RC365 Holding (LON: RCGH) shares are unchanged on their release of results. We continue to maintain that RCGH shares simply are not worth the price on the current market. Yes, obviously, we're aware that market prices are market prices and that's that. Other people value RC365 at a great deal more than we do. But we would also still insist that there's such a thing as objective value. That being rather the point of trading in shares after all. To try to spot where the market value is out of line with that objective value and thus trade on the supposition that market sentiment will move to that other, objective, valuation.
We've the results at RC365: “Financial highlights. Revenue up by 109% to HKD16.9m (2022: HKD8.1m). Loss for the year up by 38% to HKD5.4m (2022: HKD3.9m). Net assets up 63% to HKD31.0m (2022: HKD19.0m). Cash and cash equivalents of HKD9.5m as at 31 March 2023 (2022: HKD23.4m)”
Now note that all of that is in HKD. They're reporting in Hong Kong dollars that is. This isn't right but it's a close enough approximation - $10 HKD is £1 GBP. Just as a quick shorthand you understand.
So, the RC365 results are now that turnover is £1.6 million. The loss is £500k. Assets are £3 million and cash is £1 million. Sure, growth of 100% but that's to support a valuation of £180 million? The company's on a valuation of 100 times revenue?
No, we don't believe it, not for a moment. This is a speculation that's got away with itself.
RC365 Holding share price from London Stock Exchange
As we've said before about RC365: “Now let's recast this RC365 Holding idea. RCGH is being paid some £1.5 million to write a wealth management app for an £8 million a year turnover company. It's also just an upgrade to the extant product. This collaboration, this contract, has added £80 million to the market capitalisation of RC365 Holdings in London? No, we do not believe that this is a rational reaction, nor do we believe it's a justified one on the substance of the deal. “ And that was before we pointed out this: “So, Hatcher Group hires RC365 for £1.5 million to write an app. This increases the price of RC365. Hatcher Group then sells shares for a £4 million or so profit above the price they would have got before the announcement about the app contract. RC365 shares begin to decline significantly once the share sale is announced to the market. Well, yes, OK. Clever. Works, is wholly and entirely legal. Wish we'd thought of it ourselves in fact, even if we did still manage to spot that there was something that wasn't going to make us shareholders out here rich about it all.”
And yes, it got worse at RCGH: “Now think on this for a moment. At that 60 pence - before this latest announcement - RCHG had a market capitalisation of some £60 million, give or take. After the announcement it's at £120 million (actually, £118 million). So, the additional value from this announcement is £60 million. That's applying a valuation of £20,000 to each credit card issued. That's absurd.”
There's very definitely a speculative bubble in RC365 Holding. In fact we'd say the current valuation is absurd. How it's all going to work out in the short to medium term we've no idea. But we'd expect to see a return to some more objective valuation in the long term.
