Small Cap Value Report (26 Aug 2014) - BQE, BOOM, CNC
Audioboom (LON:BOOM)
Share price: 9.125p
No. shares: 466.5m
Market Cap: £42.6m
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This share is an interesting speculation. It cannot be described as anything else, as on fundamentals you would probably value it at less than cash (i.e. below £3.1m in cash reported at end May 2014). So why is it valued so highly, considering that it has today reported dismal interim results? Well, part of the reason is that it was a shell company, and the company which reversed into it, called AudioBoo, is only reporting 11 days figures in the interims to 31 May 2014 reported today, the deal having been completed on 20 May 2014.
So the interim figures today don't really matter, which is a good job, as they show turnover of just £24k, and a pre-exceptional loss of £745k.
I should add at this point that I spotted the highly speculative potential here a couple of months ago, and bought some stock. It's not a value or GARP share, it's a pure speculation. Having said that, I think it's potentially very interesting for the following reasons. It is currently the UK market's only Listed social media share. The company is trying, through the AudioBoo platform, to become the world's YouTube, but for audio (instead of video).
That may sound ambitious, but they've already made a lot of progress - AudioBoo has 2.8m registered users at 25 Aug 2014 - growth of 100% in 12 months, and importantly this is happening with no marketing spend, growth is viral. What I've noticed is that when I find audio links on Twitter, they are very often hosted by AudioBoo. The company is collecting & managing audio content from many top media companies, e.g. the BBC, Sky, radio companies, etc. Users can then create their own radio station of audio content that appeals to them. This can then be monetised in various ways, e.g. advertising. However, as with most social media companies, it's likely to be cash burning for some time).
It might all sound bonkers to value investors, who look for assets, cashflows & divis, but this isn't a value investment, it's a fashionable growth company, where in my view 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. So I am putting a massive, flashing neon wealth warning sign in front of this share, it's a total punt - but that's what people probably thought about Facebook, Twitter, etc, when they were small & growing rapidly.
The user interface with AudioBoo is rubbish in my view, at the moment. I tried it on my iPad and iPhone, and was very disappointed. However, the company is set to launch a new, all singing, all dancing user interface in Sept this year, which could provide some excitement if it's good.
A content deal in India is announced today, which sounds interesting.
So in summary, the figures are terrible, and the valuation is nuts. However, at the moment that doesn't really matter, because investors are prepared to take it to a higher & higher valuation. Bear in mind that in the USA social media companies are often valued on $x per user, and growth rates are taken into account too. So if AudioBoo manage to continue growing their user base rapidly, and get a decent App out there, then who knows maybe one of the heavyweights (e.g. Google, Facebook, Twitter, etc) might bid for it at a stratospheric valuation? Sounds crazy, but it's happening quite often at the moment - with paper on a wacky valuation, those giants can afford to shell out mad prices for bolt on acquisitions.
Anyway, it's easy to scoff, but just look at the chart below - nobody who owns shares in this will be complaining!
I should also note that this company's ticker, BOOM, is my second favourite ticker. This is great fun when telephoning an order through to your broker, as you can invoke various comedy voices, and make them jump by saying the ticker very loudly! (my favourite ticker is ZZZ for Snoozebox)
53fc554e33208Screenshot_2014-08-26_at_10
EDIT: Another point worth mentioning, is that in an announcement on 23 Jul 2014, about new content, BOOM said;
The Company has recently been approached by certain investors who have expressed interest in investing capital into the business. The Board considered these approaches, as the Company is growing very rapidly and additional personnel are required in new offices and in content management to direct this expansion. The Board has, however, decided that the number of initiatives in progress mean that this is not an appropriate time to raise further capital.
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.
- See more at: http://www.stockopedia.com/content/small-cap-value-report-26-aug-2014-bqe-boom-cnc-85607/#sthash.XKcuFzYr.dpuf
http://www.stockopedia.com/content/small-cap-value-report-26-aug-2014-bqe-boom-cnc-85607/