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International Investing / Australia (All-Ordinaries)
|Subject: Re: Iocom / Optima||Date: 1/30/2002 7:21 AM|
|Author: wayjo||Number: 3424 of 6185|
Karina, until you posted this I had never heard of Iocom. However, I have done a small amount of research over the past hour and I think from my assessment this "investment" can probably be considered an education in sharemarket hype.
A brief history as I understand it....
- Floated onto the sharemarket in December 2000 at $1.00 per share.
- Made various public announcements about all the wonderful things they were going to do and alliances etc...
- Made a profit in 2000/2001 year of about $900k because of Y2k etc..
- Made a number of acquisitions issuing shares each time to buy the business.
Announce a loss of $12m dollars and write off $5m due to the acquisitions. Even without the write off they still made an operating loss of $7.2m on sales of $8.2m. For every dollar coming in the door they were spending $1.90 to make it.
So after raising $12m in shareholders funds, they now sit at $1.5m due to accumulated losses. Latest Cash flow report for September shows they burned through another $589k.
ASX queried the company as they appeared to not have enough cash to last another 3 months, so the company issued another 3.7m shares to raise $500k. Poor people paid 14c per share in a sharebroker placement!!
Again issued another 4.7m shares in December for working capital purposes at 5c per share this time.
Interestingly, in all this time the Directors have bought virtually no additional shares even though the price has plunged 90%.
So as at December they have 36,536,644 shares on issue with shareholders equity of approx $2m or less depending upon the loss for the first half. That's about 5c per share if all assets could be realised - which equates fairly closely with current share price.
The Directors proudly announce they have now made another acquisition which will change everything - Optima. To buy this company, you guessed it, they have to issue more shares. 341,666,6667 to be precise.
So after the acquisition the company will have over 378m shares plus perhaps 20m more from the shareholder top up plan.
What does the company get for its 341m shares. Supposedly a well established company with a profitable history making $2.9m per year before tax. However the attached proforma Balance Sheet shows a company with accumulated losses of $8m. Hmmm.....
Now if they have got the acqusition right this time (and I have my doubts based upon past experience) a fair price for a computer seller might be 8 - 10x pre-tax earnings or $24m - 29m. The price they seem to be getting is 7c - 8c per share which is in line with current prices so they haven't given away the company. IF THEY HAVE GOT IT RIGHT.
For existing shareholders the company will now have close on 400m shares and probably still make a loss unless things have changes dramatically in the old business. Remembering they made an operational loss of $7m last financial year and the September Qtr report annualised indicates a loss of close to $2m for the year. This should balance out with the Optima purchase.
Karina, if it were my money I would consider the following options:
Firstly, I would not give them another red cent of my hard earned money, it takes too long to earn to watch these guys p_ss it away on half-assed acquisitions, which they obvioulsy have little or no skill at.
If I had a capital gain somewhere else in my portfolio I would sell the capital gains shares and these shares and offset them against each other for tax.
If you have no capital gains and don't need the money I would hold on and wait for a dead cat bounce as happened in early December and sell then.
If they go to 1c then I would also seriously consider selling because they may actually go broke and you will need the sale to crystalise the loss.
Don't get sucked in by the "it's dropped so far it can't go any lower" argument. There is fair chance this company may go to zero or will have to issue more shares to stay afloat. I would also think they will consolidate the shares down to 20 for 1 to make the share capital look more manageable.
As another point of interest it only takes a $7,500 investment to get on the Top 20 shareholders list. This is a pitiful amount for a public company and demonstrates that investors are staying away in droves.
Consider it part of the education process. I started in the early 80's and some of the junk I bought on a story is embarrassing now. I even bought Terrex Resources because a guy mentioned it in the gym to me one night. I had never heard of the company and proceeded to lose nearly $1,000 within a month. For a 22 year old that hurt, but I have never made the mistake again.
Do the research and you will find your way.
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