Australia's largest stock trading and investment forum Australia's #1 stock forum

UPD updater inc

0.00%

99.5¢

I take it you are short? Your quote ""Let’s be frank – when I...

First 2 Last

Share
Profile

Follow
druce

735 Posts.

57

03/04/18

09:38

Post #: 32176432
Share

Originally posted by bruutz82 ↑

A few things are really concerning me about Updater - and please excuse my rough numbers. Feel free to discuss.

·So Updater is expecting 8 to 10 times CY2017 revenue so if on the lower end eight times so ($2.37m X eight) equals $19million by calendar end 2018 – result due late January 2019.

·We already know Updater can make $2.37m in revenue (as seen in the 2017 calendar year) and circa $7m of revenue is expected from Updater’s non-organic acquisition of (IGC and ACI) so that leaves Updater needing another $10m in revenue growth required to obtain Updaters goal.

·Considering last quarters receipts for Updater were circa $1.7m Updater will need to grow 55% quarter on quarter in profitability during CY 2018 to reach that end result goal of $10m.

·That means next quarter receipts from organic growth in the Updater business needs to reach $2.72million and should not include any revenue from their IGC and ACI acquisition.

·To ensure Updater is not sneaking in revenue from their acquisition if Updater are not breaking down where revenue is coming from next quarter – one should deduct $1.75m ($7m divide by 4) each quarter from Updater’s receipts which would include revenue from their recent IGC and ACI acquisition to see if they are keeping on track.

·It is true that Updater’s acquisitions could also be growing in profitability which will assist Updater but I am hesitant to consider/ include this because I predominately want to see Updater grow organically as a business (as its current market cap commands) rather than Updater only growing through acquisitions which can result in further dilution etc.

Quarter/ year outflows

·So these appear to be growing at the rate of $1m quarter on quarter with Jan quarter being $7.5m as compared to the quarter previous $6.2m. Second quarter outflows could be circa $8.5m so let’s say $34m for 2018 with about $19m in receipts (supposedly) coming in – a net decrease in cash and cash equivalents of circa -$13m or $37m left in the bank. There could be potentially more in Updaters bank if they increase revenues and ensure their costs do not blow out.

If Updater keeps outflows at around $8.5m per quarter whilst growing massively (55% per quarter) and if Updater’s gross profit ratios work at circa 33% they will need at least $25m in receipts per quarter to break even or $100m in receipts per year. To get to break even Updater will need to grow Q on Q at 55% for another five quarters or until the end of Q1 2019.

Let’s be frank – when I hear a company already (supposedly) having 35% of the market and is only making $1.7m in receipts and has already chased an acquisition this can be a bit concerning.

The main things to look out for:

1.That Updater obtains there quarter on quarter growth goal of circa 55%.

2.That Updater does not start to go on an acquisition spree in order to obtain it’s growth (revenue) targets.

3.That Updater’s costs (outflows) do not start to blow out.

4.That Updater’s ability to scale does not slow down as it needs a lot of scale in revenues to justify its current market cap / future return.

5.That Updaters cash in the bank does not start to dwindle fast

If any of the preceding things begin to change - get the hell out of Updater! The overall problem with Updater is that it is already commanding such a large market cap and it is not really making anything in revenue. That means ‘hopes and dreams’ have been largely priced in. Typically, as soon as unrealistic ‘hope and dreams’ begin to unravel under the sheer weight of such expectations (MC) the share price of that company can drop rather quickly.

And let’s be frank – there is a lot already priced into Updater and not much room for failure. If a target is not hit Updater could be severely reality checked.

Expand

I take it you are short?
Your quote ""Let’s be frank – when I hear a company already (supposedly) having 35% of the market and is only making $1.7m in receipts and has already chased an acquisition this can be a bit concerning
is totally wrong. UPD are currently at approx 20% market penetration and believe that will grow to 35%.
Given every other estimate they have given has been blowen away to the upside I suspect this figure will also be exceeded. They have under promised and over delivered on every metric.
I have met management on several occasions and would rate David Greenberg as one of the best CEO's i have met.
Anyway good luck if you are short. Suggest you too meet management and look at the history of this company and its achievements to date in such a short time.

UPD Price at posting: $1.23 Sentiment: Buy Disclosure: Held
6 Upvote

0 Great analysis

Reply

Top Stories

ASX Market Close: Iron awe keeps the XJO tracking along

Japan tariff deal inked at 15% – as long as US gets half a trillion of investment

TLX

Telix sinks as US regulator SEC issues subpoena over claims

Listen: HotCopper Wire Podcast 019 – Dreaming of the 9,000s

TMG

Trigg brings famed Finnish metals refiner – and its tech – onboard to bolster antimony processing

First 2 Last

Add to My Watchlist

What is My Watchlist?

A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.