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I have noted before that the valuation of AIM listed investment company Zoltav Resources (LSE:ZOL) is a total joke. Results today suggest that other folks are starting to twig. I am aware that Roman Abramovich’s son is the largest shareholder so that might float your boat but this good ship is going down. The shares now trade at 3.275p, valuing Zoltav at £12.5 million. My target price was 0.5p but I am slashing that and here is why.
My previous comments (now vindicated) can be found HERE
The company is looking for a big project. Meanwhile it has punted away on a few Russian blue chips and the odd AIM listed penny share. It has not always punted with spectacular success as half calendar year results out today make clear.
The company reports an income of $35,000 down from $37,000. Ooooh er missus – that’s very impressive. And the bottom line? A net loss of $788,000, up from $757,000. Shareholder funds as at June 30th were $637,000, down from $2.51 million a year previously and $1.425 million at December 31st 2011. Ouch.
So what happened to shareholder funds? Well it sold a few Russian resource blue chips for a small profit (and for much needed cash) but its investment in Evergreen Energy (whatever that was, not the past tense) has been written down to zero as it went bust in January. When did Zoltav put that cash in I wonder? It also saw a big writedown in the value of its holding in AIM listed mining and oil investment company Viridas, now known as Paternoster Resources (LSE: PRS). But administrative expenses of $660,000 did not exactly help. If you are pissing away $110,000 pcm on running a company with no income to speak of there can only be one result.
At the period end the company had cash of $454,000 but trade liabilities of $188,000 as well as shares worth $341,000. I am not sure how easily and quickly these shares could be sold or at what price so roughly speaking the company had net cash of $266,000 – 75 days of operating expenses. And so not surprisingly on 25 Sept, Baby A had to inject another £500,000 via an unsecured convertible loan. This loan note can convert at 2.3p. But it only buys a few months. At current cashburn rates the kitty will be empty once again by mid April. Even if the remaining shares are flogged that only buys two more months.
If I was a shareholder I might just ask how on earth a company whose only asset is a few shares managed to burn its way hrough £70,000 a month?
So Zoltav continues to look at opportunities. Jolly good news. Meanwhile a company which now has net cash of £470,000 but which is burning it at a rate of £70,000 a month plus a few penny shares is valued at £12.5 million. My target price is 0.5p (which still values Zoltav generously, because I am a nice guy) at £1.9 million. No, sorry I am not that generous. If it did a deal tomorrow a 100% premium to net cash is fair enough so my target price is cut to 0.25p. This is a slam dunk sell.
lol. You couldn’t make this up!