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RTD - Why? (RTD)
Nitefly - 15 Sep 2003 10:55
Why are we again at 10.5p bid?
It doesn't add up...
Good Results + Strong buying pre results + Christmas online buying soon = Price drop
Then again some companies that have debt for equity hanging in the balance, poor results and bankruptcy around the corner and they go up!
Why sell now at a loss?
Wont that be a kick in the teeth when we see 13.5p 14p again!
Best of luck all.
It doesn't add up...
Good Results + Strong buying pre results + Christmas online buying soon = Price drop
Then again some companies that have debt for equity hanging in the balance, poor results and bankruptcy around the corner and they go up!
Why sell now at a loss?
Wont that be a kick in the teeth when we see 13.5p 14p again!
Best of luck all.
B_ASKIN - 05 Oct 2003 11:53 - 93 of 2406
- 16 Sep'03 - 17:03 - 7 of 91
Been following all comments made on rtd for some time now and am having the same thoughts as many other investers.
just read a post on another BB which gives me some encouragement and comfort in my investment.
" The question that this BB asks continually is – what is the value of RTD shares? Is it 8p or less or 20p or more?
How can the correct value be calculated? The best and most accepted method is to predict the future cash flow of the Company and discount this value back to the current day. If the discounted cash flow is better than the current value, you invest, if they are worse then you sell or do not invest. Trying to spot these cash inconsistencies, especially in high growth stocks such as RTD, is the fun, the buzz, the gamble we all take.
So what is the outlook for RTD?
One of the simplest methods is to look at EPS to represent cash flow, so long as the EPS figure has not been “smoothed or tampered with”. As many have pointed out on this BB, the basic EPS of RTD is only 0.16p, so the company looks over valued trading at 68 times earnings. However, to get to the true figure investors will have to look behind the numbers to understand the true cash flow potential in the future. The two areas which causes a great deal of argument is whether exceptional costs and amortisation should be excluded or included.
Exceptional costs – by their very accounting definition are unusual, one off items that distort the accounts from their true underlying position. For RTD some 700K of exceptional charges was posted to the accounts. We have been told that these costs relate to three items:
1 – the cost of terminating two executive directors
2 – the cost of a reorganisation in the US
3 – cost of migration in Australia
What is the effect of terminating two directors – does it help future cash flow? Yes it does help future cash flow. In the 2002 set of accounts the two directors cost some 300k in pay and benefits – without a bonus – therefore, ongoing costs have been saved. The accounts do not disclose the amount paid out, but given that they were on a years notice, I would expect the cost to be at least the 300K cost last year. Therefore, say 350K should be added back to the Basic EPS, to allow for the future saving, so long as they are not replaced.
Does the reorganisation help future cash flows. Again yes, actions like this are only taken to save future costs and must be material to the company to be allowed to be an exceptional cost. On a worse case basis the costs would have a “payback” of one year – normally, it is around 9 months – therefore say 250k minimum should be added back
Finally, the final costs relate to Australia and a migrations/integration cost. Again these costs are targeted at making the business more efficient – which again should save costs, and cash, into the future.
Therefore it is suggested that all the exceptional costs should be added back to the EPS figure to get a truer underlying prediction of cashflow.
Amortisation – there is a great deal of confusion as to the treatment of goodwill and the impact it has on the future of the business.
Amortisation is just an accounting entry – it is meaningless to the future cash flow of the business as it just reflects a past cost that is being depreciated and will not be spent again in the future – hence all city analysts remove the figure from their calculation. It is all good and well looking at the money spend in the past – but that is an emotional attachment, what is important is what is going to be achieved in the future. If you think about it, the whole point of valuing a company is to work out what it worth now, and this cannot be related to what has been spent in the past – the errors of the past cannot be undone.
For everyone’s information, from 2005, when the new international accounting standards are introduced (huge impact for companies), amortisation of goodwill will not be allowed – it will be replaced by a straight impairment test, thus companies that are performing well will not have their goodwill amortised. So there will not be any amortisation figures to adjust for in the future.
Therefore, to get a truer or “normalised” earnings figure – as quoted by city analysts – the basic EPS should be adjusted for both exceptional items and amortisation. Hence, why the Company has published the figure – being 0.69p for the first six months of the year.
Okay – so how reliable is the EPS figure in the accounts of RTD – what scope is there for “adjustments”. Looking at the balance sheet, the company has few assets to manipulate – most being intangible assets and debtors and creditors. Auditors are very sharp on "manipulation" of these items. The Company does not have large fixed assets, which are normally the areas where manipulation can occur, and it does not seem to capitalise development work – again an area of potential for adjusting the p&l. Therefore, the EPS figure would give a fairly true reflection as to current cash flow.
This assessment is further backed up by looking at the consolidated cash flow statement – with the trading operations generating 3.3m – excluding exceptionals - in cash before working capital adjustments – which would be of a one off nature (2m positive) and tax and interest and tangible investments.
So what is the EPS going to be in the full year? The Board has given some very careful wording that the second half will be less than the first half, due to the one offs – but even if the second half is down by 10% (300K) the EPS will be approximately 1.2p for the full year (also cash per share of 1.2p). At this level the company on a forward multiple of only 8/9 – not the 60 times that have been bounced around this BB.
What about future growth? All on this BB agree that the company appears to be in a strong, growing market – revenues are up 11% already so lets say they fall to 7.5% growth, given the wording on operational capacity in the CEO statement, most of this would fall to the bottom line giving a faster growth in EPS. For every 1.5m in additional revenue some 0.1p would add to EPS, if 50% falls to the bottom line before tax. If this 5% growth is projected out for say 15 years, and discounted at say 10% (we would all like to get a 10% return on our money) then the value of the shares would be around 20p each
Can this value be justified by looking at other companies? RTD is pretty unique, however, the most comparable companies around are Datacash in the UK (AIM: DATA) and Cybersource (Nasdaq: CYBS).
Take Datacash – its current market value is some 24m on turnover of 4m for 2003, and a small operating profit. Therefore it is trading at 6 times revenue or 50 times operating profit! RTD on the same multiples would be worth 180M (60 p per share) plus, and RTD is a more robust and balanced company.
Take Cybersource – it has small turnover ($5- $6m per quarter) and is loss making – its market value is US$180m and has a real problem history. If you strip out its cash pile (which is dwindling) then it has an enterprise value of $130m or 80m. Again on the same multiples, RTD would be worth 40p + per share.
Either RTD is massively under valued or the other two are over valued – you choose?
How does RTDs value compare against other PE ratios for technology companies? Looking in the FT, the average is around 30 – but due to some high one offs – if you look at individual companies – stripping out the large ones (FTSE100), then the average is around 16 – 18 times. This would give RTD a price of 23 – 26 p now.
There are other examples to justify a higher price, all leading to the same conclusion – recent tech company sales at a multiple of revenue, etc
Therefore, on the basis of the above RTD looks a screaming buy – so why is it not still powering ahead? RTD has a chequered history, it came to market in the boom – rose massively and has been falling since. PJ Birks well written note demonstrated the history well, the $64,000 question to be answered is “Is the past behind them?” Some are betting it is – some are betting it is not.
The share price has excellent fundamentals – indicating a price of 20p plus in the short term, hence the rampers are right, but the reality is the share price is held back by reputation, the doom-mongers are right and the share price is down at a low 8 times multiple – 10p. On balance some where inthe middle is going to be right, so long as the company does not make any more gaffs.
For all those who are wondering, yes I am now a holder of RTD shares – I have bought in during the last year and I am sitting on a nice profit. The amount I hold will not make me rich, but if I am lucky will allow me to take some profit and buy a decent holiday for my family.
Enjoy RTD, it is fun to try to predict what will happen next – it is a gamble, an interesting challenge and an opportunity. I have not bet my shirt, no one should ever do that, and I think I will at least get my money back if it goes really wrong, but momentum should take the company higher.
Please feel free to post this note onto other BB, which I do not subscribe to. Please do not slander me for giving my views, and most of all…. DYOR"
Food for thought!!!
Been following all comments made on rtd for some time now and am having the same thoughts as many other investers.
just read a post on another BB which gives me some encouragement and comfort in my investment.
" The question that this BB asks continually is – what is the value of RTD shares? Is it 8p or less or 20p or more?
How can the correct value be calculated? The best and most accepted method is to predict the future cash flow of the Company and discount this value back to the current day. If the discounted cash flow is better than the current value, you invest, if they are worse then you sell or do not invest. Trying to spot these cash inconsistencies, especially in high growth stocks such as RTD, is the fun, the buzz, the gamble we all take.
So what is the outlook for RTD?
One of the simplest methods is to look at EPS to represent cash flow, so long as the EPS figure has not been “smoothed or tampered with”. As many have pointed out on this BB, the basic EPS of RTD is only 0.16p, so the company looks over valued trading at 68 times earnings. However, to get to the true figure investors will have to look behind the numbers to understand the true cash flow potential in the future. The two areas which causes a great deal of argument is whether exceptional costs and amortisation should be excluded or included.
Exceptional costs – by their very accounting definition are unusual, one off items that distort the accounts from their true underlying position. For RTD some 700K of exceptional charges was posted to the accounts. We have been told that these costs relate to three items:
1 – the cost of terminating two executive directors
2 – the cost of a reorganisation in the US
3 – cost of migration in Australia
What is the effect of terminating two directors – does it help future cash flow? Yes it does help future cash flow. In the 2002 set of accounts the two directors cost some 300k in pay and benefits – without a bonus – therefore, ongoing costs have been saved. The accounts do not disclose the amount paid out, but given that they were on a years notice, I would expect the cost to be at least the 300K cost last year. Therefore, say 350K should be added back to the Basic EPS, to allow for the future saving, so long as they are not replaced.
Does the reorganisation help future cash flows. Again yes, actions like this are only taken to save future costs and must be material to the company to be allowed to be an exceptional cost. On a worse case basis the costs would have a “payback” of one year – normally, it is around 9 months – therefore say 250k minimum should be added back
Finally, the final costs relate to Australia and a migrations/integration cost. Again these costs are targeted at making the business more efficient – which again should save costs, and cash, into the future.
Therefore it is suggested that all the exceptional costs should be added back to the EPS figure to get a truer underlying prediction of cashflow.
Amortisation – there is a great deal of confusion as to the treatment of goodwill and the impact it has on the future of the business.
Amortisation is just an accounting entry – it is meaningless to the future cash flow of the business as it just reflects a past cost that is being depreciated and will not be spent again in the future – hence all city analysts remove the figure from their calculation. It is all good and well looking at the money spend in the past – but that is an emotional attachment, what is important is what is going to be achieved in the future. If you think about it, the whole point of valuing a company is to work out what it worth now, and this cannot be related to what has been spent in the past – the errors of the past cannot be undone.
For everyone’s information, from 2005, when the new international accounting standards are introduced (huge impact for companies), amortisation of goodwill will not be allowed – it will be replaced by a straight impairment test, thus companies that are performing well will not have their goodwill amortised. So there will not be any amortisation figures to adjust for in the future.
Therefore, to get a truer or “normalised” earnings figure – as quoted by city analysts – the basic EPS should be adjusted for both exceptional items and amortisation. Hence, why the Company has published the figure – being 0.69p for the first six months of the year.
Okay – so how reliable is the EPS figure in the accounts of RTD – what scope is there for “adjustments”. Looking at the balance sheet, the company has few assets to manipulate – most being intangible assets and debtors and creditors. Auditors are very sharp on "manipulation" of these items. The Company does not have large fixed assets, which are normally the areas where manipulation can occur, and it does not seem to capitalise development work – again an area of potential for adjusting the p&l. Therefore, the EPS figure would give a fairly true reflection as to current cash flow.
This assessment is further backed up by looking at the consolidated cash flow statement – with the trading operations generating 3.3m – excluding exceptionals - in cash before working capital adjustments – which would be of a one off nature (2m positive) and tax and interest and tangible investments.
So what is the EPS going to be in the full year? The Board has given some very careful wording that the second half will be less than the first half, due to the one offs – but even if the second half is down by 10% (300K) the EPS will be approximately 1.2p for the full year (also cash per share of 1.2p). At this level the company on a forward multiple of only 8/9 – not the 60 times that have been bounced around this BB.
What about future growth? All on this BB agree that the company appears to be in a strong, growing market – revenues are up 11% already so lets say they fall to 7.5% growth, given the wording on operational capacity in the CEO statement, most of this would fall to the bottom line giving a faster growth in EPS. For every 1.5m in additional revenue some 0.1p would add to EPS, if 50% falls to the bottom line before tax. If this 5% growth is projected out for say 15 years, and discounted at say 10% (we would all like to get a 10% return on our money) then the value of the shares would be around 20p each
Can this value be justified by looking at other companies? RTD is pretty unique, however, the most comparable companies around are Datacash in the UK (AIM: DATA) and Cybersource (Nasdaq: CYBS).
Take Datacash – its current market value is some 24m on turnover of 4m for 2003, and a small operating profit. Therefore it is trading at 6 times revenue or 50 times operating profit! RTD on the same multiples would be worth 180M (60 p per share) plus, and RTD is a more robust and balanced company.
Take Cybersource – it has small turnover ($5- $6m per quarter) and is loss making – its market value is US$180m and has a real problem history. If you strip out its cash pile (which is dwindling) then it has an enterprise value of $130m or 80m. Again on the same multiples, RTD would be worth 40p + per share.
Either RTD is massively under valued or the other two are over valued – you choose?
How does RTDs value compare against other PE ratios for technology companies? Looking in the FT, the average is around 30 – but due to some high one offs – if you look at individual companies – stripping out the large ones (FTSE100), then the average is around 16 – 18 times. This would give RTD a price of 23 – 26 p now.
There are other examples to justify a higher price, all leading to the same conclusion – recent tech company sales at a multiple of revenue, etc
Therefore, on the basis of the above RTD looks a screaming buy – so why is it not still powering ahead? RTD has a chequered history, it came to market in the boom – rose massively and has been falling since. PJ Birks well written note demonstrated the history well, the $64,000 question to be answered is “Is the past behind them?” Some are betting it is – some are betting it is not.
The share price has excellent fundamentals – indicating a price of 20p plus in the short term, hence the rampers are right, but the reality is the share price is held back by reputation, the doom-mongers are right and the share price is down at a low 8 times multiple – 10p. On balance some where inthe middle is going to be right, so long as the company does not make any more gaffs.
For all those who are wondering, yes I am now a holder of RTD shares – I have bought in during the last year and I am sitting on a nice profit. The amount I hold will not make me rich, but if I am lucky will allow me to take some profit and buy a decent holiday for my family.
Enjoy RTD, it is fun to try to predict what will happen next – it is a gamble, an interesting challenge and an opportunity. I have not bet my shirt, no one should ever do that, and I think I will at least get my money back if it goes really wrong, but momentum should take the company higher.
Please feel free to post this note onto other BB, which I do not subscribe to. Please do not slander me for giving my views, and most of all…. DYOR"
Food for thought!!!
dalrymp - 05 Oct 2003 14:30 - 94 of 2406
It's encouraging that this post was originally written before:
1 The appointment of Jane Tozer
2 The recent announcement of a deal between RTD/Chase Merchants
Both show that the company is looking to the future and getting out there and finding business.
1 The appointment of Jane Tozer
2 The recent announcement of a deal between RTD/Chase Merchants
Both show that the company is looking to the future and getting out there and finding business.
dalrymp - 06 Oct 2003 08:38 - 95 of 2406
What a lovely start to the day! Hopefully the share price will now rise steadly to where it should be. Well done to everyone who kept the faith.
javidshaik
- 06 Oct 2003 08:43
- 96 of 2406
Yeh, as of 8.45am we have had 1.45 million buys and 100k sells. Looking good!
jules99
- 06 Oct 2003 09:06
- 97 of 2406
RTD has to reach 12/13p before i begin to become bullish and confident for the real rise, towards 15p level...
has oversold in last few weeks...which is a pity...
just my thoughts...
Jules99
has oversold in last few weeks...which is a pity...
just my thoughts...
Jules99
Douggie - 06 Oct 2003 10:15 - 98 of 2406
mornin all up .75 loads buys keep the faith :-)
dalrymp - 06 Oct 2003 11:26 - 99 of 2406
Any info on the 500,000?????????...Please say it's a buy!!!
javidshaik
- 06 Oct 2003 11:40
- 100 of 2406
4 million shares bought (value 413k)
312,000 shares sold (value 31k)
Javid
312,000 shares sold (value 31k)
Javid
Nitefly - 06 Oct 2003 11:44 - 101 of 2406
Ok, guess I'll be the 100th reply to my own message :)
If I was out then I certainly would be getting in very quickly from what the level 2 data below and the amount of buying going on, is showing.
Level 2 as of 06/10/03 11:46 am:
| BUY ORDERS | SELL ORDERS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
dalrymp - 06 Oct 2003 12:44 - 102 of 2406
Thanks Nitefly...How's it looking now?
Nitefly - 06 Oct 2003 13:06 - 103 of 2406
dalrymp: the 500,000 trade was almost certainly a buy ...does someone know something I wonder? - You can almost feel this is about to break Northward;)
...its all looking very positive IMHO;)
regards
...its all looking very positive IMHO;)
regards
Nitefly - 06 Oct 2003 13:15 - 104 of 2406
Level 2 as of 06/10/03 1:15 pm
| BUY ORDERS | SELL ORDERS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
javidshaik
- 06 Oct 2003 16:32
- 105 of 2406
What happened? 4.72 million buys, 1.23 million sells yet once again we saw the price drop. I am totally confused.
Anyone got an idea what's going on?
Javid
Anyone got an idea what's going on?
Javid
Douggie - 06 Oct 2003 17:50 - 106 of 2406
I,ve no idea, but it is going up :-)be nice if it went up as fast as it came down, we are probably watching too closely wishing too hard, Irealy want to see 3p to put my lot in profit xfinger c u tamorrer!!!
Douggie - 06 Oct 2003 17:55 - 107 of 2406
that of course read 13p.... :-( Douggie
Douggie - 06 Oct 2003 17:57 - 108 of 2406
i am not in tune with this keyboard :-(
Nitefly - 06 Oct 2003 18:09 - 109 of 2406
Keep the faith guys!
You know exactly what it will do the moment you sell out and it doesn't start with "u" ;)
Good luck all!
You know exactly what it will do the moment you sell out and it doesn't start with "u" ;)
Good luck all!
dalrymp - 06 Oct 2003 18:55 - 110 of 2406
Retail Decisions is still oversold and undervalued. The share price should be 15p - 20p NOW!
It's in an uptrend now and should go from strength to strength. It should rise steadily now.
Onwards and upwards!
It's in an uptrend now and should go from strength to strength. It should rise steadily now.
Onwards and upwards!
Douggie - 07 Oct 2003 08:28 - 111 of 2406
:-)
Douggie - 07 Oct 2003 15:43 - 112 of 2406
does someone know something we dont, buysn changed to sells :-(
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