By HotStockRockets | Sunday 25 December 2016
Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
We have four more share tips out between now and January 2nd which you can access for just a fiver HERE, but here is one we prepared earlier which is our first share tip of the year.
Here we go again with another Adam Reynolds RTO. Some have worked brilliantly. Optibiotix (OPTI) shares are still cheap at 64p but it is already a near eight bagger. Concepta (CPT) has more than doubled in just a few months. Okay, Premaitha (NIPT) is down a bit but we reckon it will recover.
But Reynolds is a man to back so his latest RTO/IPO started trading last week on AIM at 8 AM at 17p. Our writers took part in a placing at that price and we will not sell until at least 24 hours after we advise you to bank gains. We reckon you will be selling at 50p plus within a couple of months.
So what is the deal? Big Sofa Technologies (BST) is a technology business that allows firms to do market research via video. This is the way forward for market research apparently as it is more accurate that traditional methods using field work or focus groups.
Big Sofa has a big name client base already as you ca see HERE ( Unilever, P&G, British Airways, Ipsos, et, etc). Its annual cost base is c £5.5 million and will not increase as business scales up so there is very high margin operational gearing in play.
Revenues in calendar 2016 will be c £4.5 million but it is on a phenomenal trend path upwards. So in 2017 we reckon that sales will be at least £7.5 million ( so profits £2 million) and we would hope for far more.
The IPO is via a RTO ( this is Reynolds the shellmeister) into an ISDX listed shell Hub Co but this is an AIM stock. The essential structure is that the fully diluted market cap at 17p is £10 million and the company will have c £5 million of cash.
It also has a raft of blue chip shareholders including Bob Morton and Hargreave Hale with the key management at Big Sofa heavily invested having injected their business on a £4 million valuation.
The bottom line is that the truly free float - short term punters who may flip for double digit gains is - we reckon just £350,000, certainly sub 5% of the shares in issue. Others will need a price at well above 35p before they part with their stock. So this stock could move fast.
So why buynow?
a) the limited truly free float will mean the shares will move fast on any news. Buy now as you wont get a second chance at this sort of price
b) the shares are cheap on fundametals. A 2017 PE of 15 would not be unreasonable. That is £30 million of 51p a share.
c) We expect news on new contract wins with household names to start after Christmas and that will drive a re-rate.
d) Listen to Adam talking about this company HERE. You see what we mean?
The trade: Buy at the current 21p offer and at up to 23p. The target to sell is 50p plus within months.
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