Tag Archives: Crimson Tide

Crimson Tide issues earnings upgrade

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Aim-listed Crimson Tide, issued a very encouraging update today in which it detailed that it expects to beat profit expectations forĀ the year ending 31 December 2015.

It noted: ā€œProfit before tax will be higher than market expectations and significantly higher than for the previous year.ā€

In addition, analyst Eric Burns at house broker WH Ireland raised his profit forecast for the stock from 2.25p to 3.5p and changed it from a ā€˜Speculative Buyā€™ to a ā€˜Buyā€™.

The outperformance was due in no small part to the massive win with Tesco that I wrote about on this blog some time ago. (17 September RNS in which TescoĀ was not named).

In a detailed note out today, Burns confirmed thatĀ he expects it to start paying a dividend this year, which coupled with earnings upgrades should lead to a further re-rating of the stock.

He wote: ā€œForecast risk exists due to the phasing of new customer rollouts (with Tesco being an example of upside risk as it was rolled out faster than anticipated) but recurring revenue is building (65% est of our FY16 revenue forecast) and provided TIDE can continue to build its subscriber base there could be material upside to the shares trading on 12.9x our new FY17 EPS forecast. In our view, the introduction of a dividend in the current year (which we now forecast) will add to the sharesā€™ attractions.ā€

The EPS for FY16 is estimated at 0.11 putting it on a forward PE of 15.8, dropping to a PE of 12.9 with EPS of 0.22p for 2017.

However, I expect upgrades for 2017 as Tesco and Nestle sign up more users to its subscription-based software as a service.

Just to reiterate, Crimson TideĀ is a fast growing, profitable, operationally-geared company with great scope for growth. It has no debt and plans to pay a dividend. Whatā€™s not to like?

I’d be very surprised if more small cap fundsĀ don’t start piling into this very soon. Indeed,Ā  given the illiquid nature of AIM stocks and theĀ fact that the shares are tightly held, this could easilyĀ double again in price within 18 months. It is currently around 3.5p to buy.

Of course this is my personal view and not a recommendation to buy. You should do your research before ever investing in a stock and never invest more than you can afford to lose.

The writer holds stock in Crimson Tide.

Every little contract helps Crimson Tide grow profits

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Small capĀ Crimson Tide (AIM: TIDE) has produced good interims today, showing a rise in both profits and revenues.

For the 6 months to June 30, 2015 pre-tax profits increased 140% to Ā£60k from Ā£25k for the same period in 2014. Notably, this was achieved on revenue growth of only 10% with turnover of Ā£673k (2014: Ā£614k).

Net cash balances increased from Ā£239k at the end of 2014 to Ā£499k at 30 June 2015 partly assisted by asset finance from Lombard for new hand-held devices purchased for new contracts.

Gross margins are now over 90% and being operationally geared, the increasingly large contracts that are being signed for its MPRO5 software service (average term 3 years) are delivering steady and predictable profit growth.

Itā€™s got blue chip clients across a range of industries. In the first half it won a contract for mpro5 to distribute The Evening Standard (it already does the Metro nationally). It addition, its deal with Nestle is continuing well: following initial roll-out in Australia, it has now being used in German and Brazil.

Another major contract for a major UK supermarket was signed following a long pilot during the first half.

In addition, it will be targeting opportunities in healthcare as well as food health and safety, where executive chairman Barrie Whipp sees ā€˜tremendous upsideā€.

Potential

Iā€™ve been a fan of this company for a while, and admittedly its progress has been slow but steady – still that is the kind of company that wins the race and delivers great returns for early investors.

Iā€™d strongly recommend that any investor looking for a combination of profitable growth that will drive share price appreciation take a good look at Crimson Tide.

Currently, its share price trades between 1.75p-2p. However, I expect it to burst through this range as soon as the market cottons on to this growth story. (In the meantime, it can be picked up fairly cheaply).

Analyst Eric BurnsĀ  at house broker WH Ireland expects full year pre-tax profits of Ā£177k for 2015, rising to Ā£421k in 2016 and Ā£921k in 2017.

He commented in a note out this morning: ā€œTIDE remains a cash cow with a Ā£361k cash inflow from operating activities (against EBITDA of Ā£198k) taking cash balances to Ā£500k. A building level of recurring contracted revenue also adds weight to theinvestment case. We retain a Speculative Buy rating and 2.25p price target. ā€œ

Personally, I think that with increased marketing effort and a steadily growing reputation in the market it could well beat these targets in fairly short order.

Executive chairman Barrie Whipp isnā€™t given to hyperbole, quite the reverse. Thus the bullish tone of his comments accompanying these results is worth noting: ā€œThe Board and I feel that we are now seeing the benefits of the substantial gearing that we have generated. We are confident that the new channel strategy will result in greater opportunities and look forward to the future with ever increasing optimism. ā€œ

Of course, small caps are inherently risky and any investor should do their own research.Ā  Still, Iā€™m expecting that regardless of the macroeconomic scene this will be a multiple of its current price within 2-3 years.

The writer holds shares in Crimson Tide

Crimson Tide set for a re-rating

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Small cap Crimson Tide (AIM: TIDE) seems set for a re-rating following news of its latest big contract win, a Ā£1.1m revenue deal over 36 months with one of the countryā€™s leading retailers, much of which should go down to its bottom line.

It’s a pity Crimson couldn’t name the company as it would most likelyĀ have set a rocket under the share price. Still, every little bit of revenueĀ helps.

Given that rollout of the deal for its MPRO5 software service is expected to start by the end of this year, with invoicing building during a deployment process the impact should be felt most heavily in the 2016 financial year.

Analyst Eric Burns from house broker WH Ireland commented: ā€œWhilst clearly positive news, we leave forecasts unchanged for the time being (FY 2015E estimated revenue Ā£1.4m, pre-tax profit Ā£177k, earnings per share (EPS) 0.04p; full year 2016 estimated revenue of Ā£1.8m, pre-tax profits of Ā£421k, EPS 0.09p) and will review our assumptions once the rollout dates become clearer. We reiterate our ā€˜Speculative Buyā€™ recommendation and 2.25p share price target.”

Much of Crimson Tideā€™s work delivers margins of around 80%. Even if one were to assume lower margins on the work, this deal should significantly boost pre-tax profit forecasts for 2016.

The news follows an announcement in June of a deal worth ā€œat least Ā£218,000 of contracted revenueā€ over its 4-year term.

More significantly its relationship with Nestle appears to be progressing well in Australia and it is apparently working on installing further systems in Germany and the US.

Given this is a minnow, with a market cap of only Ā£8m, Iā€™m expecting an upbeat interim statement at the end of September after which profit forecasts should be significantly increased.

As a debt-free, profitable company that is growing revenues and profitability, with increasingly good earnings visibility, it seems cheap at 2p.

In a yearā€™s time, I expect that this will look very much like a buying opportunity regardless of how well the overall economy or stock market is doing.

Of course, small caps are by their very nature a risky play. Still, in this instance Iā€™m very happy to eat my own cooking. Iā€™m in good company as David Newtonā€™s Helium Special Situations fund increased its holding to 20.45% in January this year.

Video interview

If youā€™d like to learn more about the company, watch my interview with executive chairman Barrie Whipp, from last year. It gives you the basics about the business.

The writer holds stock in Crimson Tide