Avanti Capital Share Discussion Threads

[hugepants] 22/6/2010 08:49

Rivaldo

they revalued their investment in mBlox down from £500k to £250k due to underperformance. From past accounts I believe they own 1% of mBlox (roundings may be significant here!).

I wonder if Spark overvalued mBlox in the first place? If they still have around 1% of mBlox and value that at £250K then they are valuing mBlox at approx the $400M valuation Motricity floated at last week.

[adam] 21/6/2010 17:29

Hi rivaldo.
Haven't followed Spark for a while, though used to be in New Media Spark many moons ago.

I'm not sure why their mBlox holding was written down in the period ending Sept 09. This was the statement that Andrew Dark - appointed CEO of mBlox in March 2009 made in November 2009


Financial results

Having developed a business of considerable scale and reach, the half year to 30 June 2009 saw mBlox deliver a trading profit at adjusted EBITDA level for the first time in its history and this positive position will be grown through the second half of the year. The company has undertaken a range of other measures that will see the company increasingly cash positive on a month by month basis in the second half of 2009 and the prospect of acquiring other companies within the sector to increase global scale is an increasing possibility."




Avanti had written their investment down again in Dec 2008 for sectorial reasons

The sector in which mBlox operates has continued to be adversely affected in terms of valuations. Accordingly, the board believes that it is appropriate to make a further provision in the carrying value of the Group's investment. In the absence of any objective data to assess the value, the guidelines issued by the BVCA suggest that provisions should be made in 25% tranches. As a result of a further 25% provision and after taking account of the foreign exchange gain, the carrying value of the Group's investment in mBlox as at 31 December 2008 was £5.86 million or 73p per share.

I quizzed the board on this and they were quite clear it was not due to mBlox operations itself (this was in a meeting with Hargreaves there too) but due to comparison group. They refused to reveal to me who constituted the comparison group.


mBlox exceeded a number of its key performance indicators, including mobile originated and terminated messages (MT). MT messaging growth accelerated in the second half of the year and in December 2008 the total volume of MT messages were up 40% compared to December 2007. Enterprise mobile messaging was responsible for a significant proportion of overall MT growth, as new and innovative uses were deployed.



....The sector in which mBlox operates has continued to be adversely affected in terms of valuations. Accordingly, the board believes that it is appropriate to make a further provision in the carrying value of the Group's investment. In the absence of any objective data to assess the value, the guidelines issued by the BVCA suggest that provisions should be made in 25% tranches. As a result of a further 25% provision and after taking account of the foreign exchange gain, the carrying value of the Group's investment in mBlox as at 31 December 2008 was £5.86 million or 73p per share.

Now they have objective data.

Worth also remembering that Avanti are board memebers of mBlox although they are "observational" rather than executive they would not be likely to make the comments they did in March 2009 had there been a material change in mBlox trading



Andrew Dark, the CEO of mBlox, commented, "In 2009, mBlox saw its 10th consecutive year of 30%+ volume growth globally for application-to-person messaging and we have also maintained our global leadership in processing premium transactions with a total retail value more than twice that of our next largest competitor. This demonstrates the immense power of SMS to deliver consumer value for businesses. We have seen growth in many sectors, including financial services, entertainment, transport and online service sectors. Although the SMS market in North America began later, the impressive and accelerating growth hints at the innovation and vast potential in the region. The dramatic increase in mBlox market share in France and growth in other territories demonstrates the value of our global presence and focused strategy."



Notwithstanding the progress that mBlox is making and, in the absence of a validation event, the Board has not reversed the provisions made in previous accounting periods. Except for the small additional investment made by the Group during the period of £60,000, the only change in the carrying value of mBlox is £191,000 and this reflects the favourable movement in exchange rates that prevailed as at 31 December 2009.

[rivaldo] 21/6/2010 16:18

Adam and HP, I'm probably teaching you to suck eggs (as I think the saying goes?), but did you know Spark Ventures PLC has an investment in mBlox?

Per this at 30/9/09 (see Note 5):



they revalued their investment in mBlox down from £500k to £250k due to underperformance.

From past accounts I believe they own 1% of mBlox (roundings may be significant here!).

I've vaguely followed AVA for aeons and would like to be sure that mBlox looks as good as it sounds, but this doesn't sound too good.

Apologies if you're already aware and/or have discussed it. Do you have any thoughts on valuation etc?

[adam] 21/6/2010 16:02

I'm not sure exactly, though I think they are broadly termed aggregators.
- what they say about themselves:-

mBlox
mBlox enables businesses to deliver and bill for mobile services and content around the world while simplifying the commercial and technical complexities involved. Specializing in global operator connectivity and mobile billing, we maintain connections to more than 600 mobile operators in 180+ countries through our carrier-grade network.

Motricity
mobile data solutions that enable wireless carriers and enterprises to deliver high-value, highly personalized mobile data services to their subscribers and consumers. Motricity breaks through the complexity of the mobile data ecosystem by providing a comprehensive suite of hosted, managed service offerings which enable wireless carriers and enterprises to deliver customized, branded mobile data experiences. Top highlights of our current business include the following:

Clearly there is a wide disparity between the implied mBlox valuation in Avanti's books, not withstanding the further discount implied by the Avanti share price and that of Motricity.

If you took Eclectic and other small holdings of Avanti as having no value then mBlox would be worth some $115m (assuming Avanti hold 6.5%). Versus $360m for Motricity.

mBlox state they are cash flow positive and the largest mobile transaction network in the world. IF they were to float they would be worth more than Motricity presumably, but surely more than current book value.

The update end of June should shed some light on the Eclectic business and of mBlox. Interims published three months ago were very upbeat


Andrew Dark, the CEO of mBlox, commented, "In 2009, mBlox saw its 10th consecutive year of 30%+ volume growth globally for application-to-person messaging and we have also maintained our global leadership in processing premium transactions with a total retail value more than twice that of our next largest competitor. This demonstrates the immense power of SMS to deliver consumer value for businesses. We have seen growth in many sectors, including financial services, entertainment, transport and online service sectors. Although the SMS market in North America began later, the impressive and accelerating growth hints at the innovation and vast potential in the region. The dramatic increase in mBlox market share in France and growth in other territories demonstrates the value of our global presence and focused strategy."

Eclectic

Sales and profits were substantially ahead of last year both in total and like for like. Despite the strong performance for the same period last year the management team continues to drive performance. In summary for the six month period ended 31 December 2009, sales were £6.8 million (2008: £5.9 million), site EBITDA £1.9 million (2008: £1.5 million) and company EBITDA £1.1 million (2007: £0.7 million). Trading over the New Year was strong and management is optimistic about the outcome for the second six months continuing the trend seen in the first half.



Edit - Probably worth noting that Motricity a post-money valuation (though I would not be surprised to see them do an SPO) whereas mBlox is pre IPO. However I think offset by apparent superior nature and scale of mBlox business and the fact they are cash flow positive- allegedly.

[hugepants] 19/6/2010 16:10

Your arithmetic looks solid adam. I also missed the november 07 fundraising when I was looking back throught the RNSs.
Incidentally how similar are Motricity and mBlox. Motricity looks like it develops a software platform for mobiles.

[adam] 18/6/2010 14:49

They might say something at the end of period trading update, which was end of June last time. The press is saying that Motricity had to cut the offering price to get it away, and it is at the bottom of the expected range. i.e. it would have been valued at more!

I was trying to recall where I got the 7.7% from, and it appears to be from the 2006 June accounts.

June 2006

In the fund-raising, Avanti invested a further £1.73 million to bring its total
investment to £3.56 million and its holding in mBlox to 7.9%. As a consequence
of this investment, the carrying value of the company's shareholding in mBlox
has risen from £1.83 million to £5.6 million.

As at 30 June 2006, the carrying value of its investment was 65 pence per
ordinary share.



This implies a valuation of £71m ($105m today's money) for mBLox

Since then there as a funding round of $22m in Nov 2007.

Dec 2007

In late November 2007, mBlox raised $22.0 million in a Series E round taken up
by the principal existing investors and a substantial new late-stage investor.
The Company invested $0.25 million. The terms of the investment (with its
preferences) reflect the change in the investment climate giving an implied
valuation of the Company's interest in mBlox of £7.8 million.


The £/$ was 2:1 at the time, so the additional £ investment was £125k. i.e. next to nothing. Yet they have increased the valuation of the mBlox holding, so I assume it was an "Up" round despite the comments about investment climate (surely Dec 2007 things were already pretty downbeat??)

If we assume if was neither an up or down round then it would have diluted Avanti by about 20% to 6.3%. (i.e. $22m is about 20% of $105m) If it was an up round then dilution would have been less. I think we can assume between 6 and 7%.

Check my maths

Edit - actually I should use m/cap of $140m if £/$ was 2:1 at the time of funding, but this only makes the dilution less, so unless I have missed another funding round it should be comfortably above 6 and nearer 7%.

[hugepants] 18/6/2010 08:11

Hmm..The last results say they will revalue the mBlox stake when a valiadation event occurs. Will a Motricity float count as a validation event or is it more likely to be a float of mBlox itself or a fundraising.

[hugepants] 17/6/2010 19:55

This from feb 2010 mentions motricity and mblox


...The fact that Motricity Inc., which like MBlox is involved in wireless billing, recently filed to go public, has not altered Dark's thinking even though Motricity is in worse financial condition. Motricity had a net loss of $78 million on revenue of $103.2 million in 2008. During the first months of 2009, the company lost $10.8 million on revenue of $88.7 million. It has, unlike MBlox, never made a profit...


...Dark's second year, however, is about growth. The company [mBlox], which Dark said generated north of $110 million in revenue in 2009, may seek to raise an unspecified amount of additional capital in order to build itself up through acquisitions. And if that growth takes hold, then year three, or more specifically 2011, may be when MBlox looks at going public...

[hugepants] 17/6/2010 19:03

Hope you are right adam. Motricity is due to start trading tomorrow.

[adam] 17/6/2010 14:32

Looks like Motricity to price in IPO at circa $400m



Assuming 40m shares and $10/share

It looks like all the shares are being sold as well as 5.8m new ones.

Must bode well for mBlox valuation which I think is a superior business. This should require an RNS from Avanti once it actually starts trading as this is highly material to the NAV of Avanti. (I seem to recall Avanti have 7.7% of mBlox - hence could be of the order of £25m net to Avanti if mBlox had similar m/cap). That's 5x current m/cap of Avanti currently.

[adam] 26/5/2010 17:48

Luminar

Luminar asks landlords for rent reduction

[adam] 20/5/2010 09:20

Monitise...

[adam] 17/5/2010 08:41

That's odd

275369 shares change hands at 63p on Friday
it is over 3%, yet nobody appears to have disclosed a holding with that number and nobody disclosed as a buyer.

by the way. i was wrong about Brighton po na na closing. it is just a refurb and change of name. i would guess it will be a Sakura.

[adam] 13/5/2010 13:59

LMR results bad and say trading deteriorated from Sept and has continued badly. VAT increase on the way too. Meanwhile, last we heard from Eclectic was that they were doing well.


As at 25 February 2010, Luminar operated 87 late night venues in 76 towns and cities, the largest estate of its kind in the UK. We traded 13 larger nightclubs under the Oceana brand, and 34 under the Liquid brand, with all of our clubs retaining an identity that reflects their local community. Our customers are predominantly in the 18-24 year age group, including many students, and some 63% of our drink sales are made after midnight. Our primary income streams are the sale of drinks (67%) and admission charges on entry (27%).

[hugepants] 29/4/2010 09:17

Is there any other of these types of comapnies worth looking at?

I also hold some EPE Special Situations (ESO) which has over 20p in cash a NAV of 72p and a share price of 30p. Ive a small amout of Aurora (AURR) which recently raised cash at 40p per share and is now trading at 32p.

[errollc] 27/4/2010 06:43

Adam, I can't disagree with what you write. I've been a shareholder for years and have been amazed/upset by the diminution in value, but we are where we are. I think Barvest will be sold for a decent profit (from the written down value) and Mblox should be a real winner. I think we can end up with c.150p a share (roughly) but it may be substantially more. I'll keep buying when shares become available and one day the market will recognise the value....hope it's soon.

[errollc] 16/4/2010 13:35

Not sure about Netfractal. Medcentre is not a down round but the same price as previously. I'm pleased the management are buying stock....aren't you? These are cheap as chips.

[adam] 15/4/2010 08:49

what's the betting the 72k matched by two 36k trades is tweedle dum and tweedle dee picking up more stock?

The following email to Julian got no reply.

A few questions re recent Interim results



Legacy Portfolio



June 2009 - "the aggregate carrying value of these investments was £51,000."

Dec 2009 - "the aggregate carrying value of these investments was £6,000"





Were these write downs or disposals?



Netfractal

In last annual report it stated

"expecting to receive up to £175,000 in 2010 in respect of Netfractal"



Has this been received?





Medcenter

"proposing to raise a further $6.7 million in 2010"



Is book value based on 2007-2008 cash call valuations? I am presuming Avanti will not participate and you are anticipating a Down-round given credit environment. If so, has this been taken into account in the book value in the Interims?

[hugepants] 29/3/2010 10:49

Amdocs acquires MX Telecom for $104M


mBlox is mentioned.

[lbo] 19/3/2010 22:28

Eclectic Bars, the Sakura and Po Na Na operator, said this morning it was optimistic for the future after revealing what it called a substantial increase in like-for-like sales and profits.

The group, which is backed by the private equity company Avanti Capital, said it achieved sales for the six months to 31 December 2009 of £6.8m, up from £5.9m the year before. Company ebitda was £1.1m and site ebitda had also improved by nearly 22% during the period - up from £1.5m to £1.9m.

[adam] 12/3/2010 14:59

Eclectic managed to show a before tax profit and amortise bank debt as well as pay coupon to Avanti.

mBlox. From somewhere I have that Avanti have 7.7% of the share capital. I can't find those details at the moment. Assuming it is correct, the book value of £5.4m (current market cap) then would imply a market cap for mBlox of $105m. It has revenues in excess of $110m and is profitable and growing. I would expect a valuation in the right market conditions of in excess of $500m. Not without risks but there is clearly a considerable upside there.

[jeffian] 12/3/2010 10:06

"It does seem strange the bars are doing so well....but they are."

Well they're bucking the trend. Luminar trading update this morning -

[errollc] 12/3/2010 07:48

Very hard to deal in and very undervalued. It does seem strange the bars are doing so well....but they are. They cater for students who seem not to be feeling the recession. Getting hold of any at these levels is hard though I got a few yesterday.

[jeffian] 11/3/2010 17:01

Hmmmm. The Eclectic Bars thing still doesn't smell right to me. All their peer group are struggling and I find it hard to believe they are doing as well as they say. Mind you, even that is barely profitable. With Eclectic representing 53% of total assets and over 63% of net assets (95p/150p) you'd better believe them.