Very Quick Overview
VLK is a specialist in Video Broadcast Technology, I am very aware of them because I am an avid Fan of motoGP Motorcycle Racing and the Cameras used on the Bikes while they are moving at speeds up to 220mph are provided by VLK.
They also make self-contained Video and Audio Broadcast equipment that can be used by News Reporters etc. in remote locations where the Footage is beamed by Satellite to the News Station for instant transmission.
One of the most exciting New Products which is due quite soon is the result of a collaboration with GoPro. At the moment, the GoPro helmet mounted Cameras for Sportspeople etc. use recorded footage that needs to be downloaded after the event. The link up with VLK will enable GoPro to provide their Helmet Cameras with a Live Feed - this could dramatically improve the ‘Point of View’ camera angles that Sports Broadcasters can provide.
You can see VLK’s Website here:
Greedy Management Incentive Plan
The Share Price has come off a lot in recent weeks after the Company announced a new Management Incentive Plan which is clearly very greedy to the huge benefit of the Directors.
This has caused a lot of consternation and understandably many Shareholders have sold out in disgust.
For more details on this and to sign a Petition against this pretty outrageous Scheme, click on the Link below:
However, I think this is an Opportunity for buyers because if the Incentive Plan remains unchanged, then it is hugely in the interest of the Directors to try every trick in the book to drive the Share Price up - and obviously that will benefit me as a Shareholder. If the Incentive Plan gets revised so it is less greedy, then I suspect the Share Price will rally hard as Buyers come back in. To my mind this is a very good time to be buying an innovative Tech Stock on a low valuation - as will become clear in a bit.
- As with any Tech play, one of the biggest risks is Innovation totally eradicating VLK’s market - these kind of changes are fairly hard to predict, but at the moment it looks like VLK have a very good Competitive Position.
- Recently the Company moved to AIM from the Main Market - there could be a risk that they get a bit more lax with regard to how they treat Retail Shareholders - the Incentive Scheme exemplifies this. On the flipside, it makes sense to be listed on AIM as the Costs of Listing are far lower.
- This is an Upside Risk - they must be a Takeover Target for some big US Tech Corporate - how about GoPro? The Downside of this would be that quite often it means another great Stock is taken off our hands before its full value comes out. Another Downside Risk would be if the Management took it Private - this might be possible as the move to AIM hints at that Direction of Travel perhaps.
- The Company has a fairly patchy past - I recall they did a Profits Warning a couple of years ago - this could easily happen again.
- A lot is riding on the New GoPro Products and any disappointment here would whack the Stock.
- The CEO has form for being a Greedy so and so - more of this kind of behaviour will put a lot of Buyers off and a Company on an attractive Valuation might remain a Company on an attractive Valuation………..
As usual, I have put some ShareScope Screenshots in this Blog to show the information that was confronting me when I took my Decision to Buy more Stock on the Night of Thursday 16th July 2015. I had been stalking the Stock for a couple of weeks because I felt that there would be a bounce-back once the Selling Wave from the Incentive Plan annoyance had subsided.
If we go out to 2017 forecast earnings per share of 5.48p, we get a Forward P/E Ratio of 10.4.
Note the company has a very small Net Cash position of £0.4m. At least there is no debt - so it has a Strong Balance Sheet in that respect - expect more Acquisitions.
For ‘Dec 2016 Forecast’, the ‘Dividend (p)’ is due to be 1.7050. On my Buy Price of 57p, this gives a Dividend Yield for Next Year of 3.0%.
So, it’s a pretty reasonable (if not stunningly cheap) P/E rating and a nice Divvy as well. These Forecast Numbers don’t strike me as particularly exacting - it must be possible that the Company can beat these - especially if they do some Bolt-on Acquisitions.
It’s a simple fact of the Stockmarket that Tech Stocks can demand some pretty high P/E Multiples. Without being over-generous, it suggests there could be considerable Upside for VLK in time.
For instance, if we take Next Year’s EPS forecast of 5.20p and slam it on a P/E Multiple of 15, we get a Target of 78p. That is 36% Upside to my Buy Price of 57p.
It doesn’t need too much of a stretch to give it a Multiple of 18 - especially if the Greedy Directors are hugely driven to max out on the Scheme !! On this basis, a Target of 93p would be in sight.
And if we really wanna get excited, imagine the Company beating the numbers and doing perhaps 6p of EPS next year - on that basis, on a P/E of 18, we could see a Target of 108p.
OK, some of these numbers are fanciful, but it gives an idea of how much Upside there could be. I am really targeting the 80p Level and I note there is Chart Resistance at 90p and particularly Strong Resistance at 110p - which was the Peak hit back in late 2006. If and when it gets to 80p, I will revisit the Investment Case and decide whether to Topslice or Sell out or whatever.
The Chart below shows a Very Long Term picture - dragging back to 1997. The Blue Arrow marks a Red Line which was a Long Term Resistance Line - this was broken in late 2014 but it has only been during this Year that the Share Price has got a wiggle on and started to convincingly move up.
The Black Arrow marks the Black Bottom Line of the Shorter Term Uptrend Channel and the Red Arrow marks the Top Line of the Channel.
This time, the Share Price has fallen out of the Blue Lines Uptrend Channel but I suspect this is an ‘Overshoot’ that has been caused by the furore over the Incentive Plan.
There were about 2 weeks of down moves after the Plan was announced and I suspect the Selling is now abating as shown by the Daily Candle I have marked with the Green Arrow. Note how this Candle went very low intraday (shown by the long ‘Tail’ down from the Body of the Candle) and then recovered - this shows the Bulls were coming in after the heavy Selling - a decent ‘Intraday Reversal.’
The Black Arrow marks the Candle from the following Day (the Thursday) when the Bulls were firmly back in charge and drove the Price up all day right from the Open to the Close - very Bullish behaviour and suggests completion of the Reversal Pattern after the wave of selling.
OK, that’s enough, wd