I was initially very negative on the 4C, mainly because of how are the A$1.3M one off acquisition costs included in the operational cashflow section not the cashflow from investing activities.... But then in this report we find out that the A$1.3M cost was for...
"During the quarter, $1.3m of cash was utilised to repay CrowdVision finance debt and aged payables at acquisition. These are one time payments and are reflected in Skyfii net operating cash outflows of $2.9m for the Q1 FY22 quarter"Crowdvision was not in a healthy position given it produced US$3.1M (A$4.1M) in CY20 revenue, to be owing A$1.3M!... So maybe some credit should be given to SKF on the acquisition front...
Apart from that I think sentiment has driven the market and unfortunately SKF have been a bit hit and miss with informing the market and providing transparency. However, if they continue to show these sales pipeline graphs, and more importantly meet the estimated pipeline - than happy days... From Q4 FY21 to Q1 FY22 the contract negotiation stage dropped by A$1.5M and the company on 7/10/21 announced an A$1.6M contract, meanwhile the client evaluation stage increased A$3.5M, and a statement is made that 23% of deals have 1H FY22 realisation... My take on this, meet the targets, deliver shareholder confidence and the market cap COULD be multiples of current, miss on these and unfortunately further impact the poor current sentiment. I also worry about the businesses ability to actually deliver scaleability, I'm seeing increased revenue, and a lot of increased staff costs.... This need to change otherwise your just driving the top line...
I hold and will consider buying a few more, another CR is the immediate risk to the business, as even discounting the A$1.3M one off cash burn, they still are loosing A$1.6M a quarter and seemingly struggling with the crowdvision acquisition and control of outgoings in a larger company with significantly increased headcount... The remainder of the US$7M acquisition of crowdvision will have to be paid for using script, or at least a significant portion of script due to low cash balance. Even at the A$0.20/sh allocation price the script payment is another 47M shares on issue, so total SH dilution from acquisition around 107M shares (60M cap raise plus 47M), which is 24% dilution... Total shares on issue ~524M at 9c is market cap of A$47M for currently $14M ARR, nice 3.3x ARR multiple and still very cheap if the company can continue to deliver... Given the 23% contract conversation by 1H FY22 they have aggressively stated, we'll know very soon whether the business can actually continue to deliver or not.
