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.

1 comment:

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