Good morning!

Apologies for no report yesterday. As usual, I'll catch up with the backlog later this week. Timeliness may not be my strong suit, but I hope my reports are usually interesting & worth reading, even if they're a little late.


Koovs (LON:KOOV)

Share price: 20p (up 16.5% today)
No. shares: 44.9m
Market cap: £9.0m

Trading update - given that fashion retail is my sector, I keep a close eye on potentially interesting shares. Koovs has been a car crash to date - it's got a very high rate of cash burn, and has run out of money basically. It's tried & failed to raise adequate funding, and instead has had to rely on a small amount of extra cash provided mostly by its own Directors. 

So this has to be seen as a very high risk punt, not really an investment at all. However, if they do pull it off, to become a big player in India's online fashion sector, then the shares could potentially become a serious multibagger. So I'm keeping an open mind on this one.

Today's trading update looks to me mostly like a PR release, to get investors excited about growth, to push up the share price before the next Placing. In fairness to the company, it has been completely open about the fact that it needs substantial extra financing, about 4 times the current market cap, to get to breakeven. That's a big ask, and so far there hasn't been any significant investor interest - in terms of actual money being stumped up. I'm sure there have been plenty of meetings, but no cash.

Today the company trumpets an 189% increase in sales, to £10.0m for y/e 31 Mar 2015. Sounds great, but make sure you read the little footnote, which says;

Gross sales order value placed through the KOOVS.COM website including taxes.  This does not represent the revenue of the Group.

Doing a bit of googling suggests that India has VAT rates which vary from state to state, and for different products. However, a rate of about 12.5% seems the norm for general goods, which might include clothing perhaps? If any readers can clarify on this point, that would be helpful.

However, a further deduction is needed, because Koovs has an unusual capital structure. The group holding company only owns 57.5% of the main operating subsidiary. So 42.5% of the value…

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