Say you are bored with Blinkx (LSE: BLNX), that you’re a brave investor, and you are looking for a really exciting equity investment that might deliver stellar returns by 2017 — how about Audioboom (LSE: BOOM) then?
Audioboom: show me the money
With Audioboom, a digital audio platform with a market cap of £25m, I think it makes sense to investigate its financials in the wake of a poor performance on the stock exchange in recent months.
The focus here is on pre- and post-roll advertising (online video advertising formats that resemble regular TV ads) whose revenue trajectory is very difficult to model over the medium term. As the group says, it aims to “create the world’s first aggregated audio content syndication and advertising network,” yet it’s currently burning £3m–£5m a year on less than £100k of revenues.
Its total assets are essentially cash and cash equivalents of £6.2m. So, if you’re looking to snap up its shares now, 25% of their value is represented by current assets, but there’s little more than that on its books.
Its half-year results show that it has more than four million registered users — that’s one million more than in November 2014 — and over 3,000 active content partners. Its chief executive, Rob Proctor, said in July that the group was confident of being able to deliver “substantial growth in advertising revenues next year and remain focussed on achieving our long-term goals, targeting cash generation and profitability in 2017.”
The shares still trade in line with the level they recorded after its half-year results were announced. My best guess is that until the company doesn’t provide a clear indication with regard to how it intends to monetise its content, the stock unlikely move far away from 5p a share.
Blinkx: is it time to be patient?
The shares of Blinkx trade at 24p, a share price that implies a market value to cash ratio of 1.6x — and that’s not bad, really. Strategically, it’s focussing on mobile while paying less attention to desktop, which makes a lot of sense.
The second quarter was particularly challenging after a decent performance in the first quarter, but the business is in restructuring mode and its will take time to pay off.
For the half-year ending 30 September, Blinkx said that it expected revenues of between $85m and $95m, an adjusted operating cash flow loss of between $5m and $8m, and cash balances of between $82m and $85m.
The amount of cash that Blinkx holds on its books is very important, following its latest trading update dated 24 August, when the company pointed out that “the cash balance anticipates operational losses of c$5m to $8m, with c$4m for strategic, one-time investments in the core product lines and c$2m for restructuring during the period.”
Frankly, it’s a long way to go, but its shares are not overpriced right now.