By Steve Moore | Friday 5 May 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
The most shorted company on AIM, Telit Communications (TCM) has announced “it has successfully placed” new shares to raise £39 million “to fund several identified acquisition opportunities, mainly in the IoT Services sector, which the company will look to execute in the near to medium term”. Hmmm…
A 340p issuance price compares to recent closes above 360p – and indeed above 370p earlier this week. Additionally, “Financial highlights” in the company’s March-announced results for the 2016 calendar year included “net cash flow generated from operating activities up 15.6% to $47.6 million” - so is a dilutive $51 million placing really required?
Well, Evil Banksta pointed out a few, er, ‘issues’ (or, in the exact words used, ‘masterful BS of the first order’) re. the noted cash generation and also pointed out trade receivables having ballooned materially to more than $105 million. The balance sheet also showed cash of $26.5 million, total current assets of $174.9 million and total assets (ex-intangibles) of $205.9 million.
However, there was also $44.3 million of debt, total current liabilities of $157.3 million and total liabilities of $190.2 million. Not great - especially considering after $9.8 million of dividends paid (and excluding $15.4 million net of acquisitions) there was a $3.7 million net cash outflow in 2016 (before other financing activities and exchange rate differences).
It thus looks worth monitoring closely to see the £39 million/$51 million being used for “near to medium term… acquisition opportunities”. Meanwhile, I’d remain sceptical on the stock – as Evil Banksta suggested.
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