Just in two days Imimobile stock price increased by +10%, thus it was time to make a decision – sell the shares and fix the +15% profit. Fly with the trend. Use the momentum. Act spontaneous on the surface, but have the calculations behind. Yes, company results are great, but not to justify that high leap in the price. All the sudden raise in the price is of course attributable to the upcoming yearly results on 23 June 2016. Lets see what do they promise.

Imimobile stock price - investorship.uk

Imimobile stock price – investorship.uk

Already two weeks ago preparations started to sell the shares of the company. The idea was to sell just before the announcement of the results, expecting that market will price in all the expectations and release the holdings before the summer, when no announcements are expected from the market. It worked. However, if the price would have not gone up so much last two days, the decision to sell would be postponed after the announcement of the results.

According to the timing of the results last year, tomorrow, 23 June 2016 company should announce yearly 2016 results. Trading update, made by Imimobile itself, indicated that company is doing very well and annual results will be very good. Imimobile declared that strong trading momentum and organic growth in all regions and business units will result in revenue and gross profit increasing by c25% and c20% respectively. That is very strong. My calculations and two year forecast show following indicators:

Imimobile (IMO FY, Mar31 2014 FY, Mar31 2015 Forecast FY, Mar31 2016 Forecast FY, Mar31 2017
cap, mGBP 58.1 70.3 100 100
Sales 43.4 48.9 60.7 69.8
EBITDA 7.3 9.2 10.3 11.9
EBITDA margin 16.8% 18.8% 17.0% 17.0%
Net income 3.92 -3.4 4.2 4.9
Equity 13.9 24.4 28.6 33.5
Net debt -9.3 -14.6 -18.8 -23.7
CFO before WC 7.2 9.2 9.2 9.2
P/S 1.3 1.4 1.6 1.4
EV/EBITDA 6.7 6.1 7.9 6.4
P/E 14.8 -20.7 23.5 20.5
P/BV 4.2 2.9 3.5 3.0

 

The forecasted results show that company at trades 7.9 Enterprise value to EBITDA for this year and 6.4 for the next year. The investment was made when the company traded at 6.1 EV/EBITDA, thus it is a good time to part with the shares of the company.

Looking from the tecnical part of trade, company shares rose too dramatically in two days. It looks like more emotional decision rather than fundamentally driven decision. After the results and perhaps after the summer company’s share might adjust a little bit, which might give a good reason to return to the stocks.

The decision to sell the stocks is inline with the earlier defined target price of £1.65 per share.

Income: Price £1.72 per share x 398 shares = £683.92 in total – £7.5 commission = total received to the account £676.42

Service Fee: There was a service fee to bestinvest.co.uk every month for holding Imimobile and other shares: 0.32+0.34+0.33+0.31+0.29+0.28+0.28= £2.15 x weight of Imimobile shares in the whole portfolio 666/(666+292) = £1.49

Profit: £676.42 income – £1.49 service fee – £598.53 initial purchase =  £76.4

Investment Return: £76.4 profit / £598.53 initial purchase = 15.4%

Portfolio outcome

Both trades of Imimobile were very successful, earning +25% and +15%.  However, the other investment in Quantum Pharma is literally terrible, at this moment staying with -40% loss. The mistake was made not to sell it when it broke the stop loss. Again and again, lesson for myself – never hesitate to sell the stock that does not confirm the expectations and calculations. At this moment the stock Quantum Pharma is worth to keep, because sector’s average EV/EBITDA is around 12, while company trades 8.2 future 2017 results. Due to the Quantum Pharma loss, the overall portfolio has not changed since the beginning.

Investment Portfolio: £1003.22

Portfolio Return: £1003.22 current amount / £1000 initial amount = +0.3%