On The House (OTH) – Putting Lipstick on a Pig

By Jason Fittler

OTH is another example of putting lipstick on a pig, after application it is still a pig.

OTH is a company that runs an integrated database of property sales and rental history, property descriptions, for sale and rental listings and property valuation estimates. The company seeks to deliver a platform incorporating government sales data, real estate industry content, analytical tools and property management features to real estate agents.

This stock listed on the 3rd of June 2011. The offer was for the sale of 55 million shares at a dollar, total shares in the company were 81.5 million.

As such the broking house which floated this stock valued the company at $81.5 million. The question is how?

The forecast income net profit after tax for 2012 is $2 million. This a return equity of 2.4% with a dividend yield of 0.6%pa. keep in mind that term deposits pay 6% or 10 times what you will get from this stock with no risk.

A sensible investor would be cashing a 10% return which values this stock around the $20 million mark which is 75% of the broker’s valuation.

The company currently has a market cap of $23 million. 

The financial statements raises more red flags, 2010 and 2011 Financials are pro form and insufficient to allow any real analysis of the business.  There is a good reason for this; the company reported a loss of $1.9 million for 2011. Losses do not read well in offer documents.

This was a pump and dump, off loading a dog to Mum and Dad investors.

We saw these sorts of stocks back in the Dot.com boom. Promising Blue Sky with no tangible assets or profit history.

The stock was over prices from the start and those unfortunate enough to be involved in the float have lost 63% in the last 3 months. The stock is now trading at $0.37 wiping out a massive $51 million dollars of investors funds.  

Even speculators should give this one a wide berth.