Following Friday's late news from Avesco i.e. the sale of Presteigne for £5m cash, I've done a quick bit of maths this morning to try and find a fair valuation for the newly streamlined business going forward.
Last year the figures were as follows:-
Creative Technology made a operating profit of £8,699,000 whilst Presteigne made an operating loss of £3,279,000.
Stripping out the operating loss but keeping finance costs, a small loss at mclcreate and the tax expense the same, it gives us a picture of possible earnings for the streamlined group going forward.
Without Presteigne then operating profits for the group would have been £5,633,000 or 30p per share putting the group on a p/e ratio of 10 (2015 figures).
The trading profit would have been even better at £6,776,000 (that includes all of the above deductions) or 36p per share (p/e ratio 8.75).
Given that CT is growing rapidly, and finance costs should be substantially reduced then a p/e ratio between 15-20 is fair imo.
On last year's figures alone that gives fair value of £4.50-£6.00 for operating profits or £5.40-£7.20 working with trading profits.
A further favourable factor includes exchange rate gains (a big slice of CT's profits are generated in the US).
Remember that these figures are based on last year's results and CT is a growth company, and hence I think it's reasonable to assume that results will continue to improve significantly.
Clearly there is massive potential upside in the share price which ever way you look at it.
p.s. A key driver will also be their ability to sustain their progressive dividend policy, and based upon the above projections this is pretty much assured. They clearly have the cash to pay special dividends as well if they so choose.
Now I've had chance to look back at the figures, I'd be very disappointed if a sale of the whole group was eventually made for anything less than £8+.
Saturday, 1 October 2016
Tuesday, 20 September 2016
7Digital update
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.
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.
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.
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