This is going to be a quickie for our friends across the pond — according to the info we receive from the Google overlords, the UK edges out Australia for being the land where Stock Gumshoe is most popular outside of the US and Canada, so we do like to look at the occasional pitch from the Fleet Street flacks every now and again.

Like a few of the London pitches we’ve seen in the past, this one’s from Red Hot Penny Shares, a letter that’s published by Fleet Street Publications, the UK arm of Agora, and uses overhyped pitches that clearly are torn from the same cloth as Agora’s stuff here in the US (though the regulatory environment is different in the UK, so they actually use footnotes and put their disclaimers above the headline … don’t know if that depresses the money-lust among their readers or not).

This letter used to be headlined by Tom Bulford, but he has apparently moved on and is writing a biotech tip sheet now … the ad is signed by David Thornton, the new editor, who has lost none of Bulford’s flair for the ridiculous.

Including, of course, the headline — which refers to the tiny stock they’re touting as “Amazon’s Big Brother.” I will share a bit of the ad with you in a moment and get our answer for you … but I have to tell you up front that this stock can really only be traded in the UK (I don’t think there’s even a “grey sheets” listing) and it has a market cap of well under $100 million and sales last year of less than $5 million. Amazon is not quaking in their Wellies just yet.

They call it “Amazon’s big brother” because it addresses a (very disjointed and decentralized) market that’s far larger than the global consumer market: Business to business sales. And specifically, it’s supposed to be the pioneer for online sales in the b2b space. I am trying (struggling, really) to keep an open mind, so I’ll let you read some of Thornton’s words:

“Sixteen years after Amazon revolutionised the way we shop, a new business is replicating the same approach – but in a market twice the size…

“Just like Amazon, this forward-thinking firm enables people to bypass ‘regular’ shops and buy things online, at a vastly reduced price.

“I won’t pretend that it’s doing something radical. This firm is essentially doing something companies like Amazon have been doing for years – seeking to profit as more and more business is done online. The difference is, it’s doing it in a much bigger market.

“Nonetheless, I believe this move could be incredibly lucrative.

“Just consider the frankly mind blowing amounts of money Amazon has made investors over the years…

“When Amazon first began trading on the stock exchange in 1997, each of its shares cost $1.50. They now cost $372. [This figure is past performance and past performance is not a reliable indicator of future results.]

“That means that over the past 16 years, Amazon’s shares have risen by 24,000%.”

So yes, if this little small cap company, one of thousands in the ecommerce business, turned out to be as good as the best company ever in its business in the history of the world, it could be shockingly lucrative.

Also, if Stock Gumshoe becomes as large and successful as News Corp. we will immediately begin having lavish parties for our readers featuring wall-to-wall dancing supermodels and fountains of Johnny Walker Blue Label, and will promptly install solid gold commodes here at Stock Gumshoe HQ. Plans are in place.

Here’s a bit more from the ad:

“In the U.S., Amazon’s core retail market is worth approximately $250bn. But for the same region, this company’s market is worth $550bn – over twice the size of Amazon’s market.

“And in global terms, the business market is worth $20 trillion.

“But here’s the surprising part – the vast majority of this trade is still done in an outdated and old-fashioned manner. Office managers visit trade shops, place orders down the phone, or dust off an old direct order catalogue to make their purchases. In fact, of that $20 trillion global market… only 7% of activity is online.

“That’s right – 93% of businesses don’t use the internet to make their purchases.

“This is a real anomaly. The business market is one of the only markets around that has resisted the move online for so long.

“But in my opinion, this just can’t go on.

“Sooner or later, the business market has to go the same way as every other market has – online.

Are you getting our free Daily Update
"reveal" emails? If not,
just click here...

“Which leaves a huge amount of growth for the ‘Amazon of the Business World’ I’ve been telling you about.

“Now all a company need do is visit one website, search for what it needs… and it’ll get the best products at the lowest price sent directly to it.”

That 7% number, by the way, is pretty comparable to the consumer market — somewhere between 4-10% of retail sales are done online now, depending on who you ask and what country you’re talking about (the UK is near the top of the list at about 10%, more than the US though obviously in a much smaller market). So that’s not a shocking disparity.

And what’s setting this B2B company apart, according to Red Hot Penny Shares? Here’s some more of the ad to get your juices flowing:

“The breakthrough that this company needed

“In March 2013, this company signed a 3-year exclusive contract with Visa.

“Not only is this deal a strong endorsement from a major company…

“But Visa is also going to act as a kind of sales force for it. In an effort to help it grow, Visa will use its affiliated banks to market this company to a large array of businesses….

“… if a business makes a purchase through this company’s platform… and pays using Visa… then Visa takes a cut… and passes some of this on to this little firm. So essentially Visa has a stake in helping this little firm make as many sales as possible.

“And of course, Visa has a working relationship with many of the world’s top companies – banks, insurance firms and other major multinationals. These are all businesses that need office equipment… a fact the ‘Amazon of the business world’ is seeking to profit from….

“Visa is going to give this small company a global roll-out. In other words, it’s going to help it expand beyond the UK, into markets across the world….

“over the coming months and years, they plan to roll out in:

“New Zealand.

“Hong Kong.

“Singapore.

“The U.S.

“And Canada.

“This global roll-out is a big, long-term plan which shows Visa’s confidence in this small company.

“And already, some investors have sat up and taken notice…

“In August 2013, the shares rose from 10p to a high of 58p by mid September. That’s a five-fold increase.

“And that was triggered merely by the excitement of what Visa was going to do with this business. In other words, before any real profits had been made.

[This figure is a forecast. Forecasts are not a reliable indicator of future results.]

“But soon, money could start pouring into this firm from various countries. And I expect the share price to rise accordingly.

“The director of this business has high expectations for the partnership with Visa. He believes it will transform this from a company with a £2.2m turnover – into a £50m turnover global business.”

What should a company that has annual sales of £50 million be worth in the business-to-business marketplace?

Well, first I can answer the question for you: this is a little firm called CloudBuy, which used to be the awkwardly named “@UK” … ticker is CBUY in London. They have a market cap of just under £46 million at the current share price of 42 pence … which is roughly where they were about a year ago after the initial announcement of the Visa deal helped to spike the shares up (they hadn’t changed their name yet back then), this analyst report that CloudBuy shares on their website does a decent job of explaining that, so if you’re convinced of the value then you can at least buy it for about the price it carried when that analyst note was published. The press release with the company’s 2013 results is here if you want to read up on them a bit.

It’s hard for me to guess what it might really be worth after my quick glance at the company, and I’d never heard of it before today. The big tech service companies like IBM and Xerox trade for somewhere between 0.5-2X sales, Amazon trades for about 2X sales, eBay for about 4X sales. They’re all obviously huge compared to this little company, whose biggest segment is web & ecommerce sales, so they can’t have the same growth potential, at least mathematically speaking, but I’m having a hard time finding an established business to business services or marketplace company that trades for much more than 3-4X sales… unless they’re really going to profit from selling unique software, their margins aren’t likely to have any room to grow because the expenses of providing actual services rise along with the revenues. Companies that provide a marketplace or enabling software for online sales would have to expect that their cut would be minimal if they’re getting a piece of transactions — particularly if they’re a reseller themselves and are trying to drive prices down, so unless they provide a lot of other services I can’t see high margins that would generate a lot of income … which means even the projected £50m turnover doesn’t sound like all that much for a company whose market cap is already about as high as sales.

So that was my impression when looking briefly at the company — I know most of my readers can’t even trade it very easily, and, frankly, it didn’t exactly light my hair on fire with excitement, so I’ll leave it to you … does this sound like a growth story to which you’d like to hitch your wagon? See some excitement in those filings or announcements that didn’t catch my eye? Have a different interpretation of their market that gives you confidence? Let us know with a comment below.

P.S. Just in case you’re keeping score I should also tell you that yes, I thought Amazon was too expensive at $50. That was more than five years ago, and it’s lately been around $400, so perhaps I’m just an idiot.