Valuing icetana shares

At the time of writing, icetana shares are at an all time low of 9 cents, and are bid at 8.6 cents.

With a traditional company with substantial assets and a track record of profitability, a company's share price can be valued based on price earnings (EBITDA). For a software company like icetana which hasn't returned a profit and doesn't have substantial tangible assets, one approach is to use a multiple of sales.

In 2020, the global average price / sales multiple for a small cap software company was 5.3X sales. In 2021, this has reduced to 4.9X. This multiple normally applies to revenue of > USD10m. Revenue of $10m + can sustain a software business. icetana has revenue of about 1/10 of that, which makes it difficult to sustain the current product, let alone keep ahead of the curve in the AI area. But this multiple is in the ballpark.

icetana's half year revenue was $468K, and to the last quarter (covering 9 months) was $896K, or around $100K per month, although it has been quite lumpy. So the annual revenue to the end of this financial year might optimistically be $1.3m.

This means a market value of $1.3m x 4.9 = $6,370,000. There are 102.69 million shares outstanding. So the valuation would be around 6.2 cents per share, based on this methodology.

However, the fact that there are only 2.6 quarters of cash available must also weigh on the share price. Any additional capital raise will dilute existing shareholders. There's an average 6-7% difference between buy and sell prices, so this share is quite illiquid also.

So my valuation based on these risks to shareholders would be somewhat lower than 6.2 cents. Perhaps a more realistic value would be 3-4 cents a share.

As always, please do your own analysis.