Habemus Papam
A new pope, a few stocks and some updates
First of all, congrats to all my American friends on the first American Pope.
Now back to stocks.
We’re in the midst of earnings season and with a ton of companies reporting, it’s time to check in on a few names we’ve discussed.
But first, let’s take a look at a couple of names where we are starting to do some serious work on.
LiveOne (LVO - $66m market cap).
Audio streaming company LiveOne was highlighted in our latest TMM, our weekly event-driven and special sits monitor.
This one doesn’t exactly scream quality, but there’s interesting action going on with concrete catalysts that might trigger strong moves in the near future.
While LiveOne has growth revenues from roughly $40m in 2020 to ~$110m expected for FY25 (YE March), this was mainly the consequence of acquisitions paid for in stock.
As often with these small companies desiring to grow rapidly, the (faulty) idea is ‘grow revenues now and we’ll deal with the costs later’. As a consequence, LiveOne has a pretty bloated cost base for its size and offering. What also didn’t help was a pretty promotional management overpromising and underdelivering.
The consequence has been this price action:
The company stopped acquiring in recent years and refocused on improving earnings, with decent success.
But the share price is still hovering at the lows, even risking delisting. And you can sense management’s frustration. Each quarter they discuss the valuation and compare it to ‘peers’.
However, recently LiveOne was triggered by the sale of Napster for $207m (shocked to learn Napster still exists), which according to the company indicates that it is significantly undervalued.
As a consequence, the company decided it will be exploring strategic options and basically put itself up for sale, mentioning ‘global interest in the company and its subsidiaries’.
I have a feeling this one will be sold, and rather quickly.
Compounding the interesting dynamic is that LiveOne also owns ~72% of PodcastOne (PODC), currently reflects ~50% of LiveOne's market cap.
We can’t discuss positioning, but we’re treating this as a (potential) option, keeping in mind that this is your classic hairy micro-cap with a pretty promotional management.
Just for laughs, here’s the CEO in the Q3 call:
And, yeah, I can confidently tell you, that if you're looking at 12 months, this is the first time the company has had an opportunity to be a multi- billion dollar company over the next 2 years to 3 years. [] And I say this totally humbly. I've never had a stock didn't go to $25 or better if you have gone to $100 or better. We never know when they really take off when lightning strikes, but this is different market out there. This is a different world out there. We got a lot of work to do, but I could tell you confidently this is the first time that I see a multibillion dollar company over the next 24 months to 36 months. If we stay focused, we keep executing…”
Intermap Technologies (IMP Canada – US$83m market cap)
Moving from speculative trading to investing.
Intermap is a geospatial intelligence provider, producing 3D digital representations of Earth’s surface and the features on it. Governments rely on Intermap for national mapping programs and new technology, with commercial applications including insurance, aviation, telecom, energy, climate resilience, space, etc.
Revenues are earned through three main avenues: Acquisition Services (project based work collecting and integrating data, mostly for governments), Value-added Data services (generally providing much more detailed and customized data), and Software and Solutions (which includes all necessary tools for clients to really dig into and make the most of their geospatial data).
This company had a very volatile history, with deep lows and not that many highs.
But after a long restructuring period Intermap seems to have found steady momentum upwards, winning a few large contracts and quite a few smaller ones, which will push group ebitda to record levels this year, and much more after.
2024 was already a big inflection year, with revenues up over 180% to $17.6m, of which $10.5m from Acquisition Services related to a large Indonesian project, and the rest of the revenues roughly split between the rest of the units. Roughly half of these revenues are recurring.
Importantly, operating leverage worked its magic and ebitda margins jumped from negative to over 20%.
And while 2024 was nice, the future looks even better.
A key driver of this is the Indonesian One Map Program, for which Intermap already generated a nice ~$11m. But the entire project is $180m for years 2 (this year) to 5, which is pretty promising for the next years. On top of this, there’s some serious momentum in US Defense contracting as well as from commercial players.
A beautiful aspect of these revenues is that the capex needs are often financed by the clients, while the data ownership is in most cases maintained. This feeds the recurring nature of revenues (as maps need to be continuously updated and improved) and high margin potential of earnings. What’s more, the data can be leveraged for other clients.
2025 guidance is for to almost double revenues with further margin expansion as operating leverage continues to feed into the numbers. Management flagged that 50%+ ebitda margins are feasible in the future.
At roughly 9x ev/ebitda on FY25e for what could be 40% ebitda cagr over the next three years, I’m willing to take the bet to find out what this company really can do.
There’s a ton of interesting stuff going on here. As a good start, you can find some recent presentations here and here.
But after these two micro-caps, let’s get more serious.