Sure it has value ... in this skittish market, loss making software/IT Coys trade around (say) 2-6x last 12 months revenue from what I observe.
That's a wide margin ...
... Upper end of range (perhaps higher again) when accelerating sales, improving ratios, path to profitability.
... Bottom end (maybe lower) when flat sales , worsening ratios (eg ballooning costs), and no evidence of path to profitability.
CDX isn't 2x but certainly not 6x either IMO as ratios aren't attractive at all.
Anyway, so let's say 4x average of 2022 and 2023e sales based on MST's forecasts of $4.1m and $11.0m respectively. That implies an Enterprise Value of $30m or equity value of around $35m assuming $5m in net cash. That implies around 25cps AFTER this capital raising. You can build your bull and bear case around that. Most on this forum I reckon will bank the bull case today (incl MST) but that's not how markets work. MST says valuation (not price target) is $1.28 today! or ~16x Sales...smok'n something.
Remember that for the last 4 years expenses have gone from ~$7m to ~$14m on flatfish sales with cumulative negative free cash of ~$25m. And expenses are tracking higher agin this year. So management have had to keep issuing shares to fund the cash outflow. And again this week bringing the change in contributed equity from 2018 to today of around $30m!
In terms of how much to get the business going, that's more tricky. But costs need to build commensurate with cash revenue. The market will only write a blank cheque for so long. Blank cheques are more forthcoming when markets are booming and management has the track record... in my view neither of these exist today. Management has been there for 4 years now. I'm yet to see any evidence that this capital raising was oversubscribed so more blank cheques are unlikely. Management needs to rethink its approach in my view.
I know there will be heaps of haters to this. Happy to be convinced otherwise. GLTAH DYOR
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