18 November 2019
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A whopping fully-franked 60% dividend!

Tim Boreham
10 September 2018

Normally dividends reflect management’s confidence in a company’s growth prospects. But in the case of Reverse Corp (REF), its 5.5 cents a share fully franked payout was a result of its legacy business (facilitating out-of-credit reverse charge calls) being made redundant by all-you-can-eat mobile plans and internet telephony using public Wi-Fi.

Late in July, Optus said it would no longer avail itself of Reverse’s services. In early September, Telstra followed suit.

Chaired by former McDonald’s supremo, Peter Ritchie, Reverse has also developed a profitable online contact lens site.

But with its 1800-Reverse service likely to join the floppy discs and dodos in obscurity, management saw no better way to deploy its $5.3m cash balance than to return $5.1m of it to shareholders.

Bravo!

Reverse shares tumbled from 9 cents to 3 cents after they went ex-dividend on September 5, valuing the company at just $2.8m.

The question now is: how much is the ongoing profitable contacts business worth, along with the reverse charging operation as it is wound down?

Reverse reported full-year ebitda of $566,000 and a net loss of $503,000, on ebitda of $566,000.

Tim Boreham authors The New Criterion

tim@independentresearch.com.au

Disclaimer: The companies covered in this article (unless disclosed) are not current clients of Independent Investment Research (IIR). Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are independent and have no nexus to IIR’s core research offering. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense.

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