Wednesday, November 26, 2014

Dourado Resources (DUO) - Tech Vend in?

There's no doubt that the current market for junior resources firms is bleak.

Technology start ups on the other hand are the flavour of the month.  This combination is resulting in a number of resources firms finding themselves with dwindling cash reserves and not many other alternatives but to vend in a Tech. firm to raise capital and rebirth.

Another company that has fallen into this category is Dourado Resources (DUO).  The Perth based company has been focusing on developing gold & copper projects (Mooloogool & Sabbath).

Their quarterly report to 30th September shows a company cash balance of $86,000. Subsequent Appendix 3b's (x2) show raisings of $25,000 and $75,000 both at $0.01 per share and a premium to prevailing share price at the time.

The company currently has a miniscule market capitalisation of $1.3 million and interestingly shareholders have approved raisings of up to $3.5 million to be made in the future, obviously significantly higher than the current market cap!  The company has stated that it is in advanced discussions with one party in regards to a capital raising initiative.

I would like to point readers to the announcement made to market on 20th of November titled "Company Update & Forward Strategy".  The market response on that day was quite muted however after market a number of popular Hotcopper members started spruiking the stock and the next day it surged from $0.01 to a high of $0.012.

Since the announcement the traders have moved on and sold the stock down steadily.  The announcement stated the company is discussing, negotiating and assessing opportunities in various sectors.  Three proposals have been put forward to them include one technology opportunity.

Considering the current market you would think that the only way to raise funds would be via a technology acquisition.  In conclusion, with a measly market cap and a possible tech vend in coming it's one worth watching, even more so with the price at or below the price before this new information has come to hand.  DUO shares closed today at $0.007.

Sunday, November 9, 2014

Broad Investments - Substantial Acquisition Coming?

An interesting announcement that came up on my radar during the week was one made by Broad Investments (BRO) on Wednesday in the form of a Market Update.

Readers of my blog will remember that I used to identify shell plays that may be about to vend in the next hottest or popular commodity or technology.  This form of speculating is very hit or miss although can be quite lucrative for the early mover who gets in at rock bottom and has a lot of patience.  There's also a good chance that nothing eventuates.  Recently, the hottest projects have been Graphite (this appears to have worn off, although OGI Group (OGI) was good fun to trade) or tech start ups.

Broad Investments (BRO) is one worthy of attention.  In it's recent Market Update the company advised that it has finally turned a profit after being listed on the ASX boards for a significant time.  It appears the company still uses the same announcement format from 8 years ago!  The company reported six consecutive quarters of being cash flow positive as well as a modest profit of $45,000 for the financial year ending 30/06/14.

The company activities involve the provision of telephony and communication services through its subsidiaries.  The company has a market capitalisation of approximately $2.5 million and as at 30th October it has cash equivalents of $575,000 (including cash $297,000 / ASX listed shares $47,000 / Trade receivables $232,000).  Revenue for the last financial year was $3.8 million.

The numbers stack up however the potential share price kicker was for those that read to the very last paragraph of the announcement which stated the following:

"the Directors and management are currently considering a substantial acquisition, which has now reached due diligence and independent valuation stage, but is still subject to successful financing and final terms and price negotiation. The Board will provide further updates should this or any other transaction it may be currently considering or working on, reaches a level of certainty in negotiations, due diligence and financing, which the Board can reasonably be confident of completion. "

BRO last traded at $0.003 on Friday on 2.5 million units.  The stock is thinly traded.