7Digital released their half-year results yesterday, and it was a bit of a mixed bag really. Here's what I had to say back in May though first of all:-
http://michae1mouse.blogspot.co.uk/2016/05/welliam.html
Let's start with the bad news.
Guvera, a client of 7Digital's is a company struggling for survival. Sadly 7Digital have had to write off a debt of £733,000 owed to the company by Guvera.
Adjusted reported losses have increased with a LBITDA of £2.8m (H1 2015: £1.3m).
Revenues have risen only slightly to £5.2m (H1 2015: £5.1m).
Slower revenue growth than expected in the first half overall will result in a larger loss this year than they had anticipated.
However, there is plenty to be optimistic about and it will be interesting to see how the rest of the year develops.
In my last report I mentioned that cash-burn has been high, encouragingly though they do appear to be bringing cash-burn under far greater control. However, I wouldn't totally rule out a cash raise in the near term, although I believe (if it happens) that it would (hopefully) be for a modest amount as they grow towards profitability.
Indeed it is encouraging to hear that they are still re-iterating their goal of reaching EBITDA positive in the last quarter of this year, and predict 2017 will be profitable as a whole for the company.
Of course shareholders have to hope that this is realistic and not just wishful thinking on management's part.
They have stated that the sales pipeline for the second half of the year is strong with a number of significant contracts in the final stages of negotiation.
Hopefully then the next few months will bring news of further contract wins to add to recent announcements including yesterday's contract win with GranPad.
Overall, I'm cautiously optimistic that as a medium to long term investment then the potential returns could be significant. However, whilst 7Digital remains loss making and cash burning then clearly risks remain.
It should be mentioned that the quality of the client base is improving significantly e.g. "The Company signed a contract with Cdiscount, the leading e-commerce retailer in France, which will see the launch of a new streamed music service next week. Cdiscount generated profits last year of €1.765bn on a turnover of €2.741bn and enjoys a 34.4% total share of e-commerce in France (source: GfK)." Hopefully, with these types of contract it means that they should eventually create a firm foundation of reliable recurring revenues.
The share price dipped on release of the results and the company is currently valued at around £6.2m.
As mentioned in my previous report, there are risks involved with an investment here. However, if they do get somewhere close to break-even by December this year, and are profitable in 2017 then things could get very interesting indeed.
Tuesday 20 September 2016
Friday 9 September 2016
Should I be FUMing at missing out? Why is everything rising so quickly?
Why did Intelligent Energy's (IEH) share price rise by more than 100% at one point today?
As far as I can see they haven't released any news. Surely they need to make a statement to the markets?
Either investors are acting on insider information or markets are being swamped by reckless day traders?
Neither scenario is particularly palatable, but I suspect it's just part of a worrying trend in recent days - the rise of the day trader.
I say worrying because in my experience it's often a forerunner to a market top. All I need now is for my local Butcher to give me some share tips and I'll know for sure.
Two further recent examples where share prices went bananas in a single day include Mobile Streams(MOS) and Futura Medical (FUM). Admittedly you can point to news stories which provided a catalyst to the share price rises, but MOS rose more than 200% and FUM more than 100% in a single day.
I'll briefly comment on FUM which I know a little about, and indeed I had the company on my monitor. Perhaps I'm just a little envious that I never got around to buying shares in the company even as I watched them drop below 20p. I think I must have written FUM off as a serial disappointer and cash guzzler?
After the last few days and following on from the news release regarding their gel which apparently gets you off the blocks quicker than Usain Bolt (DYOR), I had a quick look back at their previous results.
I think I can quite easily justify to myself why I never bought the shares.
Take a look for yourselves, but by my reckoning they're already pretty much out of cash? Last year they burnt through around £5m and had about £4m remaining. Bearing in mind we're into the 9th month of their financial year, they must be down to their last £1m-£2m?
Luckily for them, and just a few days before their half-year results are released, MED2002 put some lead into their pencil which in turn should help with another raising. A dilutive fundraising will inevitably be announced in the next few weeks (if not next week).
Both MOS and FUM may prove to be multi-baggers, who knows? However, I'm happy to miss out on these two, and I'll watch their progress from the sidelines.
Good luck if you are a holder of the three companies mentioned though.
As far as I can see they haven't released any news. Surely they need to make a statement to the markets?
Either investors are acting on insider information or markets are being swamped by reckless day traders?
Neither scenario is particularly palatable, but I suspect it's just part of a worrying trend in recent days - the rise of the day trader.
I say worrying because in my experience it's often a forerunner to a market top. All I need now is for my local Butcher to give me some share tips and I'll know for sure.
Two further recent examples where share prices went bananas in a single day include Mobile Streams(MOS) and Futura Medical (FUM). Admittedly you can point to news stories which provided a catalyst to the share price rises, but MOS rose more than 200% and FUM more than 100% in a single day.
I'll briefly comment on FUM which I know a little about, and indeed I had the company on my monitor. Perhaps I'm just a little envious that I never got around to buying shares in the company even as I watched them drop below 20p. I think I must have written FUM off as a serial disappointer and cash guzzler?
After the last few days and following on from the news release regarding their gel which apparently gets you off the blocks quicker than Usain Bolt (DYOR), I had a quick look back at their previous results.
I think I can quite easily justify to myself why I never bought the shares.
Take a look for yourselves, but by my reckoning they're already pretty much out of cash? Last year they burnt through around £5m and had about £4m remaining. Bearing in mind we're into the 9th month of their financial year, they must be down to their last £1m-£2m?
Luckily for them, and just a few days before their half-year results are released, MED2002 put some lead into their pencil which in turn should help with another raising. A dilutive fundraising will inevitably be announced in the next few weeks (if not next week).
Both MOS and FUM may prove to be multi-baggers, who knows? However, I'm happy to miss out on these two, and I'll watch their progress from the sidelines.
Good luck if you are a holder of the three companies mentioned though.
Thursday 1 September 2016
Updates - Avesco and Stilo
Two quick updates.
I've held shares in Avesco since 2009, and I've been extremely pleased with the progress that this company has made in the intervening years. If you're looking for frequent news stories from the company then you're going to be disappointed. This is the type of company that I love. It just gets on with the job. It's a growing company that is cash generative and pays a good dividend. It operates a progressive dividend policy.
Avesco is a company that benefits from large events, and they don't come much larger than the Olympics. I was a little apprehensive this year since it's been apparent from various media outlets that the budget for the Rio Olympics was significantly less than for London 2012. Would this affect Avesco's earnings?
I needn't have worried. The company released a RNS this afternoon stating that trading is comfortably ahead of market expectations for the full year:-
http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/AVS/12951319.html
Even after today's 13% rise in the share price, previous broker forecasts were for around 22p and 23p in 2016 and 2017 putting the forecast p/e ratios at around 12 and 11 respectively. Given that tangible NAV is around 230p (and almost certain to rise), net debt is very low following the sale of Fountain Studios and broker upgrades will follow, the shares still look very cheap to me. The World Athletics Championships to held in London in 2017 should also provide a nice boost to earnings.
Stilo International is a relatively new holding for me. See my two previous blogs:-
http://michae1mouse.blogspot.co.uk/2016/06/stilo-international.html
http://michae1mouse.blogspot.co.uk/2016/07/stilo-update.html
Stilo released their interim results today, and although I correctly predicted in my more recent blog that the results this year wouldn't "blow the bloody doors off", they have shown further progress.
Sales revenues and EBITDA were up 11%, but perhaps more significantly cash was up 30% and the interim dividend increased by 33%. This is the second significant increase in the dividend following a 33% hike last year. It's more often than not a sign of confidence in the future.
Results for the full year are expected to be in line with management expectations, and my guesstimate would be earnings around 0.30p-0.35p putting the shares on a p/e ratio in the low 20s with three months of the current year to go.
The exciting part for me is 2017 and beyond. If sales of OmniMark and Migrate show some steady growth or even remain consistent, and AuthorBridge begins to make a more significant contribution to revenues then with 99% gross margins the extra revenues will pretty much drop through to the bottom line. Costs are kept tightly under control and the company is debt free. It's worth bearing in mind that every £120,000 profit adds 0.1p to earnings. Profit for the full year in 2015 was £309,000 for earnings of 0.28p. A relatively modest lift in earnings will see the p/e ratio fall quite dramatically.
Whilst waiting for AuthorBridge to (hopefully) accelerate Stilo's growth trajectory, Stilo appears to be a relatively low risk profitable, cash generative, debt free, (progressive) dividend payer operating in a niche area.
p.s. IBM was indeed the prestigious client that is using AuthorBridge. (see previous blog).
"Its initial deployment in production at IBM, following extensive co-operation and testing by the central Information Developer Tools team, serves as a good foundation upon which we can build."
I've held shares in Avesco since 2009, and I've been extremely pleased with the progress that this company has made in the intervening years. If you're looking for frequent news stories from the company then you're going to be disappointed. This is the type of company that I love. It just gets on with the job. It's a growing company that is cash generative and pays a good dividend. It operates a progressive dividend policy.
Avesco is a company that benefits from large events, and they don't come much larger than the Olympics. I was a little apprehensive this year since it's been apparent from various media outlets that the budget for the Rio Olympics was significantly less than for London 2012. Would this affect Avesco's earnings?
I needn't have worried. The company released a RNS this afternoon stating that trading is comfortably ahead of market expectations for the full year:-
http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/AVS/12951319.html
Even after today's 13% rise in the share price, previous broker forecasts were for around 22p and 23p in 2016 and 2017 putting the forecast p/e ratios at around 12 and 11 respectively. Given that tangible NAV is around 230p (and almost certain to rise), net debt is very low following the sale of Fountain Studios and broker upgrades will follow, the shares still look very cheap to me. The World Athletics Championships to held in London in 2017 should also provide a nice boost to earnings.
Stilo International is a relatively new holding for me. See my two previous blogs:-
http://michae1mouse.blogspot.co.uk/2016/06/stilo-international.html
http://michae1mouse.blogspot.co.uk/2016/07/stilo-update.html
Stilo released their interim results today, and although I correctly predicted in my more recent blog that the results this year wouldn't "blow the bloody doors off", they have shown further progress.
Sales revenues and EBITDA were up 11%, but perhaps more significantly cash was up 30% and the interim dividend increased by 33%. This is the second significant increase in the dividend following a 33% hike last year. It's more often than not a sign of confidence in the future.
Results for the full year are expected to be in line with management expectations, and my guesstimate would be earnings around 0.30p-0.35p putting the shares on a p/e ratio in the low 20s with three months of the current year to go.
The exciting part for me is 2017 and beyond. If sales of OmniMark and Migrate show some steady growth or even remain consistent, and AuthorBridge begins to make a more significant contribution to revenues then with 99% gross margins the extra revenues will pretty much drop through to the bottom line. Costs are kept tightly under control and the company is debt free. It's worth bearing in mind that every £120,000 profit adds 0.1p to earnings. Profit for the full year in 2015 was £309,000 for earnings of 0.28p. A relatively modest lift in earnings will see the p/e ratio fall quite dramatically.
Whilst waiting for AuthorBridge to (hopefully) accelerate Stilo's growth trajectory, Stilo appears to be a relatively low risk profitable, cash generative, debt free, (progressive) dividend payer operating in a niche area.
p.s. IBM was indeed the prestigious client that is using AuthorBridge. (see previous blog).
"Its initial deployment in production at IBM, following extensive co-operation and testing by the central Information Developer Tools team, serves as a good foundation upon which we can build."
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