13th Mar: Trader Tim’s Penny Stock Post – #AFC #GEO #FBT

@TraderTim5AFC, FBT, GEO0 Comments

Trader Tim’s Penny Stock Post analyses key RNS releases every morning. Not all releases can be covered, priority will be based on liquidity, significance and demand. To receive Trader Tim’s Penny Stock Post direct to your email box at 10am each morning, click here.

Morning all!

I was completely stacked over the weekend, so didn’t have time to complete a Penny Stock Portfolio. That said, I am undecided on which stock to add next. I have my eye on a few, but they just aren’t at the right entry point at the moment.

Thor is really bombing ahead for me at the moment. For those that have been out of the loop, I took a small, speculative position in Thor about two weeks ago now at 0.8p. At the time of writing, it’s at 1.72p, so has been really motoring. Elsewhere, Tlou and EVRH look at interesting levels this morning, perhaps looking good for re-entry.

AFC Energy has seen a 10% jump in its shares this morning after the announcement that Schroders have taken a 8.441% interest in AFC Energy. Schroders were the single largest contributor to the AIM company’s recent £6 million placing. Schroders join Ervington Investment and Mr. Roman Abramovich as major shareholders in AFC Energy.

We’re getting to results season, which will make a pleasant change. It’ll mean I’ll get to cover some proper business beyond the speculative resource stocks.


Forbidden Tech

Market Cap: £13.31m
Price: 7.375p
Spread: 6%

Forbidden Technologies, the market-leading cloud video platform, announced its preliminary results for the year ended 31 December 2016.

I know these numbers are not great as I had a spoiler on Twitter this morning that the cash burn is around £2 million. Bizarrely, on the Vox Markets sites the announcement is 7-1 in favour of thumbs up over thumbs down. The share price has only fallen 3% also.

Revenue

The numbers here are underwhelming. I see nothing that excites me, more that scares me. The primary stat that the AIM company are latching on to is that invoiced sales up 42% to £1,007,074 from £707,502. Decent growth, but this growth doesn’t filter down into revenue growth. Forbidden also state that in H1 the AIM stock saw growth of 25% in invoiced sales, but in H2 Forbidden accomplished 59% growth. The thought is this rapid growth will continue. It’s a tech company, so I wouldn’t attribute this jump in percentage growth to seasonality.

Deferred revenue is up 593% – from £39,004 to £270,321, so a very small initial base. However, the company point to the fact that they have revenue booked for next year already. This is a promising sign. However, despite all this impressiveness. Revenue growth only saw a 9% increase from £708,717 to £774,825.

If I were being generous, I might say that the growth is beginning to gain traction and maybe next year will be the year where investors will see significant revenue growth. The H1-H2 growth numbers look interesting, which if the trend continues, could amount to something material in 2017. That said, it’s just far to early to say.

Cash

However, the bearish case is more compelling. The AIM company made a net loss for the year of £2,340,464 compares to a loss of £2,556,423 in 2015. Forbidden have raised £4 million over the course of the year through the issue of new equity, which is very significant dilution. That said, this gives the tech company a bank balance of £3,711,033 and the AIM stock is debt free. There should not be anymore placings in the next 12 months. Forbidden have raised more than they have needed. Why?

The Chairman states: “we successfully raised over £4 million on the strength of the opportunity available to us”. This worries me a little. It suggests that the company want to raise cash at a good share price. This would normally be fine, but they are raising more than they need, which essentially means they are diluting shareholders and killing share price momentum unnecessarily.

Management

Last month, in February, the CEO resigned with immediate effect. Aziz Musa for “personal reasons”. Therefore, Forbidden Tech are currently without a CEO, which would worry me. Any small company relies heavily on management and their leadership for direction and strategy. This is not a big, well-oiled bluechip that can effectively run on autopilot. This would be enough for me to sell any holding I had (not that I have a holding). Technology is fast-paced and without someone at the helm, you’d think FBT will only fall further behind. They don’t currently have a sustainable business, and it is hard to see how they can get their without a CEO in place.

The company does say it is “actively engaged” in a search to find a new CEO. However, currently, responsibilities are being shared across the Chairman, CFO and Head of R&D. This is a big worry for me.

Outlook

For 2017, we start the year with deferred revenues of £270,321 vs. £39,004 at the beginning of 2016, as well as a larger pipeline of business. In addition, we have a larger sales and marketing team, and more resellers and key partnerships compared to last year … Our recent funding, gives us the capability to invest behind clear new growth opportunities, whilst continuing to move towards cash generation and profitability
Georgian Mining

Market Cap: £8.44m
Price: 10.5p
Spread: 6%

Georgian Mining announce results from the program to expand the gold oxide resource at Kvemo Bolnisi East.

GEO have 50% ownership and operational control of the Bolnisi Copper and Gold Project in Georgia, a well-known location for high grade copper-gold producing mines. The AIM resource stock have a 30 year mining licence on two project in this location: Kvemo Bolnisi and Tsitsel Sopeli.

Today, the AIM company have results pertaining to the Eastern region of Kvemo Bolnisi.

At Gold Zone 1 and 2, GEO have drill 14 vertical small diameter core drill holes drilled to a maximum 20m depth. The extracted samples confirm: “confirm the presence of high-grade gold-bearing structures”.

Further announcements will be made over the next four weeks as assay results filter through.

GEO now plan further drilling at depths of 200m to 300m for Gold Zone 2. This is to best test gold mineralisation at depth and build resource tonnage.

Our exploration team has made rapid progress in advancing the Gold Zone 2 resource development program. Excellent channel sample results warranted a quick follow up of shallow drilling and each of the initial seven small diameter core drill holes has confirmed gold mineralisation near surface. We are stepping up the drill program with a large diameter core drill rig to test the extension of gold mineralisation at depths below 20m to determine the size of the gold resource

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If there are companies that you want me to cover in the coming days or have significant news due imminently then let me know. My aim is to deliver value to readers, so I want to ensure I’m doing this as much as I can.

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