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Mirriad  Advertising PLC (MIRI:LON) - A Nano-cap tech firm trading below  Net Cash

4/3/2019

5 Comments

 
 Today's stock is yet another nano-cap tech firm which floats on the AIM market of the LSE.

Mirriad  Advertising PLC (MIRI:LON) is a  UK-based video technology company which is focused on the development of native in-video advertising (NIVA). The firm's patented technology enables the insertion of advertising into existing video which cannot be skipped or blocked.

It won't come as any surprise to those who follow my blog that MIRI is tiny, dirt cheap and in a spot of bother.

MIRI began trading on AIM (Alternative Investment Market) after an IPO in December 2017. Since then it's share price has fallen from a high of 62.5p to a low of 4.20p, it currently languishes at 5.75p.

Picture
Source: Morningstar.co.uk

Since inception the firm has performed poorly with little sign of meaningful revenue growth,  from £710,000 in 2016 to £870,000 in 2017. Half year results for 2018 were even worse with revenues of £120,000 for 6 months to June 2018 vs 2017 half year revenue of £352,000  (2018 full year results are due 9th May 2019)

Losses have risen fro £7.2 Mil in 2016 to £11 Mil in 2017, Half year losses for 2018 amount to £6.5 Mil.

To make things worse MIRI has been burning cash at a rate of around £1-1.2 Mil per month.

At this point you are probably asking why on earth I'm even telling you about this stock.

Two reasons;

1) The company is selling at a discount to net cash

2) Change is afoot.

We'll start by taking  a look at the most recent financials  to see what we can find on the balance sheet.


Picture
Picture

So as of the June 2018 interim results we had the following;

Current Assets

Trade receivables £760,072
Tax receivables £304,077
Cash £22,090,400

Total liabilities

£1,907,311

This equates to;

NCAV(Net Current Asset Value) = £21,247,238

Net Cash = £20,183,089


The company then released a strategy update on March 27th in which they revealed the following;


Picture

 So the firm has been burning through cash at a rate of £6.7 Mil every 6 months and this cash burn continued at a similar rate in the second half of 2018 and the first 3 months of 2019.

To err on the side of caution I'm going to assume a future cash burn of £7 Million every six months or £1.17 Mil per month.

This rate of cash burn for the second half of 2018 and the first 3 months of 2019 would shave another £10.5 Mil off the assets side of the balance sheet resulting in;


NCAV (Net Current Asset Value) = £10,747,238 or 10.22p per share

Net Cash = £9,683,089 or 9.21p per share

Current  Market Cap is £6,044,556 or 5.75p per share

Shares outstanding = 105,122,717


MIRI is thus currently trading at;

0.56x NCAV

0.62 Net Cash


Now on to the change I mentioned about.


Firstly the old CEO, Mark  Popkiewicz, was recently replaced by the current CEO
Stephan Beringer. From what I can gather the old CEO was pretty bad and despite the company having a good product mismanagement left the firm floundering.

The current CEO had the following to say in the recent strategy update;


Picture

It's good to hear that the new CEO not only appreciates that MIRI has a unique product with real potential, but that he also aknowledges that the firm's previous strategy was misguided.

In the strategy update the company notes the following;

"Mirriad's Go To Market strategy has historically been flawed.  There was previously a lack of focus on the demand side of the market (media agencies and brands/ advertisers) and the company had spread itself over too many markets"

MIRI's revised strategy is then outlined as follows;

Picture

According to the most recent insider ownership information I've managed to find it doesn't appear that management has  much skin in the game. This data is from June 2018 so  we may see some insider buying been reported in the near future giving the current discount to net cash and the possibility of a turnaround. News of directors buying would certainly prompt a rally in the share price.

Picture

What might happen?


The new CEO could fail to turn the ship around, revenues may not grow and large losses could continue. The cash  pile could be burnt through forcing the company to issue equity or debt to keep itself afloat. The stock could go to zero.

Or

The new CEO could begin to turn the ship around. Some contracts could be signed, revenues and earnings could grow and the stock could take off and become a multi-bagger.

I'll hop on for the ride.


Thanks for reading,

David




Disclaimer: Long MIRI



5 Comments
rukawa
4/7/2019 04:34:11 am

How did you find this one?

Reply
David
4/7/2019 11:28:01 am

Hi rukawa,

I found MIRI much in the same way as I found MNO and ENET. I used the tradingview.com screener to screen for the following;

Market Cap < £50 Mil (I'm interested in tiny illiquid companies to minimize my competition and maximize upside potential if things go well)

Enterprise Value < £0 (This should screen for stocks selling below net cash but check when the most recent results came out and calculate cash burn)

Debt/Equity < 0.2

I normally also would look for companies with shares outstanding < 100 Mil but made an exception with MIRI

The reason I look for stocks with a low share count is becasue they are more illiquid. This puts many investors off, illiquid stocks will have more dramatic rises if and when demand increases on good news.

Thanks for taking the time to read my blog!

Regards,

David



Reply
rukawa
4/14/2019 04:58:41 pm

Thanks!! Excellent blog btw, I really like it.

Reply
Peter
4/20/2019 04:46:12 pm

I really enjoy your posts. I am not as sanguine as you are about companies that are constantly loosing money but I appreciate your write-ups nonetheless. Thanks again for sharing your hard work!

Reply
David
4/20/2019 10:30:43 pm

Hi Peter,

I'm glad you enjoy my blog and thank you for the kind words.

I should make it clear that I buy these types of deep value stocks as part of a basket, never as a stand alone investment.

Some of the stocks will go under, some will go nowhere and some will really take off.

The deep value/Net-net approach is proven to outperform the market and the aggregate performance of the portfolio is what counts, not that of individual stocks.

Regards,

David

Reply



Leave a Reply.

    David J. Flood

    UK based Investor. I focus
    ​on Net-nets, Pico/Nano caps, AIM/OTC/Dark stocks & Special Situations. Balance sheets & Long-range price charts are my guide. Caveat Emptor!


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