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Market Analysis Latest ASX News

Vault Intelligence Shares Climb 16% Thanks to a Superb Quarter

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By Ryan Clarkson-Ledward, Wednesday, 22 July 2020

It’s been a busy fortnight for Vault Intelligence Ltd [ASX:VLT]. They confirmed that they were the subject of a takeover bid from Damstra Holdings Ltd [ASX:DTC] on 8 July. A deal that spurred Vault’s share price to prices not seen since the start of the year....

It’s been a busy fortnight for Vault Intelligence Ltd [ASX:VLT].

They confirmed that they were the subject of a takeover bid from Damstra Holdings Ltd [ASX:DTC] on 8 July. A deal that spurred Vault’s share price to prices not seen since the start of the year.

And now, two weeks on, they’ve released their latest quarterly result. Showcasing an incredible lift in customer receipts that has put them in a cash flow positive position.

That’s why the VLT share price is trading 16.56% higher today. Sitting at 54 cents per share.

Which begs the question, will Damstra now have to sweeten the deal to get it done?

Great results, greater pull

All up, Vault raked in $2.16 million worth of total sales for the June period. A 50% increase over their March quarter, and a record result.

It was a huge last-minute haul, that has helped the company reach $4.7 million worth of revenue for FY20. With the expectation that they should be able to do one better next year and pull in $8 million.

Helping them reach this goal will be an ever-growing suite of product offerings. Including plans to make their software compatible with Apple (iOS) and Android based watches.

However, for shareholders, all this good news will likely come with mixed emotions.

On the one hand it is impressive to see just how far Vault has come. And how much further it could go.

But, on the other hand, it will soon become just a part of a much bigger whole. That is, provided the Damstra acquisition goes ahead, which is looking likely.

Vault’s board once again reminded shareholders that they fully endorse the takeover. One that will see Vault shareholders become Damstra shareholders.

As for whether it is a good deal though, is a little unclear.

Fair value or not?

Two weeks ago, when the takeover was announced, Vault shareholders probably would have been pretty happy.

Damstra was offering to pay a decent premium to snap up the company, giving shareholders a decent scrip arrangement. Valuing Vault shares at 46.4 cents each, at the time.

Now though, with the reveal of the better than expected quarter, Vault is trading at 54 cents per share. Giving investors reason to ponder whether new terms may be appropriate.

Granted, Damstra’s shares have also moved higher today, likely thanks to Vault’s update. But, even so, it presents an interesting conundrum for all involved.

For what it’s worth, I suspect it is unlikely we’ll see any revisions. Because this is purely a scrip deal, I imagine both sides will stick to the original agreement. An outcome that may irk some shareholders, but certainly isn’t a dealbreaker.

At the end of the day, this has been a big win for both Vault and Damstra.

If, however, you missed the boat on both, don’t fret. There are still plenty of other great small-cap investments to be found.

Check out our report on four ‘high-value small-caps’ here, for example.

It will showcase just a few examples that the market has to offer right now. Stocks that are brimming with potential despite the broader uncertainty and volatility.

Don’t let opportunities pass you by. Because as Damstra has shown, there are some real bargains out there right now.

Regards,

Ryan Clarkson-Ledward,
For Money Morning

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

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All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.

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