Globo plc – 2014 results, cash flow & balance sheet concerns intensify

Comments

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   Tom Gilbert

   1 May 2015, 08:36

   I had a lawyers letter from these people a while back. Bargepole.

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   Steveb3

   1 May 2015, 16:39

   Steve,

   Since January when Ennismore modestly increased their short position, high performing funds with superior investment performance track records like FORUM European Smallcaps GmbH(21% IRR since they started in 2002, against Ennismore’s 10%), Goldman, Inflection and Global Asset Management have become shareholders and now hold a collective long position some six times the size of Ennismore’s short position.

   Research suggests Ennismore have what can only be politely described as mixed success in their shorting strategies and their position in Globo should be seen in this context.

   FORUM European Smallcaps GmbH investment performance since inception shows they clearly have a methodology, process and team for making smart investment decisions. They hold a far more concentrated portfolio which means a greater degree of conviction in any position – as of early 2015 they only held 11 positions(including Globo), in the part of the portfolio they term “Tactical”.

   The following quote is from their “Mission Statement – Value Investing”:

   “As part of a German Family Office, FORUM European Smallcaps GmbH (“FES”) invests in quality businesses displaying high customer “stickiness” and robust competitive advantages.

   We select companies from the European Smallcap universe with a market capitalization of £35-350 m. as we believe this segment presents us with the most market inefficiencies. We target an absolute return of 20-25 % p.a. over a 5-10 year investment cycle.

   They say of Globo: “Globo is using cash flow from a mature business to build up a new business in a high-growth category. We feel we have paid for the mature business and get the optionality of success in the new business – or a take-out – for free”

   “The current Globo share price and valuation means that in effect you can buy the CitronGO! / GO!Social & Telecom business for what is very nearly a single digit PE multiple and the GO!Enterprise business is in for free.”

   Ennismore Fund Management have held a short position in Globo Plc for over a year now, so it is interesting that a high conviction small cap fund with an outstanding investment track record is, along with Goldman Sachs, Inflection and Global Asset Management now appearing on Globo Plc’s shareholder register – collectively they have recently built new positions totalling nearly 45m shares.

   I suspect Ennismore and TT expected by now to have the s/p lower than where it was last April, but have clearly been frustrated by the company continuing to report industry leading sales growth, and cash generation by far the best in this very fast growing sector – the recent results and market valuation of Nasdaq listed US competitor Mobileiron is worth looking at for a comparison, and demonstrates well why the Globo CEO is aiming for an early Nasdaq listing.

   Time will tell who has made the better call and it is of course conceivable that both could make money from their respective positions albeit over different timeframes – however, my money is on Forum, as their long term investment track record is simply in a different league – and unlike Ennismore and TT Int, they have actually spent a week with the management, senior staff, sales people in the field, customers and major suppliers, as part of the extensive due diligence they do on the relatively small number of investments they make.

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   Johan Cruft

   2 May 2015, 03:13

   SteveB3, I only wish to acknowledge that your post is a very informative and helpful one. I am very glad to read it.

   Steve Moore is a good stock picker and has my respect when giving tips, but I feel he is playing with fire when he makes an analysis of Globo. The risks to him calling this right are substantial. Probably a lot of people would agree that this is a very difficult stock to judge. It is a technology stock and as Tom’s good friend Mark Slater told us all, technology stocks are very complicated. I suspect Globo is far too complicated for even him therefore!

   Having said all that there is a lot of fascination with the products of GLOBO and their potential, and they appear to interest many tech industry commentators. Globo is being watched most closely by those in the “complicated industry”.

   Nothing is certain, but the events of the early months of this year seem most positive, it looks like the downtrend from October 2013, is now finally broken, and an uptrend is slowly forming.

   As regards the shorters, well quite simply just because a stock gets shorted does not neccsarily mean bad news for the stock. Shorters can and do make errrors. If it was that simple we would all be doing would we not. Just look at the short positions taken on PLUS500. Other examples can be found. (Maybe Regenersis will emerge from the ocean floor soon.) Has that caused the stock to trend down? Clearly No.

   Steve Moore you cannot rely on the fact that a share that has been shorted will fail to rise. It is far more complex than that. Hedge fund operators can be more sophisticated and complicated to understand than just judging their behavouvour in that way.

   There are no guarantees and calling this stock will continue to be a risky game, but at least there are glimmers of hope now for GLOBO to have success.

   JC

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   Monty9

   2 May 2015, 11:42

   What a pleasure to read such well informed comment on this company, whether bull or bear.
   For sure the balance sheet is not normal but I can see that it works for their situation and has done for some years.