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MNL - Manaccom Corporation

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bloomy88

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21 October 2008
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No thread on this one so thought I'd start one...

Quick rundown of company, they have 2 main divisions of the company:

-Online Division. This division is involved in the online sales of Australian lottery tickets from www.ozlotteries.com (ozotteries, powerball, ect)

-Distribution and Software Publishing. Software includes: McAfee, Net Nanny, MYOB, Zone Alarm, Blaze Video, ect.

Current price: $0.35
2009 EPS: 6.4c
09 PE: 5.5
Market Cap: $16 million
Interest cover: 16 times

Any thoughts would be appreciated...
Cheers
 
Was looking at this due to ok roe and low debt, but can't work out what's going on with retained earnings? Pure guesswork, but might it pay for licensing and look to repay that over time, hence the huge -ve retained earnings which are only slowly being paid back? Will take a long time at this rate...
 
Manaccom had a good run this week. I see that one of the directors has been buying the company's shares on market. Not spending huge amounts, about $12,000 in the last month or so but certainly a vote of confidence.

As far as I can see the lottery division is making about 5 million in net profit. Current market capitalisation is 14m. With about 40 million shares on issue, a P/E of 8 would mean the share price should be around $1???

I think the business is pretty easy to understand. They sell lottery tickets online. I actually started taking notice of this company because I was using their website to buy lottery tickets. Their website is quite good and I thought their email marketing was great. Then when I started investigating the company I noticed they were listed on the ASX.

Anyway, take a look through their annual report etc. and tell me what you think. Am I missing something here?
 
I've been following Manaccom for awhile, Mike Veverka is the CEO and founder of Manaccom and pretty much buys on market every month, he's also the #1 holder (from memory) i think, there's some things to like about MNL and some things not to like about MNL.

Some thinks i like about MNL

  • Easy to understand business, operationally profitable, value SP
  • Potential to pay regular dividends, potential for modest (low cost) organic growth.
  • Mike Veverka is CEO and a major holder, shares tightly held.
  • No dollar, refinancing, or interest rate risk.

Some things i don't like about MNL

  • Lotto actually costs more to play online than thru a newsagent.
  • Slightly complex sign up account procedure (same as any online account)
  • Lottery's contract up for renewal soon (not much of a business left if they lose that gig)
  • limited organic growth with current businesses (mite need to buy something)
  • low market cap and low share liquidity...and the SP isn't as cheap as it was.
  • Even the Ninemsn agreement is only 2 years at a time.
 

good points So_cynical about the only thing I would add that I don't like is why pay dividend when making a loss - this only compounds the loss of shareholder equity, unless they are so unconfident of making money in future the have decided to pay back some now? This to me is almost as bad as any company that pays a dividend and raises capital in same year.
 

From memory the (one before last) dividend was paid from operational profit and the loss was from a total (in one year) write down....again from memory i think they decided not to pay the last dividend, like this spring.

So in general agreement with you Robusta....as in MNL don't tick all the boxes for me yet, but realisticly buy the time all the stars line up for MNL the SP would of taken off.
 
Some good points there So_Cynical.

I think the overwhelming risk for this stock is, as you say, if they don't renew their lottery arrangements then they don't have much of a business at all. But I'm thinking if they really are selling so many tickets for tattslotto and nsw lotteries then they would be eager to keep those agreements in place. Afterall, they don't have to do the marketing and software development and get a constant revenue stream.

MNL is also marketing their capabilities aggressively to the US market. Apparently they are expecting a law to be passed in the US later this year to allow US residents to purchase lottery tickets online. This could definitely open up a huge market for MNL.
 
I have noticed that MNL has broken through a yearly down trend last week. I thought I'd post the chart here for you to check out.
 

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News came out today that the CEO Mike Veverka has bought another 20,000 shares in Manaccom averaging around 36c each. Another vote of confidence.

I see the key point of resistance will be 0.40, after that the next area to look at is 0.50, then after that the yearly high of 0.55.
 

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At the upcoming AGM on the 15th of November shareholders will be voting on the following share options:

Director Bill Lyne 300,000 options exercisable at $0.70 each expiring 3 years after granting (expected 15th of November 2010)

Director Bonita Boezeman 550,000 options exercisable at $0.70 each expiring 3 years after granting (expected 15th of November 2010)

The current share price as at 2 November 2010 is $0.41 so the exercise price represent a 70% increase at current prices.

Presently the total number of shares in Manaccom is 39,453,468 and if all options are exercised (including other options not mentioned here) the total number of shares would be 44,433,468. So the dilution of shares has changed my target price a little based on net profit of 5 million with p/e of 8 to $0.90.
 
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