I first wrote about MIRI back in April when it was trading at a discount to net cash, you can read that post here.
At the time I wrote it up the firm was loss making, there was no revenue growth, the company was burning through cash and things were generally not going well. I saw a stock selling below net cash, at an all time low, and a company with what I considered to be a decent product.
For those who don't have the time or inclination to read my earlier post, MIRI has developed and patented a technology which allows the insertion of advertising into pre-existing video, these advertisements cannot be skipped or blocked. With the rise of ad-blockers I figured that this technology could turn out to be quite valuable if it could be marketing correctly.
I bought in at an average cost of 5.96p and added it to my basket of cheap stocks.
Over the last few days the stock has shot up to 23.5p, rising nearly 300% from my purchase price.
News has just broke that MIRI has signed an exclusive two year deal with Chinese internet giant Tencent. The recent company RNS reveals the following;
"Mirriad Advertising plc, the established computer vision and AI platform company, today announced a new two-year agreement with Tencent, one of the largest online video platforms in China, by mobile daily active users."
"The new contract provides exclusivity to Tencent for Mirriad's technology and services in the People's Republic of China. Under the contract Tencent will pay a fixed monthly licence fee and Mirriad will provide a minimum volume of advertising and promotional work for use with Tencent advertising clients. Work over and above this minimum will be charged incrementally."
"This is the first contract of its type that Mirriad has struck. The contract will immediately enhance 2019 revenues due to the fixed monthly fee and at a minimum the contract will generate multiple millions of pounds of revenue for Mirriad over the 24-month contract term."
This is very good news and hopefully more contracts of this type will follow in the coming months. Despite the large rise in share price over such a short period I'll continue to hold my position. In the past I've made the mistake of pulling up the flowers whilst watering the weeds. I think there is more upside in this stock and I'll be keeping an eye on the chart to monitor price and volume action.
Now to ENET, you can read my intial post about the company here.
I came across ENET back in August of 2018 when I was screening for stocks selling below net cash.
Much like MIRI it was a nano-cap tech firm which had fallen to an all time low and was selling at a discount to net cash. The firm was buring through cash and it's revenue prospects were poor.
I buy based up the balance sheet and the stock chart. I'm ideally looking for tiny illiquid companies which are in net-net territory and are either despised or forgotten by investors.
I bought ENET at an average cost price of 23.4p and added it to the basket.
Not long after my purchase ENET rose on the back of some positive news regarding contract wins with clients in North America and South Korea. The stock climbed over 90% before drifting back down over the preceding months as holders sold to lock in a profit and things went quiet again.
Despite the rise I decided to hold my shares , I was sure that they was some greater potential with this stock , I knew management had skin in the game and I liked the sound of the technology. Most of all though, I liked the chart . I love to see stocks that are at all time/multi-year lows or that are forming long-term bases.
Fast forward to June 2019 and ENET released an RNS revealing that they had struck an agreement with a major Chinese telecom company.
"Ethernity Networks (AIM: ENET.L), a leading innovator of comprehensive networking and security solutions on programmable hardware, announced that its ACE-NIC100 FPGA SmartNIC has been selected for implementation within the FitBNG, the latest Broadband Network Gateway (BNG) product by FiberHome Telecommunication Technologies, a major Chinese networking and telecommunication equipment provider.
The accelerated platform will integrate FiberHome's BNG software and Ethernity's SmartNIC hardware using standard DPDK (data plane development kit) to fully offload up to 80Gbps of data processing to the ACE-NIC100's onboard FPGA. This will minimize CPU intervention, saving CPU cycles and significantly reducing CPU power and cost. Moreover, the ACE-NIC100 will support tens of thousands of subscribers with PPPoE (Point-to-Point Protocol over Ethernet) termination, performance monitoring counters per subscriber, and hierarchical quality of service (H-QoS), which is impractical for implementation in software-only BNG.
The resulting product will be promoted to FiberHome's core Chinese telecom operator clients, including China Unicom, China Telecom, and others, that serve tens of millions of households."
I was delighted with this news since both China Unicom and China Telecom have just been granted 5G licenses by the Chinese government. This agreement has the potential to bring in substantial revenues and earnings for ENET.
Off the back of this news the stock price rallied around 115% from my purchase price and has since fallen back down to around 100%. I will continue to hold and mointor the situation.
I buy tiny illiquid companies trading at a discount to Net Current Asset Value (NCAV) or Net Cash, especially those which are hated or forgotten, because these are the types of situations where major price moves can occur.
If you focus your attention on large companies you are pitting yourself again armies of analysts and fund managers, do you really think you are going to have an edge against them?
The answer is no, take the advice of Charlie Munger, Warren Buffett's right hand man;
"I find it quite useful to think of a free-market economy - or partly free market economy - as sort of the equivalent of an ecosystem. Just as animals flourish in niches, people who specialize in some narrow niche can do very well." - Charlie Munger
Find a niche and focus your attention there. Limit your competition, maximize your potential upside, look for unloved and ignored companies and wide discounts to intrinsic value.
My niche is to focus on balance sheets and long-range price charts.
Thanks for reading,
Long MIRI and ENET
David J. Flood
UK based Value Investor.
BLOGS I FOLLOW
Svenda's Manual of OTC Stocks
Clark Street Value
Deep Value Investments
The Asian Contrarian
Value Stock Geek
Value and Opportunity
Barel Karsan - Value Investing
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Distressed Debt Investing
Streets Of Value
TES Optimal Value Investing