BNN Technology Share Discussion Threads

[perfect choice] 14/7/2017 09:46

Clear momentum with BNN this morning, into the 60's we go, broker 12 month target was 208p. I say easy 100p+ by end of 2017 with right news coming out on "execution" of new services and plenty of potential to beat that figure as well. This is what I like about BNN right now, its now about launching new services any longer, but rolling out what they have already announced - just get on with the job!

As speculation, I think some of the B2B deals should be coming soon are for the new student services platform. I've read names of familiar western companies wanting to use this platform for recruitment in China so watch this space and this is just one new service from BNN. Roll on the rest.

[charlesdarcy] 14/7/2017 08:49

Agree Newman ;

Would hope 63-4 with that order on the books and that would set the stage for 70p end of next week

[newmanontheblock] 14/7/2017 08:36

Goldie. Hope that big order does not get filled at that price!! Let the share price March higher please!!!

[topazfrenzy] 14/7/2017 08:27

It's about to take off IMO, the bottom seems to have been formed judging from recent price action. When people jump back in it'll take off properly, many of the shares are in II's hands and they're not letting go, not until £5+ that is!

Last chance saloon to get in cheap ...

[perfect choice] 14/7/2017 08:19

Noticed price seems to be reactive to little volume. Should be interesting when next RNS issued. Remember the price rose into the 60's up to and on the day of the AGM before the Nasdaq delay knocked it back. Expect steady growth like that again and that is without the news.

[pj 1] 14/7/2017 08:18

Nothing at all to read into L2. More topaz bias.

[topazfrenzy] 14/7/2017 08:12

MMs seem to have very little shares according to L2, jump into the 60s after 58p is showing

[goldie40] 14/7/2017 08:05

NICE 200000 BUY AT 56 ON L2 GOOD TO SEE A BIG ORDER NEVER SEEN THIS SIZE ON BNN ON L2

[perfect choice] 13/7/2017 14:12

Just a reminder from the 28 June AGM statement. See last sentence below, we should be getting close to those new B2B partnerships and should generate RNSs then?

"With the major launch of petrol card top-ups expected in July, followed by the student platform before the end of Q3, we anticipate material revenues at much higher margins in the second half of the year. Preparations for these launches in terms of access to customers and users are advanced and we look forward to reporting on these revenue streams in the coming months. Our competitive advantage in the marketplace has improved considerably and we expect to sign a number of key B2B partnerships in the coming weeks.

[topazfrenzy] 13/7/2017 10:17

Looking like the selling may be exhausted, next step hopefully 80p on next news.

[andy] 12/7/2017 21:45

vegpatch,

Good to see someone asking the right questions.

[perfect choice] 12/7/2017 21:43

Contract negotiations are part of my role newmanontheblock and I have plenty of contracts with NDAs which do not expire until end of term. Its just how it is at times.

Cash burn and costs are different subjects so just want to point that out. Costs can include depreciation of previous one time capex costs for example so accounted as cost but the cash spent was previous.

VP, there are certainly base/fixed costs as well as transactional costs which vary to revenue. I'm waiting the next interims to get a better picture especially as historical accounts cover now discontinued service costs or legacy relatively fixed services which in previous accounts formed a significant portion of costs. Basically need a clean slate for the new business model so next interims should be a better indication with 78% (my calc) of new service income and costs.

But I can apply general principles as familiar with this type of business. I would categorise costs into 3 main segments namely (a) transactional related costs, (b) development costs, (c) management/central office costs. So if you look at page 57 of the 2016 AR, (a) is the cost of sales while (b) and (c) contribute to the administrative expenses figure. There are other costs lines as shown like exceptional items and finance costs but the are the 3 main categories I would expect for an internet services business, be it BNN work in the middleware sector as a gateway to commercial/consumer services.

The transitional cost of sales I expect to cover the regional states annual payments you mention where there may well be an incremental element but in main as a base annual fee. The cost of sales will also cover related costs such as data centre facilities, infrastructure and licensing. Couple of things to highlight on this namely (a) BNN are currently utilising their former online lottery infrastructure in 4 data centre locations, the AR report mentioned this and even states it was under-utilised at times so one value with this is that it is "sunk cost" already in place, (b) modern practice these days is to invest on a monthly/annual subscription base for data centre facilities and server computing/network infrastructure, it is actually quite rare to upfront capex investment for data centres these days so you pay when you need to use computing resources, not pay up front. Net effect of all this is as revenues grow the cost of sales should increase at a lower rate so higher margin. But 2016 AR covers a high proportion of old digital and land based revenues and cost so really cannot use the AR as a baseline going forward. I should also point out some revenue generators like advertising as a transaction in its own right does not really have a direct cost, but the cost relates to the football microsites in place rather than a direct outcome of securing advertising income. So for this revenue line, BNN are already incurring the cost but then gets the revenue income as payments at some stage in H2. This could actually be very profitable.

Development costs are fixed cost but not related to revenue income. One thing I can disclose that has not been mentioned is that the headcount in China is now over 400 which would be expected with all the new services being launched. The new services have to be developed. There will also be an element of this team working on rollout activities in particular the regional council/city interfaces where it will take into 2019 to complete all the interfaces and rollout. But one thing to point out is that such development resource are usually employed on a contract basis with core support teams permanent. So this cost actually flexes to service development which when done can actually reduce. So basically it is a variable cost related to business development not revenues. Right now BNN is in the development phase for a number of new services so expect this to be a significant figure and fully expect admin expenses to increase.

Management/CO costs are a traditional fixed cost which will increase year on year but relatively fixed during the year.

So that is my take as it stands right now, its a complex web of cost items but the basic principle is that if you grow revenues significant at a set margin, you will build up healthy profits once you exceed your cost base and other recoveries.

For FY2017 I think the new broker report actually looks about right. BNN will exit 2017 with an operating profit and be cash generative on a month on month basis. However accounts wise they may well make an operating profit for H2 but for FY2017 they will make a pre-tax loss at lower margins to 2016 (due to the higher legacy higher margin mix). Cash is predicated to be higher than end 2016 but you need to account for the fund raising which occurred earlier this year i.e they have spend cash but have turned the curve upwards.

2018 is the year to turn into full net profit and healthy cash growth. If they get anywhere near £30M full year revenues this is all on track as I see it. So H2 is now the time to deliver.

One final point, think somebody asked about the number of downloads of the XNA app and whether it is 140M or 200M. The figure now is somewhere around 220M and increasing. This is the value of going to AGMs and finding out these snippets before any future reports catch up with events e.g you'll see this number or higher in the 2017 AR next year!

Thats enough for now, signing off tonight.

[newmanontheblock] 12/7/2017 18:39

Going back to the telco big fish deal that was announced at the AGM. If there an NDA in place for entire contract I would be surprised, but if so, it would suggest a really big fish move. We will see how big an impact this deal is having sometime in H2, when we get our next trading update. Also, this new deal might help cash burn, as revenue would be immediate and most probably deployed using current technology and assets, given the speed by which it was deployed. Anyway, we are all in the guessing game until a new update. GLA.

[and11] 12/7/2017 18:21

Like the post Vegpatch! I also would be interested how cash burn is going if this was updated at the AGM....

[vegpatch] 12/7/2017 18:15

That's a well reasoned post Perfect Choice. If you are right then that is likely to be positive for the company.

Could I ask about the costs that accompany the revenues?
I seem to remember there were minimum contractual payments to the Chinese states. Do these ramp up as revenues ramp up (the word minimum implies they can go higher)

Also how much do you think the cost base has or will ramp up by?

I have often met management teams willing to discuss revenues but conveniently forget about costs.
Before certain members of this board go Tonto on me, I would point out that the value of a company is the value of future cash flows discounted back to today (where cash flows are effectively net income minus changes in working capital minus the differential between capex and depreciation), so I think it's a valid point.

Anyway hope you don't mind me asking.

[charlesdarcy] 12/7/2017 17:53

Excellent post PC , as usual .

A little surprised Telco news is not released from NDA ?

[and11] 12/7/2017 17:08

Cheers for your thoughts pc! Always welcome

[perfect choice] 12/7/2017 16:58

Been a bit busy recently so a quick visit here. Done a quick check through so a few thoughts or comments below:

1. "hope" - wrong word - "confident expectation" is where BNN are now, anybody who attended the AGM visibly saw that confidence.

2. No issue with traders posting and what I mean as a trader is someone who may buy and also short. What I object to is blatant rampers and blatant shorters who are blind to the possibility the counter opportunity to their position. Some can be quite devious of course (sheep in wolf clothing approach), I prefer them to be obvious as clear what their intention is either way.

3. These might be public boards but that doesn't mean you are obliged to communicate with all posters, we all have a right to ignore. everybody should assess risks on anything they invest in either way, that is normal investment planning or should be.

4. There will be no RNS on the Telco deal, the NDA is for the contract term. That is the Telco choice and only they can decide to release their own details. Seen a couple of well know names mentioned of course but no basis to confirm.

5. Upcoming interims aim to be issued in August (stated at AGM), that is fairly quick. They will be fairly boring, think I mentioned 3.23M revenue F/C in an earlier post as shows income only from mobile top-up (where we already know the GTV bar a few days variance as issued before end of June) and legacy services plus a few other minor income streams e.g. the 2 pilots). Margins will be reduced as expected simply because the % of GTV commission (at much lower margins) as a proportion of total revenues will be much higher to 2016 results (new digital revenues were 54% of 2016 H2 income I make it but will be 78% of H1 2017 income I forecast, so 78% at 0.25-0.3% commission from GTV is my best guess).

6. Wrong to state no relationship between GTV and have stated this before, BNN earn commission from GTVs for mobile and now Telco deal, that is the contract. There are elements of income however which is not commission based e.g. marketing income which will appear in H2, and old digital/land income not related to GTV commission. The petrol app also will start to generate revenues in H2 and at a significantly higher commission rate.

7. While interims cannot cover this, unless BNN issue a forward looking statement (would be useful), BNN are now running at an annual GTV rate of at least £2.8BN as of 1st July but financial output cannot be seen until full results are issued next March. Trading update statements should help in the mean time. On top of this, key drivers for income in H2 is marketing for football sites (BoD seemed very keen on this at AGM), petrol app rollout income (much better commission versus mobile top-ups), student services platform which BoD are also very keen on it seems. £30M total 2017 revenue F/C from me and confirmed twice at the AGM as a reasonable target (in fact the actual broker target is higher), all components seem to be in place to hit that figure such is the big change in H2 already happening e.g. GTV jump due to Telco deal.

Looking forward to exciting H2 then!

[charlesdarcy] 12/7/2017 13:07

Delboy ;
Best ignore them .
Very quite trading

Hopefully news tomorrow / Friday

1 share trade at 8am 😊

[delboy39] 12/7/2017 13:00

Sounds like you will be spending the summer in your darkened room please don't come back here .

Send your paid posts elsewhere .

[bergsy] 12/7/2017 09:04

Obviously pj1 doesnt like the radio silence. Keep it up, dont engage!

[pj 1] 12/7/2017 08:36

delboy-you assume? And we all know what that leads to..its also the BNN thread, not the PJ thread,