Have not seen the Moneyweb article. I do not own these shares, but following this one closely. A couple of things. 1. volumes traded are very low, which means most are holding on to the share at present. 2. In the AltX, I expect share prices to be a little volatile. Declines of 10% are not suprising, given the huge demand for shares. 3. There might be a buying oppourtunity now. And finally, I like the airline as a passenger.
IMO: a large number of listings are showing signs of dying. Then: 1TM was not favoured by a large number of forumites, which may also be regarded as the sentiment of 'the general public'; the share is not liquid; the placement did not require a large amount of money, so the bookrun was relatively easy; an investor in this share should take a long term approach. I subscribed initially, bought more in @ 99c and sold out on 102c. Good riddance.
Where are the exceptional profits going to come from? If all it is going to give me is earnings growth, there are lots of companies that can give me that without the risks.. SAB Lib Int to name just 2.
Response to 1time's response on Moneyweb (credit to Mr Roy Topol) raises at least one very pointed question about their application of IAS16. "Revaluation surplus" (i.e. when you revalue your plane to more than its depreciated value based on current market prices) must *not* go through the income statement (unless you're reversing a previous valuation hit that did go through the income statement - still with me?). The increase in value of the asset goes through the statement of changes in equity to a non-distributable reserve - no impact on profit. I haven't checked the prospectus myself, but if they have put the increase in value of the planes through the P&L, they're in for a bumpy ride. Let alone the apparent inclusion of profit on acquisition through headline earnings. Looking through the prospectus - some pretty ugly graphs so far - clearly copied straight from excel with grey background, no units on axes, no title. Anybody who could put that in a supposedly important document isn't playing serious. Add that to Roy Topol's comment that audit fees were R91,000 (can this really be true) and it seems that the numbers themselves can't be much to trust. I think the R30m raised wasn't strictly correct. I think I heard the CEO on Moneyweb radio comment that there was an earlier private placing as well. Total amount raised still well below R100m. And the directors still control the company, and, hey-I'm-young-too, but the FD is 26? What, time for articles and maybe on year of additional work and now FD of a listed, 4 company group in the airline industry...? (Again, all credit to Mr Topol for unveiling this). Very curious to see how this pans out.
I don't think it's yet clear that 1Time's depreciation and revaluaton approach isn't correct in terms of IAS16. More on this later, but first let me consider a couple of points relating to IAS16. 1. The revaluation surplus (when the company revalues the 'planes upwards) should not go through earnings. (Except where the plane was previously revalued downwards. Revaluation downwards does go through earnings, unless it reduces a previous revaluation upwards). The difference goes through the statement of changes in equity. Now for 1Time, there is a revaluation surplus in the statement of changes in equity, so it looks as if they're probably not completely getting this wrong after all. 2. IAS16 requires depreciation over the useful life whether the cost or fair value approach is adopted. However, only depreciation down to its residual value. Also, depreciation "stops" when the carrying cost gets to the current fair value. Thus, it isn't simply a question of depreciating of 10 years meaning 10% of asset value per year. The residual value comes into this as well. (Depreciation is straight-line as disclosed in the prospectus. You *have* read the prospectus, right?) So, it's not clear that they've got these numbers wrong. What they do seem to have "got wrong" is the careful disclosure requirements of IAS16, which requires them to disclose important estimates used in calculating the depreciation, and the details of how (and who) did the revaluation. We really should have enough information to come pretty close to replicating such an important component of the costs for an airline. There is no option here. IAS16 requires it. So from my perspective, the fact that it isn't clear what they've done is a problem. Mr Topol is very right in his questions - we shouldn't have to guess and hope that it's all above board. One last point on the age of the FD. I don't think anyone has a problem with his age. The potential problem is with his experience. Working for less than 4 years, and just completed his articles at an audit firm that, while well-known and respectable, doesn't have the same cachet as one of the Big Four - I think it is fair that potential investors and current shareholders at least consider whether this is appropriate background and experience for such an important role in looking after shareholder money and reporting financial performance to shareholders. Well done Mr Topol, best of luck 1Time - but can we look forward to award-winning financial statements next time where full and useful disclosure is considered a point of pride for the company?