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Real-Time news about Spark Vent. (London Stock Exchange): 0 recent articles
|exit234: As others had mentioned, I entered this fully expecting them to wind down the company and convert everything to cash, or distribute IMO shares. That is what all the announcements had been suggesting until the most recent. I can only think it is a way for the management and directors to extract some more money. Disappointed really. Sold out for a 20% gain (225% annualised) so can't complain too much (and this was entirely based on the fortuitous and timely rise in the IMO share price after my purchase rather than any skill) , but it could have been so much better. Good luck to all those that decide to hold. I hope the new investment managers prove their worth.|
|topvest: Well yes does seem rather rushed. I'm going to take a look at this company again after a number of years away. I'm a holder in Gresham House. Rather miffed you are getting the SAL shares at a 7% discount to a low share price in an asset swap. The Miton shares also look a good swap. All a very odd arrangement but does look positive here. Will look at further I think, but probably await the consolidation.|
|johnstonp: 4.5p to return to shareholders
why is the share price at such a low level ?|
|warrensearle: From IC today
Sparking a re-rating
Full-year results from Aim-traded investment company Spark Ventures (SPK: 11.75p) have beaten my estimates by a large margin after the company boosted net asset value per share by 12 per cent to 15.1p a share. This was after adjusting for a 2.5p capital return through the issue of 'B' and 'C' shares in January. For good measure, Spark has announced yet another capital return of "at least 2p a share" through the issue of 'D' shares after the forthcoming annual meeting. Moreover, having analysed the company's investment performance in quite some detail, we can expect further large significant cash returns over the next year, too.
That's because after the March year-end Spark sold 65 per cent of its stake in Kobalt, one of the world's leading music publishers, for £10m. This disposal not only resulted in a revaluation of the holding from £8.9m to £15.5m in Spark's accounts, but also means that the residual stake is still worth £5.5m, or 1.4p a share. To put the deal into some perspective, Spark has 410m shares in issue net of 40m shares held in Treasury, so the £10m share sale brings in 2.4p a share of cash.
At the end of March, Spark also held £3.6m of cash on its balance sheet and this will be bolstered by a further £3.6m, or 0.9p a share, in January when the company receives the outstanding consideration following the sale of semiconductor business Aspex to Ericsson. In other words, the current share price of 11.75p is in effect backed by 4.2p of cash or cash equivalents. Strip that cash out and it means that investments worth 10.9p a share are being attributed a value of only 7.55p - a hefty 30 per cent below their carrying value.
Unwarranted discounted to sum-of-the-parts valuation
Clearly, a discount of that order would be fully justified if Spark's investment portfolio was underperforming. However, this is not the case as the company has doubled the carrying value of its investment in California-based OpenX, a business that has developed a free open source ad server trusted by more than 30,000 web publishers in over 100 countries around the world. OpenX is now developing a set of tools to help publishers make more money from their web presence and is backed by financing from leading venture capitalists including Accel Partners. Sales growth has been robust, with trailing 12-month revenue figures "significantly in excess of $100m (£65m) and, for the second year running, revenues are over two and a half times the level for the equivalent period 12 months ago". Spark's holding in OpenX is now worth £5m, a valuation in line with a recently concluded funding round from Samsung and Dentsu (a Japanese advertising company).
There is also upside potential in Spark's stake in Mind Candy, the company behind Moshimonsters, one of the world's leading developers of social multi-player children's games. In the last financial year, Mind Candy's revenues were up 125 per cent and profits trebled. However, Spark's investment in Mind Candy is still only being valued in its accounts at £3.2m, in line with the price received when Spark sold half of its stake two years ago. That looks a conservative valuation.
Spark's stake in Notonthehighstreet.com, an internet marketplace for over almost 3,000 specialised UK-based businesses selling a wide variety of unique products, also looks conservatively priced at £10.2m, the valuation used at the time of a funding round in May 2012 when Spark sold 7 per cent of its holding to fund manager Fidelity. Notonthehighstreet's revenues surged 66 per cent to £45m last year and the company is "on course to deliver 50 per cent revenue growth this year". That's well ahead of budget.
The largest investment is a £16.2m holding in IMImobile, a highly-profitable provider of the technology infrastructure for mobile data, voice and video services to mobile telecom operators and media companies. This has been revalued up by £300,000, reflecting the fact that both revenues and cash profits rose in double digits in the year to the end of March. That wasn't a one-off, either, as cash profits have risen by a compound rate of 30 per cent over the past three years.
As a result of strong operational performances by investee companies, Spark's portfolio actually edged up in value in the 12 months to the end of March to £59.1m even though the company made disposals of £8.7m. That's not the type of investment performance that warrants the company being valued on a 30 per cent discount to the underlying value of its assets net of cash.
I initially recommended buying Spark's shares at 7p ('The spark for a re-rating', 10 Jul 2012) and repeated the advice four months later when the share price had drifted down to 8.75p ('Time to spark a re-rating', 8 Nov 2012). These buy-in prices have been adjusted for the 2.5p a share issue of 'B' and 'C' shares in January. Ahead of last week's full-year results I also reiterated the investment case at 11p ('Awaiting another spark for a re-rating', 9 May 2013).
Interestingly, Spark's shares are closing in once again on a 12-year high of 12.4p. In my view, a move above this level looks firmly on the cards given the imminent cash return, potential for further investment gains on the portfolio and disposals that in turn would lead to additional capital returns. Realistically, a share price around 13p is fairer value. On a bid-offer spread of 11p to 11.75p, the shares rate a buy.|
|stemis: Overall I think the share price has got ahead of itself here and there is better value in other breakups. I can understand some holders just hanging on trusting management to deliver increased value prior to sale of the remaining investments. But that's what this they are doing, lets not fool ourselves. Just on value metrics this isn't attractive.|
|stemis: Okay I've checked back with the online IC. The comment by Simon Thompson that "a total distribution to shareholders of at least 14.25p a share, or £54.8m, looks realistic" is from the Dec 21, 2012 edition of IC. So shareholders have already had 2.5p of that with the distribution agreed at the 18 January 2013 General Meeting! That means there's only 11.75p of Mr Thompson's "total distribution" left. Not that attractive when the share price is currently 11.375p mid. People need to check their figures before just quoting past comments.....|
|pog1234: The update years before that was later in July, so no worry yet.... :)
I agree that some of the portfolio companies are valuable, it is just problematic to assess what they can sell them for and compare the value of the parts to the share price.... my worry is that they have to sell them cheap in order to unwind the company. Lets say they sell two of the "good" companies, that leaves a bunch of less valuable companies. Is it worth extending the "life" of the company (in order to find the "right" buyers) when you own less good assets, perhaps it is not justified from an economical perspective? Maybe it is better do do a firesale of the rest of the portfolio companies? If you have that view you need to discount the value of the portfolio quite a lot.|
|nickelmer: In that case, why is the share price performing so poorly?|
|nickelmer: My thoughts are that the share price tells the story, they have been puffed up a few times by the tipsters, but tipsters aside the lack of real news and soggy share price seems to suggest that they may finding it more difficult to sell off their investments, as pog points out selling a non profitable business cannot be easy.|
|warrensearle: Here's part of it emphasising discount to book value I won't post all of it but will be in the print version on Friday which will give another boost
So, by my reckoning, Spark's holdings in notonthehighstreet.com, Kobalt, Firebox and Mind Candy have a combined value of £22.4m, or 5.5p a share, which could be easily realised. Add to that the current cash pile of £4.5m, or 1.1p a share, and the £3.25m cash outstanding from Ericsson on the Aspex sale (or 0.8p a share) and 7.4p of the current share price of 10.25p is backed by cash or these realisable investments. And that's assuming there will be no more upside in these investments between now and when they are sold. But, even if there isn't, this means that Spark's other 11 investments (excluding the cash outstanding on Aspex) are in effect being attributed a value of just 2.85p, or £11.7m, even though they have a book value of 6.26p, or £25.6m. That looks incredibly harsh since one of those investments is a £15.5m holding in IMImobile, a highly profitable provider of the technology infrastructure for mobile data, voice and video services to mobile telecom operators and media companies.|
Spark Ventures share price data is direct from the London Stock Exchange