BELATED APPRAISAL ON ADVFN RESULTS – STILL WAY OVERVALUED
13 NOV 13 – WITH THE LOOK OF THE PRICE ACTION TODAY, LOOKS LIKE SOMEONE ELSE AGREES WITH OUR VIEW & IS TRYING TO GET OUT…
This is a bad sign in our opinion for revenues that was received today by us –
“Call me in the office today and claim a free month’s trial on ANY of ADVFN’s premium data subscriptions.
If you’re unsure which subscription to go for, our friendly support will talk you through what’s available. This offer is for today only so to be quick!
We hope you are all sitting short still on ADVFN shares following our Conviction Sell stance detailed in the Feb edition of Spreadbet Mag. Here it is on page 16 in all its glory – http://issuu.com/spreadbetmagazine/docs/spreadbet_magazine_v13_generic
For those of you that are not familiar with the sell case, then be sure to read this link first in which we suggested that the shares were a raging sell at 4.75p. At half the price now having fallen near 50% since or call, we still believe the stock a raging sell.
1. EBITDA profit of £108k for the first 6 months for a business valued, amazingly, still at £18m is utter madness in our opinion (and how this can be described as a “significant success” just illustrates the “spin” that CEO’s put on their company’s results and re-affirms what I was taught 15 years ago – ignore the intro and go straight to the cash-flow statement – which we’ll get to shortly). Jeez, we’re on target to make that for the year here at SBM and I’d happily take a value of £9m for the mag!
2. The registered user base rises and still they cannot make money out of them. All it seems to do is put more cost on operations – not a good business proposition.
3. Headline turnover from continuing ops actually fell around 5%, which illustrates extremely succinctly the truth in point (2). A song and dance is made about Brazil’s performance but we cannot square Mr Chambers enthusiasm for this region with the figures in the segmental analysis where revenue actually fell by 20% in the “other” category (and which we presume is Lat Am as the other categories are USA & UK). The UK, as we suggested in our article, actually saw turnover decline by 10%…
4. The one “apparent” glimmer of hope is that the cash balance remained largely flat at £1.4m but, as we can see from the costs breakdown, this is only a little over 2.5 months operating costs – hardly much wiggle room in the event of an equity market shakedown (which we think is coming) that hits their subscriber and advertiser revenue. The steady cash balance was from purely tighter working capital management too and a £300k adjustment to an “embedded derivative” – a one of benefit most likely (we do not know the details of this) and so strip this out and the cash was hovering near just £1m. Either way you look at it, barring a major uptick in subscribers or ad revenue (we doubt the latter as more ad spend goes to the likes of google adsense and away from the likes of ADVFN), cash, in our opinion, will be lower at the year end and so the capital raising requirement we maintain that they have, grows ever nearer…
5. The balance sheet remains largely supported by intangibles – as Blackberry is finding out, intangible values on one’s balance sheet is a very subjective measure (irrespective of what the accounting bodies say). If we look at real tangible book value for ADVFN, it is only circa £3m. Let’s be generous and say the database and technology is worth another £1m. In a distressed sale, then the business is worth £4m which, with 629m shares in issue = 0.63p.
As such, we remain steadfast in our view here at SBM that the stock is still a raging short and the target remains 1p.