Last week I wrote I’d buy Optimal Group. Now I am doing as promised.
Cogitator, in his interesting comments, made me doubt about this purchase:
- Cogitator – January 31, 2008
- This company is trading cheaply for a reason: it is not profitable. In the first 9 months of 2007, OPMR lost almost $5 million. If losses continue, cash will erode along with your purchase.
- Cogitator – February 2, 2008
- I should add that the company spent $55 million on WowWee and only has about $60 million in cash now. That works out to $2.30 per share.
My information about cash held by Optimal Group comes from Yahoo finance. Unfortunately Yahoo finance does not always display updated info. I found an Optimal Group balance statement on MSN. They had $197M in cash at the beginning of 2007. Maybe they used part of that money to buy WooWee. Yahoo’s figure of 113.91M cash held by Optimal may be correct.
I can’t find out. I know it is stupid to buy a company for its cash, without being able to find out if they still have 50M or 100M.
I am very aware that this investment is quite risky, but:
1) Wowee’s Robots are cool results of great engineering innovation.
2) An high tech company loaded with cash (50n or 100 are both a lot) and investing heavily in research and making losses is less risky than many high tech companies doing the same using debts.
3) Woowee is about to produce in partnership with Evolution Robotics a new telepresence Robo. More on this blog
4) Analysts expect Optimal Group to turn to profits in 2008. They may be wrong, but at least I can hope they are right this time:
they estimate $ 0.12 earnings per share in 2008.
it is only one analyst. This involves even higher risks, but this happens with small companies.
Bill Gates predicted that 2007 should have been the year of Robotics. He badly missed his forecast. I hope what didn’t happen in 2007 will come true in 2008.
I am going to place a zecco order to buy at market price in the next 5 minutes.
Let the force be with Optimal Group!
BUY, SELL, KEEP 
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