking time-bomb.

In my view, there is limited upside for Watchstone, while the downside risk is so substantial at Tungsten and Igas that I believe selling would be the most prudent move.

The post Are Watchstone Group PLC, Tungsten Corp PLC And IGAS Energy PLC Ticking Time-Bombs? appeared first on The Twelfth Magpie.

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• Up 446% in 12 months! What’s next for the Ceres Power share price?
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• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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.

Furthermore, RWS is benefitting from positive currency translation and expects to consolidate its market-leading positions within its chosen sectors. As such, it seems likely that forecasts for growth in earnings of 17% in the current year will be increased and this makes RWS’s price-to-earnings growth (PEG) ratio of 1.3 appear to be extremely good value.

That’s especially the case when you consider that RWS enjoys significant barriers to entry and a relatively wide economic moat, thereby providing relatively consistent financial performance. As such, it seems to be a strong long-term buy.

Wait and see

Also reporting today is Tungsten (LSE: TUNG), with the electronic invoicing and analytics company stating that trading in the third quarter was in line with market expectations. Revenues for the full year to 30 April 2016 are expected to be broadly in line with previous guidance, while Tungsten continues to anticipate an EBITDA loss for the year of no more than £15m (excluding one-off items).  Furthermore, Tungsten believes it’s on track to break even on an EBITDA basis by the end of the 2017 financial year, which could be viewed as a positive event by the market.

Despite this, Tungsten’s share price has fallen by as much as 10% today following the release, although it’s still up by a whopping 61% since the turn of the year. While it’s tempting to buy now due to the improved investor sentiment of recent months and the expected improvement in the company’s financial performance, it could be prudent to wait for confirmation of profitability before buying a slice of Tungsten.

Bright future?

Meanwhile, Sainsbury’s (LSE: SBRY) has also been in the news of late regarding its bid for Home Retail. The inclusion of Argos within the Sainsbury’s business seems to be a logical step, since it should create synergies and boost sales at both companies due to the potential for cross-selling opportunities. In addition, it may help to diversify the Sainsbury’s brand away from food retailing and clothing.

Looking ahead, Sainsbury’s is likely to benefit from an improving UK consumer outlook. With inflation being low and wage growth on the up, disposable incomes are rising in real terms and this could help to push some customers back towards mid-market operators such as Sainsbury’s and away from no-frills supermarkets such as Lidl and Aldi. And with Sainsbury’s trading on a price-to-earnings (P/E) ratio of just 11.3, it appears to offer good value for money given its bright long-term future.

The post Should You Buy J Sainsbury plc, Tungsten Corp PLC And RWS Holdings plc After Recent News Flow? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of RWS and Sainsbury (J). 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.

Monitise

Monitise boasts relationships with a roll-call of blue-chip companies, including Banco Santander and IBM, and describes itself in rather impressive terms: “Monitise plc has created the most extensive and commercially successful mobile banking and payments service in the world”.

For the 12 months ended December 2014, the world’s most commercially successful mobile money firm posted an EBITDA (earnings before interest, tax, depreciation and amortisation) loss of £52m on revenue of £91m. However, the company has reiterated a target of positive EBITDA for its financial year ending June 2016.

The reason why I think Monitise has potential right now, though, is connected to the company putting itself up for sale on 22 January, then calling off the process on 25 March, having rejected “a number of expressions of interest from various parties”, which the Board believed undervalued the business.

Now, I’ve no idea about Monitise’s intrinsic worth. What I do know is that trade buyers were interested when the company went up for sale with a market value of £350m in January. I would suggest that the parties concerned value Monitise significantly higher than its current price in the market of £110m. If so, there would appear to be plenty of scope for a new offer for Monitise at a 100%+ premium, giving investors today significant upside.

Monitise’s Board may have waved suitors away just a few months ago, but the appetite of some major shareholders for a sale of the company would appear to have increased markedly since then. In a series of trades during July, Monitise’s largest shareholder — US group Omega — reduced its holding from 13.9% to 10.9%. Also during the month, it was revealed that 5.3% shareholder Visa Europe intends to reduce its stake over time.

With strong indications that Monitise is worth more than its current market value in the eyes of trade buyers, and that some institutional shareholders appear happy to exit at a relatively low price, I think the stock currently looks a speculative buy on the potential for corporate activity.

Tungsten

Tungsten’s relationship with blue-chip companies is, if anything, more impressive than Monitise’s. Tungsten trumpets that it serves “many of the world’s largest companies”, including “56% of the Fortune 500 and 67% of the FTSE 100“.

For its financial year ended April 2015, this processor of global transactions worth £121bn, posted revenue of £23m and an EBITDA loss of £25m. House broker forecasts for positive EBITDA have been pushed back to the company’s financial year ending April 2018, according to data from Thomson Reuters.

As with Monitise, I’ve no idea about Tungsten’s intrinsic worth. But, unlike the case of Monitise, I can find no clues as to what kind of valuation a trade buyer might place on the e-invoicing firm. In the absence of such an independent valuation, leaving only the house broker’s numbers to go on (of which I’m always sceptical), I find it impossible to reach a conclusion as to whether Tungsten’s current market value of £88m is fair — or whether it might be worth half or double that figure. As such, Monitise is my preferred choice for a speculative buy.

The post Has The Time Come To Buy Bombed-Out Monitise Plc And Tungsten Corp PLC? appeared first on The Twelfth Magpie.

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