NBS - Nexbis Limted

[jayinoz]

Re: POTENTIAL BREAKOUT Alerts

NBS- Nexbis Ltd

www.nexbis.com.au

Running at a PE of under 3 times current earnings. I noted that the Directors of this company are holding off on giving a cash position statement to the market. As they had over 42 mil outstanding in Trade Receiveables 3-4 months ago.

Now 2 Directors have made several large 'On Market' purchases (Including their CFO), after the did not release their current cash position. So they were able to purchase the stock at a substancial discount to the near 50c it had been trading. They purchased at 38c, share price now 33.5c and we await their financial position.

As the Directors have made substancial out of pocket 'On Market' trades I gather that they have a very good financial position. And will relaease this information when they are good and ready, whilst they buy up at a discount in the meantime.

It all looks highly suspicious yet could be a good stock play if they are in a good financial position.

The NBS Nexbis Ltd thread is also an interesting read. As it shows the general attitude of shareholders being to sell out, as they are not being transparent about their financial position. Plus it is impossible to get any response from the NBS CFO in regards to the 42 million dollars that was owing.

My guess is that they have been paid. ASX queried a large drop in price from 46c to 33.5c and the CFO even told them that he advised shareholders that he will not be giving cash position updates in the future. Whilst stating this to ASX, he goes ahead and snaps up a huge amount of his own shares at a huge discount. To me, look for a rebound.

Even if the stock was $1 per share, that still only x9 current earnings and they look set to accelarate current growth. As they have their foot in the door with the Chinese government and selling a lot of contracts for their Nexcode security system. It is unlikely the Chinese government will be defaulting on them. Could be a good short term trade and long term value hold.

They will be paying their first lot of dividends early next year. All looks good to me, yet their non transparency needs to be dealt with to get fair market value for their share price.

 

[Galba85]

Thanks for the timely update Jayinoz, sounds like you've been keeping a close eye on things. I would imagine most people are in the red a little, but as you mentioned directors buying shares gave me confidence when I was getting a little worried

Cheers

 

[ROE]

Thanks for the timely update Jayinoz, sounds like you've been keeping a close eye on things. I would imagine most people are in the red a little, but as you mentioned directors buying shares gave me confidence when I was getting a little worried

Cheers

In recent history ABC Learning directors load it up like crazy

Even Singapore Fund got suck into the confident and they lost many many million as the stock plunge they buy and buy only to see it going into trading halt and end in bankruptcy.

Just repeat recent event it bears no correlation to this event

When a company book cash and they haven't got in the bank I count that as sloppy management and they walk the thin line between fraud and reporting errors.

 

[Kuri]

This stock is so hard to figure out. Orbis Investments has just increased their holdings so they must have faith in the stock. I think I am seeing resistance around the current levels but would love someone with a bit more charting experience to let me know their thoughts. Time to be bold maybe...

 

[melbournedee]

When a company book cash and they haven't got in the bank I count that as sloppy management and they walk the thin line between fraud and reporting errors.

They haven't booked it as cash - it is reported as a receivable so there is no question of fraud or misrepresentation - only that there has been no update on the status of the cash collection. The longer it remains outstanding the greater the risk that it won't be collected and earnings will suffer. The outstanding amount represents about 65% of total revenue for the year and 90% of reported NPBT.

 

[Ozymandias]

The share price was hammered today after their announcement regarding the Malaysian contract. Personally I see this as a buying opportunity;

In note 4 of the annual report, you can see that only $3.3M of $65.5M worth of revenue came from Malaysia anyway. The majority of their income in fact came out of China.

This also means that the majority of the large outstanding receivables are from China, since they are much larger that the revenue booked against Malaysia and Sweden.

This announcement does not mean that the full balance of the trade receivables is under threat, only that $3.3M is.

So not good news, but hardly enough to justify the incredible 35% drop.

Any other opinions out there?

 

[craigj]

starting to lose faith in this company big time
the instos sold out thru lack of disclosure last month
but after a day like this only the true believers will hold

because they have cash flow and money in bank i will hold but it is becoming more and more speculative and a punt that 1 of the jobs in the pipeline will come to fruition

 

[skyQuake]

the instos sold out thru lack of disclosure last month
but after a day like this only the true believers will hold

How so? They disclosed it to the asx after they sold didn't they? They've put out a fair few 604 forms

 

[JungleMaster]

because they have cash flow and money in bank i will hold but it is becoming more and more speculative and a punt that 1 of the jobs in the pipeline will come to fruition

I have gone down the same path. I have some confidence that something will come out of it...but then again, I am so new at this, it is probably one of the biggest risks I will take

But some say this is a learning process right

 

[monkeyA]

In note 4 of the annual report, you can see that only $3.3M of $65.5M worth of revenue came from Malaysia anyway. The majority of their income in fact came out of China.

This also means that the majority of the large outstanding receivables are from China,

I question if the outstading amount from the chinese will be paid. Do the chinese agree that they owe NBS this amount? If NBS can continue to generate the revenue & profit that they reported in FY09, mostly off the back of china, then they will do well even without the malaysia contract. But I'm worried their china contract could turn pear shaped too??

 

[craigj]

the instos selling out is from different firms on the sky business channel that in previous months were buiyng up th shares

 

[jayinoz]

Would have been nice to buy at 16.5c today... huge lift during the day to a high of 26...ending @ 24c. All eyes are on a cash position update to come out soon. Or the CFO will have some very unhappy shareholders demanding an instant update later this month at the AGM.

I look forward to personally hearing the explaination of the lack of transparency in relation to the current cash position on all the other projects (X Malay). As the Malay project could be a 3.3M impairment as of 30th June 2009. I expect they will be working hard now to collect as many outstanding debts as possible and release an update to the cash position before the meeting.

I fear they continued working for free for the Malay government after this date. All up I guessimate they maybe looking at an approx 5 mil impairment over 2 financial periods.

On the plus side the company has enormous potential if it can sort out its collection of debt issues. Plus no further impairments are likely particularly from the Chinese project.

Their new Investor Relations team told me they will not be releasing another cash position in the near future. Not something we wish to hear just before the AGM. I would like to see who takes responsibility for the leniency of the companies policy in terms of terms of payment. I expect this to be the CFO, he is asking to be re-elected as a Director at the meeting.

He has a lot of explaining to do before getting my vote.

To me, it is easy for companies to say this company owes xyz. It is another matter if they actually agree. Let us hope the CFO has given us the correct figures, not fantasy figures they hope to bill.

Many months have passed with no further update. More shocking is that after the 29th Oct bad news in regards to Malay Immigration halt of services due to non payment. They never bothered to state that the other 90+ % of Trade Receiveables has been paid.

In my mind they are having issues with their terms of billing and terms of payment. Look forward to the AGM.

 

[Ozymandias]

They never bothered to state that the other 90+ % of Trade Receiveables has been paid.

Has it been paid though? I've seen nothing to confirm that it has, and it seems like we'll have to wait until the half year financials to know for sure, unless they cave to pressure at or after the AGM.

Here's hoping that the CFO doesn't make re-election as director and the company takes it as a sign...

 

[Kipp]

The share price was hammered today after their announcement regarding the Malaysian contract. Personally I see this as a buying opportunity;

In note 4 of the annual report, you can see that only $3.3M of $65.5M worth of revenue came from Malaysia anyway. The majority of their income in fact came out of China.

This also means that the majority of the large outstanding receivables are from China, since they are much larger that the revenue booked against Malaysia and Sweden.

This announcement does not mean that the full balance of the trade receivables is under threat, only that $3.3M is.

So not good news, but hardly enough to justify the incredible 35% drop.

Any other opinions out there?

As you put it.... only 3.3 mill of revenue from Malaysia last year. READ: the Malay contract was canned in FY09. What wasn't this reported to market back then? Management are dodgy, and their reports read like a Grade 10 powerpoint presentation (just take a look at their full annual report today, and you will see what I mean, I love the "for personal use only" printed down the side.

NBS are dodgy.

 

[Ozymandias]

As you put it.... only 3.3 mill of revenue from Malaysia last year. READ: the Malay contract was canned in FY09. What wasn't this reported to market back then? Management are dodgy, and their reports read like a Grade 10 powerpoint presentation (just take a look at their full annual report today, and you will see what I mean, I love the "for personal use only" printed down the side.

NBS are dodgy.

Their disclosure hasn't been as complete as I'd like, but they did disclose in FY09 that the Malaysian contract had been delayed.

Also, the 'for personal use only' watermark appears all sorts of reports and announcements released through ASX. I don't see how it's relevant in this case.

 

[mastatrada]

I have taken the liberty of copying a well researched and alarming post from another popular stock forum, compliments of poster 'ousia'. I believe its a vital read for anyone involved or thinking of getting involved with Nexbis, and goes some way to explain the recent sp hammering. It is obvious that there is a lot (or rather, not a lot) going on behind the scenes that the company is not telling us.

"The Malaysian FY10 budget was handed down on Oct 23, so, presumably, the earliest the Malaysia project could be reinstated will be Jan 2012 (Malaysian FY corresponds to the CY). But I think the company is probably putting some positive spin on this news. I have serious doubts the Malaysia contract will ever materialize now. It is evidently not a priority for this cash strapped Malaysian govt. In some early media releases from 2008, the then immigration minister spoke of a short term "trial" to showcase Nexcode (because it was a Malaysian technology), for a potential contract worth only around $4mill. This info contradicted the numbers and project scope that NBS was putting out at the time, but it now looks to have been fairly accurate. (It is becoming increasingly clear that virtually all of NBS' ASX releases over the last 12-18 months are misleading to a greater or lesser extent – see my old posts).

And you would have to assume that the Malaysia cancellation will make it difficult for NBS to sign new contracts (given that the Malaysian contract was the spearhead for Nexcode into the govt sector).

I think anyone considering trading NBS for a bounce should turn their attention to the significant China uncertainties.

As I've been saying for some time now, China receivables are well past due, and NBS' auditor probably does not have a sufficient handle on the nature of the China debtor. NBS' auditor, like most analysts, thinks this debtor (called CITP) is a Chinese govt entity. The reason the auditor and analysts think this is that NBS has told them so. On page 10 of NBS final FY09 results, it is claimed that CITP was "formally known as AQSIQ." Since AQSIQ is a Chinese govt entity, this statement clearly implies that CITP is one and the same as AQSIQ. And since AQSIQ is a Chinese govt entity it is at almost zero risk of default. Thus, we have been led to believe that NBS’s China debtor is at almost zero risk of default. Lodge partners, in particular, have emphasized this point in their recent reports.

However, the following document outlines the true owners of CITP:
http://www.hoovers.com/free/co/secdoc.xhtml?ID=115393&ipage=5740614-1087-7606

This document shows that CITP is only 12% owned by AQSIQ. The other owners of NBS' China debtor is Philadelphia based TPID (70%) (market cap of only $700k) and some private Chinese company that doesn't have website (18%). Now TPID is 95% owned by the well known pornographer James Mackay (who had some uncomfortable dealings with ERG in Perth in a similar looking deal a few years ago). The Mackay group of companies have a long and sorry history of making major contract announcements in relation to distant Asian govts, which do not become actual revenue generating contracts. See http://www.australianit.news.com.au/story/0,24897,21017138-15316,00.html

The key point here is that it is not strictly true that NBS' Chinese debtor is the Chinese govt. The debtor is in fact basically 70% owned by James Mackay (via Mackay's TPID vehicle). It is difficult to avoid the conclusion that NBS' auditor and all of its analysts and major shareholders have been intentionally misled by NBS into thinking that the Chinese debtor is the 'safe' Chinese govt.

(For those interested in detail, TPID’s interest in the China contract was transferred to a British Virgin Islands front company called Saddington in exchange for a 5% share of the China revenue. The China contract supposedly started around 7 months ago, and TPID are still yet to receive a cent from Saddington. It is possible that James Mackay also controls Saddington, although I can’t confirm this).

When a possible Mackay connection to NBS’ china contract first arose a this thread a few months back, I asked a couple of analysts if they could explicitly put the question about NBS involvement with James Mackay to NBS management. John Houston fired back an email to these analysts saying that (1) NBS had no relationship to James Mackay or to Saddington whatsoever, (2) NBS had done an incredible amount of due diligence on the China contract, and (3) the contract was going to be great for the company. NBS also organized for a few fund managers to go to China and actually see some cards being printed in June 09. Safe to say that all the big investors as well as the analysts had very good reasons to believe that the China contract was/is genuine, and that the Chinese debtor is very low risk. I reported some of this info (in a positive light) on this thread at the time.

However, the 8-k report cited above from TPID indicates that Houston’s email was misleading. As noted, NBS’ counter party in the China contract is 70% owned by TPID/Saddington/Mackay, and only 12% owned by the Chinese govt. So, contrary to Houston’s claim, NBS’ Chinese counter party is majority controlled by Mackay. And it is possible that even this 12% figure of govt ownership is false; it may be part of an elaborate scam by Mackay to raise funds for a 'govt contract' that may not be what it appears to be. After all, NBS paid CITP $5mill supposedly as a “bond” just to participate in the China deal. And this $5mill has effectively gone to a James Mackay controlled vehicle. Furthermore, Mackay seems to have raised some $50mill from other sources to get this China contract off the ground. It is possible that Mackay raised these funds (including the $5mill from NBS) under false pretenses.

At the very least, it is difficult to avoid the conclusion that CITP is a much higher risk debtor than what NBS management (and its auditor) have led us all to believe.

I'm not explicitly saying NBS has been defrauded by Mackay, nor am I explicitly saying that Mackay has defrauded anyone in relation to this particular China deal. I'm only speculating on these possibilities and drawing attention to inconsistencies between what NBS management and auditor have lead the market to believe (i.e., that they have no financial connection with Mackay or Mackay controlled entities) and the from 8-K cited above.

It is still quite possible that China is a legitimate govt contract and the China cash will come in soon (as recently as last week NBS management was still telling at least one fund manger that China was going gangbusters and the cash was "immanent"). But as each day passes, the likelihood that NBS has been caught up in a larger $50mill scam by James Mackay grows. In light of the default risks of CITP, I personally rate the probability that NBS will receive all of the cash owed to it from China at no more than 50%."

 

[jayinoz]

"The Malaysian FY10 budget was handed down on Oct 23, so, presumably, the earliest the Malaysia project could be reinstated will be Jan 2012 (Malaysian FY corresponds to the CY). But I think the company is probably putting some positive spin on this news. I have serious doubts the Malaysia contract will ever materialize now. It is evidently not a priority for this cash strapped Malaysian govt. In some early media releases from 2008, the then immigration minister spoke of a short term "trial" to showcase Nexcode (because it was a Malaysian technology), for a potential contract worth only around $4mill. This info contradicted the numbers and project scope that NBS was putting out at the time, but it now looks to have been fairly accurate. (It is becoming increasingly clear that virtually all of NBS' ASX releases over the last 12-18 months are misleading to a greater or lesser extent – see my old posts).

As I've been saying for some time now, China receivables are well past due, and NBS' auditor probably does not have a sufficient handle on the nature of the China debtor. NBS' auditor, like most analysts, thinks this debtor (called CITP) is a Chinese govt entity. The reason the auditor and analysts think this is that NBS has told them so. On page 10 of NBS final FY09 results, it is claimed that CITP was "formally known as AQSIQ." Since AQSIQ is a Chinese govt entity, this statement clearly implies that CITP is one and the same as AQSIQ. And since AQSIQ is a Chinese govt entity it is at almost zero risk of default. Thus, we have been led to believe that NBS’s China debtor is at almost zero risk of default. Lodge partners, in particular, have emphasized this point in their recent reports.

However, the following document outlines the true owners of CITP:
http://www.hoovers.com/free/co/secdoc.xhtml?ID=115393&ipage=5740614-1087-7606

This document shows that CITP is only 12% owned by AQSIQ. The other owners of NBS' China debtor is Philadelphia based TPID (70%) (market cap of only $700k) and some private Chinese company that doesn't have website (18%). Now TPID is 95% owned by the well known pornographer James Mackay (who had some uncomfortable dealings with ERG in Perth in a similar looking deal a few years ago). The Mackay group of companies have a long and sorry history of making major contract announcements in relation to distant Asian govts, which do not become actual revenue generating contracts. See http://www.australianit.news.com.au/story/0,24897,21017138-15316,00.html

The key point here is that it is not strictly true that NBS' Chinese debtor is the Chinese govt. The debtor is in fact basically 70% owned by James Mackay (via Mackay's TPID vehicle). It is difficult to avoid the conclusion that NBS' auditor and all of its analysts and major shareholders have been intentionally misled by NBS into thinking that the Chinese debtor is the 'safe' Chinese govt.
"

Yep this report and evidence attached I stubbled across in the other forum, made me get out of the company at a substantial loss. Better a loss of 35% than find out that the Chinese project is a con job as well. Sounds like the Management are either corrupt or stupid.

Surely you would think they would investigate who is behind the wheelings and dealings of companies they are to give credit too. James Mackay being involved in the deal was too much for me to take. Not for his past\current porno work but his business ethics have done over many a company. He has become very sophisticated in his persuasive craft with the ability to setup very complex schemes involving huge numbers of plays all over the world.

I believe NBS Management know they have been dealing with James Mackay- even with their public denial. This story will probably end becoming a pass the buck story with no one ever taking responsibility for the manipulation.

No news is bad news from this company... I credit the author of the above from giving such a thorough review. She could be wrong but she is very thorough in her reporting on hc. Giving articles of evidence along the way.

Although it did cross my mind that she could be trying to drive the price lower with negative speculation, yet it is more compelling than anything NBS Management has been able to supply me. Their Investor Relations and CFO simply will not return my calls and emails. Suck up the loss...

 

[Galba85]

This is some serious analysis. Thanks go to the poster and original credit to ousia. However I'm wondering Jayinoz if you have some info you can share with us about James Mackay, I confess in ignorance to know nothing about him

 

[jayinoz]

This is some serious analysis. Thanks go to the poster and original credit to ousia. However I'm wondering Jayinoz if you have some info you can share with us about James Mackay, I confess in ignorance to know nothing about him

THE long-suffering ERG Group struck its latest smartcard deal with hardcore gay-pr0n website entrepreneur James Mackay, who has been under investigation by US authorities.

The link should give you a start in getting to know Mr Mackay....and his wheeling and dealings. His link to Nexbis is via the Chinese deal with CIPT... you can search over his company and name for more details. He is a colourful character with a colourful biz history.

Nexbis Directorshas publically denied having anything to do with him. Although he owns a good share of the company they work for in China. Naturally it is possible that they do not know him, not probable.

Links as supplied;

However, the following document outlines the true owners of CITP:
http://www.hoovers.com/free/co/secdo...0614-1087-7606

This document shows that CITP is only 12% owned by AQSIQ. The other owners of NBS' China debtor is Philadelphia based TPID (70%) (market cap of only $700k) and some private Chinese company that doesn't have website (18%). Now TPID is 95% owned by the well known pornographer James Mackay (who had some uncomfortable dealings with ERG in Perth in a similar looking deal a few years ago). The Mackay group of companies have a long and sorry history of making major contract announcements in relation to distant Asian govts, which do not become actual revenue generating contracts. See http://www.australianit.news.com.au/...-15316,00.html

 

[Kuri]

A new presentation was added to the ASX today. It looks like NBS took a few select investors (not me by the looks of it) over to be wined and dines in Malaysia. They apparently met withe the Malaysian PM which is hopefully good news for the continuation of the program there. They also mention the problems with the receivables so far.

An interesting section is that they say they wish to improve communications with investors and be more transaparent. This is a big step as a lot of people have sold because they cannot get enough information regarding the company. It will be interesting if they are true to their word over the next few months.

The link is below for the presentation on the ASX website.

http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=NBS


Kuri