Thursday, 22 October 2015

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.
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

Half yearly report due out end of October (usually 28th 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 1st 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.

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.

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.

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

No comments:

Post a Comment