Should You Buy Monitise Plc After Today’s Results?

Do today’s results mark a turning point for Monitise Plc (LON:MONI)?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in mobile payment specialist Monitise (LSE: MONI) edged higher this morning after the firm published its half-year results that were broadly in line with expectations.

Revenue for the first half of the year was £33.4m, down by 21% from £42.4m during the same period last year. Losses from earnings before interest, tax, depreciation and amortisation (EBITDA) were £20.2m, reduced from an EBITDA loss of £30.8m during the first half of last year.

Importantly, Monitise expects the second half of the year to generate an EBITDA profit. The firm still has a cash balance of £53.4m and says it’s “well-funded to meet its future plans”.

Should you invest £1,000 in Boohoo Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Boohoo Group made the list?

See the 6 stocks

Good news?

The shares’ positive reaction will be a relief for shareholders who have seen the value of their investment fall by 92% over the last year. However, I do have some concerns.

Monitise is pinning its hopes for the future on its cloud-based FINkit subscription platform. This is designed to replace the firm’s older Monitise Enterprise Platform (MEP) in Europe and the Vantage Platform in the Americas.

However, the majority of revenues still come from the MEP and Vantage platforms. FINkit deployment is at an early stage and the level of take-up by existing customers is uncertain. In today’s results, Monitise said:

As some existing MEP contracts come to an end, and while we seek to transition these clients to FINkit, we have plans in place to manage the cost base and the potential impact on EBITDA.”

This suggests to me that Monitise isn’t entirely confident that existing customers such as RBS and Santander will be happy switch from MEP to FINkit.

Can Monitise really make a profit?

One of the ways in which Monitise hopes to achieve an EBITDA profit this year is by continuing to cut costs. However, my calculations suggest this will be quite a challenge.

The firm’s total costs during the six months to 31 December were £53.6m, 23% less than during the same period the previous year.

Monitise expects to reduce costs by a further £3m per month during the second half of the financial year. This suggests that total costs should fall to £35.6m. This is still more than first half revenue of £33.4m.

Monitise says that revenue is expected to be “broadly similar” during the second half. That language doesn’t suggest to me that the firm expects much sales growth. Yet I estimate that for costs to fall below revenue, sales growth of at least 6.5% will be needed during the second half of the year.

I’m not sure how Monitise can be confident of positive EBITDA during the second half when its own forecasts suggest that costs may still be higher than revenue during this period.

But there’s plenty of cash…

It’s true that Monitise does still have plenty of cash. The firm reported a cash balance of £53.4m today, albeit down from £88.8m six months ago.

If cash burn does slow during the second half, as expected, then Monitise will gain time to make a success of its FINkit solution. However, in my view there’s a definite risk that sales will continue to disappoint and that Monitise may eventually run short of cash again.

Should you buy Boohoo Group now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Young black colleagues high-fiving each other at work
Investing Articles

Up 73% in one year, is this the best value stock in the FTSE 100?

A brilliant run of form suggests this FTSE 100 giant should no longer make the cut as a value stock.…

Read more »

Investing Articles

The best could yet be to come for UK shares! I’m buying these ones

Amid ongoing stock market turbulence, this writer's been adding selected UK shares to his portfolio. Here's why and what he…

Read more »

Top Stocks

4 UK stocks trading well below book value to consider buying

Sometimes, it pays to be contrarian: who says the UK market has priced a stock precisely right, anyway?

Read more »

Investing Articles

The S&P 500’s 12% off its highs. Is now a good time to buy US shares for an ISA?

Right now, a lot of British investors are wondering whether it’s a good time to buy US shares. Here, Edward…

Read more »

Investing Articles

2 stocks that could help investors earn £2,516 of passive income per year from a £20k ISA

Our writer selects two high-yield UK dividend shares for investors to consider that could turbocharge a passive income portfolio.

Read more »

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Why I think FTSE 100 dividend shares could build a better second income than the S&P 500

US tech stocks are hot, but when aiming for a sustainable second income later in life, our writer prefers dividend-paying…

Read more »

Investing Articles

2 blue-chip FTSE 100 shares Hargreaves Lansdown investors have been buying in the market sell-off

When global markets were in meltdown mode, Hargreaves Lansdown investors recently piled into these two well-known FTSE 100 names.

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Investors considering £10,000 of Sainsbury’s shares could one day make £2,590 a year in dividend income!

Sainsbury’s shares deliver a yield significantly over the FTSE 100’s 3.8% average and they also look very undervalued against their…

Read more »