Ls -1x Mu Discussion Threads

[the jitters] 05/7/2002 18:50

The trouble with this one as I see it is the huge holdings by Sky, time etc. This basically rules out any takover premium as anyone attempting a takeover is just gonna be laughed at. Similar to Petronas and Amerada Hess and their holdings in Premier if I recall.

On that criteria, the cash is worthless to anyone as they cant lay their hands on it easily (if at all).

As a going concern, the company looks interesting, but then in this kind of climate so do dozens of others and this tiddler is fighting with them all for interest and investment. My favourite on this category as you know is Transware.

I still like KSS and also thinking of adding to my Dataflex (DFX) holding, both on a value footing.

Phil

[ghhghh] 05/7/2002 11:06

Shares now 8p.

You would have thought downside should be limited by the cash because can't think of another share trading at this sort of discount - the others have all bounced (KSS, Nettec, Emblaze) or been taken over (Actinic, Riversoft, TEAMtalk).

[ghhghh] 07/2/2002 11:11

Shares 11p, market cap £13.4m, net cash estimated at currently around £28m imo.

About Music Choice (from their web site)

MUSIC CHOICE--the largest digital audio service--provides cable, satellite and telephone customers with 45 channels of commercial free CD-quality music in a wide variety of music genres and original programs 24 hours a day. Music Choice produces an exclusive weekly concert series through nationwide network of cable systems. Music Choice's audio service reaches 21 million customers and the concert series airs to 28 million homes nationally. Headquartered in Horsham, PA, Music Choice is a partnership between

Microsoft Corporation,

Motorola, Inc.,

subsidiaries of Sony Corporation of America,

Warner Music Group, Inc.,

EMI Music and several leading U.S. cable providers: Adelphia Cable Communications, Comcast Cable Communications,

AT&T Broadband,

Cox Communications

Time Warner Cable.

MUSIC CHOICE is a registered trademark of Music Choice. Visit the MUSIC CHOICE website at


Music Choice was floated October 2000 at 162p. Herald and Invesco techMARK bought 350,000 and 130,000 shares.

Last July three directors bought 163,000 shares at 27p.



From Int Results for 30th June announced 13th September:

Highlights

* Strong revenue growth in the period, with turnover for
the half year rising 68% to £3.8 million (2000: £2.2 million)

* Successful launch of the interactive TV service in UK and
Sweden with subsequent roll-outs of the application across the
other major platforms, beginning with Spain

* Subscriber numbers continue to rise and have now reached
10 million

* New revenue stream being developed through advertising
opportunities, which has already attracted the interest of a
number of big name advertisers

* Acquired iCrunch in April 2001 which helps to create a
one-stop solution for fixed line and wireless broadband
providers, and brings a library of over 6,000 tracks and
strategic alliances with many indie labels

* Sufficient financial resources to take Music Choice to
profitability with £34 million cash in the bank

Mike Thomas, Chairman of Music Choice commented:
"The new interactive TV service was launched in the UK and
Sweden and we made our first major acquisition, iCrunch - the
UK's award-winning source for exclusive digital downloads. We
now have 10 million subscribers, enhanced by the distribution
agreement with Canal Satelite Digital, the largest digital
satellite TV operator in Spain, in April.

"Music Choice remains confident that the business is still on
target for profitability and is well positioned for a market
recovery."


By my calcs the cash position was £5m debtors, £35m cash and £7m creditors. Assuming debtors pay up the net cash was £33m at June.

Cash burn was £5.3m less £1.5m interest or £3.8m for the six month period. Assuming average £9m per annum to allow for decreasing interest on the cash this gives net cash at December of about £28.5m. (This is a very rough estimate since current revenue/expenditure unknown).

122m shares in issue means that December net cash would equate to 23p and the (guessed) £9m cashburn would equate to 7.4p per annum. Hence looks financial strong, especially if revenues can continue to grow at the 68% rate achieved over the first six months.

Is the business viable? Perhaps others can answer this but it looks to be something that people want, the problem may be competition. Will the competition decline and only the strongest survive or is the market big enough for everyone?

Music Choice seems to be market leader and should benefit from the following shareholdings:

Sky Ventures 36.4%

Time Warner 16.4%

Mozatian Company 13.1% (Motorola and Microsoft have a stake but not sure if this is them)

Sony Digital 8.21%


So to sum up.

Is business viable? IMO yes

Clear route to profitability? Yes, business plan looks straightforward.

Strong balance sheet? Yes but cash burn about three years on last six months figures.

Downside risk? Competition and slowdown in advertising revenue.

Why are shares multi bagger? MUS appear to be in good position in growth market with strong backers and plently of cash.

Quality of management? Effectively controlled by Sky and Time Warner.


Final thought - with this shareholder base, is it going places or going bust?