LK Hyman
29 Aug 2017
Re: Interims - O/T QQ Games,"I also don't know how many stocks you plan to have and what weighting you wanna put on it."I was planning to have 16 or 17 stocks because that was what Terry Smith said was the number of (uncorrelated) shares one needed to have in order to spread risk in a optimal fashion (whatever that means). Then, for some reason known only to myself ... which I have forgotten LOL ... I decided to reduce the number to 10. Then I was only able to find 7 that I actually wanted ... all of which, except RIO, have subsequently declined in price LOL ...So, as of now I have 7, all more or less equally weighted, with 31% of my stocks wad currently sat in cash. No plans to reduce that 31% weighting any time soon.Essentially I'm looking to increase the simplicity of my wad, such as it is, so I don't intend to overweight or underweight any of my selections. As you implied it's hellish difficult to keep tabs on more than a handful of stocks and, until recently I had over 30 (including funds and linkers).LKH on the flybridge
gamesinvestor
27 Aug 2017
Re: Interims - O/T QQ LK -- I wouldn't knee jerk decision on QQ, and I apologise if it all looks a bit downbeat from my end of the stick.However, I have to point out two things and that's 1) they look so much like Roke Manor to me and trust me as an ex IC designer myself I used to be able to figure out what was going to a) work (very difficult when you have 10 million elements on a chip - Integrated Circuit or IC if you like) and b) who's going to be any good at making any money out of it.I reckon QQ doesn't deserve to be in your top 10, but I could be wrong of course.I also don't know how many stocks you plan to have and what weighting you wanna put on it.For me, if QQ were to be in my portfolio (which I guess you already figured out it ain't) it would be no more than a % or two. And then you have to ask yourself if you want to be in the realms of a Woody who has stocks with 0.1% of his fund - eh what?Games -- that's all my tiny brain can cope with at this stage I guess --one thing I do know is my tiny brain is at busting point because I have too many holdings at close to 40.
LK Hyman
27 Aug 2017
Re: Interims - O/T QQ Games,Blimey, m8, that's quite a demolition job you did on QQ! Your qualitative concerns are similar to my own (pointy heads in white coats with pipettes are no good at making money in summary) but I just like a lot of what they do ... I won't go over it all again ... and I think that, unlike with the AA, the corrosive effect of Carlyle (yeah, I know it was CVC and Permira with the AA) has had time to wear off.You're a bit hard on Steve Wadey. I know he's not a brain surgeon but he is a rocket scientist and that's the sort of bloke you want running a company that is at least partly engaged in rocket science, even if it is only via having a jazzed up version of a carousel training thingy to spin wannabe astronauts around in or a big swimming pool in Gosport. Or a wind tunnel somewhere.You've got me a bit worried about the chief abacus rattler, mind.I really must take a closer look at the numbers. All I've done so far is to think that with a fifth of a billion in net cash the old enterprise value of QQ amounts to the square root of Jimmy Jack Shizzer, which makes the EV/ebitda ratio which Bill keeps banging on about (because it's pretty simple to calculate innit, miiiaaaooowww?) pretty low .... doesn't it? .... jaysus I must go and check. LKH on the flybridge those Talon robots aren't easy to make ... you know it makes Optasense
Kool Keith
26 Aug 2017
Re: Interims - O/T QQ Thanks Games for the detailed reply. Apologies for my short reply but there's not a lot I can say in reply to that other than it's a good job it's a bank holiday weekend and I won't be placing a buy order just yet if at all.Thanks for your time Games.
gamesinvestor
26 Aug 2017
Re: Interims - O/T QQ KK -- For a company that bases it's ethos on Kineo -- it doesn't seem to move very fast does it m8?You also have to be mindful of the fact this is a Carlyle cast-off (sharks the lot of them) sold out in the 2006 IPO -- so they saw a pretty valuable exit stage left - snagglepus an all that !!Still if the world goes all star wars, you could witness a bunch of Talons, popping their heads over the parapet and firing at you at will. -- unlikely and not a very predictable business stream.QQ has 6000 people and they are all pointy head white coated pipette swinging, AVO waving techies innit -- (LK's own view). Now doing the simple mathematics that's £18K profit per noodle -- is that enough when the taps turn off and they don't sell much? -- that happens a lot with the defency type guys as they work from feast to famine according to who's wealding the bat in goverment and how much they want to spend of your lovely tax payers moular !!Earnings -- they is in decline old boy -- 18p last year, 16.8p this year (still an estimate - could be less) and 16.7 next year (another estimate, could be less also).Cash -- It's declining in the last two years from £274M in 2016 to £221M in 2017. Cash conversion ratio has also shrunk from 95% in 2016 to just 68% in 2017 -- that a big drop, is someone not paying?Consequently net cash inflow in 2017 was £111M compared to £134M in 2016 -- a sizeable but not a disasterous drop of course.They have secured a long term contract with the MOD so that's positive, but no doubt that is not billable in the short term and you never know when this has cancellation calls in it - innit, so it could (negative thinking I know) be a detraction from future years numbers if it goes txts up.There's something distinctly non reassuring about the companies statement :-"We are a company of scientists and engineers committed to responding to our customers’ needs.">>> That kind of smacks to my simple noodle that - we have 6000 engineers and scientists sitting in our offices and it's a privilege for you customers to come and be serviced by themI once dealt with Roke Manor Research - a similar governmenty type group of scientists and electronic engineers who's company was passed from pillar to post and never really made any money for it's multiple owners -- is QQ of similar ilk? -- could be!!LK will have studied this more perhaps -- but the one area where they might have something is their expertise in robots - these are ideal if you don't want to get your heed blown off when you can send in a robot on a tractor -- does the business scale enough here he wonders -- does the company have the ability to scale this economically in the commercial world as well as the military applications? -- I suspect they've been doing it for 40 years and not found a way - so what will change here?Cyber is another area that's topical but there are hundreds of companies jumping on the bandwagon -- do any make any money?Acquisitions - Target from Megitt and Rubikon in Canada -- without these two, would not QQ's revenue declined?Of the two business groups -- EMEA services, the biggest division with £613M (£616M - 2016) declined revenues and I think this included some numbers from Target as well.There doesn't seem to be a lot of sense having the EMEA business (which in itself has an international business) and a separate Global products business, which has an EMEA division -- sounds like an overkill in people management.In the annual report, the Chairman's statement says absolutely nothing -- which is worrying in itself. The company has also undergone a complete change of top management CEO in April and CFO in March --- now the CFO came from --- errr Rolls Royce -- so you can bet your axs that Warren East sacked him because of the poor state of RR's finances in the last years leading up to Woody losing his shirt on it.The company also doesn't have a strategy. In the Annual Report there is
