Is INT (CVE) recent share price movement sustainable?
This is a very interesting question. INT has been on my top pick list for 2012 for some time now (November 2011)as they seem to have created a very interesting product called Ortsbo capable of translating instantly in 53 different languages.
That by itself is very interesting and even if the quality of this product is not 100% on the translation side, I must agree it is very good and well designed.
I was watching their latest presentation in all those languages simultaneously and it was really good. Even the plug in for Outlook is doing good.
But IS there a demand for this kind of product?
Based upon the incredible high number of unique users (that is on a rapid rise every month) it would suggest that indeed there is a great demand for it.
Now, the challenge that Intertainment Media is facing is how to make great revenues from this unique product AND that takes time.
Last Friday (January 20th 2012) the sudden share price rise was in fact driven by an update from INT stating that the spinoff of Ortsbo was imminent and that actual shareholders would get a 30% of pre-money that Ortsbo would attract and paid a share dividend from the new company created. That was enough to see an increase of 29% in about 3 hours.
Last year at the end of march 2011, it took about 2 weeks to see share price climb from a bit over 40 cents to a whopping 3,35$.
Unfortunately many investors lost their shirt as the share price went down to 0,28 cents early October 2011.
Are we at the beginning of a new leg up where this time INT will climb to a 4 or 5$ share? Think about that: if INT would climb to 5$, it would mean that INT is valued at roughly 1,4 billion $. Is that reasonable? We must not forget also that they have roughly 47M warrants and 15M options for a possible total of 327M shares issued if all warrants and options are exercised and would now place INT value at 1,6B dollars. Based on the fact that actually the social media hype allows a multiple of close to 100 times the revenue estimated for evaluation purpose, INT will have to generate 16M$ in yearly revenues if we want to take for granted that 1,6B$ is a possibility. IS THIS POSSIBLE?
Last quarter they generated 1,3M$ in gross revenues and it is only the beginning.
They have 21M$ in cash on hand and are burning a little over 3M$ per quarter. So they should be ok for the next year and could even add up some more buyout of interesting technology.
They actually control many divisions and the most interesting one is what they call ‘The new Media’ division mainly consisting of: Ortsbo, Ad Taffy, Deal Frenzy, itiBiti and Commobility.
There is a lot of very good info in the MD&A posted on Sedar end of December that I will not replicate here but here is the address:
Over all, I think that INT has a great future especially if they retain a good chunk of Orstbo. With all those acquisitions they made recently it would not be impossible to see major advertisers come on board. As an example, how much money would a company like Mcdonalds invest in a pop-up add that would appear on every user of Ortsbo offering a free coffee? At the same time users could get the direction to the next McDo restaurant in their OWN LANGUAGE, anywhere in the world at the same time?
The possibilities are endless and only limited by management imagination.
Can they achieve 16M yearly in revenues? Yes they can
Can they achieve it this year? No I do not think so
Do they have the right management? Yes they seem to be really dedicated to INT success.
Do they have the right customer base? Yes and increasing by the minute
Do they have enough money to continue expansion and creativity? Yes they do
Do they have competitors? Yes they have but none as integrated as they are
Is this the right timing for a spin off? Yes as long as they keep control over Ortsbo
What is the value of INT shares: If revenues stays on the same track as they are, they could end up this year with revenues of (for the 2012 quarters ) 1,5M$, 1,8M$, 2,2M$ and finally 2,7M$ for a 8,2M in 2012 revenues. Based on that figure and a 100 time revenues INT could be valued at around 820M$ at the end of 2012 for a 2,51$ per share price when fully diluted.
This value is based only on what has been disclosed as of December 2011 and does not take into account the intellectual value of INT, trademarks etc.
Is INT at 0,60 cents a good investment? WOW sure it is. If you like a bit the roller coaster associated with speculation combined with some great value you are in for a heck of a ride and for the dreamer in you, what would happen if Microsoft, Google, Yahoo, Facebook and those really involved in this social media market were deciding to acquire INT. It could be the biggest share price war since a very long time with results only dreamers have in the back of their mind. But even if it was to break 2,50$ it would still be over a 400% gain.
How about that!!!
Disclosure: I am long on INT. As usual never invest more money than you can afford to lose and always discuss with your financial advisor before investing to be certain the investment is suitable for you.
