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By Tom Winnifrith, The Sheriff of AIM | Friday 7 July 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.
FastForward (FFWD) the investment company chaired by my old friend, the offshore based asset stripper Mr Jim Mellon, served up results for the year to 31 March today. Cynical Bear will give them the full workover they merit over the weekend but I could not give my old pal Jim a completely free pass. The numbers are shite
The company boasts about how the shares have traded at a premium to NAV throughout the year. That is a mistake. It just reminds anyone smart enough to think about it how grossly overvalued this company is.
Investment companies trade at a premium to NAV if the market things a) the management are great and b) that NAV is set to rise sharply. On the latter point, Mellon's recent record with AIM listed investment companies is dire. Life Sciences got booted off the casino, Port Erin (PEBI) is seeing its NAV tank and its shares are c50% down since IPO and FastForward is a trainwreck in motion. CEO Lorne Abony is clearly grossly overpaid and an A1 bullshitter. As critically, NAV actually fell last year.
Companies where management's recent record is not stellar and where NAV is falling should be valued at a discount to NAV not a premium. At 10.125p (down sharply today) FastForward is capitalised at £13.4 million. Net assets at 31 March 2017 were just £10,101,000 ( down by £167,000 on the year). The company has had one profitable disposal since then but its management costs are bloated so things will not have got that much better. In fact I suggest to you that NAV will by now be sub £10 million.
There is an awful lot FastForward failed to say in the results which Cynical will cover which suggests things have got much worse.
I make two additional points.
At the year end net current assets were down to sub £150,000. Operational cashburn last year was £1.3 million with quite extraordinary amounts paid to City advisers and the board. I put it to you that even with one post year end disposal this company is now running on fumes. Since nearly all its investments are unquoted and thus illiquid - and often related in some way to key players in this company - they are not readily realisable. That is a big issue.
Second, that year end NAV figure is a matter of opinion. The travails of the Diabetic Boot Company bankrolled by Mellon and latterly by a raft of public companies where he is involved, have been well documented here. Yet it appears to be valued without write-down. That begs the question - are all of FastForward's valuations as imprudent.
These shares should for all the reasons above be trading at a steep discount to NAV not a sharp premium. That makes them a sell with a fair value of, if I am being generous and since my old pal Mellon is involved I shall be, 5p per share. At best.
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