The title of the first article I wrote on my blog was ’magnificent micro-caps’, and aren’t they just! At close of play last night Burst Media was languishing at 5p, but early this morning the shares had risen almost 5-fold to just shy of 25p.
Why, because they received an offer for the company from BLINKX at around $30m (£18.5m) or the equivalent of 25p per share. I’d suggest a near 400% rise in the SP in 1 day isn’t bad. That’s the appeal of buying micro-caps!
At the same time they released the offer news, Burst also released their preliminary results. Having given them a once over, they make for interesting reading. BRST made an operating loss of about $3.3m and an EBITDA loss of $1.2m. They have about $21m in net assets (or around $18m if you strip out the goodwill and intangibles). Cash on the balance sheet is $0.4m. Given these figures, I would fully expect BRST shareholders to take up the offer. At $30m it would seem a very generous offer from BLINKX.
It has certainly given me cause to smile because I can’t help but think about BLINKX’s valuation of Burst media, and compare it to the current valuations of two media companies that I currently hold. If you care to look back at the blog entitled, ‘It’s fun to look at the E B I T D A’, then you can briefly compare BRST’s figures and balance sheet with those of DCD Media and Avesco; currently sitting on market capitalizations of around £5.5m and £25m respectively.
My conclusion suggests that both DCD and Avesco are either in the order of 10 times undervalued or BLINKX are paying too much for BRST. Anyway, whatever you decide, I for one won’t be selling either DCD or Avesco in the foreseeable future. Although sometimes, as BRST shareholders have just discovered, you can suddenly receive an offer that you just can’t refuse.
Speaking of Avesco, I received a nice dividend payment from Avesco on Wednesday. I do like dividends for the following reasons:-
A chunky payout enables me to re-invest my money in the company or elsewhere without having to sell anything.
It tells me that management are confident going forward, and don’t need all the cash the company has just made.
It shows management care about and wish to reward loyal shareholders.
Avesco have just re-introduced a dividend payment, and I expect, given their forward looking statements, that this payout may increase in 2011. It certainly will in 2012.
If they eventually receive a payout from Disney, then investors may be able to look forward to the ultimate Special Dividend. When they won the jury case last year, a press report said that the Directors had no plans for the money other than to return it to shareholders. Now that would be a bonus!
Finally, shares in SUN keep on rising, but just like Avesco, although this one has already multibagged for me, I’ve absolutely no inclination to sell any. Results are due on Tuesday 19th April, but the sudden sharp rise in the share price makes me wonder whether there is news in the offing. That said, with forecast earnings of about 0.6p for 2011, even at today’s close this year’s forward p/e is less than 14. For a profitable little growth company with a healthy balance sheet and exciting prospects, it’s hardly expensive. In fact, if you compare it to BRST (different sector I might add) then you could argue that the company is hugely undervalued.
It’s all great fun, happy hunting!
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