Coffee Microcaps November 2024 Newsletter
Takeover Tales
Hi Everyone
The ASX microcap market continues to trundle along and climb the proverbial wall of worry. The S&P/ASX Emerging Companies Index TR closed up +0.23% in October. That’s a positive return for the microcap index every month in this financial year. The microcap index is now up 27.88% on a 1-year basis, which is now ahead of the ASX 200 TR Index, which has returned 24.89% on a 1-year basis after slipping -1.31% in October.
Upcoming Coffee Microcaps Zoom Webinar Events
For anyone who doesn’t know, I regularly host presentations from ASX Microcap companies via Zoom Webinars. Two or four companies usually present Thursday mornings from 9 a.m. to 11 a.m. AEDT Sydney time.
I 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.
Coffee Microcaps Morning Meeting November 14th
I will welcome returning companies in Pointerra Ltd (ASX: 3DP) and Intelligent Monitoring Group Ltd (ASX: IMB) at the next event.
Feel free to register for the event this Thursday 14th, November 14, at noon AEDT via Zoom.
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, in 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.
Be sure to check out the channel, subscribe, and hit the bell to receive notifications of new content.
Coffee Microcaps Morning Meeting November 9th 2024.
At last Friday’s event, I was joined by the following three companies:
Control Bionics (ASX: CBL)
This was the first time that the team from Control Bionics joined us. New management has joined the firm in the last 18 months and has looked to ramp up the commercialisation of the firm’s existing suite of approved medical devices. Similarly, the team is looking at bringing two new devices to market in the next 12 -24 months and into the adjacent fields to expand their total addressable market. They are also looking to adjust the current revenue model from an internal sales model to a more partnership and agent/distribution model, depending on the market and the product.
Salter Brother Emerging Companies Ltd LIC (ASX: SB2)
Gregg Taylor, who recently joined us for our Microcap Manager Roundtable, came in to dive deeper into the LIC he manages, some of its top holdings, and where the ASX microcap market is currently. The LIC is presently trading a 30%+ discount to NTA with a buyback in place but does not currently pay dividends. Gregg highlights in the presentation that the opportunity set in microcaps is similar to the aftermath of the GFC and that the relative valuation gap between microcaps and large caps is as wide as it has ever been. Top holdings in the LIC are names such as AI-Media (ASX: AIM) and recent microcap IPO Alfabs Australia (ASX: AAL)
Gratifii Ltd (ASX: GT1)
It's been a while since Iain Dunstan from Gratifii joined us, so it was good to have him back to give us an update. GTI has recently acquired two businesses, one being a significant competitor in the Australian market and the second being a business in New Zealand, to give it a more substantial presence in the NZ market and act as a beachhead for further expansion there. While the company has traditionally worked with membership rewards programs such as RACV/NRMA, it is increasingly moving into servicing employee rewards and incentive programs such as the Coles employee rewards programs and others. The acquisitions will provide a material uplift in scale and revenues. It will be interesting to see how the expansion into additional verticals plays out over the next 12/24 months.
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.
This month, I wanted to draw your attention to a recent LinkedIn post from Mike Henshaw from Pure Asset Management. I have reproduced the post below for anyone who hasn’t seen it.
Mike’s analysis reflects what many of us have been saying for a while now: outside investors are increasingly attracted to the ASX microcap market. They are very happy to pay up for businesses to take them private. Mike’s analysis shows that the average takeover premiums are more than double the 30% to 35% average takeover premium noted in academic research.
Mike’s analysis does not cover the two most recent microcap takeover bids we have seen in just the last two weeks for Quickstep Holdings Ltd (ASX: QHL) at 105% premium and Silk Logistics Holdings Ltd (ASX: SLH) at a 45% premium.
I would also like to mention that out of the 30 stocks covered in Mike’s analysis, at least 10 have presented at various Coffee Microcap events. So, I am hoping a few subscribers managed to get onto the various share registers before these bids came in.
Thanks for reading. If you haven’t already subscribed, you can do so below.