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uhlf -
I do not think management changes make any difference now. From my perspective, the company has max 12mo of funding and I do not think there are more equity or debt financing options still open at current prices.
So the shares are a bit of a lottery ticket: do they announce new contracts and make it to cash flow positive or will ENET cease to exist?
Have not followed ENET too much over the last days, however, could the 5G placement be a driver for the latest SP movements?
Do I understand it correctly that they still have the $2m raise outstanding and they can pick a three day average price within the 15 days prior to their notice? So they can drive down price and get >10m shares for their 2m capital?
Other option is that the raise is cancelled and we are getting more serious "going concern" risks.
Next weeks will tell.
@ uhlf -
I think 5-6m from Tarana this year is overly optimistic. In that case, ENET would have communicated i a different way and so far experience tells us that ENET often lands below or at lower end of expectations.
I see total reveneus for 2022 at $6-8m and $8m would really be a nice success! Next year $8-14m and again, landing at $14m would justify a significantly higher SP.
Unfortunately, I think this is just a "blabla" marketing statement. How many OEMs are there? If you take the 2.8m ENET revenue, subtract known deals like Tarana than they likely contribute less than 100k revenue. So does it mean they all got a "test kit" worth 10-20k?
And a third comment, ENET do not expect to have any news for the next months that will have significant positive impact on the share price, otherwise they would have waited for a higher SP before doing this funding.
So, might make sense to go to sleep for the rest of 2022 and wake up in 2023 to watch where ENET stands then :)
and yes, you can see information leaks quite clearly. Stock sinking signifiantly over the last days and being rather neutral today.
So share price still is the best indicator of the health of ENET, not RNS or other info shareholders think to get from "other sources"
Let's put all the marketing blabla aside, this means they still have serious cash issues and do not expect to get anything from the warrents. I assume this is just additional working capital funding and cash break-even is likely another 18-24 months away.
I expect 5-6m revenue for 2023 and 10-12m for 2024 (which is more than the market expects, that still is not sure whether ENET will survive at all)
Skid,
on the first one, I think we have a misunderstanding. I do not say that the company should buy back shares (would not make any sense with current cash constraints) but I want the management team to buy further shares DL and MR. That would signal their conviction.
On two, again agree with you but they cannot do everything themselves. I wonder how good their collaboration with Tieto is and whether there are not other companies they could partner with, e.g. Marvenir, ADVA, NEC, who ever...
From my perspective, the two things management could (or should) do:
First, buy further ENET shares in the open market. If the company does not have any cash flow issues and is on a growth path, it is seriously undervalued and for any reasonable management team, further investment in ENET should be a no-brainer. This would be a vote of confidence vs. not doing it raising some questions whether they doubt prospects.
Second, establish more sales and go to market partnerships. If their products are really leading, there should be more system integrators or Open RAN companies interested in partnering.
As long as neither 1) nor 2) happens, I have at least some doubts about the 2022 case.
skid, I think the current valuation can only be "justified" with "going concern" risks. Assume those selling at current prices do not believe that ENET will survive in the market. As down days had some higher volume with 700k and 900k I would not put those concerns away too easily.
That is also how I interpreted the latest RNS "hmm, we were not sure whether we had sufficient cash to fund our product but when we stopped it we heard back from one or two customers that they might like it so we give it another try"
I still have a long position but think that this is more of a 2023-24 investment case if all goes well.
In the end, despite all the external events, all that matters for ENET is:
1) what is their current cash burn and when are they planning to be cash neutral or positive?
2) how long will current cash reserves last?
3) given painfully slow sales cycles, will sales come in time for 1) and 2)
If they need to do another funding round at 15-20p, dilution will eat most of the positive case even if their products are successful. So cash updates are most important for me.
Nice one! However, my interpretation is a bit different. First, I do not see any indication in the text that the 20m refers to UEP alone. This is rather total ENET revenue for 22 and 23.
Further, pipeline is rather vague. So from my perspective this includes contracts as well as some "client discussions" that might or might not lead to contracts and revenues. So maybe 6-7m this year and 10-11m next year which would by the way, already justify the current market cap if cash burn is going to zero in 23.
Looks like the market does the same interpretation.
All very disappointing but I would not panick at this point. Do think for those who have not sold, risk-reward currently is positive if you do not need the money short-term.
Nice action would be to have some director share purchases now. Might reassure more than some press releases.
@ gtg, actually the text you are quoting explains quite well why investors have lost confindence. First of all, you always have to compare to the mid point of forecasts which between 3.5 - 4.5m obviously is 4m, leaving a 1.2m top line revision (according to Dec-14 statement, postponed into H1 2022). Before the interims, there was a 6m "ambition" (not forecast) reduced to 3.5m-4.5m and they are talking about a 1m-1.5m top line revision as "postponement" into H1 2022.
If this is reliable, there would need to be at least 1m+1.2m in postponed business in H1 2022 on top of any initially planned business for H1 2022. I guess we all agree that this would have to translate into at least 4m H1 22 revenue, if the postponement forecasts materialize.
That is what ENET will be measured on, whether they deliver this in H1 or whether we will see postponements of postponements.
Maybe somewhere in the middle, Sergi.
They talk about 2.8m and 74% GM 2021. So without any modelling 7m revenue would give them around 5.2m gross margin vs. 1.6m in 2020. All other variables equal (of course not realistic), that would give them an EBITDA of 0. With some other realistic cost increases, EBITDA break-even could be around 7.5-8m.
Working capital needs would only come from increased business, so both good and bad. If they have a margin of >70% in the future, the product cost has to be below 30%, so with an increase of business from 3 to 8m, 1.5m increase in material orders (again no modelling)? Of course you also have pre-ordering of inventory etc, but maybe 2-3m unless business increases more?
I think still something that could come from current cash balances and easy financing. So do not see any immediate liquidity issues.
Sergi, at what level would you expect them to be cash-neutral? I have some 6m-8m- range in the back of my head? So if they manage 6m rev, there should not be any serious cash topics?
I think current market expectations are max 6m and cash negative, so cash neutral and 6+m would have positive impact on SP.