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XLM is still a growth stock despite the drop in revenues and profits in 2018.
What investors need to understand is the reason for the drop in the share price from it's high of 204p on December 14th 2017.
First off, the company made some poor acquisitions primarily around games on FB and also mobile app and software downloads. These two were then discontinued with just short of $10m exceptional costs.
Secondly, XLM announced back in February a profits warning. It was cutting back on it's Media side of the business which would result in a decrease in revenues and profits.
XLM has been over sold.
The company has cash of $47m.
It has a progressive dividend policy giving approx. 8% yield and paying back over 50% of profits.
Currently it is on it's second share buyback program.
Regular buying of the share by the CEO who owns 2.73% and buying from as high as 188p.
The P/E is just 7, below the Industry average of 9.89.
PEG is high at 5.07% but this reflects the drop in profits.
Book value of XLM is 64p.
The Return of Capital is 15.3% vs Industry of 5.55%.
The Return of Equity is 14.0% vs Industry of 3.52%.
Operating margins are in excess of 20%.
Forecast net profits for 2019 are $27.3m, a third higher than 2018.
What wasn't taken into account during the de-rating of the share price was that the Media side of the business has a lower profit margins that the rest of the company. While descaling the Media side, XLM was then focusing more on it's Publishing side which has far greater profit margins.
In particular, XLM is now focusing on the USA and it's gambling side. The USA is currently going through a transition where the different states are starting to legalise sports betting. 17% of revenues come from US. Currently only 21% of Americans can place a bet online.
XLM are not new to this though. Currently 36% of it's revenue comes from Scandinavia, where they have legalised gambling advertising online. There is still room for growth here too, as not all of XLM's customers have yet converted to online ads.
There is also a Finance side to XLM, which is only about 6% of the company but they are growing this.
So all in all, the company is in way better shape than when it IPO'd, cash rich, profit making, buybacks, high divi and plenty of skin by CEO.
Worth watching this video from back in March.
pls not Zak he is bad luck
Good posts this morning and long may they last.
Share watch recommended as buy .it says it is DIRT cheap
15.9% up on open.
Good report from sharewatch suggesting a 3 bagger here from this price.
Nothing really new unknown if you have done your research except after interviewing Ory last month, they suggest that tapping into America is progressing well and ahead of target. Highlights the large position held by Ory and his large buys recently. Cash rich, low P/E and in a way better position than it was when the company IPO'd.
Not sure if you are aware, but apart from copyright, there is a fairly widely observed convention here and on a number of other BB's not to go into detail about paid for research/letters etc for a "reasonable" period. I have always assumed that is about a month. i.e. quote from last month's SCSW is OK but not from this one's. But like you, I look forward to Monday and beyond.
Paul thanks for that.
what are the highlights from the scsw write up?
why are you expecting a positive response on monday?
XLM is the main feature in this month's SCSW and it is a very positive and encouraging article. I am expecting a positive response from the market on Monday.
Almost certainly but, famous last words, it looks as if the sp is breaking out so you may not see sub 55p for a while.
I'm not invested here, but I see the constant RNS of XLM buying their own shares. Given it's a known that they are buying at around 60 and above, isn't it a no brainer to buy when it falls below 55 for example?
Swedbank sold down on 18th June which is 2 weeks ago. In that time the sp has risen by more than 20%. Quiet or noisy, I will take that rate of appreciation anytime.
It’s gone quiet for a while following the offloading of Swedbank’s holding. Hopefully we’ll get some news soon!!!
Yes, you’re right. It is the fear of non-compliance in a broader sense that made the flee away from gambling shares because when you say gambling compliance people only hear money laundring. When you say alcohol they hear party :-) More people have drinking problems than people who have addictive gambling problems. But compliance people are not driven by logic these days because Scandinavian banks have been hit by laundeeing scandals.
Changes of policies and heirarchy to little to late.
Lets call it what it is money laundering .
Thank you. Nice clear post.
Important to understand why Swedbank sold all XLM shares:
Earlier this year Swedbank made a general decision to sell all securities in gambling industry companies. This was a ‘political decision’.
Now they are out of XLM and the market dynamics should be back to ‘normal’ (whatever that implies).
But I thought that it is nice for people to know the context.
XLM will continue to pick up shares
They will acquire- price rite
I thought swedish bank was dumping borrowed shares to get the price down for an assault on XLM - but totally wrong. They are now out pro tem
The swedish bank may continue to borrow shares to drive th e pricee down but if they have no ulterior motive then they will go away
Forwards and pls a good bit of news
I only see positives with shares in treasury, if in the future XLM see's a bolt on it quite likes maybe a deal could be done entirely by XLM shares backed by a tie in period so that they could sell the lot the week after the transaction, or maybe cash and shares.
I get your drift I think in that if XLM dumped a few million quids worth of shares on the open market it most likely would drive the sp down.
Also if things pick up substantially, they still have the option to cancel, I am happy with all options still open so the company has a choice.
No reason other than Scandanavian Banks are a law unto themselves in recent times.
Whenever an II with a significant holding needs to sell - the PI suffers.
Not sure why the Swedish Bank bought and then sold.
I thought that there was a Swedish outfit in the same game as XLM - so perhaps some guys thought we need to buy into the opposition.
Think u are a potato farmer supplying Tesco. Tesco changes tack and gets its supplies elsewhere. U have loads in storage and put them on the spot market - no gain but a loss.
With no business news, except that an ii has sold their entire holding would you imagine the sp could soar as swiftly has it has.
How much has this been weighing XLM down? can't imagine why they sold so low must of been at a loss, and wanting to get out and not having the opportunity to do so effected the sp negatively over the last twelve months or so, because the news from the company has not been all bad, just the need to readjust in a changing market.
Which if you wanted a company to succeed you would expect them to do, hoping we can maintain our rise, and well done XLM with the share buyback, nice to have the shares in treasury and not cancelled, so maintaining our cash assets of sorts.
The RNS confirming Swednak's exit and clearance of their overhang was issued yesterday, and since then XLM's momentum has accelerated.
Hopefully this is going to be the cue for a very nice - and swift - recovery.
G Smiley.I fully agree and support your post.