Riverfort Global Opportu... Share Discussion Threads

[glasshalfull] 03/2/2010 17:37

....for evidence that investment plan working well or weaker share price?
Have to say I thought the shareprice would have slipped back.

Regards,
GHF

[ltinvestor] 03/2/2010 12:13

>ghf.Re your final sentence you may not have to wait very long.

[glasshalfull] 06/1/2010 11:54

Thanks zho.

The Guardian write-up is on the back of an app that RGO completed for the Guardian Group. £2.39 payable to download onto the iPhone.
They must have been pleased.

I still feel RGO will tread water for the timebeing. The share price isn't particularly cheap with payback on development 12-18
months away. I'm happy to add lower down or on anticipation that their investment plan is bearing fruit.

Regards,
GHF

[spangle93] 06/1/2010 10:43

no message

[zho] 06/1/2010 09:24

RGO was one of the Guardian writers' new year tips - possibly the reason for iincreased liquidityover the last few days:



Rick Wray

The success of the iPhone and the arrival of Google with its Android mobile operating system have produced a revolution in the mobile phone industry. As 2010 progresses, more and more people will get their hands on a smartphone, finally presenting media companies and brands with a big enough installed base to make mobile a viable platform for advertising and marketing. Salford-based 2ergo, 119p, has more than 10 years experience in mobile marketing. The iPhone has also spurred the creation of mobile applications – users of the Apple device have downloaded more than 2bn already. It recently snapped up Activemedia Technologies Group, an Indian mobile marketing specialist that provides the technology behind the Orange Wednesdays cinema campaign. That investment plan does mean that a profit in 2009 will swing to a small loss in 2010, but with no debts and £6.4m in the bank, the company is worth a punt on the future being mobile.

[glasshalfull] 26/11/2009 16:05

Hardlines steg.
I thought the results were excellent but didn't quite comprehend the scale of their investment programme until WJ's post and a bit of digging confirmed £600k loss expected in the coming year.

I do disagree with your "Sh1t or bust" comment though. Management have performed v well up until now and the calibre of the managers they are appointing to drive the business forward are all top drawer (again, in my posts above).

Following investment they will have transformed themselves into a high growth company with appropriate infrastructure. Otherwise, perhaps they would have continued along the 25% organic growth route per annum.
They are still highly cash generative so I would still expect them to have net cash at the end of this financial year.

I bought in the 115p-119p range and wish I'd top sliced a few more when they pushed over the 130p mark (invested the sale proceeds in some other "mobile play(s)" , namely VEL and BGO). My rationale was that they had not issued a trading statement as they had in 2008, so looked to be only "in line".

I only have a few RGO and given the illiquidity I'm not inclined to sell.
Should they drop significantly then I will be looking to snap some up as I see this as a fantastic long term investment.
I do however think that the share price will remain static in the short term.

Regards,
GHF

[stegrego] 25/11/2009 19:01

Having got in yesterday, (in a small way) and having read the forecasts and re-read the RNS (rather than skimming it) ive sold today!

Cant see this doing much as it will make a loss next year and then only be on a p/e of 10 the year after.

Of course if markets improve then maybe it will be rated on a p/e of 20 by then and the share price will have doubled.

However, it appears to be a 'sh1t or bust' effort from the (confident) management, as it will eat up all their cash.

If it comes off then great, but if not.....

I do have a reasonable time horizon for things ie months and years rather than days and weeks like many nowadays, but its more risky than it first seemed and money can be used elsewhere to better effect (i hope) and i could still come back here once the story starts to unfold.

Good luck GHF, not one of my longest holds! (i did hold it a couple of years ago for about 6 months)

[glasshalfull] 24/11/2009 19:17

Thanks WJ. Balanced summary as usual.

I'm on-board and plan to remain.
It was only small investment and I'm more inclined to add to other investments in the short term as unless they are subject to a bid I cannot see much appreciation of the share price until for another year.

I don't see too much downside risk either given their net cash and willingness to buy-back to treasury.

Regards,
GHF

[wjccghcc] 24/11/2009 18:03

Not sure I agree with Hoodless. While the direct sales have a gross margin of 86% (bit like IGP, GHF:-)), it's hard to see them accelerating beyond the current 25% organic growth rate until the new staff have settled in so H210 at the earliest.

Having said that, it's a question of how far the market looks ahead. They're clearly pleased at the successful build of the US business which is now profitable and probably one of the market leaders in the mobile space and they're looking to replicate that in Australia/India and China.

Management hold 25% so they wouldn't fritter away cash lightly, and everything I've read/heard has indicated they're ahead of the game. The only real blot on their record is the Broca episode (though you could argue RGO actually did okay out of it). I don't think it's about the 2011 PE ratio, it's the 100% customer retention and annuity type income that follows.

If you believe the mobile is how we'll all be accessing the internet in 5 years time, then RGO is the place to be. But , as you say, it's a question of when to jump on board ...

[glasshalfull] 24/11/2009 17:29

Conflicting view in Hodless Brennan flashnote:-

2 ERGO (RGO, 125.5p, £41.1m).

The provider of mobile enabling technologies for announced strong results for the year ended 31 August 2009. 2ergo's Multiserve Platform encompasses years of R&D addressing the growing need intelligence solutions for platforms between mobile network operators, the internet and customer facing applications. Revenue reduced -30% to £22.6m (FY 2008: £32.6m). However, gross profit increased 26% to £10.1m and overall gross margin an impressive 18% to 48%. EBITDA before impairment (the £3.2m impairment charge in respect of Broca plc, since acquired, is reversed ion the balance sheet and added to goodwill but there is no impact on the P&L) increased 21% from £4.1m to £5m EPS on the same basis was 9.87p (8.54p) 16% up and well ahead of broker estimates of 8.3p (and our expectations of around 8.9p). Cash reserves of £6.4 m at the year end meant that the company was able to complete a buy-back and cancel 1m shares at £1.4m.

Going forward the group is confident of increased demand as trends move increasingly towards accessing internet via handsets. The Americas region reports first profits, expansion into Asia and Australia and broadening of product set through acquisitions bode well for further progress with a growing number of global clients.

The rating is around 12.8x actual EPS, going forward we expect an upgrade to 2010 forecasts which should see the company trading at well under 12x. With cash in the bank with which to complete acquisitions or fund further share buy backs and a robust outlook we retain our Buy recommendation and increase our price target to 145p.

GHF

[glasshalfull] 24/11/2009 17:12

Ahh!!!!

Minutes after posting I discover the following IC article which confirms your thoughts WJ. Have to say in this occasion I'm disappointed that you are absolutely spot on.

Even the 13p EPS mooted for the following year would still leave them on a PER of 10. By then I'd hope that the growth shown would result in a substantial re-rating, but I certainly cannot see any traction in the share price in the short term

-------------------------------------

Write-offs mask progress at 2Ergo

Created:
24 November 2009
Written by:
Miles Nolan

The world now boasts four billion mobile phone subscribers, so as handsets become increasingly used for micro payments, 2Ergo, a specialist in mobile-enabling technologies, hopes to reap the rewards. The company has developed a 'Multiserve Platform' that works between mobile operators, the internet and customers.

The decision to pull away from low-margin wholesale reseller business led sales in this area to more than half last year to £11m. However, direct sales are taking off and jumped 29 per cent to £11.7m, more importantly, this derives a huge gross margin of 86 per cent. Overall underlying pre-tax profits increased 11 per cent to £3.8m, although reported profits were hit by a £3.2m impairment charge on 2Ergo's investment in Broca.

Overseas, 2Ergo has finally moved into the black in the US and, thanks to three recent acquisitions, the company is well placed to expand its secure data transfer skills, as well as seek new business in Australia and India. It is also benefiting from the lower cost of development overseas. Sales are being driven by transactional charges, but to cope with anticipated demand for its services 2Ergo is investing £7.1m in the coming year, largely on increasing its headcount.

The investment programme has led broker Numis Securities to slash its 2010 forecasts to a pre-tax loss of £600,000, but this is expected to swing to pre-tax profits of £5.5m and EPS of 13p in 2011.

2ERGO (RGO)
ORD PRICE: 127.5p MARKET VALUE: £41m
TOUCH: 125-130p 12-MONTH HIGH: 150p LOW: 113p
DIVIDEND YIELD: nil PE RATIO: na
NET ASSET VALUE: 72p* NET CASH: £6.4m

Year to 31 Aug Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2005 23.1 1.24 3.37 nil
2006 29.5 2.49 7.26 nil
2007 33.3 2.59 8.58 nil
2008 32.6 3.45 8.54 nil
2009 22.7 0.62 -0.60 nil
% change -30 -82 - -

*Includes intangible assets of £21.2m, or 65p a share

IC VIEW
FairlyPriced

2Ergo is placing a big bet on a forecast surge in appetite for its products. Investors would be best served awaiting further evidence before buying in.

Fairly priced.

Last IC view: Fairly priced, 150p, 21 November 2008

--------------------------------

GHF

[glasshalfull] 24/11/2009 16:59

Good to see you steg. Share same thoughts on picking up small amounts along the way. All the hallmarks of a long term winner.

WJ - thanks for that. Also agree that investment could depress the share price in the short term, well, postpone any meaningful profit growth for 12 months.
Again, agree that organic growth preferable (worked so well for IGP :-)

Interested to think that they may even be loss making in yr to Aug 2010. I've not worked back through the figures but would have thought that growth in existing business would mitigate a large proportion of the costs. Initially I thought that profits may be static and hadn't considered that they would be loss making.
Would appreciate any further thoughts you have on this.

I'll hopefully have a better chance to look in depth over next few days.

O/T - WJ - have you looked at BGO? As always would value your take, good or bad.
I'm attempting to spread my investments throughout the mobile sector.

Regards,
GHF

[stegrego] 24/11/2009 08:33

In for a small few this am, will build position as progress is made.

[wjccghcc] 24/11/2009 08:29

Very good results and good transparency on their investment plans. I'm all in favour of organic growth versus acquisitions. share price may be held back by the fact that 2010 results will be less (may even be loss making) as they ramp up staff with a consequent lag in revenues coming through. Having said that, this is one management team I trust to know what they're doing. 2011 onwards could be very exciting.

[glasshalfull] 24/11/2009 07:58

Better chance to remind myself of forecasts which were for £3.5m PTP and 8.3p EPS

Well they improved by £300k, produccing £3.813m and EPS 9.87p..EPS a whopping 19% above forecasts.

Regards,
GHF

[ltinvestor] 24/11/2009 07:55

They are so confident of the future growth that staff numbers are to be ramped up over the next year to around 240 from 150!There aren't many companies that could do that during a worldwide recession.An excellent set of results showing that the change of business emphasis away from wholesale is delivering where it counts -- the bottom line.Let's hope that the share price begins to reflect the" vast" growth potential.

[glasshalfull] 24/11/2009 07:49

RGO capitalizing on stonking growth in mobile services.
Excellent to see Gross margins increasing to 48% (30%).
Almost 100% client retention rate.

V bullish tone and confirmation of strategy plus enevitable investment in building the business over the coming year. They anticipate reaping the long term rewards....and I'm more convinced that they will do so.

I'm currently on my mobile device so unable to comment in detail on the figures but they look to have exceeded EPS forecasts and again produced strong cashflow.

Regards,
GHF

[glasshalfull] 23/11/2009 20:18

Couple of further announcements.
Reading both (and between the lines) it appears that business is booming.

Roll on results :-)


17/11/09

2ergo Takes Australia by Storm Following Wapfly Acquisition




and

19/11/09

2ergo Announces Appointment of New Head of Media and Entertainment, James Macdonald



Snippets from 2nd announcement whetted my appetite

"appointment reflects 2ergo's success in this dynamic market and the scale of opportunity for content owners and marketing agencies to capitalise on the potential of mobile."

"...he was responsible for setting up O2's Media division and developing the Telefonica O2 Media proposition across the UK market..."

"2ergo is an ambitious company, which is increasing its global footprint almost daily after a succession of strategic acquisitions last year. The company has an unrivalled and prestigious product suite offering clients a world class, 360 degree mobile technology service. My aim is to develop 2ergo's already strong relationships and make the company the mobile partner of choice within the media and entertainment industry."

Regards,
GHF

[glasshalfull] 13/11/2009 13:31

Confirmation that results will be released on 24th Nov.



The fact that no trading statement has been issued since the interims were announced on 19th May indicates (to me) that they will meet forecasts of £3.5m PTP and 8.3p EPS...so PER for year ended approx. 15

Reminder of Outlook Stetement released with interims:-

Outlook


Despite the current global recession, industry commentators continue to predict significant worldwide growth for the mobile technology sector, a view that the Board shares and which is upheld by the Group's continued strong performance during the period. This natural sector growth coupled with planned increased investment in sales and marketing will support the Group's organic growth in its current territories. Further growth will be driven through the Group's global Business Partner Programme and acquisitions, both of which have considerable traction with an encouraging pipeline of opportunities.

I am hopeful that they will issue a bullish outlook with the Final Results and I would be concerned if broker forecasts for 2010 weren't raised significantly.

With growth of smartphone segment I'm convinced that RGO will be a beneficiary and I should add that I have also taken a position in VEL.

Regards,
GHF

[theo13] 04/11/2009 11:17

good to see they are doing something, even if the share price is languishing! thanks smell.

[shroder] 07/10/2009 13:44

steady as she goes, couple of large trades at the bid this am