Coffee Microcaps May 2024 Newsletter

A good start is half the battle

A good start is half the battle.

Hi Everyone

The S&P/ASX Emerging Companies Index TR finished up +0.62% for the month of May 2024. This continues the good start we have seen from the microcap end of the market in 2024. Per the image below I posted on Twitter, it’s been a good start for ASX Microcap investors in 2024. The month of June and financial year-end always throw up some weird moves, with profit taking in names that have done well and tax loss selling in names that have underperformed. Bear this in mind as we progress closer to June 30.

Upcoming Coffee Microcaps Zoom Webinar Events

June is traditionally a quiet month for us, with no events planned at this stage as companies enter blackout periods on the run into June 30 and the financial year-end. With Appendix 4c reporting coming in July, we will have a series of events happening from the end of July through early August for those stocks that are on quarterly reporting and quarterly updates.

For anyone who doesn’t know, I regularly host presentations from ASX Microcap companies via Zoom Webinars. Two companies usually present on Thursday mornings from 9 a.m. to 10 a.m. AEDT Sydney time.

I want to thank Raas Research for sponsoring all the Coffee Microcaps Virtual events.

The ASX Microcap companies that present generally have the following four criteria.

•Under AUD$300m in market capitalisation

•In revenue and approaching cashflow breakeven or already profitable

•Outside the resources and biotech sectors

•"Industrial Microcaps” Include 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 my subscribers. If you want to be added to the events list, please email me at mark@coffeemicrocaps.com, and I will add you. I would love for you to join us for these free events.

Please check the Coffee Microcaps social media pages for details on the times, dates, and presenting companies for our next events.

Coffee Microcaps YouTube Channel

All the Zoom events get recorded and uploaded to the Coffee Microcaps YouTube Channel. In addition to the ASX microcap company presentations, I interview leading ASX microcap fund managers on some of their top picks. Occasionally, we also 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, subscribe to the Coffee Microcaps YouTube channel and hit the bell to receive notifications when new content is added.

Also, the description section of each video on YouTube has 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 Morning Meeting, May 9th 2024

Firstly, we were delighted to welcome four ASX companies to this meeting. Joining us for this event were.

Beonic Ltd: (ASX: BEO) New CEO Billy Tucker joined us and outlined a refined strategy for the business, which has seen them cutting costs and exiting some unprofitable businesses and market segments. Billy is keen to focus the business on its key strengths, especially its airport customers, and expand in the existing international markets it already operates in without moving into any new jurisdictions. We will continue to track this turnaround story over the next 12 months.

Verbrec Ltd: (ASX: VBC) There is also a new management story here, albeit they have been in situ longer than Billy. The new team's strategy is thus more established. VBC looks like an interesting play on the energy transition and future energy infrastructure growth, especially gas in Australia, over the next few years. As a well-diversified engineering and services business, Verbrec could be sitting in the pound seats over the next few years, given its market positioning and capability.

BNK Banking Corporation Ltd: (ASX: BBC) This is the online metamorphosis of the old Goldfields Money operation that started in WA. A new fully digital bank, it is entering the market with a digital offering that is more demanded by modern consumers and a purpose-built system to deliver such an experience. The business weathered the CV19 pandemic and the ramp-up of interest rates over the last four years, and now it looks like it can focus on growth and expansion. It will be interesting to see their growth.

ArchTIS Ltd: (ASX: AR9) Cybersecurity is a hot topic for governments, with cyber-attacks and international spying front and centre of national security agendas. ArchTIS has long been cultivating and working on products and services that meet the highest level of trust and security required to enable government-to-government sharing of classified data. As you can imagine, the sales cycle in such an offering can be very long, even by enterprise sales standards. Still, the wheels are starting to turn slowly in the right direction, and it’s clear we are in a new geo-political paradigm.

You can watch the webinar recording with all four companies via this link on the Coffee Microcaps YouTube Channel.

Coffee Microcaps Morning Meeting, May 10th 2024

We were delighted to welcome four more ASX companies to this meeting the next day. Joining us for this event were.

Pioneer Credit Ltd (ASX: PNC) Keith John, the MD, walked us through the current business and how they have been working on improving the underlying operations over the last few years. He also talked about upcoming changes to their funding at improved rates, which will help improve profitability in the future. With banking majors happy to exit or not play in this consumer debt recovery space, providers like Pioneer are increasingly filling the gap in this debt collection space.

Pureprofile Ltd (ASX: PPL) is A business that is no stranger to the Coffee Microcaps audience and has consistently improved operations under the new exco team of Martin Filz as CEO and Melinda Sheppard as CFO. The business recently delivered a cash net profit for the first time in many years, and it is turning the corner regarding cash flow and profitability being sustainable and growing. Expansion into other markets, such as the UK, is maturing and performing well. The management team has been grinding hard for the last few years with a few setbacks here and there, but directionally, they are still on course, and FY25 looks like many years of hard work could come together.

Pointerra Ltd (ASX: 3DP) With a recent capital raising out of the way, it looks like 3DP is all set in funding for FY25. This should hopefully be its last funding round as management has guided that many of its pipeline of enterprise sales contracts are due to come stream over the next 12-18 months. This has been a frustrating journey for management and shareholders alike, but in some sense, it is the nature of the beast when dealing with enterprise sales agreements; hopefully, the light will start to appear at the end of the tunnel.

RocketDNA Ltd (ASX: RKT) With its first drone in-the-box modules out in the field with paying customers, the next 12 months will hopefully see more of these units deployed into the field with existing customers. Like Pointerra above, this has been a bit of a journey for the business. Still, with actual units operating in the field, the business case should hopefully be easier to sell to mine managers who utilise some of RKT's more traditional services. It’s early days for this new drone-in-a-box offering, but with existing traditional services contracts helping underpin it, hopefully, we can see a lift-off in FY25.

You can watch the webinar recording with all four companies via this link on the Coffee Microcaps YouTube Channel.

Coffee Microcaps Morning Meeting, May 30th 2024

We were delighted to welcome three more ASX companies to the last meeting of the month. Joining us for this event were.

Plenti Group Ltd (ASX: PLT) Daniel Foggo, the CEO & Co-Founder, walked us through their latest results, which were hot off the presses. The business has found a niche in consumer lending, especially in auto and home renewable project financing, along with a smaller personal loans business. A recent partnership with NAB will be kicking off in earnest as we move through the next 12/18 months, along with improved funding terms, which are coming with increased scale; the NAB partnership means that Plenti looks to have a busy year ahead of it. Interestingly, NAB has also taken the option to become an equity holder in the PLT business, which certainly adds some further meat to the new partnership.

Atomo Diagnostics Ltd (ASX: AT1) is again no stranger to the Coffee Microcaps audience. The recent Federal budget has committed funding to HIV self-testing within the broader Australian healthcare system. Atomo currently has the only TGA-approved self-test product on the market, so it should pick up some easy runs over the next 12/18 months as the various state and territory governments roll out the program. In the background, its blood-based pregnancy test is one to watch regarding traction in the EU market, along with the potential approval from the TGA for pregnancy test in the Australian market. Its OEM kit business seems to be ticking up after a CV19 lull. AT1 has many irons in the fire, and hopefully, it can forge some positive cash flow quarters in the medium term.

Comms Group Ltd (ASX: CCG) announced that its strategic review didn’t produce any transaction that would be in the best interest of shareholders in terms of real value unlock; thus, the process has been put on the back burner. Still, management is alive to offers and keeps an open mind. A plethora of recent licensing approvals in various Asian markets will hopefully translate into contract extensions with existing global telecoms players in the newly licensed markets.

You can watch the webinar recording with all four companies via this link on the Coffee Microcaps YouTube Channel.

Content 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.

Ian Cassel from Microcap Club puts out some really good content, and his latest blog post, The Superinvestors of Microcap, is no different. From various studies, he looks at modern-day microcap superinvestors and some qualitative factors that have produced multiple baggers. Many of these modern-day superinvestors of microcap investors are on Twitter and worth a follow as they also put out interesting content on investing and specific stocks in some incidents. The stock analysis can be a valuable way to understand how they look at investment opportunities and how you can add pieces of their process to your own investing process and philosophy. All of these investors are based in the US and/or Canada and discuss stocks that, while they might be unfamiliar to Australia, investors can nevertheless provide useful case studies and possibly peers against which to benchmark ASX microcap stocks in similar sectors.

Thanks for reading. If you haven’t already subscribed, you can do so below.