For a still unknown reason, SITO gained another 4.08% yesterday on higher than the average demand and reached a price of $1.13 on the higher volume after the market opened. The current market valuation looks much higher than suggested by the company’s fundamentals and is reflecting too high expectations for the future growth of SITO.
Particularly, the ability of SITO to grow its revenues seems somewhat overestimated. According the latest quarter data, the company derives its revenues from various wireless software application and services offered, though instead of gaining new clients, SITO lost two of its largest customers during the nine months ended this June. The customer base became even more limited and consists now of eight instead of ten clients, resulting directly in three times lower revenues than the same period of last year.
Also in that period, the number of the outstanding shares of common stock almost doubled, but despite the further dilution risks from the 45.5 million exercisable warrants and stock option, it seems that the much stronger cash position is what currently keeps the market value high.
From the cash raised through the sale of stocks around $5 million were left by the end of the last quarter and in addition $6.2 million were raised in a private placement in July. The additional funds are to be used for expanding the business, which according to SITO management plan for the next twelve months will be the development of the retail messaging segment. In the SEC filing the company states that the proceeds may also be used to satisfy some existing obligations. SITO’s does not have a lot of current liabilities, but $15.3 million in long-term debt.
