When investing rule one is the "returns" and
"potential." However with King I cannot help but wonder will the
world wake up one morning and think: perhaps it’s time to read a book
on the way to and from work.
In looking at Zynga's not so stellar performance, 1.0
version of the "Gaming Online Entities". Well, let’s put it another
way January
30, 2014 - Zynga Announces Fourth Quarter and 2013 Financial Results results
are slightly different to King's recent performance on numbers only but I
suspect a similar performance profile for their Farmville Offering as Candy
Crush. They tried spinning out different games, but the psychology of humans is
well known, simplistic app games are fun "for a while." You only have
to look at your teenage children, perhaps even you partner to realise Candy
won't be sweet forever. I have resisted the temptation to go on pun-overload.
The rate of decline for games is well versed...so if you
were to look at Zynga, I cannot help but wonder if the outlook doesn't bode
well for online/app gaming as a realistic long-term venture at 'these prices.'
The investment case for short-term trend profits bodes well, albeit people
argued that for Apple and Samsung earnings, but the difference being something
quite massive, parties are able to see, touch and utilise their purchase, it's
tangible. It’s not the intangible offering of paying for an arcade styled
mental benefit or challenge that, save for the odd addict, generally disappears
as a fad or trend.
The pricing doesn't appear to be so overcooked as Zynga's,
Facebook's or Twitter's however in the short-term there will no doubt be some
plus as there's plenty of people to sell the story to. So I’m thinking in the
short-term (4 months) there may (will) be a material appreciation for the stock
but post the ability to sell the story in any great numbers and the comparisons
to previous dividend payments becoming reality the price of stock will be lower
post the 1st Quarter of listed results.
This theory is based on there being parties with significant
profits on these IPO's and one suspects wanting to realise some gains. Any
limits/lock-ins will bode well in the short-term but post which there's going
to be a real depreciation in the share price.
Candy Crush aka King and Zynga are reliant on primary
platforms and equipment to function. Facebook, being the social interaction
point of millions is indemnified against these risks (including the access
point for these games). Candy Crush and Zynga , without a decent roll out of
games that are "not reliant" on offering 'free lives' to the original
app are doomed to lower returns but currently based on higher expectations. My
trading head offers some lemming style longs for brief-periods prior to
the reality kicking in post earnings. Let’s see...
Back to reality and normality, the Chinese are now spooked
by defaults, China banks begin retreat from risk. It will have an impact on
commodity demand again as the oversupply issue "to the market appears
resolved with iron ore going back to $110/t for what reason? Well
its common-sense that people, banks and bond traders are waking
up to the fact that with defaults being real and the perception of guarantees
disappearing the market will become real. Higher financing costs for entities
(Risk) that really should not have survived in their own right. Consolidation
will lead to contraction as savings need to be made to create 'going
concerns'.
It appears that there's rumours of an 'very well paid CEO'
departing to attempt to reduce the scandal and distractions affecting a company
that's trying to raise funds to produce oil. I can't think who that person
is!?!
The markets is betting on H&T Group (HAT) to
benefit from Albemarle & Bonds position. I'd a liken HAT as the DSG to
Comet if ABM go fully to the wall. Declining pledge books (across the sector)
which is common after a large increase in sector as people realise there is not
much left to 'pawn' or sell. The margins are being squeezed on the purchase
price as well, which does not bode well for the companies over the longer term,
without a reduction in the footprint of stores nationally. Some may benefit
with the eventual close of ABM stores that do not meet a viability threshold or
are not acquired.
It’s a mystery why parties thought ABM's demise came about
unexpectedly. The odds of a return for shareholders still holding stock (WHY)
is likely to be nil. HAT's 2.5% dividend based on yesterday's SP on may present
some welcome relief but my concern is these entities do not leverage well for
which HAT are focusing on paying down the debt. The issue remains with
regulatory pressure on the higher cost lending market is likely to impact on
margins further.
Very slow market news wise for directional plays, save for
LMI. As one party points to closing operations permanently which would make
sense. When will South African's Miners Unions learn that you can't milk the
cows nonstop. They do have to graze... Lonmin
PLC Update on Protected Strike Action 05th March 2014 was over 3 weeks
ago with little change. As such, the cost implications are going to be
significantly higher. Russian issues are predictably positive for Palladium,
combined with the on-going strikes, is Palladium going to break its 800$/oz.
resistance and tick up to a new range? Certainly looks that way, which should
benefit Platinum!
The mockery of "analyst" consensus is being
exposed again by the revision of Tin
Deficits (Reuters) only a near 7 fold increase upwards. Well there's
no prizes to think that the price reacted accordingly.
Finally, Mediterranean
Oil & Gas (MOG) Litigation Update suggests that the judgement will
be handed down tomorrow on the case Leni Oil & Gas brought against the MOG
Subsidiaries. Now based on common-sense, with MOG's announcement so soon after
the LGO relinquishment for $1/£1 (whichever it was) surely meant they took
legal advice. Its still very odd for the claimants have not issued any news on
this? Perhaps it’s on the basis MOG are? Not long to go before the results...
All the best, Fraser
Fraser
ReplyDeleteRe King- another IPO based on the Greater Fool Theory- no doubt it will show a premium as the mania is still with us, but the gaming industry is similar to movie making, in that you have to continue to reinvent past successes - Tomb Raider is a good example, plus Grand Theft Auto- as the sales drop off a cliff eventually if you don't. This is an expensive and time consuming process and trends change, so the quarterly figures here will be all over the place, just what the US mkt doesn't like. I like safe "sleep at night" longs and this isn't one of those. When the IPO musical chairs game stops, some will end up with some v heavy losses in overhype untradeable rubbish. Good luck all King longs- and watch those quarterly bloodbaths.
Re MOG/Leni- yes- today could be the day and the news blackout will soon be broken. I can see this coming down to the agreements they had re this asset, and a comma in the right or wrong place. It would be nice to see Solomon type justice to prevail here, as one party seems to have played the other here, but we all know that isn't how these legal matters are settled. Im on neither side but an interested spectator none the less.
More outdoor pursuits today, so Im off into the green and pleasant land shortly. Nice news from VLK but as expected so don't see much action there. DCI have further complicated their development options, so some homework for me there this evening but they have steadied the ship so I could be adding further there.
Cheers. The Leggie
Seems I would have been wrong on Kinga :-) Tank on!! Atb Fraser
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