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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Hi Peter
I have been doing well with TNC over the past few months and it is up to 5% of my portfolio with a 50% gain. You still rank it as a B- but since your last report it has doubled its Market Cap and finalized its most recent acquisition. Would you still consider it a B- because of risk? Do you think I should take profits or let it ride a while longer. It is rather illiquid at times.

Also KUDOS on your chapter in the Market Masters book by Robin Speziale. I am on my second reading. It is the best book on investing I have read. Extremely diverse ideas. From common sense to algorithms. I highly recommend it!
Read Answer Asked by Bryan on July 07, 2016
Q: Hello again team,

One of the companies I have been absolutely smoked on is PHM. Currently I hold it, and I see that in previous questions that it is likely trading under fair value but with concerns of further losses. With the recent quarter being as messy as it was I am stuck in two modes of thought. 1) Wait for a quarter with business write offs removed to show more clarity on the situation. 2) Swap the stock with something for fewer issues. I am considering DHX media and TIO Networks. I found DHX interesting after reading the research report in regards to opening up more channels for distribution. Do you have a fcff, or RI (Residual Income Model) stock price valuation on the three companies and which do you prefer at this moment? Do you also have separate models / option pricing models for DHX in regards to opening up a youtube channel, netflix, or China subsidiary? Do you have any thoughts on which options provide the greatest benefit?

Thank you, looking forward to any feedback that you can provide.
Read Answer Asked by Liam on June 21, 2016
Q: Hello 5i.
Would you please consider the following as recommend a company or two that may fit the bill?

I have been looking at the tech stocks run up in USA but not yet joined the ride. I do believe FB, Amazon and Google are super companies and stocks but can not seem to pull the trigger given high price and buying in US$.

Is there a Tech stock worth purchasing that would sub for these US juggernauts(business growth and price appreciation) - Or do I just move on Google or Amazon?
Does TIO fit the bill given its high score as one of Canada's fastest growing companies?

Thanks for your contributions.
Dave
Read Answer Asked by Dave on June 03, 2016
Q: Dear Peter and 5i research team:
Thank you for the advise on Royal Nickel. I sold my Initial investment In Royal Nickel and am sitting risk free thanks to you and your team. I would like to ask you for 3 small cap penny stocks you would think may run?
Thanks for you and your team saving me allot of heart ache. And for your time and courtesy in sending me such well thought out, well written advise.
Hugh in Calgary
Read Answer Asked by Hugh on May 03, 2016
Q: Hello Peter,

Could you please provide an insight on how stock prices tend to behave when a private placement is announced as in case of Tio Networks. Does it kind of set a floor? Does the price trend down after the closing date of Jan 28. I have been keeping an eye with the intention of taking a position but given its fast rise and the present market conditions, have been apprehensive of doing it right now.
Regards
Rajiv
Read Answer Asked by Rajiv on January 12, 2016
Q: The MD&A provides an explanation for the decrease in revenue.

"Revenue for the Q1 2016 was $15,276,822 a decrease of $4,407,391 or 22.4% from $19,684,213 as
recorded in the first quarter of fiscal 2015. When compared to the three months ending July 31, 2015,
revenue increased by $1,325,387 or 9.5% from $13,951,435. There are a number of factors impacting
revenues between Q1 2016 vs. Q1 2015:
- The revenue growth at TIO and its subsidiaries.
- One-time revenues related to the Company’s kiosk program, which included sales of kiosks to
an existing biller customer and a removal fee charged to another biller customer for the
removal of low transacting kiosks.
- The strengthening of the US dollar from quarter averages of 1.0927 in Q1 2015 to 1.3163 in Q1
2016
- The change in revenue resulting from the migration of TIO’s largest biller’s entire customer
base from one billing platform to another
Page 7 of 18
This migration affects the Company in the following ways:
1- Historically, the vast majority of transactions processed by the Company for this biller carried
a front-end consumer funded convenience fee of $3.00. The Company historically has
recognized this fee as its revenue and shared the proceeds of this fee with both the retail
partner and the biller itself. Once migrated from the CDMA to the GSM platform, the
customer no longer is required to pay such a fee. The Company’s margin is now paid as a
back-end fee directly by the Biller and in the same amount ensuring that the Company’s per
unit economics are not affected as it relates to gross profit generated per transaction.
2- In Q1 FY 2016, an immaterial amount (approximately $10K) of this billing partner’s bill
payment transactions for its branded retail channel (which excludes 3rd party locations)
resulted in the Company collecting a $3.00 front-end fee. As noted in Q4 2015 virtually all of
its gross transaction revenues from this billing partner is earned through back-end fees. A
typical back-end fee from this partner is expected to generate 1/12th the revenue of a typical
front-end fee, however at a significantly higher gross margin percentage. During August 31,
2015, we had less than 3k monthly bill payment transactions with a front-end fee for the
branded retail channel; the legacy CDMA service was disabled at the end of August. This
transition has significantly reduced the recognized gross revenue while having no impact on
gross profit on a per transaction basis as our largest billing partner’s transaction volume
reached the maximum discount level allowed in the tiered pricing structure. This zero
consumer fee structure may also incentivize more customers to pay using the Company’s
services.
3- As a result of this revenue model transition, TIO experienced a decline in transaction revenues
generated by its largest billing partner from Q4 FY 2014 through to Q1 FY 2016. However, at
the same time the gross margin percentage of the revenues generated by this partner
increased significantly to a range of 90-95%. Due to this billers growth, TIO saw transactions
and total gross profit dollars generated by its largest billing increase despite the significant
reduction in gross transaction revenues. Throughout this transition, investors and analysts
were reminded to monitor the total transactions, gross margin percentage and absolute gross
profit generated by TIO as the best indicators of growth in TIO’s business."
Read Answer Asked by Richard on December 17, 2015
Q: Good Afternoon,
I read your recent report on TNC, the company sounds interesting but I'm not sure I really understand what it is they do? Don't most of us use online banking. I can access my online banking via home, the office or my cell phone to make my bill payments to the phone company, utilities etc.. I'm not sure why I would access one of their kiosks in a retail location to pay my utility bill? I must be missing something here?
Thank-you
Read Answer Asked by Chris on October 20, 2015
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