Pinned straw:
mikebrisy
@rmoss just to underscore your point, those 11 trades have a value of less than $8,500 and are less than 0.1% of SOI. So, I don't think there is any special information underlying the change, on the face of it.
I think that on the soft last result, the change in Govt ERP mandate, and absence of newsflow, it is inevitable that $8CO drifts lower driven by negative momentum. With some choppiness in the last few Q cashflow reports, and the lack of momentum on the "user funnel", I'm not surprised that over recent months several holders have decided this is no longer for them. I'm on the fence myself.
I consider that the exodus has pulled the SP below fair value on fundamentals, even in a bearish scenario, and I am happy to wait out the next couple of quarterly reports to see if it stays on track to become a profitable business. (To be clear, I haven't revisited my valuation of $0.16 of about a year ago, and I should update given the evolving external context and execution progress of the business not longer supports this number. )
My RL position is 0.33%, and I have to be honest and say that I can't see this becoming a material business, and it therefore doesn't fit my portfolio rules. (I noted this when I initiated my position and, if there is a lesson for me, it is that I should have filtered it out on that criterion.)
So my strategy is one of looking at a medium term exit (2-3 years), with a view that there still could be value there as it transitions to profitability.
It is another case where my position sizing approach is serving me well. (If I can extract a positive from this.)
Slideup
@rmoss currently its 25 trades have gone through, but it looks like its really only 7 on market sell orders. Down 18% on $25K worth of turnover.
@mikebrisy, all fair points and it is a bit concerning how the costs are growing faster than revenue, for me I am still happy to let 2024 play out and see if the growth in live users speeds up. I am expecting a good uptick in live users in the next quarterly as they have previously said that year end is a key time for this to occur. To me the current market dynamics is the exciting thing about microcaps and the opportunity, the market price at the moment doesn't really reflect the underlying business, if the warts around growing costs to revenue and low cash balance and cap raise risk, turn out to be temporary. It is definitely out of favor/ interest at the moment and probably will come in for some tax loss selling if the next quarterly isn't a ripper.
The biggest question marks I have is what is covered in their Admin and corp costs, this is a graph of their quarterly numbers and the red shows this consistent increase in what they call Admin and corporate costs. Staff costs (i am assuming these are direct 8CO employees) are in yellow and have more or less stayed the same. I am also looking to see revenue continue to increase, which has plateaued a bit over the last 6 months and has more or less returned to that $2m level, since the very good revenue (implementation boost) quarter in Q4 2023. I had put the increase in admin costs down to contractors who are doing a lot of the implementation work in Canberra, but it is possible this is just a catch all category for the company and the costs around improving cyber security and protected status are all bound up here. The question for me is are these costs going to continue to increase or are we peaking relative to revenue growth?
Where I am getting a bit confused is the half year report where they break their costs out a bit more, it looks like contractor costs are fairly stable year on year running at around $1.3m after we remove the $1m staff costs given in the quarterly. Going forward, if we remove these contractor costs, as I assume once implemented they wont need the contractors or anywhere near as many. They then will have a cost base of $4.6m/yr. Their current SASS revenue is $4.2m annualised, so not too far off break even if they stopped any growth spend.
Things I am unsure of is why the cost of services has increased from $841K to $2.5m this year. Is this likely to be additional contractor costs? It changes the cashflow position if these are temporary costs, I hope they are, as otherwise the more 8CO grows the more it will lose.
