Aveng Stock Analysis: Worth the cents?

Is Aveng a good investment?

I did something bad, I broke my rules and dived into Aveng's financial statements. It was for the Channel's viewers and subscribers, so it was done out of altruism. I do not do fundamental analysis, although what I did cannot be fully described as fundamental analysis. Note that I have already made a video of Aveng analysis using technical analysis. I did this to help the people who are supporting the YouTube Channel; most of those people are interested in Aveng, some of them know why whereas others do not, they bought the hype.

What is in the financials?

I used the company's 2021 interim results for the analysis. I then compared those with their most recent trading statement. Below is a summary of the interim results.

As you can see, it is green everywhere. I love the growth in revenue, it means that there is money coming into the business bank accounts. Another great thing is the net cash, I do not know what it means but it good to see the significant change; from a loss of R552 million to a positive figure of R579 million. Also, there is a positive headline earnings, from a loss of 1.1 cents to a positive 0.6 cents. Overall great results.

The elephant in the room of course is the debt burden. The R 1 billion Rights Offer helped to shave some debt, this led to the subsequent R100 million Rights Offer that was concluded in June. Plus the company is still sitting in a pile of assets that it is yet to dispose, and what is the story of the liabilities they want to dispose, if you have an answer leave it in the comments below.

I am not a Value Investor, in case you did not know, but I have paged through The Intelligent Investor. One of the things I learnt there and never forgot is the net working capital. 

Net working capital = current assets - current liabilites

Current assets is anything that a company can convert into cash within 12 months. Current liabilities is those liabilities that are due within 12 months. A positive net working capital means that the business is healthy, it is the opposite for a negative value. In Aveng's case, you get a negative figure if you do the math. The picture changes if you take the assets & liabilities that are held for disposal, then you get a marginal R 263 million. So far these are good sets of results.

Net Asset Value

Well, I have no idea what this means in but humour me nonetheless. In my limited thinking, this is the fair value of the stock, theoretically what should be the trading price. I believe that if you ask different Analyst you will get a different NAV for Aveng, unless I am confusing NAV to intrinsic value. Anyway, Aveng already mentions that the share price is significantly below the NAV, at the time of reporting the share price was 2 cents/share. They reported a NAV of 10.8 cents. I will just use their figure. This implies that Aveng is significantly undervalued, except that it is now trading between 4 & 5 cents, but still undervalued.

Whilst this is all positive, I still feel sorry for those people who held the stock only to see it shave off half the market capitalisation. Based on these figures, assuming they are not engineered numbers, it is worthwhile to park a few cents in the stock for as long as it is selling below 10 cents, anything above 11 cent is a premium. However, keep in mind that the risk of delisting will always be there!

Where to from here?

There is not much that we find in the latest trading statement. Aveng shaved off some debts, still have assets & liabilities to dispose. Few jobs have been added on the order book. Ideally I want to see the company increasing revenue, earnings, cash in hand, and obviously reducing debt. As a shareholder, I am looking forward to their 2021 final results.

Worth it?

I cannot answer that for you but the technicals look good and I already have a speculative position on the stock.

Disclaimer: This is an opinion piece, it should not be interpreted as financial advice.