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Author: kjbt100 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6186  
Subject: Iocom / Optima Date: 1/29/2002 11:49 PM
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Has anyone got an opinion on either Iocom (ICM) or Optima (...

Iocom basically provides IT department services... it was the first company I bought shares in - just before the share price crashed phenomenally (by about 90%). I knew it was risky - and I'd only bought what I could afford to loose - but I've still learnt a lesson in caution(I hope!)

Iocom is now looking at acquiring Optima Computer Technology - an Aus manufacturer of PC's, Servers and Workstations.

I've got the option of buying further Iocom shares at a discounted price, prior to the acquisition. The discount isn't huge - share price is currently 0.055 - discount purchase price is 0.05

My catch-22 is that, now that the share-price is low, it might actually be a good time to buy and re-coup some of the losses, however I've also been burnt once - I think the company basically has a sound foundation - but I'm not sure if thats sufficient to turn things around... I'm a little wary whether acquisition is always a positive - just because it can be difficult to amalgamate different companys and cultures...

Unfortunately, I don't yet know enough to make a decision based on analysis - I simply don't yet know how to... but I don't want to make another gut based decision...

does anyone have any thoughts?
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Author: Barcoo Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3423 of 6186
Subject: Re: Iocom / Optima Date: 1/30/2002 7:06 AM
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Don't know anything about the companies but you obviously want to make a decision based on Fundamental Analysis.
If you don't know enough to do that yet then the answer is simple - don't buy.
There is your whole life ahead of you and many companies out there that will give you the opportunity to buy once you have the knowledge. Don't let your money burn a hole in your pocket. If you don't buy, you will still have the money. It won't go anywhere.

To educate yourself I would suggest reading Hagstrom's Buffett books- especially "The Warren Buffett Portfolio". I would also suggest "Of Permanent Value" by (can't remember). Also "Buffettology" by Mary Buffett.
I would also suggest "One up on Wall Street" - Peter Lynch
"Common Stocks & Uncommon Profits" - Phillip A Fisher
"The Intelligent Investor" - Benjamin Graham.

I also had a couple of stocks that went down about 90% so I know where you are coming from. One of these I have topped up on at the lower price. Not to a large extent as it is firmly in the speculative part of my portfolio.

Some others may recommend a different "education" path and that is OK check it out, but at least read the ones I recommended so you can make an informed decision.



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Author: wayjo One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3424 of 6186
Subject: Re: Iocom / Optima Date: 1/30/2002 7:21 AM
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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.

June 2001:
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.

Regards



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Author: harmy Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3427 of 6186
Subject: Re: Iocom / Optima Date: 1/30/2002 2:29 PM
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My catch-22 is that, now that the share-price is low, it might actually be a good time to buy and re-coup some of the losses, however I've also been burnt once

kjbt100
Averaging down is a big mistake - the experts never do it - they average up but not down !! I've done it myself in the past but it cost me plenty in the long run. The thinking seems to be that if the price was $50 then it's got to be a real steal at $25. However, there is no law that says that it will stay at $25 and the probability is that it will continue to fall.
Have a look at the chart for DTL - from memory I bought at around $2 - it fell to a little over a $1 where I bought more. It then fell to around 50c before stabilising. I've been followinging it recently and on the back of a good earnings report it it now at around 75c and rising.
I'd suggest waiting for the next earnings report, insider buying or some other positive report before jumping in again.
JMO
Regards
Harmy

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Author: harmy Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3428 of 6186
Subject: Re: Iocom / Optima Date: 1/30/2002 2:37 PM
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Well said Wayjo !!
Harmy

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Author: jono202 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3432 of 6186
Subject: Re: Iocom / Optima Date: 1/30/2002 7:01 PM
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I've got the option of buying further Iocom shares at a discounted price, prior to the acquisition. The discount isn't huge - share price is currently 0.055 - discount purchase price is 0.05

Dilution of capital is always something to think about.

My catch-22 is that, now that the share-price is low, it might actually be a good time to buy and re-coup some of the losses,
A good way to judge this, no matter what your experience, is to say to yourself is investing in Iocom the best use of my capital? Try not to think that you need to recover you losses from this stock.You got hammered either take the loss & move on or hold as you've lost most your original capital already, accept it & move on.

Don't make the other mistake of selling your winners & holding your losers, no one is right all the time sometimes you gotta bail but when you are right you wanna take full advantage. I always buy in 3 or 4 segments which tends to reduce your risk significantly.

Hey think positive your gonna clean up with your future investments, thus Iocom could give you something more as a tax deduction.

Sometimes you gotta pay if you wanna play.

IMO
JR



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