[Logan]

Magnite slides 18% as supply chain hits results; Peers sink in sympathy

Magnite reported a somewhat good result but since it didn’t meet analysts expectations, it fell more than 20% in just two days. Other ad-tech stocks followed Magnite and they were/are also down. The same happened when Snap Inc and Facebook reported results.

Some ad-tech stocks are trading at least 50% below their recent highs. Magnite is down more than 60%, PubMatic is down 60%, Viant is down more than 80%. TTD is down 30%. Criteo and Perion are doing well but these companies, like BCG, underperformed for many years.

Many months back when I talked about market factors some people mocked me and they tried to bring the perception that market factors don’t matter at all and that price changes happen only because promoters and management manipulate stock prices. Going by that logic all the promoters and management teams of all the ad-tech companies aren’t worried about the changing trends happening because of privacy changes in iOS and Chrome and they are just spending all their time manipulating their companies’ stock prices.

People misguided everyone just because they couldn’t agree with me. Just to disagree with me some people said momentum investors and traders won’t give a damn about fundamentals and they just follow some charts. If someone took that seriously and if a trader bought Magnite’s stock yesterday looking only at some charts and didn’t follow fundamentals then he/she would’ve lost 18% in just one day.

If market factors don’t matter then why did TTD, PubMatic fell when they haven’t yet reported their earnings? Why did all the ad-tech stocks fall when Snap reported it’s earnings? This is a very dynamic industry and things change very often. The positives of today will the negatives tomorrow and vice-versa. That’s why all the companies spend so much money on technology.

Serious Investors will be following the trends closely. Before 2020 no one was interested to invest in ad-tech stocks but things have changed a lot in the last 18 months. Magnite traded below $10 for four years and for more than a year it traded below $2. From $2 it went above $60 and that time no one said it was a manipulated rally like some genius people are saying now about BCG. The funny thing is some people don’t even understand the market risks and they think investing in stocks is like child’s play. They want the stock to always go up and any correction happens then it’s all manipulated. As written above, Magnite is down more than 60% from it’s highs so is it a correction or a manipulated movement? What about Viant which is doing so bad? PubMatic which is also down more than 60%? Are these because of market factors or all these part of some manipulation?

Last year Affle went up but BCG underperformed and that time people were saying that was because of manipulation but the same is happening with Perion and Criteo. These two didn’t perform that well when compared to Magnite, TTD etc but now are doing very well when others crashed/corrected.

Its very confusing for me to determine which of these are manipulated and which are genuine. I’ll try to figure it out – Last year Perion and Criteo were manipulated because they didn’t do well compared to Magnite etc and this year Magnite is manipulated because it has crashed/corrected more than 60%.

Any stock that doesn’t go up when other stocks are going up is a manipulated one and the stock that corrects after going up is also manipulated.

So, all the stocks that go up, and correct and the ones that don’t go up and later go up when others correct are all manipulated.

Damn, it’s so confusing.

There are no things like market factors and company specific factors that determine the movements of stock prices. Things like Daum case, Axis case etc don’t matter. Even for a company like IRCTC, company specific things don’t matter. Few days back it simply crashed 25% without considering the revenue (Convenience Fee) sharing with the railways and then suddenly came back to the previous price when railways withdrew that decision and said IRCTC need not share that revenue.

[odysee]

Thank you @Logan for providing the latest on market movement of the other well known players in the ad-tech field.
Would I be correct in assuming that the current market capitalisation of most, based on multiples of earnings per share or revenue, is still very substantial, and well beyond what BCG commands today?
You did mention supply chain issues for Magnite, but I presume those would get resolved going forward. In the interim, would not the competition exploit that opportunity if the demand is still intact or growing?
Or is that too simplistic an assumption?
Valuation and market price, unless at absurd levels, would tend to follow the business and growth, and the revenue and earnings, as you have pointed out many times earlier.
Closer to home, Affle continues to show growth ( albeit with a different business model and market ) and commands a relatively very high valuation.
BCG management has, for the first time ever, given a guidance that is very impressive in terms of growth in revenue and earnings, which would be keenly tracked. Bearing in mind the experience and expertise and knowledge of the business domain that Mr Reddy and his team operate in, it would indicate that opportunities in the ad-tech field ,through varied mediums, abound and will continue to expand as traditional and new businesses adopt and adapt to the digital world.
Would be very grateful for your thoughts and I apologise for my lack of expertise in the ad-tech domain.

[Logan]

Thanks @odysee, and sorry for the late reply. All these days I didn’t get time to reply to your message as I was very busy.

You are 100% right about other ad-tech companies’ valuations. Even though they have corrected, they still command better valuations compared to BCG. I wrote that post because I wanted everyone to know how other ad-tech stocks were performing. Some people were desperately trying to bring unwanted negative perception when BCG corrected. They think in the whole world only BCG corrects and rest all stocks always go up or they have this thinking that only for other companies market factors matter but for BCG the same things don’t matter. Those people are so childish and their arguments are so silly and I really can’t understand why investors give/gave so much importance to these silly people. What I don’t like about some people is that they don’t hesitate misguiding others. Their mindset and thinking are so rigid and they are not open to new ideas or opinions. They don’t feel any guilt after misguiding others and that really is a bad personality.

After Magnite didn’t do as per expectations, other ad-tech stocks fell but when TTD and PubMatic did well, all the ad-tech stock did very well. This shows that markets (everywhere) are not efficient and that investors have herd mentality. After Magnite’s results, TTD fell 10% and just because Magnite didn’t do so well (it actually did pretty well but not as per expectations), people sold TTD’s shares. I really can’t understand this logic. If everyone was rational and if the market was efficient all the time then people would’ve waited till TTD’s results to come to any conclusion about TTD. It’s simple as that.

Regarding supply chain issues, people are worried because they think advertisers (brands) may cut their ad budget which impacts most ad-tech companies directly. I don’t know how these things play out in the near-future. I did ask about inflation (which is related to supply chain issues) in the last conference call questionnaire that we sent and the CEO said that it doesn’t impact that much. I think the 3rd quarter (which is 4th quarter in the US) will be very interesting. Because of the holiday season there’ll be more shopping and travelling activities. The important thing is travel is reaching pre-Covid levels which is positive for ad-tech companies. There’ll be lot of travel, tourism, hotels, leisure related advertisements. These industries didn’t advertise after Covid outbreak.

On BCG’s valuation, BCG will get the valuation it deserves when the whole market understands it’s business properly. I think people are finally understanding the importance of investing in technology and they’re understanding that not all tech companies are “IT companies”. There’s still a long way to go but I’m glad that people are putting efforts and are actually trying to understand the company’s business and operations. There are still many people who are not that mature and they don’t even bother checking what the reality is. They say BCG’s receivables are scam without checking other ad-tech companies’ receivables. Magnite, TTD, PubMatic all have receivables almost double their revenues whereas BCG has little over 1/3rd it’s revenues. They think Affle (which has a completely different business model) is the only ad-tech company there is. Just because other companies aren’t listed here doesn’t mean we have to ignore them. We all understand this but those self-proclaimed experts will never understand.

As I’ve written many times before, when there are outstanding issues pending, the upside will be limited and when there are no outstanding issues, the downside will be limited. I even said that people who were trash talking about the CEO/company when the stock price was low will start praising him when the stock goes up and I’m proven right. DAUM case was very big back then but now (because of this forum) no one is worried about that. Only few ignorant people who can’t understand what’s happening think that Lycos/Daum is important.

[Logan]

Regarding Affle, it gets a premium valuation because of many reasons but I think there are 2 that are most important. One is that it came to the market at the right time where market factors benefited it. BCG was too early and companies that come early often do poorly. As they say “being too early is the same as being wrong” and we experienced it with BCG. Second is that Microsoft has a stake in it and that brought a lot of good press, publicity and people were ready to value it at premium levels. BCG also had many FIIs but they weren’t that well known. And the great thing about Affle is that it has good growth rates. BCG also had good growth rates like Affle but the 150cr write off and later declaring the loan as NPA brought a lot of negative press.

Regarding the CEO, Mr.Reddy, he’s very talented and that he knows what is important and what is not. I have massive respect for him and I have written about it many times also. One thing that he has to improve on is that giving one timeline and not committing to it and because of that many people lost trust in him and the company. He has all the good intentions – He conducts conference calls without fail and answers all the questions patiently (even some silly and stupid some questions) but sometimes he makes few mistakes and that overshadows good things. For example – when the company wanted to raise money through warrants last year, they didn’t say why it was needed and that caused everyone to make up hundreds of conspiracy theories. Had they informed us that they would use the money to acquire an audio ad company then everyone would’ve supported the CEO and the management.

Compared to the past, he has improved a lot and he’s understanding the market better. First the management’s attitude was – if we do the business well then the market would take care of the valuations automatically but when that didn’t happen, they changed their thinking. From 2019, they have improved a lot actually and it’s getting better and better. Now that the valuation has reached a decent level, there’ll be more scrutiny and hope they are ready to face that. All these years most of the critics were silly people on MMB and people with less followers on Twitter but now many stone-aged self-proclaimed experts with more following will start criticizing the company. They’ll compare it with some random IT/software companies (like Mastek or Happiest Minds or Tanla etc) and they’ll say BCG doesn’t deserve this valuation etc. Because of these type of people many start-ups didn’t list here and they waited till 2020 to list here. The CEO has to be ready to face tougher crowd/audience.

[whyShares]

Great news for Brightcom – it has been included in the new ‘MSCI India Domestic Small Cap Indexes List” effective from 1st December 2021. MSCI stands for ‘Morgan Stanley Capital International’, and their indexes are the benchmarks on which Foreign Investors base their investing decisions on. Most of them invest only in Companies that are included in MSCI indexes. So this is a big deal for BCG and may be todays breakout volumes in BCG trade in NSE and BSE could have been the result of FPI (Foreign Portfolio Investment).

This is the link to the new MSCI India Domestic Small Cap Indexes List:
https://www.msci.com/index-review-india-domestic

This is the link to know what MSCI is:
http://raconteur.digitalmagazines.online/msci-difference/p/5

[whyShares]

The link to the first page about MSCI is
http://raconteur.digitalmagazines.online/msci-difference/p/1

[rahul]

What a massive show by BCG. This has been a roller coaster ride, but loving every bit of it!!!
Congratulations everyone..!

[Abhishek]

Outstanding result, beaten projection, happy investing .. please share your views

[VALUEBUYER001]

Congratulations to all BCGians

[Logan]

The results are flattish because there’s no growth in EPS. The company has to perform better than this because all that matters is EPS and not the actual growth in business. Profits doubling doesn’t matter. 72% growth in revenue also doesn’t matter. Adding new clients and expecting better free cash flows in the future also doesn’t matter.

When warrants were converted to shares I wrote that ratio investors would start saying that promoters sold their shares and I was right on that. Now ratio investors are saying there’s no growth in the business because EPS is same.

Forget understanding the business, some people can’t even read P&L statement. I seriously don’t know what to say. Common sense is a luxury for some people. In this day and age some people behave as if they are living in stone age.

I forgot to mention one more thing – I thought only Mr.Peshwa Acharya was naive but it turns out another well respected professional Mr.Satish Cheeti is also naive. He’s joining this fake company willingly. It’s fake because it makes 98% profits outside of India. If you’re an Indian company and if you do more business outside India then actually it’s a crime. I love this logic.

[odysee]

@Logan, ego does not permit naysayers to acknowledge their deficiencies in objective appreciation of reality even when it stares them in the face.
A glass half-full will always remain so for petty minded people irrespective of the increase in the size of the vessel.
The remarkable performance by Mr Reddy and his team needs to be applauded by all and sundry, and all of us who have kept our faith in the company and the management over these many years need a quiet moment to reflect and celebrate this vindication of our conviction.
You have played a major role in the maintenance of the faith of the members on this forum by providing such in-depth data and analysis and logical viewpoints, and I am convinced that all my fellow members will join me in expressing my(our) appreciation of your immense contribution to the deeper understanding and belief in this grossly underestimated and unrecognised new age enterprise, and the very smart people behind it.

[odysee]

Should be read as ‘A glass half-empty rather than half-full’. Apologies. Muddled expression at this time of the night😊

[myainvest]

Logan, hope you are not serious in your last post!! It is a spectacular result ! Two things, which I liked a lot in the information submitted to exchanges are about the FCF and the declaration that EY is the auditor for OMS! Although SRK had mentioned it numerous times in concall about EY, guess it is the first time submitted to exchanges officially, if I’m not wrong!!

[JackSparrow13]

First Post here.
Invested since 2014, when there was a big rally and fall.

I would like to thank Board Seniors, for freely sharing their knowledge, This proved critical this year, especially when share price started crossing my purchase price, and started hitting upper circuits for breakfast at 9.15 am. Did not sell my quantity.

Coming to the result discussion, I found 3 aspects in management commentary.
1.” *Brightcom Media, the brand operating under our Israeli subsidiary OMS (Online Media Solutions), has been the epicentre of improvement in traffic management, contributing hugely to improving the company’s profitability. (EY is the statutory auditor of OMS). (This entity contributes over 40% of our overall business)”
Loved the small referance to EY in this line. Nice punch to trollers, who think all foreign income is imagination. I always used to wonder if foreign income is day dream, there was no reason for company to show slow growth over last 3-5 years.

2.I find it rare for management (in general) to set goals in quarterly management updates (normally they are self-congratulatory – to influence shareholder opinion)
“Our focus is singularly on creating significant shareholder value, by constantly improving Free Cash generation, and increasing Return on Equity (RoE). We remain deeply committed to the highest & improving standards of governance, accounting and transparency in our operations, for the benefit of all stakeholders. ”

3. Setting target on FCF
“Based on the revenues and profits growth, the company is targeting a Free Cash Flow ( FCF) of about Rs 250 crores by the end of March 2022. And looking at an additional 250 crores by the end of June 2022. ”

A couple of my other thoughts.
1. This quarterly result is perhaps devoid of any impact of any acquired/ to be acquired companie(s). So, if/when consolidated, in future, the future results may be even more stunning.
2.One of the key reasons for market to distrust Brightcom in past was low/neglible dividends(Show me the Cash!). Perhaps after acquisition of Indian company, the dividend payout might be increased. This may also signal better corporate governance (management sharing gains with shareholders).

[vgsatwork]

Finally the business turnaround is visible in results and the organic, industry leading growth is shown by BCG and I am quite thrilled with the numbers, especially because the company met the higher end of it’s projections. That is what separtes men from boys. Also, the intent and tone of the messaging in terms of the cash flow, Return on Equity, delivering value to the shareholders are very comforting and is a welcome one.

BCG, from now onwards in the big league and it has to match that expectation when it comes to sharing updates/communicating with the investors to show that they are now a more matured and investor friendly company.

I feel BCG still has to improve a lot on that front. I know it is hardly 2 weeks or so since Manohar Mollama had resigned, but I was expecting an announcement w.r.t new Company secretary (Since he is the face of the company to all investors), which was missing. Also, I was expecting the management to emphasize the projection numbers given in late august w.r.t Q3/Q4 anf FY 22 full year projection numbers (Either confirming the same number or giving a more revised projection). Again, there was no mention of the projection numbers for Q3/Q4, which would have done a world of good, if announced along with the results. Especially when the company indicated about the free cash flow and Return on Equity. Also, another update that would have been apt to include, but was given a complete miss is about the proposed india acquisition. Given that the company had conveyed to the market about the LOI that it had signed with the indian company back in June and now it is mid november, good 3+ months since that announcement and hence an update on the same is something that should be provided to the investors. Any kind of update around that would have been helpful. I am not sure why the company chose to keep quiet on the same. I hope that the acquisition plan is still ON.

[odysee]

@ vgsatwork, your comments are well taken.
But the Coy Secretary is never the face of the company, so to speak. I’m sure the management is in the process of identifying and filling that position expeditiously. If the departure of Mr Malloma was somewhat sudden, then it would obviously take some time for a fresh recruitment at that level.
This reporting was for quarterly ( and half-yearly) unaudited results only, as per statutory requirements. And not for providing additional information on future projections or company developments on acquisition or otherwise.
I’m sure some of us can pose all business and company related queries including for LOC, future guidance, Acquisitions etc. at the conference call scheduled for Tuesday 16th November 2021.
Best wishes.

[whyShares]

BCG will take off now. Results announced show 75% increase in sales and doubling of profits, but PE remains the same due to doubling of Equity base due to Bonus shares and new issue. Industry leaders like Peshwa Acharya and Satish Cheeti (Link below) have joined BCG in top positions. Inclusion in the MSCI index is recognition of BCG as an investable stock for FPI (Foreign Portfolio Investors).
The 75% increase in sales must be a compounding increase each month and the trend should keep on for some time. Expect substantial increase in turnover and again doubling of profits next quarter.
Looking forward to many UCs and a rapid rise in the share price

[whyShares]

Peshwa Acharya to steer Brightcom Group strategy as President

https://www.thehindubusinessline.com/companies/peshwa-acharya-to-steer-brightcom-group-strategy-as-president/article36451020.ece

[whyShares]

Satish Cheeti to head Brightcom Audio

https://www.thehindubusinessline.com/companies/satish-cheeti-to-head-brightcom-audio/article37377112.ece

[VALUEBUYER001]

Bcg investors concall postponed to 20.11.2021 @ 11.00 a.m

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