Syqic Share Discussion Threads

[masurenguy] 14/10/2015 08:16

Me too AISHAH - I added @24p yesterday.

[aishah] 14/10/2015 08:06

I am happy to accumulate below 30p

[mikeja] 14/10/2015 07:28

Large seller has now finished,badly mishandled order.Still gave me a chance to pick some up around 20p.

[qs99] 13/10/2015 14:10

someone obviously thinks so as up sharply today.

[masurenguy] 13/10/2015 11:34

Excellent find A1SHAH and I agree that it provides a very fair risk/reward assessment too !

[aishah] 13/10/2015 09:24

I don’t know when, but SyQic shares could sharply re-rate

By Richard Gill, CFA October 12, 2015, 16:12 PM Europe/London

Driven by increased penetration of broadband, along with higher adoption of smartphones and tablets, it is no secret that the market for online video streaming is growing strongly. Market leader Netflix for example grew its global subscriber numbers from 20 million in 2010 to 65.55 million by July 2015. For the third quarter of this year analysts are looking for the firm to post revenues of around $1.75 billion, a figure which beats the $1.67 billion posted for the whole of 2009.

A study from Deloitte released earlier this year found that streaming services are used by over 42% of the US population and that consumers are now more likely to turn to an internet service than switch on the TV. Streaming on mobile devices is also growing strongly, with the study finding that younger people especially are increasingly turning towards their smartphones and tablets for entertainment.

One small cap company which is looking to take advantage of these growth trends is Malaysia based SyQic.

The Business

Listing on AIM in December 2013, raising £3.2 million, SyQic is a Malaysia based provider of paid video content across mobile and internet devices. Focussing on the South-East Asian market, the company was founded by CEO Jamal Hassim in 2004 and he retains a 32.9% stake in the business.

SyQic’s flagship product is Yoomob, a subscription based mobile pay TV service which is provided through strategic partnerships with large telecoms providers (telcos) in South-East Asia. The service offers affordable, live and on-demand entertainment, such as comedy, music, sport and news, for as little as 10p a day or 90p a month. Subscribers pay through their mobile phone bills and SyQic then receives the money from the telecom operators (more on that later), with the telcos and content owners also receiving a cut.

The company’s platforms are fully compatible with all Android and iOS devices, thus providing access to around 80% of the global mobile market. Following the first half of the current financial year the Yoomob service now has over 2.5 million subscribers and delivers monthly revenues of over £1 million.

SyQic’s second product line is Cool2vu. This a Korean focussed video service, launched in Malaysia, Indonesia and Singapore earlier in the year in order to take advantage of the growth in interest in Korean popular culture. The service offers on-demand streaming of Korean drama, entertainment and music and (in contrast to Yoomob) has an advertising based monetisation model. The service has been further expanded into Europe, South America, Central America, India and the Philippines and is translated into seven languages.

Growth figures so far have been impressive. Between launch in January and the end of June the service attracted 134,000 users. This accelerated markedly after the half year end, with Cool2vu being accessed by more than 427,000 users across 198 countries by 27th September. Encouragingly for growing advertising revenues, the average session time was 26 minutes. SyQic is also looking at subscription and e-commerce avenues to further monetise the product.

Numbers

Interims just released for the six months to June were good overall, showing revenues up by 30% at £6 million. While gross margins slipped from 47% to 41% pre-tax profits were up by a more pronounced 43% as the firm reduced administrative expenses against the first half of 2014. Earnings only grew by 23% to 5.09p per share however due to a higher number of shares being in issue.

Risks

As we will see in the valuation section below shares in SyQic are currently being given a very low rating by the market. This is because of three main reasons:

Currency exposure – SyQic’s main areas of business are Indonesia and Malaysia. The firm invoices in Malaysian ringgit in these regions but its reporting currency is sterling. With sterling having strengthened significantly against the ringgit since the start of the year results for the half to June saw the company book in £0.7 million of translation losses.

SyQic has also flagged that it expects to show further forex translation losses in the second half. With an overall 8.3% strengthening of sterling since the end of June this looks likely, although there has been a 6% fall in the past 2 weeks. These issues are offset to some extent by ringgit based revenues being matched with costs and SyQic having expanded its international presence during 2015.

Sterling/Malaysian ringgit 1 year chart. Source: xe.com

High reliance on 2 clients – in the first half of the current financial year the company’s top 2 customers accounted for 98% of revenues.

Which leads on to the elephant in the room…

Debtor issues – SyQic’s relationships with the South-East Asian telcos provide access to a huge potential customer base. In fact the telcos also drive the marketing – add-on services such as SyQic’s help them to increase average revenues per user.

However, the major downside to the business model is that it takes a long time to collect the cash. Under the model the telcos pay SyQic’s fees to a third party. For example, major customer PT Nextnation Prisma (PTNP), a firm which operates SyQic’s licence agreement with key telcos PT Telkomsel and XI in Indonesia, collects the money and then passes it on to SyQic. But debtor days for the last financial year were 234 days, meaning that it took the company around seven and a half months to be paid. PTNP even owes money from 2012 and 2013, payments being delayed by a regulatory investigation into added services to mobile phone users in Indonesia.

Despite the debtors issue SyQic does seem to be on top of it. A formal payment plan lasting until mid-2016 is in place with PTNP for the 2012/13 income. Payments to date have been on track and no bad debt provisions have been made (a weakening ringgit does reduce the value of these payments however). Also encouraging is that debtor days fell from 295 days in 2013 to 234 days in 2014 and that the company managed to post a £1.07 million net cash inflow from operations in the first half of 2015, with net cash up from £0.45 million to £0.58 million. Should cash collection become more of an issue the company has access to a £3 million working capital facility, at a rate of 5.5%.

Valuation

SyQic shares have fallen from their all time high of 124.5p and the IPO price of 62p to currently trade at a mid-price of just 21p. That capitalises the business at £5.5 million.

Market forecasts for the current year are for earnings of 8.5p per share – revised down following the interim results due to the currency issues. Given the debtors issue the prospect of a dividend does not seem likely in the short-term. Nevertheless, the shares trade on a rock bottom multiple of just 2.5 times forecasts. Dare I say that AIM’s “Asian discount” is also being applied to some extent despite the firm’s head office and key staff being based in the UK.

These issues aside there is a lot to like about SyQic. Revenues are growing quickly in a booming industry; the firm is expanding into new markets with new products; development costs are fully expensed; and there is strong operational gearing in the business. The catalyst for a re-rating will clearly be improved cash collection, something which we could see in the full year results.

Again, the shares are not for widows or orphans but I do see the potential for significant gains in the medium term.



Fair assessment above. Risk reward looks good here imo.

[mikeja] 09/10/2015 14:14

The cash flow figures attached to the interim results are worth investigating. Without the FX losses cash would have been £1.2m rather than £585k. At current MYR levels H2 FX losses should not be more than £250k so hopefully cash will be around £800k at year end.I still expect receivables to be up again.

[yump] 09/10/2015 10:25

Its a shame that an apparently good business falls foul of late payments, especially if the business actually has integrity (as against those that are actually dodgy themselves).

[adamb1978] 09/10/2015 10:22

Recently sold my small position. Receivables are now greater than market cap and debtors days have gone back up to 250 days, after they had come down a bit to nearer 230. Add that weak position to the flat turnover (H1 this year vs H2 last year) and the fact that they only have 2 customers, and this has the feeling of something which could go bust.

I had hoped that they could continue growing the top line and keep reducing the debtor days, however that no longer looks to be the case. It feels like these could be added to the long list of Chinese/SE Asian companies which lists on AIM and goes under (SYQ also had the same reporting accountant on IPO as has brought the vast majority of the dodgy Chinese companies to market).

Best of luck to holders; I'm going to try to earn back my losses via different means rather than hoping this recovers.

Adam

[mattjos] 09/10/2015 09:45

are you replying to emails Mike?

[mikeja] 09/10/2015 09:20

The IDR and MYR have rallied very substantially over the past two weeks,indeed theIDR is now above the June 30th price. This means that the FX losses for H2 should be much less than H1.There is a close correlation between the MYR and the Aussie so I have hedged by selling some Aussie against the £.At the current market price receivables are about 50% more than mkt cap. Have just started buying.

[mudbath] 06/10/2015 19:07

Only "beginning" Mattjos ?

Invest in the West !

[mattjos] 06/10/2015 14:45

beginning to look rather like the Geong business model

[imranawan] 01/10/2015 14:25

I sold out in February for a loss and moved on, and am glad I did. I'm not saying this is a fraud like some of the China floats, but a major red flag is the increase in debtors. The most recent interims show that trade receivables have increased to £8.4m from £6.2m at the year end. Part of that seems to have been a re-classification of non-current trade receivables into trade receivables of £768k. This still means that trade receivables increased by almost £1.4m in the last 6 months - given that revenue was broadly flat compared to H2 this is worrying.

In addition trade receivables now represent 78% of the revenue achieved in 2014 - this is far too high and a major red flag. I'd expect to see trade receivables to be 25% of full year revenue. I think at some point they're likely to write off some of the debtors.

The market clearly has doubts about the business model, and their ability to turn trade receivables into cash - hence the low rating.

[adamb1978] 29/9/2015 19:39

Results are a bit of a mixed bag, however I was fearing an equity raising so they could be worse.

The bull in me thinks:
- profitable, costs under control
- They made over £1m cash in the period, despite a net £500k cash outflow from working cap, largely caused by receiveables increasing by almost £1m. That means that even if the business perofmrnace was flat (turnover, costs, margins, receivable etc) they should be able to make £1.5m cash per half year....so £3m per year, yet the company has a market cap of just under £8m. Thats cheap

The bear in me thinks:
- Turnover in H1 was flat on H2 last year
- given flat turnover, how on earth have receiveables increased from £7m at the last year end to £8.4m now?!?

It feels like my concern about an equity raising have gone away given the cash position plus the company is sufficiently profitable that even with increasing receiveables, it can absorb the outlow.

Part of me thinks I should buy more to lower my in-price, however I dont have enough confidence in the board or management to do so....

Any thoughts?

Adam

[yump] 29/9/2015 10:49

I had a dabble here a while back - not sure what to make of it really.

If they are competent, then they would know before float, that actually getting paid in 'that' part of the world is an issue. The float of course gives these companies access to working capital, which is obviously needed in the receiveables situation and presumably that would have been part of the purpose of the float.

But if they're not competent...

Catch 22 in some ways.

I suppose its up to new investors at float, to do due diligence which would reveal the racing certainty of late or non-payments.

Main problem now is: is there any likelihood of it changing ? ie. receiveables get paid, but don't get replaced by a load more...

[greasynut] 29/9/2015 09:40

Well, I am pleased with the results.
In particular, they generated some FCF in the period.
Since all the receivables have graduated into the current period, their cash position will look great this time next year if the telco's keep their promises.

So far they haven't needed to dip into their overdraft facility.

Yes, the challenge remains to manage their high rate of growth without seizing up due to WC shortfalls, but I really hope that they are not under pressure to sell up because this could deliver great returns over the next couple of years. I would prefer those to accrue to me rather than some conglomerate.

At a PB of 1, obviously someone disagrees.

[mikeja] 29/9/2015 08:31

The receivables are now the equal of the market cap,although they are slow payers they are large companies and will eventually come in. The way forward is via a takeover,I believe there is an insti roadshow over next few days.

[daz] 29/9/2015 07:34

The interim results are a mixed bag in my view. A good operating performance with revenues up 30% marred by an increase in receivables and the write-off for currency translation losses, although the latter can be seen as exceptional, the company is exposed to foreign exchange risk.

While I'm sure the company continues to trade well, this isn't emphasised in the outlook statement, I really think the advisors could have done a better job in drafting a statement that better describes the progress being made.

[masurenguy] 29/9/2015 07:26

Good set of interims which correlate with their AGM statement. Based upon an annual eps extrapolation of circa 10p the current PER is circa just a lowly 3 !

RNS Number : 4686A
SyQic PLC
29 September 2015

Half Yearly Report

SyQic plc, (AIM:SYQ), the fast growing OTT provider of paid video content across mobile and internet enabled consumer devices, announces its unaudited results for the six month period ended 30 June 2015.

FINANCIAL HIGHLIGHTS

-- Revenue increased by 30% to GBP6.0m (H1 2014: GBP4.6m)
-- Operating profit increased by 43% to GBP1.38m (H1 2014: GBP0.97m)
-- Profit after tax increased by 43% to GBP1.37m (H1 2014: GBP0.96m)
-- Earnings per share increased by 23% to 5.09p from 4.14p
-- Net cash at 30 June 2015 of GBP0.58m (H1 2014: GBP0.45m)

OPERATIONAL HIGHLIGHTS

-- Agreement with telecoms provider UK GlobeTel Ltd ("Globe UK") to launch a UK based co-branded Filipino version of the Yoomob service
-- Korean focussed OTT service, Cool2vu, launched in Malaysia, Indonesia and Singapore

-- Cool2vu service expanded into Europe, South America, Central America, India and the Philippines

-- Heads of Terms agreement with ASIA eUniversity, to host courses and deliver educational programmes to its global student population

-- Since launch, to the end of June, the Cool2vu service attracted 134,000 new users across 182 countries including in high growth markets such as Brazil, India and France

POST PERIOD HIGHLIGHTS

-- As of 27(th) September 2015, the Cool2vu video service had been accessed by more than 427,000 users across 198 countries since launch with an average session time of 26 minutes.

Jamal Hassim, Group Chief Executive Officer of SyQic, commented: "Our performance during the first half of 2015 has been very pleasing. While the Yoomob service continued to grow revenue through its transactional revenue model, our new Korean focused OTT service Cool2vu has seen rapid growth in user numbers, particularly in the period since the end of June. SyQic is now well placed to leverage its unique industry position as the global video streaming market expands and we continue to look for new geographical markets and new revenue opportunities to drive the business forwards."

Other financial points

At the half year the Company has made a charge against reserves of GBP0.7m for translation losses into our reporting currency of Sterling. Due to the ongoing pressure on the Malaysian Ringgit, management expect that the Company will show further foreign exchange translation losses in the second half of the year. SyQic's exposure to currency fluctuations in the Southeast Asian region are mitigated by the Company having launched its services elsewhere across the globe in 2015, including Europe, South America and Central America.

The Company ended the period with net cash of GBP0.58m (H1 2014: GBP0.45m) and trade receivables of GBP8.4m (H1 2014: GBP5.4m). The Company has received some large payments from its customers during the first half of 2015 and management are focused on further improving the level of collections in the second half of the year. As the company is now coming to the later stages of the payment plans struck with its primary customer for recovery of 2012 and 2013 billings, all trade receivables are now classed as current assets. In addition the Company has access to a GBP3m working capital facility should it ever be required.

Outlook

We are pleased with our performance during the first half of 2015, during which time we achieved strong growth in revenue and earnings per share. While our core telco business remains strong with Yoomob generating revenues of GBP6.0m during the first half of 2015, the re-branding and launch of Cool2vu during the period has enabled us to realign our content portfolio towards high-demand Korean drama and music. This has enabled us to expand our customer base, create advertising revenue streams and provide a number of new revenue opportunities and cost synergies going forward. These positive strategic developments, combined with the continuing profitable growth of our core business post period end, enables the Company to look forward to the future with confidence.

[eric76] 28/9/2015 14:55

Thanks Masurenguy, will be looking out for them in the morning now.
Well undervalued here if/when they can convince the market of their receivables/cash position imo.

[masurenguy] 28/9/2015 13:03

The shareprice has declined by 30% on a news vacuum since the AGM in mid-July, 11 weeks ago. During that period the total trading volume was circa 860K shares, an average of just 16K per day.

The interim results will be issued tomorrow. Here is a reminder of the main points from their last AGM statement. Lets see how this correlates with tomorrows actual H1 results.

"Trading in the first half of 2015 has continued to accelerate in line with management expectations. In particular, Cool2vu is showing signs of strong growth potential across Southeast Asia, Europe, South America, Central America, India and the Philippines as the emerging advertising revenue stream and the cross-selling of our services to our telco partners begins to deliver positive financial results for the Group. The Cool2vu service is expected to grow further post expansion into North America and Australasia during the second half of the year. Since launch, the Cool2vu service has been accessed by more than 149,000 users in 184 different countries, with an average session duration in excess of 40 minutes. Yoomob continues to grow revenue through its transactional revenue model, and the dependence on the Group's primary Indonesian customer has reduced further over the past six months. As stated in our recently published results for the year ended 31(st) December 2014, the balance sheet has strengthened in the period since the year end. The level of long-term receivables has continued to fall and the net cash balance stood at GBP0.6m as at 30 June 2015 (H1 2014: GBP0.4m)."

[adamb1978] 24/9/2015 20:17

The price is surely assuming an equity raising in the coming weeks....