NBS - Nexbis Limted

[Kuri]

Who would have thought a name change could have this kind of effect on a stock. Since changing from ETC - Entertainment Media and Telecoms the share price has rise nearly 25% without any announcement on the ASX. Any other holders out there and anyone have any idea for the new found energy in the SP? I am finally in the black after a year and looking at making a bigger profit now.

Kuri

 

[Kipp]

I only discovered Nexbis recently in the Fin Review (1st Sept I think). And based on their performance in FY09, I think they could be an awesome opportunity. EPS was 11c, so currently trading at 4x earnings, debt free, and a 65% profit margin (they are exempt from income tax in Malaysia).

& More positive coverage from the Australian

"Nexbis's NexCode suite allows immigration authorities to verify documents via a mobile camera phone. Nexbis won a contract with Malaysia's immigration department to keep tabs on foreign workers, worth $60-80m annually.

Nexbis also has procured a $300m, five-year contract to keep track of LPG cylinders in China. Widely used in cooking, the bottles have a tendency to explode, with fatal results."

Therefore, I would be pretty confident of further increase in NPAT in coming years, as total revenue was only ~$65M.

However, I do not really know the history of the company so well (name change etc) and their annual report is really pretty watery when it comes to details like their current/future projects, key shareholders etc (all of which are standard on any other listed company a.r.) And is there some dirty news surrounding the company or it's management that I am blissfully unaware of?

Any thought's would be appreciated.
[Disc: I hold NBS]

 

[lizard]

I'd be cautious of this one. Not yet clear what the ongoing margins are on these contracts and how the business model can support 80% margins. I'd also have questions about the lack of transparency in relation to other parties involved in some transactions.

The company has become increasingly unclear in its disclosure of late. This is generally a sign of a company that is aware clarity of disclosure might be unfavourable. Perhaps raise even more awkward questions than those they are already slow or reluctant to answer...

 

[kenny]

Yesterday's SMH had some unflattering news about Peter Dykes. I agree about the concern with lack of transparency in partners and earnings certainty. The management did make a comment recently about how their "naive" disclosures in the past may have cost them contracts eg. Driver's licences work. Check out recent announcements.

Cheers,

Kenny

Falling down on the town

The chief beancounter of the listed IT security concern Nexbis Limited, Peter Dykes, had more than a hangover to deal with following a big night at the Cross.

Dykes, 40, was slapped with a 12-month good behaviour bond this week, after a magistrate in the Downing Centre Local Court said his conduct in an incident that involved a taxi driver was "appalling".

According to police, Dykes was with some companions on Bayswater Road at Kings Cross on April 29 when they hailed a taxi to take him back to the Westin hotel on Pitt Street.
On the way, the taxi driver had to push the heavily intoxicated Dykes, slumping from side to side, into an upright position.

The cabbie was concerned that Dykes could lean on him and cause the taxi to collide with another car. When the taxi arrived at the Westin, the driver, Muhammad Iqbal, tried to open the passenger door and wake Dykes.

Police say Dykes then walked off without paying the $12.55 fare.He slapped the driver, who attempted to get him to pay the fare, and tried to strike the driver several more times. Police arrived at 1.40am to find Dykes lying on the ground. He was apprehended and put in a caged police vehicle.

An ambulance was then called and Dykes was sent to hospital for observation. The next day he refused an electronic interview because he did "not remember anything about the night".

Nexbis's chief executive, Johann Young, offered a character reference, but said Dykes would have to resign from the company if convicted. The bond means Dykes has escaped any criminal conviction and will keep his job, which last year paid him $405,850 (including a $250,000 bonus).

Nexbis was formerly known as Entertainment, Media & Telecoms Corporation and listed by Tricom Equities in April 2000. The company's mission statement in its last annual report: "Our vision is to become a trusted partner to governments worldwide in their pursuit to create a safer world for their citizens."

At least it had some good news on Friday when Standard & Poor's said the company would be included in the S&P/ASX 300 Index from late this month.

 

[Kipp]

Thanks kenny.
Yeah, I saw that article too... ouch! However, it was back in April though... so hopefully he will have reformed his ways since then (on a Wed night too... )

Think I may trim down my holdings a bit, until I am convinced they are the real thing.

 

[craigj]

anyone give an explanation why this got smashed today down over 20%

it actually climbed a cent on opening then collapsed in first hour

 

[Ozymandias]

No explanations forthcoming...

NBS does seem super cheap now, especially considering the revenue potential of the projects it's already secured. Is anyone else considering buying in as a comeback bid? Why / why not?

Personally their lack of transparency and the apparently unexplained plunges in share price worry me somewhat, despite the tempting price.

Do any more experienced investors have thoughts on NBS at it's current price?

 

[Kuri]

No explanations forthcoming...

NBS does seem super cheap now, especially considering the revenue potential of the projects it's already secured. Is anyone else considering buying in as a comeback bid? Why / why not?

Personally their lack of transparency and the apparently unexplained plunges in share price worry me somewhat, despite the tempting price.

Do any more experienced investors have thoughts on NBS at it's current price?

It is very tempting to dollar cost average my price down at present but there are too many questions unanswered at the moment to risk more money. I hope that I am wrong. The last lot of figures did not match with their announcements concerning the Malaysian and Chinese contracts which look like an "accounting" trick. I am holding until the next quarter results are released to see if the Malaysian revenues are sorted out then. If it turns out to be a house of cards I could lose the lot.

Kuri

 

[Ozymandias]

The last lot of figures did not match with their announcements concerning the Malaysian and Chinese contracts which look like an "accounting" trick. I am holding until the next quarter results are released to see if the Malaysian revenues are sorted out then. If it turns out to be a house of cards I could lose the lot.
Kuri

I've only been able to find announcements that give the total value of contracts - did they release something more specific that I've missed?

They've claimed delays in printing etc. on the Malaysian contract for some time now - but even without this contract their profits would be healthy. Though they would be relying very heavily on the Chinese contract for their revenue.

Something else of potential concern - p39 of the annual report lists 'Trade and Other Recievables' of $42M with no further explantion. I would like to know who owes them and why they haven't paid.

I'm not too familiar with strict accounting rules - am I right to say that this $42M cannot be included as part of their revenue for 08/09?

 

[Ozymandias]

I'm not too familiar with strict accounting rules - am I right to say that this $42M cannot be included as part of their revenue for 08/09?

Ok a quick check of the Cash Flow Statement Reconciliation - p65 answered that for me - they can and they have. That said, their cash flow was still >$5M positive. Also, it seems very unlikely to me that the central Chinese goverment would default...

 

[Kuri]

Ok a quick check of the Cash Flow Statement Reconciliation - p65 answered that for me - they can and they have. That said, their cash flow was still >$5M positive. Also, it seems very unlikely to me that the central Chinese goverment would default...

If you look at the note No. 5 it doesn't mention the $47m but it says that
$3.7m is late but not impaired. For a company that has $9m in cash that is poor revenue collecting.

In regards to the massive revenue if you look at note 2: $18.5m of the 65.5m revenue is from consulting (over 28%). All the presentations have been about the signed deals with the Chinese and Malaysian governments, not the conuslting side of the business. This leads me to believe they are not being executed as stated.

You mentioned the accountanting standards. I am no expert but one thing I look at is cash flow as oppsoed to revenue. You can't eat a profit. The revenue has been $65.5m but the cash flow receipts from customers has only been $20.8m. In my simple pessimism I don't know if they have actually suppplied all the services they have booked as revenue. It is easy to seal a deal and class it as revenue even though you have not received the money in the bank. You give the same set of books to 10 accoutnants you will gte 10 diferent reports. To me the reports leave many unanswered questions but I am happy to hear other views.

I honestly believe this share won't hang around at this price for long. It will shoot up or tank. I hope it shoots up and the cash flow receipts start showing on the statements.

Any other thoughts?

Kuri

 

[suhm]

on an older announcement they said they were gonna recieve 30rm per card on the malaysian deal, the market seems to think that there is a very real possibility they won't get the cash as there is a very high amount of recievables outstanding.

If that were the case however I don't see why management would have bought shares on market twice, the second time being a co-ordinated buy after an asx price query. It won't be very pretty for me if im wrong though.

 

[Kuri]

That is the sort of mixed messages that are hurting this stock. The preliminary results showed $47m of revenue which finished up at $3.3m. Nearly the overdue amount in the receivables. They received $43.6m from the China LPG deal which was signed well after the Malaysian contract. Now the director spends $100,000 to buy more shares on market.

As I said I am a holder and wish I was as brave as Peter Dykes to take advantage of this price and average my cost a bit better.

Anybody buying and taking a punt?

Kuri

 

[ROE]

I have a look at this stock a while ago.. It was a puzzle..I couldnt figure out what
how they make the money ...lot of annoucement dont see it clearly how they make money
and that bring me to another company called Firepower I look into many years ago ..

Lot of Photos taken with Minister and Head of state of some exotic countries
lot of contract announcement show me the money that is the puzzle..

http://www.watoday.com.au/national/asic-let-firepower-warning-slide-20080721-3iec.html

Anyway I'm not suggesting this company going that way but for me I stay clear stuff that arent simple to understand

 

[Ozymandias]

I'll be giving this one punt shortly, since I'm selling my current speculative stock. Reasons why:

1. With the PE where it is now, earnings could be much lower than claimed and NBS would still be greatly undervalued
2. The future value of the contracts, if true and correct, are enough to sustain growth of NBS for a long long time
3. Buy ins from company insiders reflect their confidence in the contracts
4. With the cash they have available, late payments should not pose a big risk
5. Since they have no significant debt, the consequences of cashflow problems will be less severe

To my mind the major risk is that the company is exaggerating the certainty of the contracts - and as mentioned before, the recent buy ins from insiders seem to contradict this - but it's still a gamble.

 

[melbournedee]

I recently sold my Nexbis shares but still watching to see if this thing turns around.

For the first time, I had a look at their web site and I wasn't impressed. It is mainly filled with pages of "corporate speak" and there aren't even any contact phone numbers, e-mails or a bricks and mortar address.

Until that $42million receivable is collected, I'll stay on the sidelines. Looks like about 9 directors and key managers being paid around $3.75 million including guaranteed "bonus" payments before any significant cash flow has been generated.

Hope that this turns out to be a winner, but less confident as time passes with no update from management.

 

[jayinoz]

I recently sold my Nexbis shares but still watching to see if this thing turns around.

For the first time, I had a look at their web site and I wasn't impressed. It is mainly filled with pages of "corporate speak" and there aren't even any contact phone numbers, e-mails or a bricks and mortar address.

Until that $42million receivable is collected, I'll stay on the sidelines. Looks like about 9 directors and key managers being paid around $3.75 million including guaranteed "bonus" payments before any significant cash flow has been generated.

Hope that this turns out to be a winner, but less confident as time passes with no update from management.

The 42mil has been received, apart from 3.7mil as updated in last fin report listed on their website www.nexbis.com.au . Peter Dykes can be contacted at their Sydney Office. However they do not have a direct Investor Relations person and the Directors do not wish to use their time on small investors.

I think that Peter Dykes as financial Controller\CO and another senior Director purchasing large 'On market' stakes in the company speaks volumes for their confidence in the future of the company. They have exciseable targets for Directors in 2010 between 75c to $1.50. A huge increase on the current price of 34c.

At a PE of less than 3 times current profit on current contracts it looks like a bargain. Naturally i agree that the company NEEDS a dedicated Investment Relations Officer and their mindset is currently to focus on sales, as opposed to investors.

They will pay a dividend of half their NAT from next year. Their revenues have increased 4-5 times from 2008 to 09. Due to primarily their Nexcode security solution for governments. In particular for Malay and Chinese governments. Nexcode being their primary revenue earner. Without the Nexcode solution (Government security, document ID, etc) and has just secured the sales with Malay and China. Yet their investment in the Nexcode solutions looks to have paid off bigtime. As this technology has already paid for itself 2 fold with what looks like a lot more opportunity for sales in the future.

In terms of bricks and mortar business you may drop into L40, 100 Miller St, Nth Sydney to view local operations. As an investor it looks to be a very undervalued stock.

I hope they can be more transparent through an Investor Relations Officer in the future. Keep stock holders more up to date on contract sales and advancements.

Even if they do not grow in sales from current levels (Which I doubt as they have only just got their foot in the door) they would be good value at anything below 10 times value for a small cap company. They are currently trading at under 3 times. More transparancy will accelerate this stock, even if no more sales were made from current levels. Combined with dividend payments may turbo boost this stock in my view.

I totally agree that it can be annoying to try and contact them as an investor at times and this culture needs to change if they are to be priced at fair market value. Hopefully the NEW Directors will prove to change this culture. Peter Dykes, the Director and CFO in the Sydney office is a pain in the neck to offer transparency. I was hoping they were to replace him when he got into trouble with the police, as another Director did state if he was convicted. He was convicted yet I gather they feel it was not serious enough for him to lose his job. A new and more transparent in nature CFO would be great for investors. Some Directors just get set in their ways and the less transparent they are the lower the price of the stock.

 

[Ozymandias]

The 42mil has been received, apart from 3.7mil as updated in last fin report listed on their website www.nexbis.com.au . Peter Dykes can be contacted at their Sydney Office. However they do not have a direct Investor Relations person and the Directors do not wish to use their time on small investors.

Can you provide a direct link to that finanical report, or the page that it can be downloaded from? I can't find it and the last financial info offered up through ASX was the annual report...

Disclosure: I am now a holder, in the red a bit.

 

[melbournedee]

Can you provide a direct link to that finanical report, or the page that it can be downloaded from? I can't find it and the last financial info offered up through ASX was the annual report...

Disclosure: I am now a holder, in the red a bit.

I think the annual report is the latest info available. The figure of $3.7 million that jayinoz is referring to is in Note 12 in the accounts. This refers to $3.7 million being overdue by up to 3 months but no impaired at balance date. However, the total receivable figure is still $42 million, there is no subsequent event mentioned in the Director's report relating to significant cash receipt since balance date.

On October 2nd, Nexbis responded to the ASX's question relating to share price movement and specifically said that they would not be providing cash updates. In this case, I can't see that no news is good news.

The earnings reported for 2008/2009 basically entirely depends on $42 million being collected in full. Its now nearly 4 months since balance date and if there are still issues in recouping this amount, I won't be buying back in at any price.

 

[jayinoz]

The earnings reported for 2008/2009 basically entirely depends on $42 million being collected in full. Its now nearly 4 months since balance date and if there are still issues in recouping this amount, I won't be buying back in at any price.

Page 51 of the latest Financial Report states the following in terms of their financial position. Please note that the company must disclose to shareholders if their trade receiveable position becomes greatly impaired. If they do not disclose to shareholders in a timely manner any information that would greatly affect the stock price then DIrectors would be held liable.

If the Trade receiveables did become overdue by more than 90 days then it is in Peter Dykes best interests to disclose to his shareholders. Some CFO's do not release cash positions until they are 100% sure and while most give a quarterly indication (Which should be law), some hold off due to other priorities.

Yet when Peter Dykes and another Director purchased another large chunk of shares this month 'On market' this made me more confident that they do not have a problem with impaired receiveables. I feel that in many small cap play's you must try read between the lines. The reason this stock has fallen is that the Directors will not release their cash in bank position on a regular basis. If they had a problem they would not purchase so many shares. There is a reason that Director 'On Market' trades outperform the market constantly over the long term.

Financial position as of 30th June 2009:

Cash in Bank= 9,207,000
Trade Receiveables= 42,009,000

If there is a problem in collecting the trade receiveables and they do not disclose it to the shareholders then the Directors will have a problem from our solicitors, ASIC and ASX. To me it would not make sense that Directors make large 'On market' purchases whilst having 42 million still owing to them. That is my view.

Anyway I have left Peter Dykes a couple of messages for a direct statement and I will keep those interested updated. If he does not reply in a timely I will make a complaint to ASX for his non discloser and try force them to release a cash position statement to market. As it is all our best interests.