MK Automotive Inc (OTCMKTS:MKAU) was first covered in this article by my colleague Alex Carlson. He noted the acquisition of the content delivery company Clikia. Additionally, its solid financial situation was remarked in the article. The situation has not really changed, but the company has put out several news releases, which pushed up the share price. Hence, we believe that a new update was necessary. Have a look at the price action.
For those who did not have the time to read the previous article, the most important asset of the company is its new acquisition; Clikia. This company provides an “over-the-top” marketplace for providing entertainment streaming packages, such as TV content via the Internet. It is an exciting new market, which was worth $27.51 billion in 2015 and may be valued as high as $85.87 billion by 2022.
The company has delivered large amount of press releases, which is very good. We want to focus on the most important information and highlight the most relevant communications. Most of the news are about new features that the OTT company brings to its subscribers.
On May 17, 2017, the company noted the introduction of a TV set-top streaming box with dedicated remote control. This new tool will let subscribers now have access to the Clikia stream across all viewing platforms. Additionally, this set-top box will be able to support other Apps, such as VUDU, YouTube, and others. It was said to be the “One Stop Box” for everyone’s needs. In addition to this new feature, on May 16, 2017, the company noted the debut of the following iPhone, iPad and AppleTV Apps. The following reaction of David Loflin, CEO and founder, resumes very well the situation of Clikia’s competitors:
“It’s getting bigger and bigger, given the dramatic acceleration in cable TV subscriber losses. As reported recently by the analyst firm MoffettNathanson, the quarter-over-quarter subscriber losses have, since the start of 2016, gone from minus 1.2% to a whopping minus 2.4% for the quarter ended March 31, 2017. Clikia is on the right side of the business.” Source
The last press release had decent impact on the share price. But, undoubtedly, the most remarkable press release in terms of share price spike was released on May 15, 2017, which noted that the Clikia App for iPhone and iPad would be available in the Apple iTunes. Note the volume and the share price spike of stock after market participants got the information.
Impressive financial situation
Additionally, the financial condition of the company is quite interesting. The profit margin is 9.26%, whereas the return on assets is 8.65%. This is quite understandable, as the company is operating in a high growth market. However, what we don’t fully understand is the fact that the book value per share is about $0.02, but the share price is only $0.00139 as of May 18, 2017. With the kind of growth that the company shows, the share price should be at least 4x times the book value per share. Hence, we believe that the share is being undervalued by market participants. In our opinion, the facts that the company is small and the OTT market is new and ignored by non-sophisticated investors are pushing down the share price. Some savvy traders may believe that this is an opportunity.
MK Automotive is certainly showing promise. First, the company sells products in the OTT market, which is expected to offer outstanding returns in the near future. Secondly, the company knows how to seduce investors, as the new products and features being announced are making traders push up the share price. Finally, the company’s financial situation as a result of the market is impressive, and we believe that most market participants did not yet see that the share price should be much higher. To sum up, this is a company that investors should check very often; it may surprise soon again. We will be updating our subscribers as soon as we know more. For the latest updates on MKAU, sign up below!
Disclosure: We have no position in MKAU and have not been compensated for this article.