Enjoy this free share recommendation on CRIMSON TIDE extracted from the latest edition of the premium Trendwatch newsletter…
Crimson Tide is currently a tiny company, capitalised at a mere £15m. But it’s growing at a cracking pace. This is an opportunity to get in near the ground floor – but with all the usual caveats about this being a high risk play.
Some of you more longstanding investors may recall an industrial metals processor called A Cohen, which eventually gave up the ghost. Our company, Crimson Tide, reversed into it (that is, in effect it took over A Cohen’s stock market listing) in 2006.
It’s quite difficult to get a grip of exactly what Crimson Tide actually does. So let’s start off with the company’s own description of itself; then we’ll try to translate some of the trickier concepts…
“Crimson Tide plc is the provider of mpro5 – Smart Mobility as a Service (SMaaS). mpro5 is delivered on smartphones, tablets and PDAs, and enables companies to transform their businesses and strengthen their workforces.
Crimson Tide offers a global service, working with some of the world’s leading companies, tailoring mpro5 to suit customer needs. Developed over 10 years by its world-class team, mpro5 is the smart choice for organisations large and small that want to im- prove productivity and save money.
mpro5 is a platform-agnostic mobility suite fully hosted on Mi- crosoft Azure, so customers are quickly up and running and the service is scalable and robust. It is provided on subscription, so clients can immediately see a return on their investment.
mpro5 not only helps people improve their day-to-day working methods while saving employers money, it also saves lives… mpro5 clients come from a diverse range of industries allowing the Com- pany to listen, share and find the best solution for all mobility needs.”
Any the wiser? Thought not! Let’s see if we can unpick it.
Let’s start with the term Smart Mobility as a Service (SMaaS). That’s pretty ambiguous for a start. Does ‘mobility’ relate to mobile phones? Does ‘mobility’ relate to people travelling across cities? Does ‘mobility’ relate to the disabled getting around?
In Crimson Tide’s case, it relates to organisations with a team of staff who work outside the office, and who need to capture data and send it back to base.
Typical examples would be service engineers, nurses visiting patients, sales staff, health and safety personnel, logistics drivers… you get the general idea.
That brings us to mpro5, the latest version of Crimson Tide’s software. The staff working out in the field have smartphones or tablets. The software, mpro5, works across all mobile platforms: Apple’s iOS, Android, Windows or Blackberry. The application provides a number of important functions such as job scheduling, alerting and reporting.
This software is now deployed at more than 100,000 locations throughout the UK and Ireland. Typical clients include supermarkets, hotels and pubs, healthcare and medicine, logistics, property, commercial services and the London Underground.
Among the advantages cited by the company are:
• Reduced admin costs
• No more paperwork
• Increased staff productivity
• Increased customer satisfaction
• Proof of work completion
• Highly advanced reporting.
• Although mpro5 is very powerful, it is easy to use.
The mpro5 software is cloud-based, as so much software is these days. What does that mean? It means that no software needs to be installed on the smartphones or tablets of the field staff – nor indeed on computers back at base.
Instead, the software is hosted by Azure, a cloud computing service created by Microsoft for building, deploying, and managing applications and services through a global net- work of Microsoft-managed data centres around the world. The users’ data passes back and forth using mobile networks.
Crimson Tide is itself a Microsoft Gold Mobility Partner, which means that Microsoft recognises that the company has achieved the highest standard of technical competency in Microsoft’s technology, and therefore enjoys benefits and privileges from working in close partnership with Microsoft.
How does Crimson Tide get its revenue? It charges a monthly subscription, which means that customers don’t have any up-front capital outlay. The subscription takes care of everything.
This is a microcap company, currently capitalised at just £15.3m. As such, it’s fairly unlikely that it will find its way into the TAM 2 portfolio. Furthermore, most small companies are relatively risky. Things can, and often do, go wrong.
So why are we recommending that it should find its way into your portfolio?
First, let’s look at its track record.
It won’t be immediately apparent when you look at the Earnings per share row; but this is a very fast-growing company indeed, albeit from a low base. The earnings growth percentages in the four years between 2013 and 2016 are: +300%; +375%; +100%; +105.3%.
|Year||2012||2013||2014||2015||2016||2017 [Forecast]||2018 [Forecast]|
|Pre-tax profit £m||0.0025||0.02||0.084||0.17||0.35||n/a||n/a|
|Earnings per share p||0.001||0.004||0.019||0.038||0.078||0.11||0.22|
|Dividends per share p||0.02||0.03|
This growth is set to continue, albeit at a somewhat slower rate, if the forecasts are accurate. The corresponding earnings growth percent- age for 2017 and 2018 are +41% and +100% respectively.
The p/e ratio for 2017 is a very expensive-looking 30.7 – but the exceptional growth rate means that it’s not actually expensive at all, as evidenced by the very low price / earnings growth (PEG) ratio of only 0.3. And in 2018. the p/e ratio falls to a much more reasonable-looking 15.3.
So the first reason we’re recommending it is that the share looks cheap. But is it cheap because it’s rubbish, or is it a bargain?
We would argue that this is a very high quality business. All the key metrics are not simply rising, but rising at an accelerating rate.
What metrics are we talking about? Revenue, operating profit, pre -tax profit, normalised earnings (i.e. earnings adjusted for one-off items), operating margins (currently a healthy 21%), return on equity, balance sheet cash (currently £0.88m), working capital, net asset value per share…. All of these are rising at an accelerating rate.
And the company has no borrowings, hence its future expansion could be largely self-financing.
Make no mistake: this company may be very small, but it’s a high- quality business. It’s the sort of company that may be small now but has the potential to deliver a big capital gain to investors.
Its full-year results came out at the end of March. In its report, the chairman said “The Directors are convinced
that the future success of the Company will exceed their previous expectations, both domestically and internationally”.
It’s now taking its first cautious steps towards international expansion, with the Netherlands, Australia, the US and Dubai to the fore. It’s increasing its staff numbers to gear up for this expansion, which will impact profit this year, but should pay off in the future.
This year was the 20th anniversary of its founding, and the 10th anniversary of its AIM flotation. Our first thought on reading that was that it has take the company an awfully long time to get to where it is today – still a tiny microcap.
Our second thought was that it spent that time wisely, building solid foundations. Now we think it’s set to reap the rewards.
BUY (3.3p; market capitalisation: £15 million; forecast yield; 0.7%; initial stop-loss: 2.6p; EPIC: TIDE; sector: Software & IT Services; classification: AIM; website: www.crimsontide.co.uk; tel: 01892 542444).
We hope you enjoyed this free share recommendation extracted from the latest edition of the premium Trendwatch newsletter…