The Speculator

PORTFOLIO POINT: Internet entertainment company GoConnect blames VicTrack for delays in revenue growth, but predicts a turnaround this quarter.

GoConnect’s (GCN) latest March quarterly report reveals an 18% lift in cash receipts from customers and an encouraging 43% reduction in net cash outflows.

But those improvements would have been greater, according to the company’s chairman Richard Li, had it not been for delays in launching its Metro Netbay free WiFi service aimed at Melbourne’s 700,000 daily train commuters.

“The unfortunate delay has largely been due to disagreement over the exorbitant charges imposed on Netbay Internet by VicTrack, for the cable connection so that remaining infrastructure can be put in place before the service can be activated,” he said.

VicTrack is the Victorian government company that owns the real estate of Melbourne’s train stations.
“Had it not been for this disagreement over the unacceptable charge, the service could be live and activated within two days,” he added.

GoConnect is the appointed media sales agent for the free WiFi service and claims to have received strong support from a number of advertisers and advertising agencies keen to embrace the emerging media platform.

GoConnect announced it has lodged formal complaints to the Victorian transport minister and shadow transport minister, and believes the disagreement will be resolved soon so that the free WiFi service will start to contribute to revenue in the current quarter.

In the March quarter, cash receipts from customers rose 18% to $231,367 (previous March quarter $196,070) while net cash outflow was reduced by 43% to $339,386 (previously $597,214).

Li added that restructuring of GoConnect’s business in the past 12 months had led to savings in overheads and staff expenses, and improvements in productivity. (As pointed out previously in this column, GoConnect has undertaken a complex reorganisation of its Internet Protocol TV (IPTV) services, with various new partnerships aimed at delivering large audiences for potential advertisers.

GoConnect shares traded this morning at 2.7c, unchanged on last week’s close when 9.97 million shares changed hands at prices between 2.6c and 2.8c.

We’ll stick with our holding, given Li’s assurance in the latest quarterly report that: “Based on revenue to be generated from new and existing businesses, capital on hand and credit facility in place, GoConnect has sufficient capital for the next two quarters and beyond.”

GoConnect shareholders are further promised that within two weeks, further details will be made available to those readers who, like the Speculator, rank for free shares and entitlements in the planned ASX listings of two spin-offs – Priority One Network Group Ltd and manganese miner First Mongolian Resources Ltd.

-The Speculator portfolio, as at May 2
Company	Code	No of shares	Bought	Purchase price	Current price	Current value
Image Resources	IMA*	15,000	31/12/2010*	0.362 av	$0.395	$5,925
Viralytics	VLA	19,995	20/12/2011	$0.308	$0.350	$6,998
Robust Resources	ROL	6,000	31/12/2010*	$1.49 av	$1.200	$7,200
Scotgold Resources	SGZ	27,500	31/12/2010*	5.5 av	$0.080	$2,200
Coalworks	CWK	10,000	31/12/2010*	$0.830	$0.850	$8,500
GoConnect Ltd	GCN	250,000	31/12/2010*	0.034 av	$0.027	$6,750
Minemakers	MAK	20,000	25/01/2011*	0.425 av	$0.225	$4,500
Platsearch	PTS	20,000	8/02/2011*	$0.130	$0.080	$1,600
Broken Hill Prospecting	BPL	20,000	22/02/2011*	$0.160	$0.090	$1,800
Austpac Resources	APG	40,000	2/03/2011*	$0.060	$0.039	$1,560
Potash West	PWN	11,050	30/03/2011*	$0.200	$0.240	$2,652
Cortona Resources	CRC	20,000	13/04/2011*	0.146 av	$0.120	$2,400
Golden Gate Petroleum	GGP	408,500	20/04/2011*	0.0145 av	$0.018	$7,353
TNT Mines	TNT	4,440	22/07/2011*	$0.000	$0.250	$1,110
Quickstep Holdings	QHL	20,000	23/11/2011*	$0.185	$0.170	$3,400
Orpheus Energy	OEG	19,250	17/08/2011*	0.164 av	$0.115	$2,214
Black Mountain Resources	BMZ	10,000	17/04/2012	$0.300	$0.275	$2,750
Total value of portfolio						$68,912
Cash at bank						-$16,950
Total						$51,962
Portfolio change since January 3, 2012 (started with $50,000)						3.92%
All Ordinaries change since January 3 2012 (then 4155.22)						8.23%
*Shares held from previous year, carried at their December 30, 2011 closing price.

Takeover target rejects Minemakers’ boosted bid

Our portfolio stock Minemakers (MAK) appears unlikely to win its all-paper bid for control of UCL Resources (UCL), its partner in a joint venture over a world-ranking phosphate deposit in offshore Namibia, on the west coast of Africa.

On February 15, the Speculator reported Minemakers’ intention to make an off-market offer of nine of its shares for every 10 UCL shares. At that time, the offer was worth 30.2c per UCL share, based on Minemakers’ closing price of 33.5c immediately ahead of the offer. That represented a premium of 59.7% to UCL’s closing price of 19c the same day.

The target promptly rejected the offer, with UCL’s biggest shareholder – billionaire investor John Kahlbetzer, who holds 31.69% – saying he would not accept the offer or any increased offer.

Minemakers’ shares have since tanked to 22.5c, half a cent above their year-low and well down from their high of 51c.

On Monday, Minemakers announced a final all-paper offer boosted to 13 of its shares for every 10 UCL Resources shares (Minemakers already owns 13.1% of UCL).

Once again, the target rejected the offer, pointing out that at Minemakers’ closing price of 22.5c on Monday, April 30, the new offer valued UCL’s shares at 29.3c a share, 3.1% lower than the initial offer.

Unfortunately for me and my readers, we’re on the wrong horse in this event. But Minemakers shareholders may find some comfort from the fact that both companies believe their Sandpiper phosphate deposit is worth significantly more.

Both Minemakers and UCL hold equal 42.5% interests in the joint venture company Namibian Marine Phosphate Pty Td, with the remaining 15% held by Namibian company Tungeni Investments.

Boost for cancer-cure hopeful Viralytics

Our portfolio stock Viralytics (VLA) has won some encouraging recognition in a nine-page overview undertaken by Microequities Research. Readers may inspect the report on the company’s website, viralytics.com.au.

The latest crop of quarterly reports due by April 30 to a still nervous sharemarket reveal most of our speculative portfolio stocks are adequately cashed-up to maintain their programs through until at least the end of the year.

David Haselhurst writes a monthly column for Money magazine. Please note that he is not able to provide personal replies to emails.