some basic info on frogdata
page 11 - https://bsmedia.business-standard.com/_media/bs/data/announcements/bse/29082022/28bd3581-7b42-4b93-80d3-96e3d913ff9d.pdf
It is for the dealers mostly, which gives them visibility on their warrantries,warranty claims and assists dealer in their sales activity.
About valuation of frogdata, so far i think the available information is only what we got from management.
D-Invested ~ 70s
The company has a high intangible asset and due to which it has low ROE. Can someone please throw some light on its asset quality vis a vis ROE.
In fact, at 800cr valuation for Frog, and with 65% post dilution holding for IZMO, this stake itself will be worth 500cr for IZMO. Assign whatever holding company discount that you must.
The operating cash flow conversion looks amazing too, at over 100% over the last 4 years. On first principles, this does look like a no brainer if they are able to achieve their growth guidance as RoEs will improve and the stock can re-rate.
However, the constant increase in intangible assets worries me a bit. Iām not sure what these are exactly, and how business critical they are. Also, the cash flow statements over the past few years have shown fixed asset purchases of 35cr, 24cr, 22cr and 29cr in FY 20 to FY23. However, on the balance sheet, I see a fixed asset increase of only 19cr, 5cr, 12cr and 18cr respectively. How does this reconcile?
P.S. Accounting is not my greatest suit and please educate me if Iām reading this wrong.
No positions yet
I think the missing link is depreciation. The net addition in fixed asset block is Opening Balance +Additions- Written down value of FA sold -depreciation for the year.
Thanks @Denny_David, but I donāt exactly follow. Possible for you to please use any year, say FY 23 to illustrate this with numbers for IZMO?
And what does āwritten down value of FA soldā mean?
I take it that the depreciation theyāve mentioned in largely amortization as most of the FAs are intangible assets. Is this true?
Sorry for a lot of basic questions, and that you for your patience.
Let me try.I am taking this data from screener.
From cash flow, FA purchased in 2023 is 30.
Depreciation for 2023 is 12.
So Op bal 229+ additions 30- assets sold 0- dep 12 gives Cl bal 247.
Regarding wdv of asset sold, when an asset is sold, Cost of asset sold is deducted from total cost.
Acc dep of asset sold is deducted from total accumulated depreciation and any difference is profit or loss.
Creating high intangible assets and amortizing them in a convenient way may be a good chance of management to shiffon off the money from the company. In this case the management has very diverse business choices i.e. from AI to arms making! I am unable to connect these dots, if someone else could do!
Disc- not invested just tracking to find if it is not a value trap.
Is the arms making bit coming along? I havenāt heard any mention of it in the last two calls. Still have to go through the annual reports and understand what the intangible assets are.
One thing thatās good is that the pace is growth of these intangible assets has slowed down compared to the growth in sales. My speculation is that most of them do be licenses and patents etc for Frog. Itās a software product company of sorts, so revenues and profits come later, capabilities come first.
If anyone already knows the details, please do share.
The company initially planned for light arms manufacturing and got a licence also but then didnāt get into it. It was clarified in its first con call.
They have developed some of the products for many years, so have capitalized most of the costs. So thatās the intangible part that we see. They are slowly writing it off through P&L. As per the management most of the heavy development will be over by Q4FY24. So next should be in terms of both P&L and intangible assets addition slowdown. They have already started investing into sales people.
I will add more details once I have. Have recently started studying the company.
One intresting thing that I found was that there frog data services that is recently launched is not a normal sales expenditure that we do on advertisement and all but it is kind of an investment for the car dealership owner because it helps him increase his revenue in organic way. They spend 60,000$ pm on advertisement and all all but this service just cost them 3,500$ pm and once they see the benefit of it then it will be easy to replicate it.
Is there any KPI that you all see through which we can track the numbers apart from US second hand car sales and expenditure on it.
Any update on the investor meet scheduled on the 05 March with Arcstone capital. Probably they are not getting buyers for the Frogdata and that is the reason the Concall is not yet held.
@Samarth1 do you mean that a dealer can easily replicate the Frogdata product?
Position: evaluating
No I meant that frog data services will be beneficial for dealer as it revenue generative for him so it will be an investment and not an ordinary sales and marketing expenditure and USA has a massive second hand car retail market and frog data services of IZMO equips him with real time data analytics that gives a dealer an edge.
I need help in understanding the taxes paid by the company for FY22-23. It is amounting to 50% of the profits made. Including the deferred it is going to about 76% of the total income. Why has the company paid such heavy taxes ?
Disclaimer: I am new to this and thank you for your patience
Position: Entered with a tracking amount
They declared results >https://www.bseindia.com/xml-data/corpfiling/AttachLive/13548bf0-b4c4-4c06-962d-079ff0d014c2.pdf
To me these numbers look ok
I dont see any negative surprises, though I am not from finanance background. why the stock is getting beaten today ?
D-Invested from lower levels
The company is not showing any significant FCF, itās increasing intangible asset ( the quality of asset may only be known to the insiders) and nil dividend are some worrisome things for me. It had also promised some equity sell of its one of the US subsidiary (Frog Data) before FY 24 but didnāt update on that.
Nothing wrong with intangible. IT products do create IP, R&D,Brand, digital asset,SaaS platform, Goodwill etc. Can be classified as intangible and It qualifies for depreciation as well. Market is nit sure of European and US market retail segment, which is a big portion of their revenue. Cash balance shows company has surplus funds. My take is cheap stock but mangement lacks ambition.
Tanla Platform a product company nearly 15x to the size of IZMO has just 3x accumulated depreciation comparatively to the later one over the last 10 years. I am not sure about the inside accountings of IZMO. I think that a lot of euphoria is built around Frog data. I donāt know much just a guess work!
I guess they are not getting the valuation for Frog Data that they want. In one of the previous calls they said minimum 650cr valuation they should be able to get and deal should be closed by March 2024 max.
In the latest concall though the figure comes out to 500-550cr valuation.
Management has been consistently missing their guidance numbers as well. Maybe thatās why the market is discounting it
