Note that the following is my own opinion only, written from information in the above announcement.
DIGITAL WINE VENTURES
IDEA SOURCE
Reorganisation and small market capitalisation.
UNDERSTANDING STATEMENT
Vertically integrated, consumer discretionary corporation Digital Wine Ventures provides wine suppliers with a logistics service, connecting them to Australian and Chinese retailers, they have a new CEO with a proven wine e-commerce track record, recently acquired Wine Depot, an artificial intelligence-driven drop-shipping service connecting retailers with consumers, and recently Wine Storage and Logistics and Australia Post began warehousing and shipping partnerships, optimal for both domestic and China expansion plans.
PAST PERFORMANCE
Inspection of the balance sheet shows nothing by way of accrued expenses or provisions for paying staff. I also could find no mention of loans or debts. I assume they paid staff, but I am not sure how to properly account for this without this information. Since operating income is currently negative more than $1M, they do not pass all past performance benchmarks, especially the ones requiring at least 15% return on capital employed and free cash flow return on capital employed. There are, however, some positive signs:
- Growth in operating income per fully diluted share of more than 30%
- Growth in free cash flow per fully diluted share of more than 25%.
- Liabilities to equity ratio of less than 200%.
Due to negative operating income, however, I had to stop the analysis because my framework calls for companies that are making money.
SHAREHOLDER FRIENDLINESS
A few observations made along the way.
- The document is not formatted in a user friendly manner as it is not possible to copy/paste the text. Document was littered with grammatical errors ('...will holds a broad...') and 1 sentence paragraphs.
- The document contains suspicious, bullshitty language about artificial intelligence and prediction of supply shortages. I mean come on. It used to be called statistics.
- A number of ASX listed companies are mentioned in the bios of directors. I plugged them all into Tradingview. Every single one has crashed spectacularly in value since IPO.
- Owning 85,369,434 shares, the CEO Mr Taylor's ownership stake is effectively $853,694.34 at today's price of ~$0.01. With 100,000,000 further shares available as performance rights, he has a $1,000,000 incentive to do well. This is ~20% of the marketcap of the company at today's share count. His present holding is nearly 20% of the current market cap. So he stands to own a large proportion of the company if he does well. This is a good sign.
- I am concerned with the fact that Mr Edwards, non-executive director, has half of his experience in geology and only has a grad dip in wine studies. Furthermore, all three of the ASX companies in which he has held director positions have had terrible price plunges since IPO. This does not a good, proven track record make.
INEXPENSIVENESSDue to negative operating income and free cash flow, inexpensiveness metrics based on market cap to free cash flow and enterprise price ($4,473,606) to operating income could not be calculated. It is, however, noted that MCAP/BV and MCAP/TBV were both above the benchmark of 3, the latter significantly: 5.958 and 9.558, respectively. Since the share price is already very very low I didn't bother figuring out at what price it would technically be inexpensive. The best way to improve in this area is for the company to grow its (tangible) book value.
VERDICTThe company has as good of a shot as any at a turnaround, having made the right acquisition, established the right warehousing and shipping partnerships and found the right CEO. I'll watch it to see if they start to make money in coming years. I'm not a buyer for now though. I'm going to analyse Australian Vintage next. They have a long track record, have had a nice pullback in price recently and overall are steadily increasing in value.
(20min delay)