XLM – XLMedia – I’m sceptical

XLM (XLMedia): “The Company operates through three segments: Publishing, Media and Partners Network. Its Publishing segment owns over 2,000 informational Websites in 17 languages. These Websites refer customers to online businesses. The sites’ content, written by professional writers, is designed to attract online traffic which it then directs to its customers online businesses. Its Media segment buys advertising space on search engines, Websites, mobile and social networks and places adverts referring potential users to its customers’ Websites or to its own Websites. Its Partners Network segment manages marketing partners, whose role is to direct online traffic to its customers. It is responsible for paying its partners. Its partner program enables affiliates to have a single point of contact to direct traffic to, and receive monies from, rather than engaging in multilateral negotiation, administration and collection of revenues. ”

It basically seems to be about SEO (search engine optimisation), which drives traffic to gambling websites. Something like that, anyway.

The shares fell 11.3% on Friday to 67p. Paul Scott did an audiocast with Leon Boros yesterday (http://is.gd/hBj9wN). Leon seems bullish on the stock, whilst Paul is sceptical. No doubt Leon is much cannier than me, so bear in mind that I KNOW NOTHING.

Its margins are around 29%, over twice that its subsector of “media agencies”, which is around 12% (source: Sharelock Holmes). Its average ROCE if 56.2% according to Stockopedia. Its revenues went from $11m in 2010, and is expected to be $113m in 2016. It seems too good to be true, to be honest.

It appears to have issued issued equity of $14m in 2013, and $49m in 2014. $38m was spent on “investing activities”. I’m not a fan of companies that grow like that.

It’s on AIM, its registered office is in Jersey, and from what I can glean from the ADVFN boards, it is actually an Israeli company. It was floated in March 2014. Stockopedia puts its Earnings Manipulation Risk as High.

FWIW, I would rate this company as “a disaster waiting to happen”, it’s just a question of time. No doubt the Market will prove me wrong in the short term, medium term, and possibly even in the long term. To my mind, though, this company simply reeks, and I won’t touch it with a bargepole.

As ever, we’ll see.


About mcturra2000

Computer programmer living in Scotland.
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