[Eye Candy]: An update on Addvalue Tech

Hi all, I have decided to do an update on Addvalue Tech since a lot had happened since my last post on Addvalue. For those who may not know what I am referring to. You can check out my 2 posts on Addvalue below.

1. Addvalue Tech, a turnaround play? 

2. Addvalue Tech’s 3Q results 

1) What happened?

— New Investors —

A few things happened since my last post. Addvalue declared 2 trading halts in a span of a few weeks.

Addvalue news.png

Firstly, news were released about AT raising money to prepare for the commercialisation of the IDRS. If you are thinking that raising money = debt = even more financial trouble at AT, then these news will be slightly different. Money were raised in 3 forms, one is through the issue of new ordinary shares, convertible loan notes and lastly an exchangeable bond worth $2 million.

Why I would say this will be slightly different is because majority of those who gave their money to AT are affluent investors. They include investment firms and some accredited investors. The placement shares were priced $0.039 per share.

placement subscribers

As for the convertible loan note, its a 5% per annum with a choice to convert it into shares of the company at $0.055.

loan note subcriber.png

Once again, most of the subscribers of the placement shares are also subscribers of the loan note.

Also a venture investment firm known to be Cap Vista, the investment arm of DSTA invested $2 million in the form of exchangeable bonds for 5 years. It is a 5% per annum payable in full on maturity, however in the event that AT spin off Addvalue Solutions (AVS) a subsidiary of AT, these shall be exchange for shares in the company. FYI, AVS is the arm in AT that is focusing on the development of the IDRS, hence the investment.

These shows that there is a form of quiet optimism that AT’s IDRS will succeed. That’s the reason for the slight difference.

— Uptick in sales —

AT uptick in sales

It’s current product the Wideye iFleetONE terminal have earned an initial trial order of about US$1.0 million. It is also in discussion with potential customers for an additional order of about US$3.5 million.

3q2017

I am not sure if the initial trial order amount of 1m is going to be recorded in Q4. But let’s assume it is. This would mean a revenue of more than US$10 million for FY 2017, as Q4 usually records 2-3 million in revenue. That would be much higher than the 9 million revenue recorded in 2016. Using a bold estimate, we could see AT returning to the black, as AT have been trying to cut cost in recent Qs. Currently, 9M2017 is a loss of US$1.2 million. Of course the above is my personal estimation, we shall see if its true in the coming FY announcement.

2) Risk remain

The recent spate of events have ticked some of the catalysts that I have laid out in my first post on AT. However, risk like their cash flow still remain in this business.

— Cash Flow —

Having sales is of no use if the company cannot bring in cold hard cash to finance the company’s operations. As for now, it could be a race against time to see if they can fully commercialise the IDRS before their money eventually run out. I am still hoping that they could finally reach a deal to sell away AVC one of their subsidiary in order to spice up their balance sheet. I will be watching its cash flow closely in the coming earnings report.

In conclusion,

AT new chart.png

The recent events have caused the stock to run up from $0.044 to $0.062. I have a tiny portion at $0.04 just 0.1 cent higher than the placement share. For now, I am holding out since I am already in the money. I am looking to add to my position when the stock consolidate or after the upcoming earnings results. Personally, I feel quite confident of the IDRS project, now the ball is in AT’s court to translate what they have into an earnings generating monster!