Don't Underestimate Steer Technology (now Argo)
Facedrive became Steer Technology and now it is called Argo.Along the way it has made a number of changes and a number of improvements.This blog has called for a simpler corporate structure and accounting methodology.And now finally both are coming into view for shareholders.Recently they have come out with their second quarter reults.And there are some effective corporate updates.The Facedrive operations have effectively been shut down.Steer Technology has also almost completely been shut down.There is a contract delivery business that was part of Steer Technology that remains and is growing in customer base and revenues.Other than that the remaining business is the newly formed FoodsUp that is quite successful at this time.
Foods Up appears to have been started in late 2022.While other parts of Steer Technology were winding down FoodsUp was quietly growing.It is reported that they have 5000 restaurant clients making orders each quarter.And,for example, it has just undergone a significant expansion in Quebec by using third party financing.More importantly it showed 74% growth over Q1 in 2023.And annual revenues of $73 million in 2023.And at this time Steer Technology owns 59% of Foodsup.
Divesting your Star Operation ?
In the second quarter report Steer Technology tells shareholders just how well Foodsup is doing and then tells that it will divest a part of it presumably to get rid of old Steer Technology and Facedrive participation.I doubt that they will do that soon as Foodsup is growing substantially every quarter.Investors need to see if Foodsup can continue on it's rapid growth trajectory.If so third party money will be available to pay out old shareholders.
The Second Quarter
The second quarter report showed growing revenues and an increase in the profit margin.But it did not give total net income nor earnings per share.But this blog believes both net income and e.p.s. are understated.Because using equity based accounting, 59% of Foodsup's profit should be included as Steer Technology earnings.Yahoo Finance shows Steer Technology (Argo) having e.p.s. of (.22) which is not unreasonable for a young, startup like Steer Technology (Argo).But because Steer Technology has a controlling interest in Foodsup it should get 59 % of total Foodsup net income.This blog believes that Steer Technology (Argo) e.p.s. is substantially understated.Although no estimate is offered as to what the correct e.p.s. should be.
This blog has repeatedly criticized Steer Technology for sloppy accounting and sloppy quarterly reports.Profits have repeatedly been underestimated by including (or imagining) expenses such as research and development and systems development in a food delivery company.Also there have been very high expenses for amortization and depreciation.In addition, money was put into starting up new subsidiaries.All of these expenses are gradually being cleaned up by new management.It is this blogs belief that e.p.s. have been consistently understated and will start to appreciate.The next quarterly report will tell whether Argo's price moves towards $.50 per share or stays at it's present level.
https://finance.yahoo.com/
Divesting?
In the last quarterly report Argo management talked about divesting some of Foodsup shares in order to remove former Steer Technology shareholders.Presumably the old shareholders are collecting Foodsup earnings that should be going to Argo.Argo management wants to remove them by selling Foodsup shares and taking away their hold on Argo earnings.But selling Foodsup shares will reduce Argo net income.A much better strategy would be to get third party financing and buy out the Foodsup shareholders.This would result in an immediate increase in Argo e.p.s.
Sloppy Quarterly Reports
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