Saturday, 4 July 2015

MobilityOne looks set for further growth

If you have followed my posts on the LSE forum you'll have witnessed my enthusiasm for this stock throughout 2015. Being a small-cap with only occasional updates it doesn't appear an exciting stock and the often ridiculous spread no doubt puts people off investing here. I would argue that it is still largely unnoticed (Final Results issued after trading hours didn't help matter). However as a recovery play it has proven to be a fine choice.

Since the February breakdown of MBO's Interim Results the stock is trading around 30% up and the general trend has been like this since bottoming in December 2014. There has been opportunities to buy stock as low as 2.4p in the past couple of months and recently the intra-day bid jumped to 3.5

Here are the reasons why I continue to hold MobilityOne and remain confident of further gains in the coming months.

1) MBO turned revenue of £52.96m during 2014, up 3.7% since 2013. This growth comes even after the sale of subsidy holdings in the Cambodia and Indonesia operations during March 2014 to mitigate further losses.

2) As expected MBO turned an operating profit this year of £420,825. This was a substantial improvement on the operating loss recorded in 2013 of (£1,583,642)

3) The Group reported a profit after tax of £44,472 compared to a loss after tax of £2,018,562 in 2013

4) More than 1,000 new agent banking points introduced by one of the Group's banking partner recently in Malaysia is expected to contribute positively to the performance of the Group in 2015

5) Cash position is up by £288,262 during the year to £1,608,255 (2013: £1,319,993)

6) Crucial to understanding performance and outlook there appears to be a significant amount due in in trade and other receivables at the end of the period compared to the previous year. According to the accounts the difference in inventories + trade and other receivables vs trade and other payables has risen to £1,510,008 (2013: £490,307). That's an increase of £1,019,701 during the year and will become cash on the balance sheet during the coming year

7) The net debt position has risen by £711,817 however appears manageable. According to the Final Results cash at year end stood at £1,608,255 (2013:1,319,993) and secured loans and borrowings were £2,977,944 (2013: 1,977,865) for net debt of £1,369,689 (2013: £657,872). This is not a cause for concern however as the company note this increase was due to a slight increase of bank borrowings for working capital purposes and a property loan which was used to purchase the Group's new office in Kuala Lumpur, Malaysia. We know the property loan amounted to approximately £300,000. 

Now add the positive growth in trade receivables due combined with the increasing cash position and add the increase in net debt position it appears liquid assets were up £596,146. If you strip out the £300,000 property acquisition cost because it is non-recurring and won't feature in 2015 cash-flow statements then it appears the company's profitable trade amounted to around £900,000 (although of course the vast majority of this is due).

Headline figures often hide the extent of trends as was the case at the last set of Interim Results. The company's operations were profitable but due to writedowns on balance sheet (non-cash impairments) the company booked a loss. It is not clear just how profitable MBO's operations really are currently given how much it already invests back into the company's research development and losses accumulated from the now disposed of subsidiaries. We should get a clearer picture in September once 2015 Interim Results are announced. Expect a balance sheet with net debt significantly reduced and much of the receivables due at the end of the 2014 realised into cash.

Much like the previous article I have assessed the FY results and broken them down into their respective half year trading periods for ease of charting and analysis.  As you can see in the final six months of the year operating profits were £379,688. Owing to the management decisions to dispose of the loss-making international remittance services and consolidating income streams long established through its organic growth over the past 7 years MBO appear in better shape than ever.

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