It is interesting how some just focus on a single part of the business (3rd party) and base a recommendation off that, ignoring every other part of the business (and also that the company has told us they wanted to do less of 3rd party and more subscription). For those interested in proper DD:
3rd party app revenue of $650k for the quarter based off the presentation. Annualise it and its $2.6mn. We know they really ramped up subscription but let's just take $850k per quarter for that, so $3.4mn. The last 2 years they've done $1mn in Aussie logistics and have just hired a National Sales Manager so that number should be reasonably conservative...so just here, we have $2.6 + $3.4 + 1.0 = $7mn in revenue.
Now doomsayers will report that is down from FY16. But take a look at what the company has done with profitability. Assume Gross Profit on 3rd party at Q1 numbers as per the presentation ($107k x 4 = $428k). We know the subscription revenue occurs almost at 100% margin because they told us they spent it in FY16...so there is another $3.4mn of Gross Profit. From page 35 of the Annual Report, the Aussie segment has Gross Profit margins of 51%, so there is another $500k...so just here, we have Gross Profit of $428k + $3.4mn + $500k = $4.328mn
What are overheads? $3.5mn...what does that leave for a company with no tax to pay? An $800k profit on revenue of just $7mn...I don't know about everyone else but I would rather a profitable company at $7mn than an unprofitable one at $12mn...and I'd also rather they dial down 3rd party and dial up subscription and logistics.
But wait, I didn't bother to include anything for BPS, E-Commerce, Lottery, Pressplay etc...all of which will generate revenue and all at much higher margins.
The company is MUCH better now than it ever has been. Its communication is as terrible as it ever has been. When that gets rectified and they explain this (properly and simply), I think everyone will be quite happy...till then, listen to ill-informed analysis at your peril.
SMA Price at posting:
2.7¢ Sentiment: Buy Disclosure: Held
