IKE - Ike GPS.com

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Originally Posted by babymonster

have been thinking about investing tech companies like IKE or GTK, GEO. any suggestions anyone?

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None of the above (especially GEO!!!)

I suggest you look at DIL, PAY and ERD :)

Thanks both of u.

Hi all

Ike GPS isnt exactly a popular stock in here but thought I'd update on their progress.

So lets begin.

Sales
Sales likely to be at least double FY14's - so lets be generous and say $5m or thereabouts. So could be down around ~20%-25% down on PFI. I think it probably more likely that sales will be down ~30-40% on PFI.

Lets drill down:

GE Mapsight sales
Down by 25% against PFI volumes. No info given on $$$. I’m guessing discounting has gone on to get even these volumes. No guidance given on FY16 sales other than saying that some FY15 sales have slipped into FY16.
Combined with the increase in OEM sales which suggests the branded sales are not going too flash, can I point investors to this language in the prospectus:
“If ike’s arrangements with GE do not result in a minimum amount of sales of GE branded products by the end of next year (31 December 2015) then either party may elect to terminate or renegotiate this relationship. Moreover, after 31 December 2015 the minimum royalty payments due to GE increase such that if ike does not significantly grow sales of GE branded products in later years, the per unit cost of the trademark license fee will increase – potentially materially (depending on the extent to which sales growth does or does not occur).”

Spike sales
While mapsight sales are bad, spikes are terrible. The prospectus stated that 2,533 units would be shipped including 381 sold on subscription. Including the subscription units (lowering estimated sales price), the average price assumed was $784 (~US$635). Removing the effects of subscription units, I’m guessing they thought they would be able to sell the units for US$700-US$800.
On 28 October 2014, ike announced an ‘introductory price’ of US$619 per Spike, indicating this was a special introductory offer. The price today – 6 months later? US$499.
The PFI said 2,533 units shipped – actual units shipped were 1,250 – that’s more than 50% down on PFI! What is worse – the prospectus states that “FY14A saw $0.9 million of Spike pre-orders that are projected to ship during FY15F and will be recognised as revenue in FY15F”.
Ike go on to say that spike sales are expected to beat PFI of $2.91m in FY16. At US$500 per unit and NZDUSD of 0.80 – that would mean unit sales of at least 4,656 – a volume increase of ~270% on FY15, where sales were 50% down on PFI. That is pretty believable huh?

OEM revenue (10% of FY16 revenue)
FY16 revenue is likely to by $2.5m, exceeding PFI FY16 revenue of $1.47m. This is not good, in my opinion its an admission that the GE Mapsight sales are a failure, and the company is having to rely on selling at lower margin to other manufacturers. OEM revenue is not the basis on which investors (should have) invested. The company pays significant licensing fees to GE and issued US$1m of shares to them for the upfront license.

Contract revenue (4% of FY16 revenue)
Likely to be materially greater than nil in FY15 – well that’s hard isn’t it?

This is about as disastrous an update as I have ever seen. Really shocked the price isn’t down substantially more than the 2% or so that it has moved.

Not an investor – wouldn’t have touched with a barge pole – but some light should be shone on these little companies.

Can someone please help me out here? I think sales are down 30%-40% on forecast (note Ike has not stated how bad sales are down) and the shares are UP today 10% based on the 'good news' announcement here:

https://www.nzx.com/companies/IKE/announcements/263678

Does no one else see through this announcement and see how terrible it is?

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Originally Posted by Xirr

Can someone please help me out here?
Does no one else see through this announcement and see how terrible it is?

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Maybe they were expecting it to be worse?

Well I was right in thinking sales would be down 30% to 40% on prospective forecasts. This level of miss is incredible, and they are sticking by their FY16 forecasts.

In my opinion, they will be down 50%-70% on their FY16 forecasts.

If the market actually reacted to this information properly, the share price would be somewhere between 20c and 30c - I have a real issue with brokers bringing these crap companies to market. You have to wonder how much of the money that got invested was by way of broker-controlled kiwisaver or other managed funds.

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Originally Posted by Xirr

and they are sticking by their FY16 forecasts.

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That is so they can justify a 200% valuation gap!

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Originally Posted by Xirr

Can someone please help me out here?

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The moment I see something along the lines of "we would have met forecast if not for a timing issue where orders were delayed" I'm instantly turned off. This is a set up for a complete fail in the next financial year. I think it's just too tempting for a newly listed company to announce good news and hope they catch up to it. It just gets investor expectations completely out of whack.
The cash burn scares me too.

Hi Guys,

I'm involved in a privately owned tech business and keep a weather eye on this forum to see what's being said about tech stocks. I hadn't considered posting until a while back when I saw Xirr's post #23 damning IKE. I like IKE (sounds like a presidential campaign bumper sticker from back in the 50's) so was going to immediately jump to their defence. I registered but in the end didn't bother to post, in part because I thought it would be better to wait until they released their financial accounts. I got up early this morning to watch the end of the cricket only to find there was a rain delay, the weather's also turned crud, so between paying computer games put this together - great cricket game with the right end result, fabulous catch by the quicks!

The one thing I strongly agreed with Xirr's was his comment "some light should be shone on these little companies". JamesST makes the same point in his post. The problem with these small cap companies is they are too small for the analysts to follow and there's little if any market supervision by the stock exchange. This means they can spin disaster into success through carefully crafted market releases with virtual impunity!

I have followed IKE since well before they IPO'd and like what they are doing mainly because IMHO they're creating their own niche market by introducing a disruptive technology. IKE's a speculative risk, I don't owned any shares but am seriously considering buying.

I had a quick look at their FY'15 accounts. They have around three years in reserves at the FY'15 burn rate so won't fall over anytime soon. I'm not an accountant but here's also the matter of the $0.5m invoiced and received but not booked to the revenue line whereas the costs were booked, unless they have offset it elsewhere it effectively makes the FY'15 result understated. I would give them another 6 months before making a more definitive call on their prospects going forward. The update for the 1st half of FY'16 should answer the question as to whether or not they were being upfront in their recent update.

I particularly like that IKE didn't start by trying to conquer the world, their target market for Mapsight was the utilities niche where they already appear to have a first mover advantage and hopefully will become the defacto industry standard. Perhaps replicate AutoCAD on a much smaller scale, you can only hope?

With a relatively expensive proprietary hardware Mapsight isn't targeting the consumer grade smart device market so they aren't going to sell a lot of this product into the bottom end of the SME market. On the flip side I can't see the smart device app developers successfully penetrating the utilities niche. While a small field service business might be happy to mobilise their field staff with relatively cheap consumer grade smart device, which inherently means there will be a lot misuse both from downloading non work related online content and actual physical damage to the devices, the utilities would prefer their staff to have proprietary ruggedized devices.

If there's one thing I question about Mapsight it's the Windows Mobile 6.5 platform which is basically obsolete. I assume at some stage they will migrate Mapsight to another development platform.

Moving onto Spike. Virtually every software developer is focusing on getting apps out for the consumer grade smart device market, with good reason. I think there is a big market for a cheaper version of IKE's technology so it will be interesting to see how Spike plays out particularly on the OE side. I would like to know a bit more about their patent applications as good IP protection is vital. Before buying any shares I will search their applications as part of my DD.

In my view IKE is an early stage GTK (utilities and airports), or even a Vista (movie theatres), in terms of market positioning because they can anchor their early business growth on a relatively few cornerstone customers using Mapsight. The added benefit is they can also play in the smart device market with Spike.

There was discussion in earlier posts comparing IKE to GEO in terms of investment opportunity. GEO released their unaudited FY'15 accounts late last week. Comparing IKE and GEO highlights to me why IKE is doing a lot right and GEO virtually nothing right, it's a train wreck about to happen. The key difference as we speak is IKE has around three years of cash in the bank at their current burn rate, GEO burning nearly as much cash on the back of less than a third the revenue has a few months at the most before running out of cash. The differences go a lot deeper, perhaps that's a topic for a second post if the weather doesn't improve?

Survfer I hate to break it to you but the ike device has been sold for many many years before the investment bankers got involved and packaged ike's device up as something 'new'. It never cracked it and never will. It was licensed with another high profile company.

Ike should simply be a case study in how you can list any old crap at the moment.

My previous analysis stands.

Xirr,

You based your original post on the proposition that some light should be shone on these little companies. I agree with you on that point. Hopefully the new NZXT market is a move in the right direction given the NZX has engaged Edison Investment Research to do quarterly reports on new entrants over their first three years in the market.

In terms of IKE's prospects time will tell if you are right, the next half year update will reveal if they were telling porkies about their FY'15/'16 revenue, a full year should give a good steer on whether or not they are going to succeed over the longer term. While IKE may be a high risk start-up it has a number of characteristics which differentiate it from "packaging any old crap" start-ups.

For the record Galvanized Group was formed in 2003, the name was changed to SurveyLab Group the same year and to IkeGPS Group in 2013, so it's been going for a bit over a decade. Jenny Morel's No8 Ventures invested $2m in 2005, a useful cash injection but wouldn't fund much development. It doesn't worry me they're over ten years old because until recently they were a tiny undercapitalised business and I'm sure like all of us they learnt by making mistakes. Even if the product is crap as you claim, in terms of the time it takes to develop and get new products to market it's hardly "old" crap.

When you say It was licensed with another high profile company the inference is they previously failed to exploit a significant sales opportunity. I assume you're talking about CERL and not the current deal with GE. They did a patent licence deal with CERL for the military version, working with the US military made good sense to get their product off the ground, most start-ups would see it as golden opportunity. But I doubt a US army research lab was ever going to be an effective sales partner, plus being beholden to a single dominant customer is often counterproductive to getting a product with broad appeal to market, the product can easily end up too bespoke. In the end IKE will sink or swim by selling into the private sector.

Interesting posts Survfer - I tend to avoid tech stocks in growth phase as the cash flow statements always scare me. And a couple of listed tech stocks are scam material to fleece the gullible ( time will tell with these.....) - if this company truly has disruptive technology it could be successful - fingers crossed for them.

http://www.ruggedpcreview.com/3_hand...r_longbow.html

http://www.gemapsight.com/mapsight-solution/device/

As you can see - not a new product. it never cracked it then and unlikely to now. The FY16 projections are mad house material.

Apologies if I'm being a bit rough on the company, but I just really don't like Ike as an investment at the market cap it floated at. It's a bad look for new Zealand's capital markets to continually overinflate the worth of small tech companies and their prospects.

Rule 10.1 : https://nzx.com/files/static/cms-doc...disclosure.pdf

From the market update on 30 April the share price stayed around 80c until financials were released on 29 May. Since that time, the share price has fallen around 25%.

Did the company's announcement provide continuous disclosure?

https://www.nzx.com/companies/IKE/announcements/263678

Excerpt

"Major FY16 sales announcement, FY15 update and FY16 outlook

Highlights
- Business on track to deliver growth opportunities
- Sales momentum pushes into FY16 with ground breaking orders from OEM channel
- FY15 revenue below PFI with timing of orders falling into the FY16 period
- US interest in making strategic investment
FY15 update and FY16 outlook
ikeGPS, the remote measurement firm, said that it expected its FY15 revenue would be up more than two times on its previous year. The company’s Before Tax result would exceed forecast (PFI FY15 forecast Loss before Tax of $5.33m) although its revenue would come in below forecast (PFI FY15 forecast revenue of $6.46m) primarily due to anticipated sales from its start-up smartphone solution falling just outside the 31 March 2015 financial year end."

Xirr,

We're absolutely on the same page about inadequate disclosure, which is one reason I got off my backside to post for the first time. However, most of these start-ups gild the lily in their IPOs and market updates and on balance I don't see IKE being nearly the worst on the disclosure front. They put out a half year update on 25 November 4 months after they listed, the half year revenue of $1.7m, which would include a chunk of interest from the IPO war chest, made it clear to a prudent investor they were going to struggle to reach the $4.5m revenue target in FY'15. Their FY'15 financial reporting is reasonably comprehensive including a good breakdown of the differences between their FY'15 actuals and the prospectus forecast, even if it is hidden at the back.

I agree with you their FY'16 revenue forecast of $14.3m is an extreme stretch but disagree that the downward trend in the share price started after the FY'15 unaudited accounts were released. It started after the half year update was released when the share price was hovering between $0.90 and $1.00, by the time they disclosed the FY'15 financial result on 30 April the share price was around $0.80 and since then it has fallen into the $0.60's, the 50 day average trend looks reasonably consistent from when the half year update came out.

Looking back at their prospectus I can't see anywhere where they disclosed what happened with the Juniper partnership, it seems they started shipping the Archer Longbow version of MapSight in August 2011 and the partnership ended in early January 2012 after 5 months, so there must have been a serious falling out. While it may be legacy water under the bridge, and I doubt GE would let their brand be associated with IKE unless they were confident GE MapSight has a few legs, it isn't a good look they didn't disclose what happened. The Longbow looks like it was a hybrid of IKE's Mapsight and Juniper's Archer GPS device which doesn't feel like a cost effective solution given how easy it is to on board your own GPS functionality. Given your view on IKE's products I assume you know the history, I would be interested in hearing what caused the parting of the ways.

The way I look at IKE is their products serve a need in a niche market as well as being appealing to a range of potential customers in the niche. They have a modest but growing revenue and around 3 years of cash at the current burn rate, plus the falling NZD/USD cross rate is helping. Assuming they can get their annual revenue to a sustainable $15 to $20m over the next four to five years and keep their costs under control they are probably worth a punt, particularly if the share price falls further. On expense side looking at where the HQ is located and the salaries they are paying their senior management I don't get the sense they are overly spendthrift, but if they needed to cut their overhead costs there's room do so.

Back to the disclosure issue. When looking at the recent crop of IPOs arguably the worst in terms of disclosure is Geoop, I mentioned this in my first post. Given their chair is the former NZX CEO they might reasonably be expected to be squeaky clean in terms of disclosure. They recently informed the market "the company remains on track with original disclosure" which is far from the truth. I'm thinking about posting my views on this to the GEO thread and if I do would be interested in your thoughts on which out of IKE and GEO is the worst in terms of disclosure.

I see the NZVIF have just taken a stake - funder of last resort?

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Originally Posted by kiwidollabill

I see the NZVIF have just taken a stake - funder of last resort?

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they held it indirectly via no 8. Now it's out of lock up, they have taken direct ownership. They are still in the money (just( as they invested early but they would struggle to sell off that large a parcel in its current state.

More deets here (NBR unlocked): http://www.nbr.co.nz/article/nzvif-t...hares-b-175890

Trading halt today.

Seeking to use a small overseas purchase interest (0.5 M) to justify a new share issue @81c to include other investors. Bit early perhaps, they should still have heaps OF $$$$$ left from the IPO.

Par for the course .... your thoughts?

DISC not holding.

New Aussie money at 60 cents and SPP coming and an ASX listing soon could make this a decent short term punt

Punting being the word of course

IKE was recently brought to my attention by someone whose record is second to none.!!
The 22nd of July presentation made excellent ready.
I greatly respect The Chairman,Rick Christie.He led Rangatira well as CEO, and his time at Ebos was very profitable for me.
I brought a small holding on 28th July at 70cents ps.The company will be a lot stronger with the capital raise,so I look forward to taking part in the SPP.