Small Cap Value Report (23 Feb 2015) - MAR, BOOM, AVAP

23rd Feb '15 by Paul Scott

8 comments 13128 reads

Good morning. A quick & relatively early report today, as a lunchtime meeting in London beckons. As the sun is shining, I might even dust down my bike and take it with me on the train - there's nothing quite like turning up at meetings drenched in sweat!!

Mar City (LON:MAR)

The fallout from 4pm Friday's shock profit warning continues today, with the share price down another 21% to 52.5 at the time of writing. Whilst this is now below NTAV, given the appalling lack of financial control demonstrated in Fri's announcement (retracting an inline trading statement just 3 weeks earlier and almost halving estimated profit for 2014), then I don't think any of the figures coming from this company can be relied upon at the moment. They need to get a new, and credible FD in place, and have the 2014 figures audited, before I would be prepared to look at these shares again.

I'd want a very deep discount to NTAV to even consider taking a punt on these shares now. Everything has changed. The house broker has this morning withdrawn their estimates too.

The proposed property transaction with management is dreadful I think. If I held shares, I would vote vote against it. If mgt owe the company money, then they should pay it in cash, with interest. It's their problem to dispose of property to raise the money, why should that be foisted onto the company in lieu of cash payments? Or at the least, the properties should be sold at a discounted price, which would be in line with the open market fire sale value of those properties, not a theoretical price calculated by a professional valuer.

Audioboom (LON:BOOM)

This was a nice little speculation last year, but looking at the results today, I'd say you'd be pretty crazy to still be holding the shares. Revenue for the 11 months to 30 Nov 2014 was only £51k! So the combined efforts of all the people in this company can only generate the same sort of turnover as a self-employed individual doing something moderately technical.

The adjusted operating loss was £2.1m, rising to £3.9m after exceptionals and share based payments.

Audioboom is a nice app, which I use myself. But seeing these figures, if I held the shares I would have immediately sold. They clearly have a big…

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AnonymousUser39518

23rd Feb '15

Nice trade on boom Paul but I don't understand your reasoning.

In August when it was 9.13p and all the same things applied (but maybe better things now), that you had increased your shareholding?

"Now we don't know the amount, or price, of new funds being offered to BOOM by investors, but this does reinforce the point that social media is a very hot space at the moment. I increased my shareholding after reading that announcement, as it seems to augur well for the future."

Supposedly you thought it was good value back then and the enterprise value is basically the same now as it was then?

"I saw that it was going up, bought some as a complete punt, and will probably sell half at some point, and run the rest for free."

Nice flip just cant help but think the initial reasoning was flawed because now you are saying it is a bargepole company when nothing has changed??! Surely you did not expect giant revenues in that set of results...

MrContrarian

AVAP has options over 22 new ATR planes, which have a premium value of $1.4m each, so an additional $30.8m value which is not yet reflected in AVAP's balance sheet.

If the premium reflects the discount to list price I don't think that's an asset to AVAP since planes are always sold at large discounts to list.

Boltonreddave

Paul,

I am no aircraft Nerd, but an obvious question has just arisen on the announcement from Avation (LON:AVAP) leasing 4 ATR 72-600's to Flybe (LON:FLYB). Flybe are currently wanting to find a sue for a number of Embraer E195's. Now I know the E195 is a Jet and the ATR is a Turbo Prop, but why lease any aircraft when you are sitting on unused ones? I can only think that the operating costs of the E195's on the proposed routes must be uneconomical? But then again, Flybe have already stated that having them doing nothing costs £26m a year!

Maybe there is a simple answer, I just thought it a bit odd.

Dave

alano20

Dave,

From Wikipedia:

ATR 72-600 Takeoff Run at MTOW: 1,333 m (4,373 ft)

Embraer E195 Takeoff Run at MTOW:2,179 m (7,149 ft)

So they need a much longer runway, so not suitable for some destinations? Do not fit in with the current management route plans, not suitable for London City?

Alan

cig

Just guessing, but isn't it more something like a slot in the manufacturing queue that may have some resale value if someone wants to jump the queue and get an earlier delivery?

medlar

One key change since August that stalled the blue sky run up in the SP was the announcement that Twitter was introducing links to play audio - a feature that until then had been part of Audioboom's USP.

jonesj

Flybe seem to be focussing on quieter regional routes. Therefore they need smaller planes to make the business model work with fewer passengers. Offloading their Embraer E195s may be hard work, as this plane does not seem to be in great demand.

Paul Scott

24th Feb '15

Hi Investor2015,

My views on stocks just gradually develop & change over time, depending on the market mood, figures released, discussing stocks with other investors, etc.

My friend Was Shakoor posted a number of very bearish articles on Audioboom (LON:BOOM) a while ago, and after initially disregarding his views, I thought about them some more and realised that he was making a lot of very good points. So I began to realise that the market cap of BOOM was probably much too high, given its extremely early stage commercial nature.

Today's figures were a real shock to me. Turnover of only £51k for the year!!! I was expecting a considerably higher turnover number. Often when hyped up, fashionable stocks like this report, it's a real bucket of cold water over investors, after previous trading updates that are often just PR releases, talking up the potential, lots of irrelevant KPIs, but no hard numbers on profitability.

So now, I look back on BOOM and think that I probably just got lucky in catching a nice speculative upward move, but it's not something I would want to revisit, or hold for the long term. I can't see it making any real commercial progress towards decent profits. Or any profits actually.

Regards, Paul.

Small Cap Value Report (23 Feb 2015) - MAR, BOOM, AVAP

Mar City (LON:MAR)

Audioboom (LON:BOOM)

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Paul Scott

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