Its Over

Originally posted by 1ronnie ↑

https://hotcopper.com.au/threads/its-over.4002109/page-239?post_id=35133749#.W4jUTU8UnmI

Just last week, I reproduced one of my earlier posts to add to the regular Covered stock commentary, cautioning against those 'falling knives' stocks. So how are they doing?

Blue Sky Alternative (BLA) - $85.6m loss , rocked by impairment with NTA now at $1.70 roughly where its sp is now sitting at but IMO believe more impairments in there to come with latest exposure to Shoes of Prey which is in dire straits.
Eden Innovations (EDE) – annual revenues improved a tad from 950k to $1.3m but losses continue to be double digit at $10.8m (improved slightly from $11.2m)
Yojee (YOJ)- Trade annual revenues were just $424k but losses widened to $5.7m from $1.86m last year contributed mainly by increased employee expenses including a $610k expense related to share based payments to its Executive Director (one payment to an ED greater than all its revenues made for the year! Go figure!).
Airxpanders (AXP) – Half yearly annual revenues were at USD 3.7m (not bad) but losses were still at $14m and had raised US3.4m recently in US
9Spokes Intl (9SP) – a disastrous day for 9SP as its sp tanked 50% today on the back of news of termination of its key contract with Royal Bank of Canada. The company has been in large losses of NZD17.37m despite revenues of NZD 5.87m
Buddy Platform (BUD) – Waiting on their annual results but very likely to be in similar fashion to those above, large losses and unexciting revenues despite growth from a low base.

I have also previously covered LVT, LVH and BRN in a previous post.

These were all stocks I cautioned several months back and IMO these stocks are best avoided. They rose on the back of expectations in the second half of last year , which were unmet and at best waiting to be met.

Expand

https://hotcopper.com.au/threads/its-over.4002109/page-248?post_id=35333120#.W4x5708UmAg

BUD annual results out this morning and as alluded last Friday, it is unexciting.

While operating revenues (excluding interest/grants) doubled from $1.05m to $2.08m for the year, its losses remain high at $13.87m (excluding revaluations) although down from ($16.96m) the previous year. A closer look however revealed that Employee expenses grew from $4.36m to $6.44m and the share based expenses alone were $3.46m which is 166% of the entire year's revenues. This is similar to that in YOJ where you do not see prudence in managing cost and issuance of shares (diluting holders) relative to revenues earned.

In addition, all the fanfare about appointment of world class distributor Ingram Micro has fallen flat and it appears that North American sales failed to gain much traction. I had pointed this out in my example with IOT (stock) where Ingram was also appointed to distribute their drones which failed. Buddy Ohm is only one of many millions of products being sold by Ingram Micro, if it failed to gain traction they are more likely to abandon it especially in this competitive marketplace where Buddy Ohm is no longer uniquely placed to be the only offering with the solution they provide. BIQ which has a much better control optimiser rather than just monitoring platform had better market traction but still proved difficult because it takes a lot of time to gain entry especially large accounts. And this is why people should look at the revenue model of the business - if it takes a long time to penetrate a building account and if successful the amount of revenue earned is not significant (<$1m per deal), it doesn't take much to recognise that the path to profitability will be difficult ahead.

Even assuming that BUD can grow its revenues by 100% each year, it would take them no earlier than 3 years before they can reach breakeven at the rate at which they are spending. And as I mentioned, once it gets to $5m revenues or so, and still bleeding, market would look at them the same way as it did for BIQ and VIV- 'ok good revenue growth but when can it be profitable'. So much for the CEO's earlier indication of an EBITDA positive soon and its lofty revenue forecasts which got it into trouble with ASX.