A Couple From Today 19 February 2014
There were two Companies with news out today which caught my eye, particularly as they are both previous subject here and in the weekly column.
First up was MONITISE, which is centred in and around mobile banking infrastructure, providing a backend platform that enables Banks and other Financial Institutions to process payments with the likes of retailers.
Announcing its Interim results this morning for the 6 month period to 31 December 2013 the company announced a number of highlights, such as, H1 Revenue coming in at £46.5m, 67% up on the prior period, along with gross margins momentum being maintained.
Registered customers also increased to £28m against £20m for the corresponding period.
But for me, despite the revenue growth and perhaps impressive numbers being reported, the fact is, that Monitise remains a loss making company and will remain so until it returns a perhaps defining moment with a pre-tax profit. That isn’t forecast in either the current financial year or the next.
Ok, so for now, it is a loss making business and I am fully aware that I often warm to such stocks as a speculative punt, indeed as I already said, I have covered these before.
The difference however, is apparent in the valuation then, as against today, where the market cap currently sits at more than £1bln at a current 68p per share, down 2.5p on the day.
For me, despite the growth potential on offer amidst a massive evolving market, that is just far too mighty, and it is worth noting, the company is still working its way through significant money.
It may well have net cash of £66m at the end of the period, but that has declined somewhat since the summer and it is perhaps not surprising that the company purchased Poziton of Turkey for £24m via the issuing of thirty six million shares, as opposed to a cash element.
Mind you, Monitise had previously stumped up £109m for the acquisition of US based rival Clairmail as recently as 2012, also in an all share deal, so this was nothing new for the company.
The adjusted loss for the period came in at £16.4m, while Broker Exane BNP which rates the stock a sell, is forecasting a 2014 £31m loss, falling to a £24m loss in 2015.
No doubt, others will continue to warm to the story at these levels and good luck to anyone holding or buying. But for this particular scribe, the valuation is just way too hot.
The next company of interest is PROACTIS Holdings which at the current 54p per share, values the business at £17m.
Proactis is described as a spend control and e-procurement business that is effectively about enabling clients to implement systems that save them money.
With clients such as the NHS and the W Yorkshire Police, one would assume as I have before, that this company should be doing Ok.
And after what has seemed an age to really get its act together, perhaps being pushed by an activist Institutional Investor, Proactis appears to be making decent headway.
Delivering a Trading Update today, the company announced that H1 revenue for the six month period to 31 January came in at over £4m with a significant increase in Profitability.
It was also added that the acquisition of EGS Group was also integrating well.
Proactis added that in terms of both the new and existing businesses, the pipeline of opportunities remain strong.
While past experience has taught me not to take such statements as gospel, it nevertheless looks as though the company is making decent progress, hence the share price’s recent trek Northwards.
Although perhaps not one of the most exciting stocks around, it has been run well enough at the financial end and until the acquisition had a total net cash position.
The balance sheet should remain solid though and there is a dividend too which is forecast to be covered more than twice from earnings for this year.
Broker FinnCap expects pre-tax profits of £1m this year and EPS of 2.4p,
Putting the shares on a forward PER of 22.5.
No doubt those holding or buying are looking further ahead though where if numbers of £1.9m are achievable, the PER based on EPS of 4.8p falls to 11. Henderson Global sits on a sizeable 27% closely followed by