Internet Business Share Discussion Threads

[yump] 21/6/2007 22:05

I hope AW doesn't get taken over and if it does I hope they don't get the corporates interfering with it. A big proportion of our commissions come through them, reliably. Wouldn't want them going the way of TD where its a battle to get service as an aff.

[yump] 21/6/2007 22:04

polzeath

The IBG business is not worth a premium, IBG's particular affiliate network core may or may not be, but that doesn't mean the affiliate model in general isn't worth a premium.

If you look at the names in the TD merchants and the names in the AW merchants, those imo are clearly worth a premium compared to any other type of advertising organisation. They are absolutely defensible.

imo IBG just haven't given that core business the concentration it needs - like any business. Doesn't mean the model is flawed or average - just the execution.

[roverisback] 21/6/2007 21:59

oh dear my stop loss got triggered at 27p

[atomic dog] 21/6/2007 21:58

Well I've had to sell half mine and will probably sell the rest tomorrow. Of course the RNS is terribly written but even so it does seem a bit of an overreaction. We are still expecting the company to make a larger profit than last year. Or are we? Its not clear. But the money for share buybacks must come from profits so presumably they think there will be some. We have previously been told that the business is going well (robustly in fact) so it seemed reasonable to assume that profits for 2007 would be towards the £2 million level having been £1 million in 2006. Which on an undemanding p/e ratio of 10 would have supported a market capitalisation of £20 million or around 26p/share. This doesn't seem like an emperor with no clothes to me. Yes of course others can copy their business model but it takes a long time to build up a network of merchants and affiliates doesn't it?

I agree with nghomi that a share buyback programme for a small company is absolute madness. The one thing which small companies need to have most of all is money in the bank to cater for unforeseen problems. Since when have share buybacks created value for shareholders? When market makers have to get hold of stock for a buyback they will simply mark the price down to flush out a few PIs.

[bonio10000] 21/6/2007 21:57

A couple of points

The term profit maximisation does not imply a lack of profits, only that they won't be stellar growth as before because they will be reinvesting in technologies.

Altium - Maz - I trust they were on a basic and a fee to sell the company. If not, why were you asking a 3rd party about anything when they clearly know less about the market and the company than you do? If there is a fat fee tucked away in the accounts for them, then that is shocking. Concentrate on your job and not using jumped out uni grads to come up with stupid excel models.

What is the new technology? Why is profit growth dependent upon it? Sounds like it is a decent bit of kit if it is that material to the business.

Maz - how on earth can you forecast 2 years into the future? That is ridiculous. Get a grip.

The number of merchants per month is still increasing rapidly and so is the internet shopping market - why is business therefore constrained in any way? If anything, the recent retail downturn has benefited the inernet market as people are buying more online to maintain their purchasing power.

Why not tell us the forecasts for the end of the year? I thought there were only some outdated broker notes? No-one has any idea what "market forecasts" are likely to be? If it is only a 50% increase in profits then you should say so.

All in all an inept declaration of a position which may or may not be that bad.

Market cap puts the company on a P/E of 9 with £1.5m of profit this year and more to come next year. Happy for them to repurchase shares at this price. Seems to me that no-one would pay what Maz thought IBG was worth so they are going to create value by buying undervalued shares. Today just makes that cheaper. I would never suggest that was the reason for the wording in the RNS.

[valustar1] 21/6/2007 21:49

By the way whilst we are all worrying about the share price AF has been adding more merchants!!

My understanding is that the business was in demand just the starting price of around 28p did not reflect Maz's value of the future.

By the way I have been told by a number of people close to the industry that Affilate Window is up for sale. With AF taken off the market options for buyers are reduced so it might bring the action to a close on Affiliate Window which will set a benchmark for valuations

[polzeath] 21/6/2007 21:46

Stegs - talking sense here, business worth what it's worth, which is about future cashflows. Goes back to basic valuation, not positive/speculative, though.

[liarspoker] 21/6/2007 21:45

They should have stuck to expanding AF in the UK & the US.

It would be worthwhile to ask Maz why they strayed from something that was working brilliantly.

The phrase 'stick to the knitting' comes to mind.

[stegrego] 21/6/2007 21:43

Steady on lads - i think you are going a bit far - isnt too much wrong here - but the share price has stagnated for 18 months and now looks likely to do the same for another 18 mths.

Probably end up ok, but in that time, given a following wind, id expect to be able to double my money or more in other shares

[polzeath] 21/6/2007 21:43

yump - it may not be easy-peasy, I may occasionally exaggerate to make my point ;-), but neither is it so difficult or defensible that it's worth a premium.

If it were so fantastic a model the business would have been snapped up but nobody's interested at the current valuation.

[polzeath] 21/6/2007 21:34

I would think tomorrow might bring another 5-6p off the share price (without anyone putting a floor under it). Emperor has no clothes, unfortunately.

[lord buffett] 21/6/2007 21:31

Well I feel that the wheels have probably fallen off the wagon and I for one won't be propping it up... I've been crushed before doing that.

It now looks like we're in for the very long haul, where we've not even been allowed to think/believe it might be less than 2 years away, FFS. (Did it really have to be that explicit?)

Today's RNS is probably about the worst I've ever seen (vs expectations anyway) and my fear is that Maz [advised by Altium] really means it!

[slapdash] 21/6/2007 21:27

polzeath - I think you make a great point... IBG only entered affiliate thing in 2003 I think so if they can do it why can't others???

Slapper

[polzeath] 21/6/2007 21:18

I'm afraid some of you seem to be missing out on the fact that IBG's business model is not particularly strong or defensible. Who couldn't do another sweatband.com if they had £10,000 and rang around? IBG's core skills are in the areas of Internet technology, online marketing & design. - fine - but hardly unique or worth a premium rating. Back to 8-10x, pronto, IMHO.

[68steve] 21/6/2007 20:48

Altium...











You`re fired...

[nghomi] 21/6/2007 20:01

Sorry to see that holders are out of pocket. I traded the shares after the strategic announcement with small profit. Some of you know my view on IBG. IMHO it was overpriced for some time. The growth story was impressive but for a small cap such as IBG, a pe ratio of more than 20 is ridiculous IMO.

The outcome of strategic review has been nothing but disaster! A share buyback is not a good idea for such a small company. This company needs cash to be protected in a bad time. Without cash, it could go easily bust in two years time if the UK economy is in recession. How much money are we talking that IBG would return to shareholders through share buy back in the next two years? 2p or 3p? It is still over priced IMO but I think IBG has a fan club and it could be protected by them from further decline. But I would not certainly buy back at these prices. IMHO IBG's fair value is not more than 12p.

[divinausa1] 21/6/2007 19:44

Sorry for you guys i sold my lot 6 months ago here, it could be worse! I was in Torex!!!!

[hugepants] 21/6/2007 19:25

If you are valueing this on PE ratio then I think its a serious mistake not to knock 30% off the eps to account for taxation. IBG paid nominal tax last year but they have only £0.5M of losses left to carry forward which presumably will be used up this year.

[shroder] 21/6/2007 19:18

I can see why folks would invest here because of the growth potential, what caught my eye was the figures in the header as I ma sure it has people.

I dont really understand how this announcement has come about, it looks like they ate going to use the companies cash to hold the share price up (literally) according to the last pargraph

[masurenguy] 21/6/2007 19:09

"Good businesses don't just become bad because of one lousy RNS".

True - but market sentiment, a crucial factor in AIM company valuations, can be severely damaged by lousy RNS announcements and opaque management strategies. This does not engender confidence in managements commercial acumen, which is why so many PI's exited today.

[68steve] 21/6/2007 18:22

Stemis it`s the 2nd and 3rd lousy RNS that peeps are more concerned about.IBG will get traded over the next couple of days until it finds a new base,my guess 15pish,good luck all...

[harrytrad3] 21/6/2007 18:07

How much money in the Bank?

[stemis] 21/6/2007 18:00

Omlaysause,

For what its worth, I don't see an MBO behind this (although before today I thought it was possible). The biggest risk in all (IMO) is that Maz takes it all to heart and we then get no information whatsoever, with Maz writing off the next two years until whatever he is building emerges at the end.

Despite todays announcement (and the market's complete overreaction) they have barely put a foot wrong in running the business. Okay maybe its all about to fall apart from here. But then again, maybe it isn't. They aren't the best at IR but then I'd rather have that than good IR and poor business execution (DGM's available for those who prefer the reverse).

The profit warning was disappointing but I suspect results a lot from 2 months spent doing this strategic review. However its not a "we're going to make a loss" warning or even "profits will be flat" warning, its a "we potentially might not achieve the 68% increase in PBT we expected" warning. So maybe it'll be 50% or 40% and PBT thereafter might grow at 20% not 60% as margin is reinvested into the foundations for future sustainable growth.

Why would anyone want to invest in such a company on a heady P/E of 10-12, with cash in the bank and a share buyback in planning.

Good businesses don't just become bad because of one lousy RNS.