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eServGlobal – argues breakeven ahoy after 2016 “turnaround”. Hmmm…

By Steve Moore | Monday 13 March 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.

Having recently recovered to comfortably above 7p, shares in eServGlobal (ESG) are currently sliding back towards that level despite an AGM Statement including “we expect sufficient order flow in H1 to support our outlook of breakeven in the core business in the 12 months to 31 October 2017, and progress by HomeSend remains consistent with reaching a breakeven point during this calendar year”.

It it also with the statement opening that “there was clear evidence of turnaround in FY2016”. However, I’ve previously noted the company missed its targets for that year - not exactly inspiring confidence for this, and that I was also wary of the funding position – this despite the AGM statement emphasising the 2016 “substantial fundraising of A$26.2m (€17.5m)”.

Indeed, it is later admitted in the statement that “we fell short of our revenue targets at year end”, though argued “we have adjusted our approach and made further operational changes early in this new year. In previous years our geographical and partner focus has been too narrow and this was not sufficiently addressed during FY2016”.

Hmmm. There is particular focus on attempting to emphasise the potential of the HomeSend joint venture - “while maintaining a first-mover lead in the north-south international remittance space, HomeSend is also now positioned to challenge the wider cross-border payments market… can now facilitate bank transfers for both consumers and businesses. This is a US$22 trillion market in which traditional services have not kept pace… HomeSend has a compelling offer for the lucrative low-value / high frequency end of this market”.

However, particularly with the previous track-record here, I’d want to see clear evidence of financial sustainability rather than ramptastic verbiage before reconsidering my stance on the shares. As such, I currently continue to avoid.

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