Profitable Micro-caps (Revenue greater than $10m)

[Corporate]

Thanks Steve. I understand what you are saying. Out of interest, what price did you pick up your shares at?

I am keen to see the profitability of each of the three divisions. However, frustratingly and contrary to IFRS 8, the segment reporting note in the annual report does not disclose profit, ebit, or ebitda by division.

[cloggs]

I noticed that one thing the companies mentioned above (high EPS, small cap) have in common is that they are illiquid. Liked EPD enough to buy a bunch of them this morning though. Like ADQ story but a big difference between buy and sell and last sale and sell prices.

[steve fleming]

I acknowledge that there may be a risk of a capital raise should the directors want to reduce gearing, but to date their bankers have been very supportive.

Well here comes the capital raise, hopefully the upside from acquisition offsets downside from dilution.

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Perth-based ADG Global is seeking to raise $3 million with the help of Melbourne stockbroking firm Investorfirst Securities. The shares are being offered at 5.5¢ apiece.

ADG, which sells and distributes specialist equipment to the mining industry, plans to use the proceeds to fund the growth of its international supply chain and for an acquisition in Singapore.

The company has grown rapidly over the past two years and now has a presence on four continents and operates in over 40 countries. Its shares closed at 6.8¢.

[Joshuatree]

What do you reckon Steve. Will you be taking up a bunch? Down to 5.4c atp

[Corporate]

Not a big fan of companies that raise capital (below market) and then give a share part of the placement to directors.

[steve fleming]

To be fair to the Directors , they all supported the share price by buying significant amounts on market at below 5.5c in recent months, when everyone else also had the opportunity to buy below 5.5c, when it touched 4.3 cents a little while ago.

Nobody likes dilution, but I kind of step back a bit, and look at what ADQ are doing – they have pretty much from a limited going nowhere position, created a global $100m plus turnover company in a couple of years.
Yes, it has low margins at the moment / not cash flow positive, but where they can take the business from here is what excites me. Yes, it is early stage, but it is the early stage of what could potentially become a major scaleable multi-national business, providing logistics, distribution and equipment support services across the world, and with a current market cap of $15m. Now that they have developed their own product, and with this acquisition, can now provide engineering and maintenance services, they have become a one-stop parts and component supplier/distributor/logistics manager and equipment services provider to major mining and other projects, with a particular focus on the high growth region of Africa....and the associated opportunities to easily scale up from their current $100m plus revenues, plus increase their margins.... Revenue growth plus margin expansion can result in very large and quick step up in profit.

Conceptually, although very different businesses, I find parallels with what IPP are doing (ie laying the groundwork for a potentially major SCALEABLE multinational business)…but IPP have a market cap of $200m or so, notwithstanding IPP being EBIT/CF negative.
Ie ADQ, like IPP, are in the process of genuinely BUILDING a potentially globally significant business essentially from scratch, not just RUNNING a business....but are therefore are far riskier investment proposition.

Hopefully the short term hot copperites who generally are always very anti directors/dilution have now expressed their short term frustration by selling. This is different from a normal exploration capital raise which inevitably results in shareholder destruction Hopefully buyers will come back next week, as the Direcotrs/IF promote the story, and the institutions that missed out on their share in the oversubscribed placement buy on market and take out the 4,5m seller waiting at 6c.

And JT yes- I have another 250k bid waiting at 5.5 and will buy more if if falls lower.

[Joshuatree]

On behalf of many who have ADQ in the comp thanks Steve for your always concise , astute sharings. I was assuming youd be receiving an offer for sophs. A vote of confidence, depending on ones risk/reward situ. cheers JT

[percy]

Anyone enjoying the fun I am having with LRG.Market cap has gone from approx $3.5mil to $13.5 mil in a few months after they announced they had sold their major operating division for $16mil.Also can receive extra earnout if the numbers add up over the next couple of years.Also have a fear stack of imputation credits avaliable.LRC have 6 months to try and buy another business or else they return the cash to shareholders.Dr.Jens Neiser of Neiser Capital has just joined the board.Googled him and he appears to be a mover and shaker.

[JBmurc]

ADQ down 20% ...?

[Joshuatree]

Look back a thread or two; cap raising but not for most .