Thanks VMK, I have to admit that was a very charitable to do and your hypothesis is right on the money.
In contrast BigTuna has been aggressive, to a point of intransigent in his/her view points. I am mindful that this appears the only stock they own and as stated "will eat there hat if the company raises money". And I am happy to provide that hat should the situation materialise.
As I have stated before I am a long focused investor, key turning points in a stock like this are EBITDA positive cash flow break even and cash conversion post capitalised amounts. The time to these events is like option pricing, and my concern with LVT is that management are:
- generally overly bullish
- have embarked on a change of strategy since IPO which I read as more capital intensive: integration with various partners and acqusitions
- At the same time innovation cycles in software companies moves very quickly and I see Microsoft building its own stack around Team/AI etc
- Whilst the announcement at the share point conference was great the language used was Good to see LVT "building" on.... which implies significant customisation and integration which means lost of people doing software development and capitalised R&D
- Have not yet demonstrated that they are good managers of other peoples capital (ROS, ROE, Expenses etc)
Cast your mind back to 4th May 2016...
RHP announced the sale of there LVT stake for $4.5m - Prior to this in November 2014 RHP had acquired N-Synergy and 12.5% of LVT for $25m.
The $2.5m (12.5%) investment in LVT being valued at $20m post money on a 100% basis
Revenue for LVT in 2017 was 1.7m and 3m for R&D, in FY'18 $6.4, which was a 50% increase, and H1 saw Revenue of 7.4m in H1'19
At the same time the capitalisation of the company has increased 15x from the original post money valuation of $20m
My view is this, the business has not yet demonstrated the operating leverage that I would have anticipated for a 15x FY'19F revenue multiple being ascribed
I think the stock is expensive, and the partnership constructs are going to be difficult to manage and revenue share.
Whilst I see the business in a good space and management have drive, the valuation doesn't stack up for me.
With that this sees my last note on LVT for a while as I take some time off in Europe.
I will be back hopefully with a buy call and a nice big indigestible hat for BigTuna but until then goodbye.
(20min delay)