CUP, GNG – penny dreadfuls

CUP: Online-dating website CUP (Cupid) is down 7% in early trading today – and down 22% over 5d. BBC News reports “Concerns raised of web dating ‘fake profiles'”, and Law360 reports “UK Regulator Prods Dating Sites Over Data Handling Practices”. Never a dull moment for shareholders.

GNG: Chinese internet software solutions provider Geong International has today released yet another set of abysmal results, sending the share price down 12% in early trading. Turnover, margins, profits, earnings per share, cash balances and order book are all down.

The only thing that seems to be up are their trade receivables. Again! Trade receivables are £22.1m against a turnover of £9.6m. Debtor days are now nearly a staggering 28 months. These figures have been getting progressively worse through time. Their auditors issue an emphasis of matter: “there is nevertheless material uncertainty regarding the recoverability of the accrued income amount.”

The company says “We are aware of the need to improve the working capital position through the quicker collection of receivables.” The problem here is that the company has always been saying that. They say that an employees has been recruited to ensure “that the
collection opportunities are monitored”. Fine, but all the monitoring in the world wont actually put the money in the bank.

The share price of GNG started the year at around 4.9p. During January, the share price rose to about 7.2p on the back of a high-profile and much-respected investor taking a stake in the company. The share price is down a gut-wrenching 42% YTD, which illustrates how careful you have to be following even experienced investors.

In theory, the company is a net-net. However, collection of
receivables seems almost non-existent, and the company once again posted negative net cash flow. If I strip out receivables, then the company actually has a negative NCAV (Net Current Asset Value: Net Current Assets less non-current liabilities). Interest cover is an inadequate 3.29. The company has a Piotroski score of 3 – a very poor showing indeed.

Avoid.

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About mcturra2000

Computer programmer living in Scotland.
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