ASC 6.67% 1.6¢ adultshop.com limited

ADULTSHOP - The AFR

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    Adult.Shop still hot to dot com
    Hundreds of thousands of mainly American subscribers to adult entertainment sites are expected to push Perth-based AdultShop.com into one of the first substantial annual profits earned by a dot com.
    The company has been raided by officers of the Australian Securities and Investments Commission, chased by anti-pornography campaigners and shunned by investment analysts.
    But yesterday its shares jumped 50 per cent to close at 34.5¢ after the release of bullish forecasts for 2002 which appear to back its hypothesis that adult industries and the internet are a perfect match.
    After a maiden net profit of $272,000 on revenues of $37.88million in the six months to December, the company expects to record revenues of $118 million in the year to June 30 and earn a full- year profit of $5.6 million.
    The rise in its financial fortunes can be traced to its acquisition of Today's Success, which operates a series of what AdultShop chief executive officer Malcolm Day calls "online entertainment services".
    Subscribers pay a monthly fee ranging from $US9.95 to $US49.95 ($18-$91). Mr Day declined to specify exactly how many had signed up but said there were 215,000 at the end of December and that there had been considerable growth since then.
    "The adult industry is one of the best types of business to be online because the desire for anonymity gives us significant advantages
    over others selling books or CDs or whatever. Not everyone wants to walk into a shop to buy movies, sex toys or whatever," Mr Day said.

    It's an argument that has previously failed to attract mainstream investors - none of the large investment houses cover the stock.
    Mixed views on the industry may have affected interest but the company's association with the largely discredited dot com sector and the fact that it was not yet part of the S&P/ASX300 were likely to have been more influential, one analyst said.
    Last August, AdultShop.com said the ASIC investigation had been resolved after it took action on an accounting issue.
    A recent report on the company by independent research house Assirt Equities, which valued AdultShop shares at 34¢ each, had sparked interest from both brokers and institutions, Mr Day said.
    Assirt indicated it would be revising its report in the light of yesterday's forecasts.
    AdultShop.com had $6.6 million in cash at the end of December. This is expected to rise to $17.4million by the end of next month. The company has forecast revenues of $106.57 million in the six months to December 2002 and Mr Day said this could be exceeded if it chose to invest for growth.
    "There are some huge economies of scale involved as adult entertainment costs are relatively fixed," he said.
 
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