#NAK - what did I learn

So i sold my NAK at 4.5p for a 20% profit. Not my best trade ever but certainly not my worst.

What have i learnt after this trade?

- NAK was up at a PE of 25 before this AM, that was too high. Buying in single figure PEs and selling at the 25 level is the way to go
- Investors/traders are really only interested in the headline profit figure. Profit up = SP up and vice versa
- Entry level was crutical here. Under 4p minimised the downside and enabled me to make a profit
- NAK was able to get to a PE of 25 tho which is encouraging for future trades if the entry can be nailed nice and low
- Some of the bigger rises come when a company swings from loss making to making maiden profit
- A longer period of being in profit and profit increases makes for a more reliable forcast of future profits



Onwards

Nakama Group #NAK

Buys - 26000
Average - 3.75p
Currently - Still 3.75p to buy when posted
Target – 6-7p
Timeframe – 2 weeks

Current Mcap - £4.2mill

What do they do?
Nakama Group plc is a recruitment group of two branded solutions placing people into specialist and management positions;

• Nakama operates in the digital, creative, media, marketing and technology sectors all over the world from offices in the UK, Europe, Asia and Australia.
• The Highams brand specialises in the Financial Services sector, specifically Business Change and IT in Insurance and Investment Management currently in the UK and Europe.

Source http://www.nakamagroupplc.com/

Or from previous RNS

“"The AIM quoted recruitment consultancy working across the UK, Europe, Asia and Australia providing staff for the Web, Interactive, Digital Media sectors, IT and Business Change"

Past performance

2014 revenue - £17.5mill

2014 net free income - £4.4mill

2014 EBITDA - £226k

2014 P/L post tax – Loss £121k

2015 revenue - £21.7mill (up by 24%)

2015 net free income - £5.3mill (up by 22%)

2015 EBITDA - £548k

2015 P/L after tax – Profit £297k

Investment case

Fundamentals

Half yearly report due out end of October (usually 28^th oct) – last year it did 100% rise intra-day.

As the last 2 years results show, this is a highly cash generative business, which is growing and now nicely profitable. Last year’s EBITDA of £548k is extremely encouraging. The 52 week high end of day close is 4.88p around the time of the EOY results in July, nothing has changed since then, no bad news or profit warning, but the SP has been on the slide to near the 52 week low. The EOY results state that Q1 had gone to expectations. You would guess that expectations are for continued growth.

The shareholder register is interesting. The notifiable holders make up around 79% meaning the free float is only around 21% of the 117.79mill shares. The BoD have more than plenty of skin in the game. One of the shareholders in particular is interesting. Miton UK MicroCap Trust (Gervais Williams), whos stated aim is “to favour those companies with unusually strong balance sheets. Were market volatility to worsen, then we believe that many quoted companies would be able to take advantage of those who may be caught out due to their high levels of debt. At times of economic stress often those with the strongest balance sheets can take disproportionate advantage of the unsettled conditions to grow their market positions”. They bought 8.85% on 1^st July at around 4.38p. They will have done extensive due diligence and felt that was a very good value buy. This was BEFORE the massively improved EOY results and now the price has drifted to basically the 52 week low on impatience alone seemingly.

Technicals

Now clearly I’m not Andy Blowster! But quickly throw up the 2/3 year chart and you can see NAK is on a nice upwards channel. They mix a flat consolidation periods with some abrupt vertical uptrends. Currently being on one of the flat periods, on a 52 week low with a nice catalyst to come, the chart looks primed for a nice move up. Each spike is to a new high so on this alone you’d hope for well into the 5-6p zone.

Bear case
You could certainly argue that on the last results alone, NAK is fairly priced. I think that discounts the swing from loss making to profit and if that continues an upward trend, i think think there is further SP upside. I have been wrong tho once or twice.
 
Comms with the company
Limited info extracted unfortunately other than confirmation of half yearly at end of October.

Summary 
NAK is a nice profit making growth company, rapidly expanding with a worldwide profile. The SP has came back nicely to near 52 week lows as the impatient sell making a very appealing price. The great Gervais Williams bought 8.85% at a much higher value before the much improved last year results were out. I think there is a clear value disconnect here on the available information alone but any growth from the half yearly report at the end of Oct should be a catalyst for a nice rise.

Decision
In for a relatively small amount for a punt based mainly on liquidity (or lack there of) and "wholesale" price.
 

AUKETT SWANKE #AUK

AUKETT SWANKE
#AUK

Buys - decided not to
Average -  
Currently - 7-7.5
Target – 10-12p
Timeframe - within 1-2 months

Current Mcap - £12mill

What do they do?
Formerly known as Aukett Fitzroy Robinson, now Aukett Swanke. These folk are a global architect and interior design firm. Most of their business is in London but the do work in Russia, Europe, Middle East etc. They’ve won plenty of awards and are number 19 in “Building’s Top 150 Consultants” (sounds impressive but ive no idea how good this actually is). They have many project you can look up at http://www.aukettswanke.com/projects

Past performance
2013 revenue - £8.4mill
2013 P/L – Pre-tax profit £550k
2013 Net assets - £3mill

2014 revenue - £17.3mill (106% increase)
2014 P/L – Pre-tax profit of £1.4mill (155% increase)
2014 Net assets - £5mill

2015 1^st half revenue - £9.2mill (21% up on same period 2014)
2015 1^st half P/L - £815k (up 9% on same period 2014)
Earnings per share up 39% at 0.43p (2014: 0.31p)


Investment case
As you can see above, this company is expanding, increasing revenue and profit. They comment that the first half 2015 figure is down on what is possible due to the election and the second half promises to be better. For nearly 2 years they have been mostly range bound between 6.5-8p with occasional spikes.
The catalyst here should be their upcoming November trading update. Year on year superb profit growth cumulating in a profit this year of £1.5-2mill at a guess should have a PE higher than single figures surely?! They have demonstrated they know what they are doing, winning awards, increasing staff numbers and are even paying a dividend!
A bit on the bear side. Two of the BoD sold a small number of shares in sept but the company have told another investor in an email they this was for personal reasons and not reflecting their view on the company. Indeed another director took some and an II took some and bought more to go over 3%. It is doubtful that they would have been allowed to sell if any profit warning was about to drop at this update (I think!)

Bear case
The "wholesale" price with limited downside was in the low 6s. Ive missed this, will it return?

Comms with the company
They have confirmed November update.

Summary 

AUK is posting some impressive profit figure and yearly growth figures. The second half seems on course to be better than the first half meaning profit will be around £2mill this year. That would have them on a ludicrously small PE. Surely it deserves a bit more? No?

So I've went around and around on this. I think it's likely it's got good upside but I've set out to be disciplined so I think I'll watch this one and learn. No doubt it'll do 100% now. If I'd more capital I'd buy, will you??

EDIT : UPDATE 15/11/15

Having a look at the broker targets (no RNS that they will be missed) is interesting here...
2015E Revenue 19.6mill
2015E EPS 0.93 (+43.5%)

Sector median PE 15.4 vs 9.1 AUK

Looks like the target SP should be north of the 10p area.
I would rate this as a BUY with an initial 10p target over the next month. 

PIPEHAWK #PIP

Pipehawk
#PIP

Buys - 55,000 at 5.2 and 32,000 at 5.88 (Smudgedan put the price up inbetween buys!)
Average 87,000 at 5.45p
Currently 7.5p mid price
Target 15-20p
Timeframe - within 1 month

Current Mcap - £2.48mill

What do they do?
Pipehawk plc is a british group of four businesses.
Pipehawk - Developing a range of ground probing radar devices. "PipeHawk is currently unique in its ability to offer a wide range of solutions to meet the needs of the UK market, from a single contractor requiring only a site mark out, to a full team of engineers & planners requiring extensive topological surveys with overlay mapping of a city’s complete utilities infrastructure" - from http://www.pipehawk.com/index.php/about_us/ The technology division
QM systems - Probably the flagship section.  http://www.qm-systems.com/ Engineering company designing and building automation services.
Adien - They are the UK leading Utility detection and mapping services company. Mostly again using ground probing radar
SUMO - PIP have 28.4% stake. SUMO is an expanding franchising operation to provide utility mark out services throughout the UK

Past performance
2014 turnover = £5.1mill
2014 P/L = Loss of £523k post tax
2013 turnover = £5.2mill
2013 P/L = Loss of £1.932mill (writing off £2.5mill in development expenditure)

2015 Half year
Turnover = £2.583mill
Half year P/L =  Profit after tax £50k


Investment case
For the first 6 months of 2015, PIP made their maiden profit which is always significant in a small growth business. The second 6 months looks to be even better for a few different reasons.
QM systems - "Healthy" order book. Continued recruitment so less costly externally contracted people. Expanding into new sectors. RNSed deal with Hadley worth £600k to dec with two more phases to come, likely of similar or higher value. The actual factory has expanded
with more in house manufacturing equipement enabling quicker and reaction times and more volume.
Key management brought in. Previously a loarge contract was moved to india, shrinking margins and costing significant staff time.
Adien - Was profitable in first 6 months despite a "key project" being delayed until the second half of the year. Certainly sounds like should have increased profits in second half
Piphawk tech - New product range going well. Next step is setting up a larger scale production. They have appiled for "horizon 2020" european funding for this and we await to know if was successful (this was due to be known in the spring so maybe an update in EOY results)
SUMO - continues to be profitable

So this is a market leading niche company that is rapidly expanding, increasing profit margins, emplying more staff and turning a maiden profit in the first 6 months of the year. The end of year results should show a contined trend and hopefully a bullish outlook for the year to come.
I expect turnover to be in the £5.5-6mill area and profit to be in the £200-300k area

Comms with the company
My initial communication with the Chairman was in late Aug. At that stage he told me they were in a closed period. The usual closed period is 2 months before end of year results. On this logic you would expect the end of year results by the end of oct (exact deduction may be off). Last years EOY results were on 14th Nov. You usually dont rush out poor results now do you. Early results are usually good results.
More recently the chairman has comfirmed that the second half was better than the first half, which was better than last year.  He has of course been tight lipped pre results, not disclosing any price sensitive info.

EDIT 16/11/15
Comms with Mr Watt the Chairman last friday re the EOY results being late. The issue is a new accounting practice whereby the JV SUMO has to have results within 3months up to date for PIP but that is outside of their normal results window so trying to get them sorted asap but accountant off sick and replacement left! Sound be soon. Not late for a bad reason as far as i can see

Summary 
Microcap (2.5mill) market leading niche company, going from loss to profit in a big way. Rapidly expanding with a bright future. Cheap.
Stacks up extremely favourably to most AIM conpanies in the £5-10mill MCap category, most of which dont make any money or infact large losses. 
Aiming for 15-20p on good results and market awareness 

A new Dawn

After listening to the super podcasts by Andy, BigGib and The Mad Stork with Justin at Sharepickers and looking at my trading history, its clear ive been making lots of mistakes. Now im a pretty bright guy, i dont make lots of mistakes in my dayjob so there is no reason i should be doing that trading.

Ive been invested in many resource and oil stocks on AIM, some at the bottom, some in the middle and some at the top. My main mistake is paying more than i should and my main annoyance is delays on the news i have waited/bought in for.

Soooo, the new strategy for the main part of my trading is...
1) Buy at the bottom to minimise downside risk and maximise profits
2) Buy with the catalyst a set date that isnt going to be delayed. This for the main will likely be around financial results, half or full year or a regular trading update
3) Research both public information and speak to the BoD, CEO or chairman
4) Look for a company i feel is undervalued either on what is currently known or what i think the next financial results will show
5) Buy companies that are profitable
6) For the main, set clear of explorers and jam tomorrow companies
7) Await value to be realised
8) If fundamentals change, re assess
9) BUY LOW SELL HIGH!

Ive decided to do a bit of a blog, to share a bit of research, and detail my "journey". Hopefully if ive to write about my trades then i'll analyse them more not make the stupid/impulsive mistake for before.