Coffee Microcaps August 2022 Newsletter
Hi Everyone
Welcome to this month’s edition of the Coffee Microcaps newsletter. I didn’t do a newsletter last month, given it was peak reporting season, and there was already enough things to read, from company results to broker reports to earnings call transcripts, the list goes on.
Some overarching themes I took from this ASX microcap reporting season were as follows.
Things weren’t as bad as many had expected, and most companies reported pretty decent results.
Supply chain bottlenecks and logistics costs are slowly normalising as the world returns to a more normal operating environment post CV19 lockdown measures.
Technology companies are refocusing on becoming cashflow positive, but those who have invested for growth were marked down even further, and many others will need to demonstrate a clear pathway to cashflow breakeven before any material rerates in their share prices, in my opinion.
Companies with a track record of acquisitions were found wanting as depressed multiples meant little or no M&A in the last 12 months coupled with higher interest rates moving forward, showed up the inherent risk in this strategy and how little organic growth can be happening under the hood when not augmented by M&A.
The S&P/ASX Emerging Companies Index TR August 2022 returned +1.89%, so not a bad month.
Coffee Microcaps Zoom Webinar Events
For anyone who doesn’t know, I regularly host presentations from ASX Microcap companies via Zoom Webinar. These events normally happen on Thursday mornings from 9 am - 10 am Sydney time, with two companies presenting.
I would like to thank DMX Asset Management for sponsoring all the Coffee Microcaps Virtual events.
The ASX Microcap companies that present generally have the following 4 criteria.
•Under AUD$300m in market capitalisation
•In revenue and approaching cashflow breakeven or already profitable
•Outside the resources and biotech sectors
•"Industrial Microcaps” In other words, microcap technology, financial services, consumer goods, industrial products or services business, healthcare, stocks etc.
I have created a separate email list for invites to these Zoom events so that I am not spamming all of my subscribers. If you would like to be added to the events list, please email me at mark@coffeemicrocaps.com, and I will get you added. I would love for you to join us for these events. These events are free to attend.
The next event is happening this coming Thursday morning, September 8th we will have Ai-Media Technologies Limited (ASX: AIM) and Gratifii Limited (ASX: GTI) presenting. You can register via this Zoom link if you want to join us.
Coffee Microcaps YouTube Channel
All the Zoom events get recorded and uploaded to the Coffee Microcaps YouTube Channel. As well as the ASX microcap company presentations, I do interviews with leading ASX Microcap Fund Managers on some of their top picks. Occasionally, we have presentations or interviews with some international microcap investors. So if you can’t join the Zoom webinars due to work, kids, life, or whatever, you can subscribe to the Coffee Microcaps YouTube channel and just hit the bell for notifications of when new content gets added.
I have added a stack of new content to the channel. You can click on any of the links below to watch these presentations.
Also, if you look in the description section of each video on YouTube, it has the relevant chapters, so you can jump to the start of a specific company presentation if that’s what you are after in a particular video.
Coffee Microcaps Appendix 4c Results Wrap 27th of July
K2fly Limited (ASX: K2F)
Coffee Microcaps Fund Manager Interview Series 28th July
Graeme Carson from Cyan Investment Management discusses his thesis on
Silk Logistics Limited (ASX: SLH)
Pureprofile Limited (ASX: PPL)
Coffee Microcaps Appendix 4c Results Wrap 29th of July
Next Science Limited (ASX: NXS)
Atomo Diagnostics Limited (ASX: AT1)
Wide Open Agriculture Limited (ASX: WOA)
Coffee Microcaps Fund Manager Interview Series 3rd August
Luke Winchester from Merewether Capital discusses his thesis on
Global Health Limited (ASX: GLH)
Knosys Limited (ASX: KNO)
Coffee Microcaps Appendix 4c Results Wrap 4th of August
Delta Drone International Limited (ASX: DLT)
Coffee Microcaps Morning Meeting 25th of August
Prime Financial Group Limited (ASX: PFG)
Webcentral Limited (ASX: WCG)
Coffee Microcaps Morning Meeting 1st of September
Wotso Property Limited (ASX: WOT)
Diverger Limited (ASX: DVR)
RPM Automotive Group Limited (ASX: RPM)
MSL Solutions Limited (ASX: MSL)
Book Recommendation
As part of this newsletter, I also want to highlight some good content worth sharing with my subscribers. Hopefully, the content will be something subscribers will also enjoy and get some value from.
This month I wanted to give a shout-out to a new book that is coming out in hardback shortly in Australia, but for all you kindle readers, it is already available, and it is called Where the Money Is: Value Investing in the Digital Age by Adam Seessel. In the book, Adam talks about how he values high-growth technology companies on value principles. In his view, things like R&D are not being accounted for correctly by the current accounting standards. Remember that GAAP and IFRS originated in the 1930s when manufacturing and brick-and-mortar businesses were ubiquitous, and high-growth technology companies were almost non-existent. Adam makes some excellent points in the book and has some neat case studies around stocks like Amazon and Netflix, for example. He also provides his overall framework for analysing technology companies which I think many will find helpful as a part of their own valuation models and research process.
Thanks for subscribing
Mark