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OneUp
02-12-2004, 01:01 PM
Web Central Group (WCG) is being taken over by Melbourne IT (MLB) so I thought I might change the name of this thread.


First and foremost I recommend checking out WCG’s announcement of November 10 entitled “historical financials” where the historic performance of both FTR and WCG are set out. The numbers speak for themselves.

However, for a bit of background info…

WCG (formerly FTR) owns two companies:

(1) For The Record which provides recording devices to courtrooms, police, education providers etc. Steadily growing demand, with simple to operate devices and good distribution network in the US.

(2) Web Central Group is involved in web hosting services and related activities.

Both divisions are market leaders.

Until recently Web Central Group was called FTR Holdings – holding FTR and 49.4% of Web Central. But a couple of months ago FTR Holdings acquired all of Web Central and changed its name to, of all things, Web Central Group.

This acquisition was paid for with $7 million cash, raising $11 million of bank debt and issuing 2 million new shares and 2 million options. Consolidation of WebCentral will “provide access to its cashflows, enable leverage of the balance sheet and reduce WCG’s cost of capital.” Access to Web Central’s cashflows should also allow the commencement of a half decent dividend.

Web Central has economies of scale which are crucial in web hosting and allow it to earn fatter margins than competitors. It is one the few profitable operators in the managed internet hosting space with “an impressive roster of customers and partners”. Web Central was awarded the Microsoft Provider of the Year award (the first time ever a non-US company has been awarded this).

WCG has 38 million shares on issue and 4 million options. Trading at $1.05 WCG has a fully diluted market cap of $44 million. Last year WCG made a NPAT of $1.5m or 4.3cps, apparently putting WCG at a PE of 29. But the result for FY04 is not the relevant measure of WCG today - because it did not include the results of Web Central (which at balance date, as mentioned, was not a controlled entity) only the dividend paid by Web Central to the then FTR Holdings went to the bottom line. Now I will refer to the information released by the company on November 10. Combining FTR and all of Web Central, WCG would have earned revenue of $50.3 million in FY04 and EBITDA of $11.7 million. So it’s trading at a [u]price/EBITDA ratio of 3.8</u>.

Insiders hold 20 million shares (about half the company).

I would argue that WCG should trade at an EBITDA multiple of at least 10x (like IINet) and possibly up to 16x (like Melbourne IT). In which case, WCG should be valued at minimum $120m - $190m or between $2.80 and $4.50 a share now. EBITDA has been increasing about 50% for each of the last two years. If this momentum can continue, the shares could well be worth between $5 and $9 within 2 years (i.e. between a four and eight bagger). It could take until 1H05 or FY05 result (when WCG will most likely declare a dividend) for the market to really take notice.

Outlook
(From the Annual Report)
Shared hosting revenues in the coming year will be boosted by the recent bulk migration of several thousand customers from one wholesale partner – one of the largest migrations of hosting customers ever undertaken in Australia. Additional benefits are also expected to accrue from the broadening of the range of products being sold across existing wholesale accounts, including managed applications such as Managed Exchange.

The prospects continue to be positive for the WebCentral Complex division, with its credibility in the enterprise marketplace heightened by a number of significant contract signings and successful project implementations during the past financial year.

Conclusion
Web hosting is a competitive business, and competitive pressures could lead to EBITDA not being maintained at current levels.

But technically WCG is trending upwards and has outstanding fundamentals. These fundamen

OutToLunch
02-12-2004, 01:33 PM
Hi oneup,

It's about time people started taking notice of this outfit. I picked up some WCG (FTR) a couple of years ago back ay 37c when the markep cap was a tiny 12 mil -- on the strength of repeated insider buying by Malcolm Turnbull (might have that name wrong, he was their head dude at the time anyways). Now that WebCentral is fully above board in their books (and visible to the market in general) I expect them to go up substantially once they release their latest financials (their first as WCG). $5 to $9 in 2 years?? Who knows -- but they do appear to be doing well and are not yet being noticed to any great degree by the market.

(Hold WCG)

OneUp
02-12-2004, 01:55 PM
It could trade at $9 if combined EBITDA continued to increase by 50% per year - ie $11.7m last year, $17.5m this year, and $26.3m next year. After two years, if WCG traded at an EBITDA multiple of only 5 it would be worth $131m ($3.10 per share), at a multiple of 10 $6.25 per share, and a mutliple of 15 $9.40.

There is of course the assumption that earnings growth will continue at the rate of recent years, and that the ASX stays reasonably buoyant. The $11m debt WCG took on to buy all of WC may constrain their expansion this year. But WCG has strong cashflows, so should be able to pay this debt down quickly and continue expanding. WCG will not have a full 12 months from WC this financial year, but will in FY06. Also, WCG does appear to be winning substantial new business.

Even if WCG only achieved half the assumed growth rate (ie 25%), it would be worth (on an EBITDA of 10-15) between $4.35 and $6.50 two years from now (three to five bagger).

Out To Lunch, glad to hear you picked up this co when it was only 37c! IMO they are as good value now as then - because then Web Central was not too profitable, now WCG has acquired all of WC, and other IT stocks have rebounded strongly.

IINET has a market cap of $242m - it earned EBITDA of $22.4m in FY04.

OneUp
08-12-2004, 12:37 AM
Hey OTL (or anyone else that knows)
WCG announced an alliance with Unwired today. Any idea how many customers that outfit has?

lacmur
08-12-2004, 12:59 AM
quote:Originally posted by OneUp

Hey OTL (or anyone else that knows)
WCG announced an alliance with Unwired today. Any idea how many customers that outfit has?


Well, I'm one but I've been feeling lonely of late. I would hazard a guess that Unwired has somewhere in the region of 5,000 subscribers. Sydney only at the moment. Could be a few less with wabbits going back under 30 day money back guarantee. They also have a wholesale user base through other ISPs, although these are not involved in the web-hosting arrangements Unwired have entered into with Web Central. Unwired wont disclose their subscriber numbers and their share price is going down, down and down to funky town.

There may well be some interest in web hosting, particularly from small business users of Unwired. I've seen some enquiries about this on the Unwired message board. BTW, the new Unwired message board up for just a couple of weeks has 350 registered users. It has been far less active than the previous incarnation.

OneUp
16-12-2004, 01:33 PM
If anyone is interested, Web Central Group has now risen from $1.05 when first posted about just two weeks ago, to today being bid at $1.20 and offered at $1.30. Decent number of buyers but sellers are hard to come by. Plenty more to come, IMO.

Damo79
17-12-2004, 12:12 PM
OneUp, I agree with your analysis of the real P/EBITDA ration being around 4 rather than much higher (comsec has it at about 28). Would love to buy in but with the offer at 1.29 and the last buy at 1.20, I'm a bit hesitant to buy at 7.5% above last market price. Will do my normal, wait and watch, and kick myself later when it shoots up without me:(

Damo79

OneUp
17-12-2004, 03:10 PM
Damo,
ComSec isn't disagreeing with the EBITDA as published by WCG per se, they are just using the stated figure from the latest financial report which as mentioned did not include Web Central (acquired after balance date). Comsec will update their EBITDA ratio when the full year accounts come out.

By the way, FTR recently announced a major deal in the US to sell $7 million worth of audio equipment in calendar 2005. Seeing FTR earned $13.4 million in revenue in total last year, and earned an EBITDA of $3.2 million, this has to be very positive (and profitable) news.

Damo79
06-01-2005, 02:51 PM
I continue to find the depth chart of WCG to be very encouraging. With about 75% of the shares held by the top 20 shareholders, it seems obvious that absolutely none of them want to sell at anywhere near the current price. And with only about $40k shares on offer, there just isn't room for a large investor to get in there unless they're willing to push the price up 70% overnight [:0]. This means that only small scale buyers (wanting a few thousand dollars worth) can get in at close to the current price of $1.35 at the moment.

I've already watched the WCG share price rise about 30% in the last month since Oneup drew our attention to it. I bought in somewhere in the middle of that, and am still very optimistic about where the share price will go when next financial figures are released :D:D. I really think I could see a doubling or tripling of the current market capetalization based on rudimentary P/E ratios [8D]:D:).

Fingers crossed. Now to continue working on the wife to let me take a little more money out of our mortgage redraw facility so I buy some more ;).

Happy new year all.

Damo

Holds: WCG:D, MSC[|)], SEN[|)], SNN:), RAC:), BGN[V]

mark100
06-01-2005, 03:14 PM
I'm also holding this one since Oneup bought it to our attention. I have done a little research and think it will be a very good performer over the medium term.

cheers
mark

OutToLunch
06-01-2005, 03:33 PM
Definitely bugg*r-all shares on offer now. This baby could become my first ten-bagger... :D

OneUp
18-01-2005, 03:53 PM
quote:Originally posted by Damo79
I really think I could see a doubling or tripling of the current market capetalization based on rudimentary P/E ratios [8D]:D:).



Damo, I'd like to think the attraction of WCG is a little more than that.

First, I'm sure you know that EBITDA is not Earnings. The D - Depreciation (as well as the Interest and Tax) - is a very real cost for a web hosting company, mainly on servers that have a limited useful life and must be replaced reasonably frequently.

If we annualize the consolidated WCG's latest half year result, we would expect NPAT of $4.7 million. However, looking forward to this year, that would have to be adjusted downwards for the interest cost on the $11m loan WCG took out to buy WC (estimate about $1.1 million). And potentially amortzation charges on the $19.6m purchase price. All in all, I'd estimate WCG is trading at an inexpensive, but unspectaular, historic PE ratio (before amoritzation) of about 14.

The real attraction of WCG, atleast to me, lies in the economies of scale that are emerging in Web Central. If you convert EBITDA, EBIT and NPAT of the last 3 years to a percentage of revenue, some key trends will become clear.

(1) WC has increased its EBITDA margin by about 2 percentage points each half in the last 3 years. (This is the economies of scale emerging as fixed costs, like the 24/7 technical support help desk, is spread over more and more clients).
(2) Depreciation and Amortization - DA - has stayed constant at 16% of revenue.
(3) EBITDA = EBIT + DA. Because DA is a constant 16% of revenue, EBIT % has also increased at an average 2 percentage points per half; i.e. a direct one-to-one relationship with the increase in EBITDA.
(4) Because of (3), EAIT (Earnings after Tax and Interest aka NPAT) is also increasing very rapidly and should continue to do so (though possibly constrained by increased interest and amortization charges as alluded to).

I played around with an excel spreadsheet and if...
(i) WCG can average a 2 percentage points increase in EBITDA margin per half until end of FY07 (in the past three years, EBITDA % has increased from 17.9% to 28.4% - 10.5 points);
(ii) Depreciation remains at 16% (as it has done the past 3 years)
(iii) And therefore that the increase in EBITDA directly causes an increase in EBIT (increase from 1.8% to 12.7% of revenue in the past 3 years - 10.9 points).
(iv) Grow revenue at 10% per half. (In the past 3 years, revenue per half has grown from $10.5m to $19.2m.)

...then I estimate Web Central will make a NPAT of $11.7m for FY07. For argument's sake let's say FTR makes $3m NPAT in FY07. And that WCG trades at a PE of 20. If we put all these assumptions together, we get a share price of $7.00 within 3 years...and hitting my 10 bagger target within 5 years. Note that these estimates only assume that the company continues to increase EBITDA margin and revenue at the same rate of knots as in recent years. With the share price at $1.25, there is clearly a large margin of safety with WCG!

Can EBITDA and EBIT margin continue to increase? There must be a ceiling somewhere, but probably not around current margins. Rather, I think we are in NPAT takeoff stage.

A note of caution is that the NPAT result for this half may not be quite so impressive, due to interest and amortization charges. The key things to look for will be EBITDA and EBIT performance, IMO. Also, I do hope WCG does not announce a capital raising to "increase liquidity" in the company's shares. They keep doing what they're doing well and they won't need to worry about much else.

Damo79
18-01-2005, 04:06 PM
Thank you for the MUCH more insightful analysis than I could currently work out myself. I'm pretty new in the sharemarket (and have only just started trying to understand fundamentals). That post was extremely helpful to me and I'll be taking those kind of considerations into account for other companies I look at. I have to admit I was using EBITDA in the P/E ratio I referred to. [:o)]

I'm still very happy with my small WCG holding, but perhaps for better reasons after that explanation.

Keep up the good work OneUp :D:D:D

Damo

OneUp
18-01-2005, 04:51 PM
No worries Damo. WCG's one to put on the bottom drawer. From my vantage point, bid support has moved from $1.00-1.05 to $1.20-125, or up about 20% in 6 weeks. I hope this trend continues...for both our sakes :)

OneUp
27-01-2005, 05:06 PM
I've been in contact with the company over the last few days, asking questions about whether WCG still plans to go through with a capital raising to increase liquidity, whether their cashflows are analogous to their NPAT, and most importantly whether they expect EBITDA margin to be able to increase at similar rates in the future. Unfortnately they weren't giving away much for now, going into lock-down in anticipation of the half year result, but they did promise to address my questions in the half year results announcement.

However, something useful did come out of it. For anyone who currently holds WCG shares, if you send an email to Monique Roberts (moniquer@webcentral.com.au) with the details of the name your shareholding is in or your HIN, then you will be put on a shareholder-only information distribution list.

Damo79
31-01-2005, 01:18 PM
Coming along nicely under very small volumes, but about 20000 shares available at any price at all. Almost wish a few holders would decide to put theirs up for a sell just to convince some bigger investors that they can get in there. I think the lack of liquidity is a big drawback at the moment. Wonder whether a share placement might actually be a good idea, especially since they've got a bank debt to pay off.


quote:The key things to look for will be EBITDA and EBIT performance, IMO. Also, I do hope WCG does not announce a capital raising to "increase liquidity" in the company's shares. They keep doing what they're doing well and they won't need to worry about much else.

What would be the drawbacks of a capital raising, do you think, OneUp?? Is it as simple as saying that the debt is probably costing something around 10%pa, while we hope that our shares are going to return more that that?

Damo

OneUp
31-01-2005, 02:25 PM
quote:
What would be the drawbacks of a capital raising, do you think, OneUp?? Is it as simple as saying that the debt is probably costing something around 10%pa, while we hope that our shares are going to return more that that?


More or less.

(1) I see no need to share my piece of the pie with others. Liquidity is a not a major issue long term - if someone wants to buy any size parcel of shares they can offer $2.00 now and get as many as they want. Hell, even I'd part with my shares if someone offered $4.00 + now :D.

(2) A capital raising is also likely to depress the share price short term (esp if a rights issue, not so much if a Share Purchase Plan.) If the company successfully communicated a share issue was to increase liquidity, perhaps the share price would not be adversely affected afterall.

(3) WCG has no need to issue equity - the current modest debt burden for WCG is well within its powers to service. Overall, I think an optimal capital structure for WCG involves more debt, not less, because their cashflows are overall very predictable (ie monthly billings for an essential service). So, at this stage, I would argue that equity is more expensive than debt ('yes' to your point).

A good case study on the virtues of not issuing equity to fund expansion can be seen in Michael Hill.NZX. Although that company could have expanded faster by issuing equity to fund its store rollout programme, it decided to take it slower and funded expansion by modest debt and internal cashflows. This strategy resulted in a 7 fold increase in the share price in the last decade, which is probably better than would have happened if expansion had been funded with large issues of equity. I'd also note that once upon a time MHI was quite illiquid and unsexy (people made jokes about Hill calling his company "Michael Hill International" when he had just a few stores in NZ, headquartered in the international cosmopolitan metropolis of Whangarei!). Now institutions are falling over themselves to get a piece of the action and have driven up the share price susbtantially.

On the other hand, there is a case for issuing equity if internal cashflows and prudent debt levels are insufficient to fund profitable expansion (and that this expansion opportunity if delayed would be lost). Seeing as the web hosting industry (especially the dedicated segment) is growing very rapidly and forecast to continue this may be a fair way forward.

PS: look at her fly today. Last trade $1.35, offer $1.56 (!)

OneUp
04-02-2005, 02:29 PM
WCG's half year result will be announced Feb 14. I'll be having a briefing with CEO Andrew Spicer and CFO Ross Dewar later that week. If anyone has a specific question they want to me to ask, please post it here.

Damo79
11-02-2005, 01:46 PM
Hehehe

I can only assume someone just bought a small amount of these 'at market' without first checking out the depth chart. There were a few thousand for sale at 1.50 or so, and not much else, and now it says last price was $1.89. Wish I'd had mine there for a sell.... Of course would have bought back once it settled.

micro
11-02-2005, 10:03 PM
G'day Oneup,
I am a fellow,albeit small but happy, shareholder.
How do you manage to arrange a briefing-is it part of a presentation to one or more brokers or do you happen to be a largish holder that can command an individual briefing? Should be interesting though as apart from DiscreteInvestment ,I've never seen a broker report or shares mag write up, or on any other forum and there arent any institutional investors in there either. Agree fully that no more shares should be issued unless at an outrageously high price in the future-providing earnings are rolling along it wont take long to work off the debt.
I hope to come up with a few questions for you, but as this will be the first report with webcentral figures, it will be the first time to see where the money comes and goes although the interim might not contain all the detail the annual report will contain - there's a first question- ask them to provide a supplementary report in the event that the interim is too brief- ie rough idea of average/range of revenue per client/market share and if there are any significant competitors emerging that might hurt margins ( speaking of which, isnt it a shame that it is not 2000 now with the Ziggermeister in charge of a big cash cow-what would be WCG worth- only dreaming).Will be interesting also to see what the cash flow is like and how d&a is treated-conservative or aggressive accounting. And not to forget FTR business either- I know its the smaller part of the business now, but they keep threatening to expand products beyond the courtroom-if this is humming along well could be some good growth there also.
I like that reference to 10 bags.

stolwyk
14-02-2005, 11:18 AM
Half year report:

http://stocknessmonster.com/news-item?S=WCG&E=ASX&N=282222

Extract:
"Highlights from the newly consolidated WebCentral Group:
#56256;#56451; Revenue $28.72m up from $5.05m at 31 December 2003
#56256;#56451; Net profit $2.20m up from $0.36m at 31 December 2003
#56256;#56451; Interim dividend of 1˘ per share declared
#56256;#56451; EPS 5.89˘ per share, diluted EPS 5.73˘ per share
#56256;#56451; Mr Wayne Goss and Hon Neville Wran AC QC appointed to join WebCentral Group Board

“The first half has given us strong momentum for the remainder of the financial year. Our growth strategy is focused on expanding our presence in the corporate and government markets in Australia and the US, as well as driving growth through our wholesale and ASP markets,” Mr Spicer said.

“Our operating divisions have signed significant new corporate and government clients in the previous half year and will continue to leverage that success in the coming six months.

WebCentral Pty Limited is expecting increased demand in 2005-06 for its high end managed hosting services and application hosting solutions and FTR will capitalise on its success with the SSA contract to penetrate new markets.”

WebCentral Group Limited (ASX:WCG)
Level 12, 77 Castlereagh St, Sydney | www.webcentralgroup.com.au | info@webcentralgroup.com.au

stolwyk
14-02-2005, 01:10 PM
About $1.64 (+19) Quote 164/168. Not much left to sell.

OneUp
14-02-2005, 11:33 PM
Hi Micro, all I can say is that management will be in Brisbane, Sydney and Melbourne later this week to brief interested parties on the result. If you want to go email Monique. The worst they can say is no :).

Overall WCG's NPAT of $2.2 m was at the lower end of my expectations. FTR chimed in with an excellent result. But Web Central was less impressive - revenue was roughly in line with expectations (increasing 7.6%) but EBITDA was a smidgen lower. This is surprising, given the economies of scale that should arise from increased revenue as discussed earlier. One reason for this may be the increased sales & marketing expenditure this half, the benefits of which would show up in coming periods. Another reason could be a decrease in the revenue from one or two major higher margin contracts (from $2.9 to $2.4m). Whatever the cause, I will read over the reports in a bit more detail and be quizzing Spicer.

It was pleasing to see debt repayments ahead of schedule due to strong cash flows and no dilutive capital raising planned. Focusing on EPS growth is just what I wanted to hear. With low forecast capex debt repayments alone will ensure an improved second half (because of lower interest costs). In addition, and as noted in the report, the results to June 30th 2005 will be accounted for under A-IFRS. Goodwill of $830,000 was amortized in the first half. Under the new system, goodwill is not automatically amortized but tested for impairement. In the future it is unlikely to be written off for WCG. Indeed, if I read correctly, WCG may well write back on the $830,000 in the second half. If we 'normalise' the current result to exclude goodwill amortization, then we get NPAT of $3.0m.

I expect a full year NPAT (assuming no goodwill amoritzation is charged this year) of at least $7m. That comes from adjusted NPAT of $3.0m in the first half, reduced interest expense in the second half, and continued improvement in both businesses. With a market cap about $70 million, WCG still offers outstanding value IMHO.

stolwyk
15-02-2005, 09:38 AM
http://www.couriermail.news.com.au/common/story_page/0,5936,12245924%255E3122,00.html

Ex-premiers beef up WebCentral (Thanks Figjam)
Liam Walsh
15feb05

ONE of Australia's biggest Internet businesses, the Malcolm Turnbull-linked WebCentral Group, has snared ex-premiers of Queensland and NSW in a bid to boost corporate and government work.

WebCentral, which hosts 25 per cent of Australia's websites, said director appointees Neville Wran and Wayne Goss would bring government sector experience and commercial expertise to the board.

Yesterday, it reported underlying revenue growth for the half year of about 26 per cent to $28.7 million, net profit of $2.2 million and a 1˘ fully franked interim dividend.

Chief executive officer Andrew Spicer predicted growth at the "larger end of town".

"Corporate and government clients are increasingly using the web as a core part of their business," he said.

WebCentral shares rose 19˘ to $1.64.

Mr Wran, a former NSW premier and Mr Goss, a former Queensland premier, started as non-executive directors this month.

Mr Spicer said their political connections would prove useful.

"Not in a negative way, but just they know how government ticks," he said.

WebCentral was known last year as FTR Holdings – partly owned by Liberal parliamentarian Malcolm Turnbull and wife Lucy. FTR bought the remaining half of WebCentral last year for about $19.8 million.

The half-year report reveals goodwill has jumped from zero to $14.3 million due to the acquisition – resulting in net tangible assets per share falling from 44˘ to 9˘.

The company also has its FTR unit selling recording software and devices. Revenue from FTR lifted $3.1 million to $8 million on a new US contract.

The WebCentral operation's revenue rose $3 million to $20.7 million with the largest growth in wholesale and smaller-end sectors.

Independent telecommunications analyst Paul Budde said WebCentral had "established itself as one of the leaders in the market and that's paying off".

A boom in broadband technology would drive corporate demand for video-based web services, he said.

Advisory firm IDC Australia predicted the web-hosting sector would expand from $217 million in 2005 to $300 million in 2007.



&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;

OneUp
18-02-2005, 07:01 PM
I've had a chat to Spicer.

Key points:
* Like I supposed, the lower EBITDA margin for WPL was due to increased selling expenses (in the range of $500k) mainly wages.
* Second half tends to be stronger than first half and no different this year (no problems so far!)
* SSA Contract in second half will underpin FTR earnings and will continue into 1H FY06. Noted that they are trying to win additional contracts of this nature but that such wins are difficult to predict this far out.
* Decision on goodwill amortization charge not made yet but at the least expect goodwill will be lower.
* Expect EBITDA margins to be fairly constant (if not ticking up a touch) for next 12-18 months before increasing again at a reasonable clip. They believe EBITDA margins can be somewhat higher (and will be achieved with increased scale) looking into the future.
* Strong free cash flows. These will be used to
(1) Pay down debt. Company is continuing to pay down debt, and will probably go as low as 5% of market value of equity (about $3.5m). But happy with 10-20% debt levels. Noted it is generally hard for IT companies to get much debt funding but WCG managed to borrow for the WPL purchase at a good rate of interest. Potential for more aggresive capital management in the future (ie borrow more to expand/make capital returns to shareholders) but Board is quite conservative in this regard.
(2) Make acquisitions. These will likely be of the smaller medium sized type. Not interested in DSE or HWG - considered too expensive and not worth taking over.If no worthwhile acquisitions can be found then can either:
(3) Buy back stock - from existing major shareholders rather than the free float so as not to decrease liquidity or
(4) Increase the dividend.
* No general capital raising planned. Seeking to convince one or two major shareholders to sell 10% of company stock to increase liquidity.

OneUp
02-03-2005, 09:20 PM
I have communicated some more with Spicer.

The company is looking at ways to improve communication of its underlying profitability to investors. This will include emphasising the NPAT pre goodwill (as many companies do) and the EBITA (as comparable companies like HWG do) rather than NPAT. Clearly, such a change in emphasis does not change the underlying value of WCG but may improve investor appreciation of that value.

Spcier also confirmed that "We'll also be adopting a completely different goodwill treatment when Australia adopts the International Accounting standards next financial year. Goodwill will be subject to an impairment test, and may not need to be amortized."

So under the new rules, the PE of WCG will be about 10x assuming $7m NPAT for the year (pre goodwill...of which there is unlikely to be under the new system).

micro
02-03-2005, 11:11 PM
I am pretty sure most institutional investors would add back goodwill anyway when assessing a growing company - I certainly do - so I cant see how promoting ebita rather than npat on its own will do anything for the share price. Why dont directors just put their heads down and worry about getting the business running even better ( VSL fell into this trap a couple of years back )and the share price will eventually move in the right direction. The only thing a high share price does usefully for the company in the short term is if new capital needs to be raised for expansion at an outrageously high price.
A little bit of interest crept into WCG and HWG yesterday. I think shareanalysis in NZ had a write up on FTR once, if directors wanted an immediate boost in the shareprice all they would have to do is put their case to shareanalysis. Similarly, a write up in shares mag would help. The only thing with this approach is that a lot of short term investors would get in and the shareholder base might become weaker. Still, cant complain about price at the moment.

OneUp
02-03-2005, 11:57 PM
Micro, WCG is not targeting institutions - the shares are tightly held as it is!

Rather, Spicer is looking at ways to communicate results better to retail investors, to increase interest and liquidity. You and I and others as well as analysts and institutions who are familiar with goodwill will usually discard it when calculating underlying profitability and PE ratios etc. But there are a number of retail investors who lack basic financial literacy (as we all did at one stage in our life!), and may not realise that goodwill amortization is a non cash charge or that there is even a difference between amortization and depreciation for example. If you look at the latest WCG press release, I did not see anywhere the NPAT pre goodwill figure. I had to read through the half yearly and look in the notes to the accounts to get it. How many people do that?

So stating the numbers plainly may help more investors understand the underlying performance of WCG.

And when WCG's numbers are re-stated under A-IFRS's treatment of goodwill (via the impairement test) there might be some out there who are surprised by the sudden surge in reported NPAT. For example, let's assume goodwill amortization for this financial year was $1.6m, NPAT was $5.4m and NPAT before goodwill was $7.0m. $5.4m would be the bottom line under current accounting standards and $7.0m the bottom line under A-IFRS (assuming no impairement, which seems the likely outcome). Such a notion that the presentation of the results can affect the share price may not fit well with efficient market hypothesis, and for a large company followed by a number of analysts and institutions I doubt it would make a difference. But WCG has few (any?) analysts following it, so it could well do.

Like I said, the way things are reported do not affect the intrinsic value of WCG one iota, but they can affect market value.

PS: Welcome to the forum :)

Damo79
18-03-2005, 03:03 PM
All the way down to $1.43 at the moment. Must admit I'm suprised. I thought they'd hold their price at the $1.60 ish mark and then make big gains in next reporting season. Considering getting back in. Unless something has really changed, WCG is excellent value at this price.

Damo

Held but took profit.

micro
18-03-2005, 09:52 PM
Yes, the price is down, but depth on the buy side looks like someone is interested at least and not a mum and dad type either.

OneUp
23-03-2005, 08:38 PM
Not sure I'm entirely surprised at some profit taking, given the great run since November.

Using fairly rudimentary technical analysis (ie putting a 30cm ruler under the graph ;):)) WCG is trending up at a consistent and predictable 10-15c a month, and whenever it's got away from that steady uptrend, like in early January or last month, it's eventually come back to the line. It's currently sitting right on the line so it looks like it will move north from here, based on the above...and consistently so, until one day it becomes overvalued. But that's some time away IMO.

Damo79
30-03-2005, 12:11 PM
Decided its too good to miss at this price. I bought back in today at what I think is a bargain price.

To summarise... They have a market cap of about $54 million at the moment, a half year profit of $2.2 million with very consistent growth of revenue, EBITDA and NPAT continuing. I'd expect a minimum second half NPAT of $3 mil, and perhaps significantly higher. So at a very conservative full year profit after tax of $5 mil, they're now trading at a P/E of about 10. There is a slide (p. 18) in their half-year results presentation that shows the P/E ratios of other similar companies. IIN, for examples, was trading at a P/E of 66. Thats a bit optimistic, but I'm hopeful that WCG should be rated up to a P/E of at least 12-15 after full-year results. So thats a share price of $1.70-$2.20. And this is still at what I would think are conservative projections given previous growth. A problem is the lack of liquidity, but thats not gonna affect a small time gambler (ahem.. invester) like me.

Keep watching

Damo

Damo79
30-03-2005, 04:09 PM
quote:The last two customers I have signed up for hosting applications in a data centre already had sites with WCG but they did not choose WCG for the new business.
Theres some competitive info for you :-)

Ack!!! :(

Thanks for the info KW :).

OneUp
30-03-2005, 04:15 PM
Thanks KW for the info. Maybe I can prise some more out of you :). Like why they chose another company, and which company did they choose. And what kind of customers were these - dedicated (large) or shared server (small)? If they're small customers, no matter, WCG has thousands. It's worth bearing in mind Spicer is concentrating on the higher margin dedicated server customers rather than the no margin shared server customers. At any rate WCG's historic churn rates have been low. If that situation changes it would naturally not be good thing, but two customers is not a trend.

Damo79
22-04-2005, 03:29 PM
Here's a question. In their half year results, it says there was $2.5 million of debt retired early. This sounds like the equivalent of me paying extra off my home-loan than I have to. So if they had chosen to stick to basic repayments on that debt, which isn't actually that large, then the reported profit after tax for the period would have been $4.7 million rather than $2.2 million!!!

That's huge considering the current share price. I wonder if the market has taken this into account. Consider if the company had decided to keep the debt levels as they are last half and this current half. Assuming only conservative growth, they would be reporting a full year profit of over $10 million! Current market capitalization is about $52 million. Is there any problem with this logic? It seems this company is way undervalued. Wish I had more money to invest.

Cheers

Damo

Disc. Hold

Dimebag
22-04-2005, 03:54 PM
Damo79

I think you will find that the effect of any reduction in borrowings has already been taken into account in the calculation of the profit figures.

Net profit is, by definition, the change in net assets during the period. A reduction in a liability, without a corresponding reduction in assets, will result in an increase in net assets, and will therefore will form part of the profit calculation.

Cheers
Dimebag (none held)

Damo79
22-04-2005, 04:20 PM
Dagnabbit! Just when I think I'm getting a good understanding of financial reports, I find I still make stupid mistakes. Thanks for that Dimebag. I think I pretty much just repeated the error that Oneup pointed out to me months ago on this thread when I misreported EBITDA as EBIT. It's all damn confusing. I still struggle when differentiating between the operating cashflow and profits section of financial reports, but I'm slowly learning the ropes.

Regards
Damo

mark100
25-05-2005, 05:23 PM
Back in today. Sell side looks to be thinning.
Oneup, do you still hold?

Mark

OneUp
25-05-2005, 05:45 PM
Yeah I do. Been a bit sad to watch it slide from $1.60ish to $1.30ish over the last couple of months, but she's still gained 30%+ since December.

OneUp
12-07-2005, 04:50 PM
Has been somewhat happier to see it's slow but steady climb back up the ladder. Back up to $1.50 today, presumably on the back of winning the Microsoft 2005 Hosting Service Provider of the Year Award (Asia Pacific). No direct financial impact, but probably helps with marketing, as well as confirming that WCG has a superior service offering.

OneUp
01-09-2005, 11:33 PM
WCG to announce results Sep 5. For The Record had a major contract in the second half, so I expect a good result (probably better under GAAP than IFRS due to executive options issued), made even sweeter by an increase in the currently token dividend.

OneUp
05-09-2005, 09:08 PM
And here we are....

Not a bad result at all (all figures under IFRS).

Market cap = $69.3m.
Revenue = $58.4m + 16%
EBITDA = $15.2m + 16%
EBIT = $7.3m + 40%
NPAT (pre goodwill amortisation) = $6.5m
NPAT (after goodwill amortisation)= $5.0m + 26%

Free Cash Flows = $7.0m

EPS (pre goodwill) = 14.7cps
Div = 2.5c + 150%

Some ratios:
Price/Sales = 1.2
Price/EBITDA = 4.6
Price/EBIT ratio = 9.5
Price/Earnings (pre goodwill) = 10.6

Price/Free Cash Flows = 9.9

Yep, this one's a keeper. It's currently being valued as a no-hoper stalwart when in fact it's a fast grower. The high free cashflows is especially impressive given the very high rate of growth. How many fast growers do you see trading at a price/cashflow of 9.9?? The dividend has been kept modest as WCG uses these free cashflows to rapidly pay back $6m of the large amount of debt ($11m) it took on this time last year to buy all of WPL. Most of that debt has now been paid off (only $5m left), so we can expect (1) increased investment in growth this year and (2) higher dividends. Up to $1.55 today...perhaps higher in the coming days as the result sinks in?

micro
05-09-2005, 09:37 PM
Oneup
I've only quickly looked at the results but it looks as if $1.5m of goodwill can be added back to the figures you quote-but then need to be offset against option issue to directors.Looks like theres at least a page on how directors remuneration is determined-perhaps this explains the md comments to you regarding getting small investors to buy stock.
FTR looked like it might have had an unusually high( perhaps not repeatable ?)profit and revenue - but then again they gain credibility in extending the courtroom bus beyond courts.
HWG looks to be going gangbusters as well-hope WCG will end up with a fair share of large co mission critical business-at least there looks to be the financial clout to not require debt or capital raising and a couple of ex premiers on board.

OneUp
06-09-2005, 01:38 AM
For those who are interested in WCG's operations and outlook, I have c&p'd a few pages from the annual report, detailing first the outlook for the web hosting business and second the outlook for For the Record...

[u]Web Central outlook</u>

WebCentral has seen continuing growth in its core segments of shared and managed hosting. In line with market forecasts by research firm IDC, the company expects growth rates in shared hosting sales
will continue to slow and demand for managed hosting services to continue to increase.

Strong demand for managed hosting from corporate & enterprise customers WebCentral’s managed hosting division provides large clients with high performance, high security managed hosting solutions and round the clock technical support. These solutions are tailored for each client to deliver tangible business outcomes and are backed by service-level guarantees.

This division has experienced strong demand in the past six months, with particular emphasis on corporate messaging services, business-critical application hosting and critical database hosting such as Microsoft SQL and Oracle solutions.

A major factor in the future success of this growing division is the trend towards the recentralisation of IT services by businesses. This key industry trend is seeing corporate and enterprise clients increasingly seeking to minimise risk by outsourcing these sophisticated, resource-intensive installations to a proven
specialist provider like WebCentral.

Wholesale customers expanding product range to include high value products

WebCentral has wholesale contracts with a range of telcos and ISPs that resell its shared hosting and related services under their own brand. In addition to the hosting products provided, WebCentral
leverages its existing customer service systems to support these wholesale partners with value-added services such as pre-sales assistance, telephone and online technical support and billing facilities.

In the past year, growth in wholesale revenue has been strong, due in part to several bulk customer migrations to the WebCentral platform and the successful introduction of new products like Managed
Exchange and Promotions Manager to these customers. Some of the company’s wholesale partners are now seeking to expand the range of WebCentral products that they offer beyond the shared hosting
range and the company is seeing demand for its high value managed hosting and ASP product range from these wholesale partners.

Increased demand for corporate messaging services, based on Managed Exchange, has been seen company’s wholesale customers, with two large premium corporate email solutionsbeing implemented during the year and further installations and upgrades planned in the coming 12
months.

Solid demand for new ASP products

WebCentral’s shared hosting division provides a range of affordable, feature-rich technology products to small and medium business customers. In recent years, the shared hosting product range has
expanded significantly beyond traditional hosting services to include premium email, email marketing, broadband and e-commerce solutions.

The breadth of services offered by this division and its high customer service standards have made WebCentral a ‘one stop shop’ for technology products with Australia’s small and medium business
sector. WebCentral continues to leverage its market leading position, trusted brand and reputation for innovative product development to consistently grow its shared customer base.

WebCentral’s shared hosting division continues to perform well, providing a steady revenue stream. Several new products that complement the company’s core shared hosting offerings, such as the
SiteShop ecommerce tool and SpamDefend junk email solution have been released in the past few months.

ASP product range to boost revenue Since 2003, WebCentral has invested in developing a range of complementary ASP products suitable for its shared customer segment. Its first-mover advantage as an ASP provider has created a st

OneUp
06-09-2005, 01:46 AM
I don't really follow HWG, but would note that it made NPAT of $1.05m or 21% of what WCG made while having a market cap of $44m or about 65% of WCG. I recall putting the question to Spicer whether WCG would consider acquiring HWG, and he thought they were too expensive.

Very fair to add back goodwill amortisation Micro, how forgetful of me! [:I] I have adjusted the figures above. Indeed, the IFRS NPAT pre goodwill is probably the best measure of the result. This is because IFRS NPAT pre goodwill does account for the loss of shareholder value caused by WCG's (modest) options and share issue incentive schemes, which Free Cash Flows and GAAP do not. I'm actually a little disappointed that WCG did not lead with the NPAT pre-goodwill figure.

On the operational results for the web hosting division (WPL), Spicer is targetting growth in the higher margin managed servers market space. WCG managed to get 25% growth in the managed servers; the lower margin shared servers grew by 14%; wholesale grew by 44%. WCG appears to have increased market share in all market segments.

The predictions about the hosting division's (WPL) NPAT I made back in December 2004 have been spot on (excel spreadsheet can be found here: http://www.sharescene.com/index.php?act=Attach&type=post&id=103744). I forecast $1.58m for 1H05, the actual was $1.55m. For 2H05, I forecast $2.46m, the actual was $2.43m. These results do not speak for my forecasting skills, but the highly predictable nature of WPL's growth. What's in store for WPL this year? Well, my excel spreadsheet tells me WPL alone will make $7.41m for FY06, and $3.25m in the first half ( that's after goodwill, but before unallocated corporate overheads).

And let's not forget FTR. The $7m contract with SAS continues until the end of calendar year 2005 (i.e. roughly half of the SAS contract profits will be included in the first half 2006 results). Given this contract, FTR can probably manage the same result of $1.0m for the first half of 2006 as it did for the second half of this year (NPAT before unallocated corporate expenses). As to your note about FTR's profits being lumpy Micro, they are indeed. But more variability does not mean FTR will make a loss, and FTR is not the main contributor to the group's bottom line anyway.

OK, so WPL ($3.25m) and FTR ($1.0m) combined gives WCG a 1H06 profit of $4.25m. Adding back goodwill ($0.75m) and subtracting unallocated corporate overheads ($0.8m), I forecast a NPAT of $4.2m for 1H06.

In the second half, I guestimate that FTR will make only $0.6m
(after goodwill but before unallocated expenses). So, what profit can we expect from the group? WPL ($7.4m) + FTR ($1.6m) = $9.0m. Subtract corporate overheads ($1.6m). Add back goodwill ($1.5m). I forecast WCG will make $8.9m NPAT before goodwill this year. The key for WCG to achieve that result will be to increase margins at WPL.

Needless to say, this year should be a good one for WCG holders. With a (fully diluted) market cap of $69.3m, that puts WCG on a prospective PE of 7.8. For a fast grower. If on top of the fantastic expected operating performance we get a PE (before goodwill) multiple increase from the current 10.6 to 20 (which is very reasonable for such a high growth company), then we could be looking at a market cap of $180m or +200% share price performance over the next year. An even more modest PE of 15 would see a market cap of $134m (or +120%). It's hard to say when such a re-rating will happen, but this is not a trading stock IMHO. Buy and hold for a long time.

stephen
06-09-2005, 11:01 AM
Thank you for drawing this to our attention, OneUp. I have friends in the biz and am making enquiries.

OneUp
06-09-2005, 09:00 PM
No worries Steve, looking forward to what your industry insiders have to say about WCG if you're happy to share it with us.

stephen
07-09-2005, 09:23 AM
"Industry insider", not quite I'm afraid. But here are the words of my experienced web-monkey friend.

"They're quite big in Oz; we had several of the sites of companies we acquired on there, they were always fairly good to deal with. They seem to be pretty well put together and have lots of different options (Microsoft partner blah blah). Compared with the sort of pricing you get out of the US though they're fairly steep."

Make of that what you will. Said mate of mine would be reasonably hard-bitten so it's good to hear a positive response from a customer/reseller POV.

Personally I think hosting is a great business. Long-term income streams, high switching costs for your big customers, marginal costs low, little labour required when done right.

OneUp
07-09-2005, 09:44 AM
Thanks for that Steve.

I agree that WCG's in a great business for the long term: reliable income streams, inelastic demand, impressive long term growth rates, high margins and the ability to differentiate. Importantly, hosting is an economies of scale business that WPL dominates (twice the size of the next biggest). If there were ever a price war, WPL would win it. Low risk fast grower at a cheap price. I haven't seen anything better for a long time.

David Hardman
09-09-2005, 10:14 AM
I wonder if Malcolm would have Web Central adminster the email system ;)

****
In a world run by millionaire Liberal MP Malcolm Turnbull, snail mail would be a thing of the past and every Australian would be allocated an email address that would last them a lifetime

http://smh.com.au/news/technology/turnbull--cutting-edge-for-national-email/2005/09/09/1125772666805.html
****

I picked up some WCG for my Super fund about 6 months ago. As Oneup suggest, a great long term hold.

09-09-2005, 02:30 PM
Malcolm Turnbull I suppose he thinks email will be delivered by Australia Post or is he going to supply free internet conections and computers to a large pecentage of population. And his suggested email address of first name last name date of birth combination would make identity theft relatively easy. And I thought this guy a brain. How wrong I was.

OneUp
29-09-2005, 12:49 PM
A 502,816 share ($729,083) trade. Spicer long ago said he was trying to encourage large current shareholders to sell down their stake to improve liqudity - was it an institution buying?

stephen
03-10-2005, 11:14 AM
I bought in this morning. My apologies to the rest of you holders: this usually results in an immediate drop.

;)

Dimebag
08-10-2005, 08:55 PM
Oneup,

Nice analysis mate. Just had a bit of a read about WCG in the October issue of Shares magazine as well. Also pretty upbeat.

If you & others could forgive my ignorance of the web-hosting business for a moment, may I ask whether WCG might face potential competition from overseas hosters in the future?

Obviously serving out of the US would have delays in terms of download time, but as high-speed internet becomes more prevailant, this will become less of an issue. If hosting rates in the states are considerably lower, as indicated by the remarks of Stephen's acquaintance, could this pose a threat to WCG?

Or are there other issues that need to be considered in the hosting business?

Interested in your thoughts,
Cheers,
Dimebag (none held)

TheBossMan
09-10-2005, 10:14 AM
quote:Originally posted by stephen
Personally I think hosting is a great business. Long-term income streams, high switching costs for your big customers, marginal costs low, little labour required when done right.

Stephen, I disagree. Switching costs are not high in managed hosting or e-mail solutions, its just the familiarity factor that locks in customers. Costs are relatively low, especially if firms do their homework looking elsewhere or doing things in-house. I liken it to our accounts with banks; negligible switching costs, yet most of us tend to stick with the same bank for years despite poor service and cheaper transaction costs with competitiors.

TheBossMan
09-10-2005, 10:22 AM
quote:Originally posted by Dimebag

may I ask whether WCG might face potential competition from overseas hosters in the future?

I do not follow the Aus. IT market, but I'd think someone like Telstra or Telecom are best placed to compete? Much like Xtra here.

A weakness area of WCG as I see it is their reliance on Microsoft products. My understanding is, 40% of e-mail market is held by IBM/Lotus and WCG doesn't appear to have expertise there. Which means, they could miss out on revenue streams from e-mail soultions, spam, archiving (a booking industry) from firms who are quite happy with IBM-solutions. The 40% figure was from last year and I don't have the URL links to corroborate it, but I used to work for IBM, so there's the disclosure.

stephen
09-10-2005, 10:52 AM
"Obviously serving out of the US would have delays in terms of download time, but as high-speed internet becomes more prevailant, this will become less of an issue."

High speed internet doesn't really enter into it. It's the LATENCY that's the issue. This has an absolute component in the form of the speed of light, contributing a few milliseconds; and another component in term of the processing time incurred at each link in the chain of links between you and the host at the other end.

Eg, the quarter second or so it takes for a packet from my desktop to hit a server in the US mostly comprises the overhead in crossing network boundaries. Absent consolidation in the network, that won't change much. Consider also that it's easier to add network capacity closer to home.

Foreign hosts also present more risk. You have the usual worries about foreign jurisdictions and assessing reputation. Concretely, with every extra step between you and them, there is an extra risk of outage, and timezone differences etc may make it harder to resolve the outage.

Finally, US providers have been much cheaper for years, owing to the potential for economies of scale and different cost structures for network bandwidth - the cost difference is not new. Nonetheless, most serious size businesses don't host offshore, unless they actually have a substantial presence or audience offshore.

"If hosting rates in the states are considerably lower, as indicated by the remarks of Stephen's acquaintance, could this pose a threat to WCG?"

I think contractual and other risk management issues come into play here. I agree with TheBoss that the local telco's are a more real threat (and also a likely purchaser...)

TheBoss, I think that moving hosted servers from one provider to another is expensive, especially if you require little or no outage time in the process. But yes, intertia and the appeal of the devil you know certainly play a part.

Dimebag
09-10-2005, 11:33 AM
Stephen,

Thanks for your thoughts and a very useful clarification.

I still have some misgivings about making an investment in a company like WCG because I simply don't know enough about how the industry works to alleviate the high risk of overlooking crucial risk factors. This concept of latency is entirely new to me, and that is not confidence inspiring!

Still, am keen to learn more, and will follow this discussion & WCG's progress with interest.

Thanks again,
Dimebag

stephen
09-10-2005, 12:21 PM
A good way to think of latency vs bandwidth is to imagine a pipe. The bandwidth is the equivalent to the diameter of the pipe; so obviously, it's important for speed. Latency you can imagine as the length of the pipe - also important for speed, and a lot harder to minimise.

Gamers in particular care about latency, as do users of video and audio streams. People who merely want to push large volumes of data around may not care so much.

Thinking about risks in a hosting firm;
- do they have enough resources thrown at their data centre to cope with outages of power, network connectivity, hardware failure, blah blah?
- are their billing systems up to it?
- do they collect in a timely way?
- do their customers believe they get good support?
- how large is their customer base (will they hurt if they lose a big one)

By the way, thinking some more about your foreign competition concerns, there is nothing stopping WCG from buying resources in the US and wholesaling in Australia. Eg, in NZ, Webfarm and Popmedia do exactly that. The core value of something like WCG's hosting division is in their customer base, their ability to support them, and their ability to bill and collect, not in their data centre, which could be outsourced. You want your own data centre for managed servers, of course, but by the same token they are much less vulnerable to a foreign offering.

TheBossMan
09-10-2005, 02:46 PM
quote:Originally posted by Dimebag

I still have some misgivings about making an investment in a company like WCG because I simply don't know enough about how the industry works to alleviate the high risk of overlooking crucial risk factors.
Did Mr. Buffett invest in Microsoft?

robbo
28-10-2005, 05:53 PM
Web Central Group

Note they won a three (3) year Contract for the USA Social Security Department.

Wow.

Note also political contacts who are WCG Directors; on both sides of the political divide are AAA...


Wayne Goss--former Premier of Qld (ALP)

Neville Wran -- former Premier of NSW (ALP)

Lucy Turnbull -- former Mayor of Sydney (Liberal)

Malcom (Liberal)

Plus some of the ex Ozzie Email millionnnaire set.....

The USA Social Security was an eye opener... that would have a been a bloody competitive and tough tender to win;... and the Microsoft thing three years running....

The Numbers are excellent...as are Existing PROFIT Margins... and year on year increasing ROE....

So all in all..... I am in.....

Kind Regards,

Robbo :)

stephen
28-10-2005, 06:06 PM
Welcome aboard, mate.

I believe the adventurous fundamentalists preceded you :-)

stephen
13-02-2006, 11:36 AM
Are we happy with today's results?

OutToLunch
13-02-2006, 12:03 PM
quote:Originally posted by stephen

Are we happy with today's results?


Haven't had time to look at them in detail, but I think the selloff is a bit overdone. WCG have increased cash in the bank, Webcentral's core business is growing strongly and last year's result was a bit distorted by FTR's 7m US contract.

Having said that the shares did look a bit expensive based on current HY earnings and yield, but nonetheless I will hold mine for further growth.

Might find some skellies in the closet when I read the results in more detail though... anyone already done this?

stephen
13-02-2006, 01:20 PM
Will do so over the next day or two. My initial thoughts are that charging options as expenses (which I welcome) under IFRS is making a difference, and the treatment of software development costs as an expense rather than capitalising them (I also welcome this). Have a look at the statement of cashflows - it's really quite cheering. I agree with you about core business growth and distortions from last year.

micro
14-02-2006, 12:26 AM
The options are a real transfer of value away from us though.
If one knew how often these options issues may arise, one could amortise them over a greater period. Still, option value not as extreme as other companies-CCV a few years back issued options about 10% of capital at 5-7c,shares now 25c. Had a look at AVFM the other day, quite a lot of director options as well.

stephen
14-02-2006, 06:43 AM
Yeah, I don't mean I welcome the options - I mean I welcome treating them as an expense.

OneUp
14-02-2006, 02:33 PM
Disappointed with the half yearly.

FTR: caught off guard a little with the SSA contract - thought there was more left (only $1.1m that half). Strong sales pipeline suggests it will have a reasonable second half (and as noted selling expenses incurred in 1H will benefit 2H).

WPL: revenues flat but expenses have increased.

This is the first half on half in recent memory where WPL's EBIT has fallen...
1H 06 vs 2H05

Revenue = $22.9m +2.2%

EBITDA = $5.7m -17.4%

EBIT = $2.5m -34.2%

Spicer says "expenses under control" but perhaps that should have read "expenses out of control". Wonder how much this has to do with the departure of the old CFO in July, and Spicer's taking over of a joint CFO/CEO role. Time to put some pressure on management. Presentation didn't seem especially optimistic about 2H.

Not selling at current levels. Will hold for better times. But have to admit after this surprise that it's hard to see WCG being a 10 bagger now.

OutToLunch
20-02-2006, 01:42 PM
I've decided to sell my holding of WCG (in at 0.37, sold at 1.21). Not that I don't think they will continue to grow in the medium term, but I have decided there are better opportunities elsewhere for the time being so I have shifted the funds into currently-neglected (and more risky?) Longreach Group (LRX) who the market appear to have almost completely disregarded in recent times -- a recovery situation, potentially. Longreach's forward sales look good and their Startronics holding in particular could be worth quite a bit if they sell it at the right time, as they say they hope to.

Will keep watching WCG from the sidelines though.

Lizard
20-02-2006, 03:00 PM
Wow OTL. LRX is a brave move given no sign they have found bottom... I hold them and has been disappointing. I am still wondering what it is that I haven't found out about them yet which would explain the sp fall!

OutToLunch
20-02-2006, 03:35 PM
quote:Originally posted by Lizard

Wow OTL. LRX is a brave move given no sign they have found bottom... I hold them and has been disappointing. I am still wondering what it is that I haven't found out about them yet which would explain the sp fall!


Yes it's a risk, no doubt about that! I've watched them come all the way down from 30c. Their need to raise capital recently to position themselves for expected future sales to Ericsson has certainly dampened sentiment. My feeling is that investors have basically deserted LRX completely until they give some sign that things are on track. My move to LRX could well come unstuck but they do claim to be well-positioned for future sales of next-generation switching equipment, and their Startronics holding alone could be worth more than the current share price. Definitely more risky than holding WCG but a recovery from current levels could be very profitable.

Now that I'm in though, watch them drop like a stone! [:0]

Lizard
20-02-2006, 03:45 PM
Start an LRX thread and I'll put some bits and pieces on it for you. Huge potential....but....it's just not behaving very reassuringly!

OutToLunch
20-02-2006, 03:50 PM
quote:Originally posted by Lizard

Start an LRX thread and I'll put some bits and pieces on it for you. Huge potential....but....it's just not behaving very reassuringly!


Ok, new thread on its way. Don't scare me too much now will you! [B)][:0]

OneUp
07-03-2006, 04:49 PM
Have to advise have sold my WCG over the last few days to fund my purchase of Buka. Disappointing conclusion to what was a promising investment.

Will keep a close eye on WCG, and will buy back in if future news suggests this latest result was just a blip on the company's path to riches.

OneUp
25-05-2006, 12:14 PM
No one still holding WCG?

Being taken over for $1.53/share.

stephen
25-05-2006, 12:53 PM
I still hold. Haven't done the maths yet to work out whether I like the deal. Certainly Melbourne IT's vital stats look good - wish I'd bought them in the first place.

OneUp
25-05-2006, 01:00 PM
Stephen, IMO this is a great deal for WCG shareholders.

MLB is a great company. Maybe with a change of management at WCG it can realise its full potential.

Hold a good amount of MLB and a few WCG still in a family trust.

OutToLunch
25-05-2006, 01:03 PM
I agree, this deal sounds good. MLB seem to be going from strength to strength. it's a shame I hadn't kept my WCG shares, though on the bright side my other half still has hers so I might have earned a few brownie points. [:p]:D

micro
25-05-2006, 10:10 PM
I still have all mine. I dont know much about MLB bet share price is holding up ok. Is MLB in an index-if they are, instos might be a little underweight after the merger, if not the combined companies might be big enough to attract more attention. From recollection CAF took a couple of days to start a steady increase after the initial spurt when they bought OMP premium funding.

OneUp
30-05-2006, 04:53 PM
MLB performing well after the merger (took a while!).

MLB doesn't appear to be in the ASX 300 at the moment, but after the takeover that should change.

Have change the name of this thread to MLB and WCG, reckon it's pretty inevitable that it will turn into the MLB thread in about 3 months.

Anyhow, I like where Melbourne IT is going (they're one of my comp picks). Over 200k customers and their push into offering them web services will have gotten an enormous leap from taking over Aussie's premier web hoster.

k1w1
30-05-2006, 08:09 PM
As a MLB shareholder I'd like to thank all the posters on this thread for the useful discussion of WCG. Gives me a greater understanding of why MLB is interested. This is a good merger.

David Hardman
30-05-2006, 08:22 PM
Melb IT margins are always at risk.

Perfect example

http://bleedingedge.com.au/blog/archives/2006/05/cheap_au_domains.html

I guess this is why they are looking at hosting etc

OneUp
30-05-2006, 11:55 PM
G'dday Dave.

Price deflation has been a major worry of mine with MLB for some time,
but it is not a new phenomenon and MLB have still been able to grow profits at an impressive rate. Their move into value added services makes a lot of sense.

trader-jim
17-11-2006, 11:07 AM
Anyone know why the sudden price jump?

David Hardman
23-01-2007, 11:43 AM
Trading update just out.

Expected EBIT for YE07 been increased

Acquisition of UK registry earnings +'ve

Looking cheap at these levels

Footsie
24-02-2010, 09:03 AM
Phaedrus.... is this a technical breakout?

Lizard
15-06-2010, 06:52 PM
Might have been, Footsie... :ohmy:

Looks like it's taken a bit more of a leg-up in recent days, but there's that resistance at $2.31 somewhere ahead, so I suppose no point getting too excited here at $2.18.

Fundamental side stacks up okay - high ROE/ROIC and forecasting growth.

They run to a December year end, so forecasts are early-days. Currently flagging strong rise in underlying EBIT but only modest net growth in 2010 due to investment. However, more robust growth in 2011. Based on their indications for underlying, forward P/E looks to be about 10.1, forward EV/EBIT perhaps 7.5. Div yield about 6.9%.

Lizard
27-07-2010, 06:21 PM
Got a chance to buy in closer to the $2 mark recently which made it better value than above. Back to $2.22 today, but still like it here.

Footsie
28-07-2010, 08:35 AM
Liz, i'v had a flutter on this due to breakout.
should have bought more on the pullback.
im targeting 2.40-2.50

Lizard
19-08-2010, 09:56 PM
Hi Footsie,

Got a bit of a run on today on good volume. Looks like a set-up that could easily take out your $2.50 this run? (closed $2.30)

Footsie
20-08-2010, 09:13 AM
maybe. market depending.
longer term the chart looks very good. maybe 6 months it could be back to 3.00

just not sure whether to take profit now or hold 6 months for 3.00..............I have quite a few trading ideas at present.
I bought some TPM at 1.43 the other day when the got smashed. I can't see Telstra turning things around.

PS my current (weekly) trailing stop in MLB is 2.13 so it does have lots of breathing room. Phaedrus would probably tell me to hold. but in this market its a case of bird in the hand...

Footsie
24-08-2010, 12:54 PM
should have taken profits at 2.30+
today's result was OK... market obvioulsy doesn't like it that much

UPdate
stock now 1.98
result wasnt that bad.

just shows this is a very tough fickle market to trade.
2.35-1.98 in 3 days. on a result that was OK, but essentially in line.

Lizard
24-08-2010, 04:41 PM
What did you think about the level of capitalised development vs the result?

I thought overall result was disappointing and have decided to take MLB off my long-term investment list for now - will review at full year.

Footsie
25-08-2010, 09:52 AM
I think it's OK. bit of a sun shower to be honest.

it's probably going to drift back to the 1.80 mark now i'd say. it which point its back on a 8.3% net yield. cant see it going sub that without the div being canceled.

i'm 3/4 out. will sell rest 2+

buyer back sub 1.80

Lizard
23-08-2011, 12:43 PM
I think it's OK. bit of a sun shower to be honest.

it's probably going to drift back to the 1.80 mark now i'd say. it which point its back on a 8.3% net yield. cant see it going sub that without the div being canceled.

i'm 3/4 out. will sell rest 2+

buyer back sub 1.80

A year later, has been sub 1.80 for a while now, despite div remaining and net yield up over 9%. Result today not too encouraging for 2011, so will have to wait another 12 months to find out if they have actually transformed or just built a cocoon and shrivelled...

Seem to be having difficulty meeting promises and too much blame on external factors. Most effective transformation might be one at management level...

Lizard
21-12-2011, 03:46 PM
After selling down to the low $1.30's, it appears MLB may be on the rebound here at $1.51. Good div at these levels. Still to be seen if they can back it up with the promised transformation.

Still wary of the lowish volumes and longer term downtrend, but I have quite a few of these now anyway.

Lizard
23-02-2012, 09:13 AM
I thought the result here was stodgy-solid. But, as the market seemed to be hating MLB more than I did, it rebounded somewhat to $1.65. I'm still holding, as still think worth $2+ and the divs are good. Heading off again all positive into another attempt at the "transformation year"... will have to see. Hoping exchange rates can't be transformed too much further into negative for them.

Joshuatree
26-11-2012, 01:30 PM
Big dump today down re 23 c on profit downgrade to last years and review assets to selling some.

soulman
12-03-2013, 10:13 PM
Announcement out by MLB after the market closed. I think it's a good deal. The board certainly thinks so. "An offer too good to passed up" is their statement.

Should be a good day tomorrow.

Joshuatree
12-03-2013, 10:34 PM
Looks like a fantastic deal , not far off the mkt cap of the company.

Lizard
13-03-2013, 07:09 AM
Well, I am still holding and maybe finally will see my $2+.

However, the remnants of the business may not exactly be a compelling buy/hold for anyone and there is a limit to how exciting a return of capital can be. So I may just depart in relief and with a fairly mediocre profit for my patience (although the divs were good).

soulman
13-03-2013, 03:12 PM
Well, I am still holding and maybe finally will see my $2+.

However, the remnants of the business may not exactly be a compelling buy/hold for anyone and there is a limit to how exciting a return of capital can be. So I may just depart in relief and with a fairly mediocre profit for my patience (although the divs were good).

Geez Whizz.....opened at $2.40. Where will the upside come from now. Such a high opened. Wished I was in it. Just offload at $2.25.

Lizard
13-03-2013, 09:06 PM
I thought about offering pre-market open at $2.23 as I figured value is somewhere between there and $2.45... didn't expect it to open so high though and left it... woke up and flicked them at $2.28.

Still have one more portfolio to quit, but may wait for the div later in the month - or at least until I've decided what else to buy.