Thursday 23 November 2017

Update: The Top 10 Events I Am Waiting For In 2017

It has been a couple of weeks since I mentioned the top 10 things I am looking forward to in the remaining part of 2017. I figured now would be a good time for an update since several of those events have occurred with some positive results.

1. Fintech Select (FTEC) launch of the cryptocurrency point-of-sales

FTEC has been having steady news flow over the last couple of weeks, reflecting the imminent and serious nature of the cryptocurrency point-of-sales business. It looks like somebody was shorting FTEC during this volatility. There was an article that highlighted the company's poor balance sheet. This is something I have brought up before and I mentioned as a risk. But there's another way to look at that. Despite the bad balance sheet, look at how far the company has come in developing this business over the last few weeks. Management is obviously working very smart to accomplish the things they have accomplished so far with minimal resources. I'd like to remind people that Mohammad Abuleil took over as CEO in 2015. So he inherited that mess of a balance sheet and has been working to improve it. He is not a good interviewer, but appears to be a doer which is ultimately what we want and need from our CEO as shareholders. It looks like that shorter left with their tail in between their legs; today's spike to 48 cents had the hallmark of a short squeeze.

I think we could get news of the soft launch any day now. That being said, I continue to take advantage of the volatility, selling into strength and buying into weakness. Even after selling a part of my position, FTEC is still my largest holding in terms of dollar value thanks to this recent run and I think it could go up further. But at this point in time I don't think it's a bad idea to take SOME off the table if you are already up over 100% like I am.

For those who are not in FTEC but might be interested in swing trading the hype or as a spec buy longer term hold, I think that is still a good idea because I think FTEC is going higher. There's a difference between someone owning a stock that has grown to a large portion of their portfolio and wanting to sell SOME shares but still owning a LARGE POSITION and someone who would be buying those same shares off of that person to INITIATE a position. Apparently there's some pea-brained traders in this market who can't wrap their heads around a basic concept like this and have to conclude "oh, he is trying to dump shares to you pump and dump pump and dump". So I thought I'd make this very clear. I am selling only because I own too much. You are buying because you don't own enough. We both stand to benefit from a price increase and are betting against a price decrease.

Just because I am selling some of my shares does not mean it's a sell. But at this point in time it is every person for themselves. I bought in and recommended FTEC when it was cheap and I am deep in the money. How high will it go? I have no idea. I am not giving any further recommendations, unless business development goes so well that I think FTEC goes from a hyped up speculative play to one that is undervalued based on fundamentals. I see this stock going one of three ways:

1. There is some kind of issue that delays the soft launch, or some other unforeseen hardship. The stock goes down.

2. The soft launch and full launch go off without a hitch. The stock goes absolutely ballistic in the following few weeks then tapers off as the business isn't as lucrative as first thought. If you look at PEEK I think this would be a great example of that effect. In the days leading up to the Halloween 2016 launch of Peeks Social, The stock raced from the 20's to 60 cents. In the three weeks after that it went as high as $2.39. It has sunk back down to 40 cents since then.

3. The soft launch and full launch go off without a hitch and FTEC starts making big money. This is the scenario where the sky is basically the limit on the stock. Lottery ticket type of returns. After taking profits to the point where you cannot lose on the stock, you might consider leaving a little on the table for this scenario.

I am enjoying the ride for now. But I'm not going to answer any questions about price targets or my selling strategy beyond what I've already done here. Sell a little into strength at every new high and buy back into weakness on any pullback. Along with prudent portfolio management when the stock becomes a very high percentage of my overall wealth, more than I am comfortable with.

2. Peak Positioning Technologies (PKK) debenture financing closed

PKK expects the debenture financing to help fund the minimum $20 million in capital required to set up ASFC to close by December 15. ASFC should be fully operational fairly soon after that. I really look forward to this debenture closing because I think that is the final step for PKK to move off this frustrating 5 cent stock price, despite the company making huge strides in setting up profitable lending and fintech businesses in China this year. Although the debenture closes in a month from now, I think that once the company makes it clear that the debenture is filled and some people were unsuccessful in getting a piece of the action, the stock will quickly move up as demand for the shares suddenly increases. The 5 cent warrants associated with the debenture would no longer be available to the market.

I am in complete hold mode on PKK until I see evidence that the 5 cent level is broken for good and I'd be willing to pay slightly more for shares to add to my position. But anyone looking to initiate a position should look into doing it sooner rather than later since the clock is ticking on the debenture.

3. Global Cannabis Applications (APP) release of Citizen Green

APP has been my diamond jewel in the couple of weeks since I wrote this piece, doubling in price in that time. Basically everything I said about FTEC applies here as well. The stock is up on hype, but there are a lot of near term catalysts that could cause that hype to run on much longer. The CEO made some very aggressive near-term projections on revenue and user base growth. So it could have huge upside on execution or downside on failure. APP has grown to a large portion of my portfolio so I sold some, but the majority of my position remains intact. I will continue to sell into strength and buy back on weakness.

Anyone who is looking for a potential high-flier that will be very volatile on hype with near-term catalysts, APP is an ideal candidate. APP has a fully diluted share structure of 68.5 million shares. That is a $22 million market cap fully diluted. FTEC has 87 million fully diluted shares, a $36 million fully diluted market cap. Both of these companies compare favourably to their blockchain-fad peers which have market caps well in excess of $100 million. Both APP and FTEC offer short term catalysts that drive revenue-generating businesses.

Another stock to consider in all this is ThreeD Capital (IDK). It bought into the recent APP private placement and owns 5 million APP shares (including convertible securities). If APP continues to run hard, IDK could follow suit as the value of this investment increases.

4. First Global Data (FGD) financials

FGD's Q3 financials, along with the rest of the financial releases mentioned on this list are due to come out by November 29. I'm most interested to see FGD's release. With profits in four of the last six quarters, it's the most advanced of the microcap companies I am invested in.

Q2 was a bit of a disappointment with single-digit growth over Q1 and a net loss. That being said, it was still a record quarter in terms of revenue for the company. I would like to see growth over Q2 well into the double digits. Profits will be nice, but if the company had to aggressively hire to fulfill many of the deals it has signed in 2017, I will be okay with that.

5. PKK financials

Revenue was $4,000 for Q3, aligned with my expectations that revenue would be small for the ASDS business that initiated in September. No orders were processed on Gold River and I think it's safe to say none will be processed until ASFC is live. While this revenue number seems paltry, keep in mind that this is just the first month of a recurring revenue business model. I look forward to a hockey stick type of revenue growth with profits once ASFC is up and running.

6. Lightning Ventures (LVI) financials

LVI claimed it was cash flow positive going forward in September. The real interesting set of financials will be Q4, but September does cover one month of Q3 so I think there will be something to look forward to here. LVI has been the beneficiary of much of my sells that took place on FTEC and APP. I bought up as many shares that I could under 4 cents and now that it is 4 cents I will spread any future profits from those two winners to other stocks. I am quite happy with my larger LVI position. I have a gut feeling something good will happen here and at 4 cents or less it is a good gamble.

7. FTEC financials

A week left until financials must be released. FTEC has pulled profits recently, but that has come in the form of gains on debt re-settlement. I would like to see continued re-settlement of debt that will further improve the balance sheet. I am not that excited to see the income statement just yet since none of the new proposed offerings have launched as of the end of Q3. But it would be nice to see some traction on the existing business.

8. FGD 40 U.S State licenses by the end of the year

FGD estimated to have 40 state money services licenses by the end of the year. The goal is to have the final 10 states in Q1. Hopefully California is one of the licenses that will get done in 2017 so FGD and LianLian Pay can fully launch and promote the WeChat remittance service across the U.S. The vast majority of Chinese citizens or people of Chinese decent reside in California or New York so the deal is getting minimal reach right now with the existing state licenses. 

9. Mission Ready Services (MRS) purchase order

As I admitted in my previous piece, I had to nuke my MRS position to load up on the blockchain name-drop fad, namely APP. This has turned out to be the correct move and now I have an interesting decision on my hands.

The news of a purchase order around MRS' $400 million multi-year supply agreement could be the biggest news maker of them all. But there comes a point in time when we're nearing the 11th hour. We're in the last week of November and we know that the last two weeks of December are basically write-offs. We are nearing a situation where the market might panic that this order won't come in Q4. I don't mean to make other people nervous, I am just coming from my perspective which is I have never spoken to the company and I don't think at this point management could say anything to reassure me that wouldn't be insider information anyways.

Now the decision point is, do I want to buy shares now, wait for a panic to buy on a dip or risk not having a position and waking up one day to see MRS up 300% by 9:45AM? Or breath a sign of relief after watching the stock tank on news of issues/delays with the deal. It's the same decision everyone else has to make.

10. Peeks (PEEK) proposed merger with Personas

People have private messaged me, confused that after the announced deal and 73 cent per share valuation that the stock had a very short-lived bounce and is back down. I was not surprised. To use one too many cliches, the stock is damaged goods right now and the market is in "show me the money" mode. PEEK isn't going to move until it demonstrates a marked step towards improved financials - much higher revenue growth, lower burn rate or profits, and strong growth in users.

At first this looks like I have a double standard. I'm willing to forgive PKK and not sell out of that stock despite the very obvious miss of the $500 million revenue and $25 million EBITDA projection that was set for this year. The difference is PKK didn't execute on that promise for (what I think is) a valid reason. The more lucrative opportunity around ASFC came up which should substantially increase profits once it goes live which will be very soon. Peeks has no excuse for not executing on some of the promises made at this time last year, except that Mark underestimated the difficulty and time needed to complete the tasks ahead of him. But with this may come an opportunity as well.

I think the stock is cheap and I now have enough spare cash to take a position once again. I plan to have a nominal position in time for the vote on the transaction just to get a seat at the meeting. Anything beyond that I'll have to take a wait and see approach. I would vote for the deal. It could always be better for shareholders like any deal could be, but it's not so off-base that it's worth voting against it and causing more headaches. Shareholders would be shooting themselves in the feet by voting no. Might as well agree to it so the company can move onto greener pastures ASAP.

No comments :

Post a Comment