HCL HighCom Limited (Prev XTEK Ltd (XTE)

[Rawz]

What we did not know..
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02771621-3A636170

Wow what a shocker!! I’m completely surprised and just by share luck I sold my holding to buy FND earlier this year.

Company announcements to date have been positive and they always said profits will continue to grow from last years results. So this is a big surprise imo

[percy]

I did very well with Scott Basham when he ran AVA.
Liked him and HCL's sector.
Hold a medium sized holding.
Times like this I think of the old saying.
"A long term holding is a short term holding that did not work out."....lol

[NZSilver]

Very ugly announcement

[Rawz]

This update has come without warning. On 5th December they released an investor presentation after the name change to HighCom.

I have read it again and there is absolutely no warning in there that inventory may need to be written down if it doesnt sell. Also no warning about how dire sales were..

FY24 Opportunity Pipeline & Outlook

The Group has an opportunity pipeline of leads at various stages ofqualification worth more than $375m:
• HighCom Technology – is pursuing multiple drone relatedAcquisition & Support Contract opportunities across the region valued >$75m;
• HighCom Armor – has a global pipeline of opportunities >$300mfor lightweight body armour, ballistic helmets, and ballisticshields, with customers such as the UK MoD, US DoD, US DoJ.

Based on the continued tailwinds for the sector, the current sales and business development activity being progressed around the world,and with the enormous long term revenue generation potential that we believe will be created from the relocation of our unique XTclave IP into the huge US market, the Group is positive about continued revenue growth and profitability in FY24 and beyond

this is bs. Cant believe i dodged this.. just by dumb luck really. Look at the timing they announced it to the market as well, right at the end of the day.
Honestly if it was me i would dump my entire holding tomorrow if i still had it. and it would be at a big fat loss. But id still do it and redeploy elsewhere. Just my opinion. Ive never had issues selling something at a loss as at the end of the day its just a dollar value and I look at the point of view- could this $ value have better upside here or elsewhere.

[Rawz]

Just read the comments on HC and they share my thoughts that this is a total surprise after lots of positivity radiating out from management and their preso’s to the market.

One poster said there must have been a big order in the pipeline that never materialized. This would make sense

[Sideshow Bob]

This is a shock and a shocker.

I have been looking at the share price over the last couple of months and wondering what had been happening - why it wasn't kicking on. Clearly this is the answer.

5th of December it closed at $0.42 but only been down since then on a 'positive' update. I had thought that lack of announcements/news would be one of the key reasons and thought the HY in late February would give it some impetus again.

How wrong......

Closed roughly 25% down since that update. Going to be a bloodbath tomorrow and undoubtedly back under 12 month lows (27c).

Not sure what my plan is - get out at any cost or throw them in the bottom drawer. :mellow:

[Rawz]

500,000 shares offered at 25cents. Going to be an ugly open

[percy]

This update has come without warning. On 5th December they released an investor presentation after the name change to HighCom.

I have read it again and there is absolutely no warning in there that inventory may need to be written down if it doesnt sell. Also no warning about how dire sales were..

FY24 Opportunity Pipeline & Outlook

The Group has an opportunity pipeline of leads at various stages ofqualification worth more than $375m:
• HighCom Technology – is pursuing multiple drone relatedAcquisition & Support Contract opportunities across the region valued >$75m;
• HighCom Armor – has a global pipeline of opportunities >$300mfor lightweight body armour, ballistic helmets, and ballisticshields, with customers such as the UK MoD, US DoD, US DoJ.

Based on the continued tailwinds for the sector, the current sales and business development activity being progressed around the world,and with the enormous long term revenue generation potential that we believe will be created from the relocation of our unique XTclave IP into the huge US market, the Group is positive about continued revenue growth and profitability in FY24 and beyond

this is bs. Cant believe i dodged this.. just by dumb luck really. Look at the timing they announced it to the market as well, right at the end of the day.
Honestly if it was me i would dump my entire holding tomorrow if i still had it. and it would be at a big fat loss. But id still do it and redeploy elsewhere. Just my opinion. Ive never had issues selling something at a loss as at the end of the day its just a dollar value and I look at the point of view- could this $ value have better upside here or elsewhere.

I too reread that update.
All looked so good.??

[Rawz]

I too reread that update.
All looked so good.??

Yes I think investors have been taken for a ride.

[Sideshow Bob]

500,000 shares offered at 25cents. Going to be an ugly open

Agree.

Just how much of the bad news is already priced in.......;)

[Sideshow Bob]

Current price match at $0.22 :blink:

[Rawz]

Now 20cents. Brutal

Too many punters out there with Rawz’s mentality of dumping the stock on shock update

[Sideshow Bob]

$0.175

Ouch!

332k through in the first 5 minutes

[Rawz]

I reckon it will finish the day in the low 20cent range

[NZSilver]

Out just now, bought a small holding at 48c sold for 18c. I didn't see this coming, I've listened to the CEO and did a fair amount of dd. Goes to show how you can get caught out. If you can't sell excess stock with two wars going on it's a bit worrying.

[percy]

Scott Basham resigns.
I have not sold.Market cap at 17.5 cents is just under $18 mil.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02772005-3A636267

[Azza]

Apparently none of the bad news was priced in... 😬😬

[NZSilver]

CEO gone, this is either great value or at risk of falling to bits from here. Why a difference 24 hours can make...

[percy]

https://sendy.tarawera.co.nz/l/J6oLVth2f3f6IXNYvUBQEg/83JKNLKarLiuwfJBPQfdmg/scfy1Oo8MupfjV9JLFVQog

[Sideshow Bob]

https://sendy.tarawera.co.nz/l/J6oLVth2f3f6IXNYvUBQEg/83JKNLKarLiuwfJBPQfdmg/scfy1Oo8MupfjV9JLFVQog

Didn't take long for his to fall on his sword - hope no golden handshake.....

What a sh1tshow!!

[percy]

Didn't take long for his to fall on his sword - hope no golden handshake.....

What a sh1tshow!!

I sold out at 19.5 cents at open..
Approx 50% loss.

[DarkHorse]

I sold out too. Extremely disappointing. I had doubts after last results - explanation for drop in HY2 cf to prior didn't ring true; my weak point is not pulling the trigger to sell soon enough. Also a lesson in focusing on quality of earnings - not reading too much into one or two big contracts.

[Rawz]

Ive been looking back trying to see what signs there were that this was going to custard.
Nothing major imo. I dont think the cash drop in the 2nd half of last year was a warning sign as it was mostly to do with the pre payment of a major order in the period prior.

Two things i have noted however.

- Insiders did not buy a single share when Regal were selling down to below 30cents. This is when most of us retail investors were bullish due to the "continued growth in revenue and profitability" and $375m pipeline bs we were sold. With the benefit of hindsight the question should have been asked- its so cheap why are the insiders not loading up??

- Guidance was never given. I.e. revenue in the range of $$$-$$$ and profit in the range of $$$_$$$. Again with the benefit of hindsight this could have been a flag that the sales pipeline was far from qualified and instead it seems they have just added up the $375m pipeline based on the whiff of a potential sale.

Overall i dont think i fully appreciated the risk these types of businesses have when they are dealing with big chunky contracts that they essentially live and die by.

[percy]

In hindsight I should have taken more notice of Regal's selling.I thought they were wrong.
I missed any other warnings.
I had done extremely well with Scott Basham with AVA,so thought he would deliver.
Everything looked to be on track,and his 5th December 2023 Company Overview Presentation was very positive.

PS.When I sold sold books to schools any "bad" buys I would give them away,if the school had bought a lot of books.Saved time mucking around with them.I had good margins so could do so.
Same with shares.My performers perform.Non performers are either sold or given more time.Seems to work just fine.

[caenix]

Looking back at my notes, I started questioning the company's ability to compete and sell their products in mid-September 2023 (coincidentally at the September share price bottom and max market pessimism:p).
- The Indian helmet contract was supposed to start before the end of 2023, and I found an article (https://www.republicworld.com/india/indian-army-to-get-steel-piercing-bulletproof-jackets-helmets-by-year-end-articleshow/) in September saying SMPP Pvt of India won an Indian helmet contract, suggesting XTEK may have missed out.
- In that interview with Strawman (https://vimeo.com/881919260/7c50391f7c), Scott mentioned the Australian DoD buys helmets from a US competitor instead of going with HighCom. Also, just the general lack of tenders and awards (https://www.tenders.gov.au/Search/KeywordSearch?Keyword=xtek&submitSort=Go&OrderBy=Publish+Date) for HighCom gears in Australia, which is the segment where the company generate most of its margin.
- There was a lack of new sales announcements throughout most of the half, until the 2 months leading up to the AGM when several contracts were announced. However, the total value of announced contracts by the end of Nov added up to about $30m, a fair way off meeting their guidance on growing revenue.
- They guided growing revenue but not growing profit for FY24, only to maintain profitability.
- Other red flags included management holding little to no shares in the company and the company secretary leaving after 20 years of service.

I decided to just hold on to my very small holding back then, mainly because HighCom gears are often given good reviews and are recommended on the internet, while the market cap of the company was barely above their liquid assets minus debts. I thought the HighCom brand was worth at least something.

The company closing its Poland office without achieving much is also very disappointing. This is with the geopolitical environment surrounding the area, on top of Poland massively expanding its own military at the moment (Poland aims to have the largest land force in Europe by 2035). The competition in the US is not likely to be any easier.
I think there is a good likelihood they will run low on cash after the loss this half.

I too have exited all my shares on yesterday's open.

[DarkHorse]

I appreciate the mature, candid reflections on this forum. We're never too old to learn, and "with humility comes wisdom" as the good book says.
I too put too much faith in Scott Basham, and underweighted both the lack of management alignment and risk due to dependence on large contracts.
The silliest thing on my part was to recategorise HCM from high conviction to speculative (even putting them in my "speculative' "guest" 2024 stock picks) without reducing my position size to a very small one, simply because they looked so cheap.
With microcaps, there will always be a lot of non-performers, but the downside can be significantly reduced through position sizing based on risk profile.

[Muse]

an interesting thread this one. Was never a holder in HCL but checked up on it from time to time.

Some good rewards in hunting in microcap land but got to remain nimble...a lot of these companies lack some of the characteristics of larger companies that make them more robust (diversity of income streams, depth & quality of mgmt and systems, blah blah blah).

When it comes to investing, you can only lose your money once, whereas you can make multiples of your initial capital....so worth focusing your time, capital and emotional energy into the winners - particularly in microcap land. and from the looks of the posters here many have done famously well and more than offset the loss on other successful microcap investments.

Contract businesses are tough. Win a couple from a small base and you are flying, lose a few and you are back to square one. Even things like Serko and Task I shy away from, and is part of the reason for my sell down of Acrow (that together the metals implosion ex iron ore).

The candor and honesty is refreshing from the usual threads where everyone acts as if they are gordon gecko. Smooth seas do not make for good sailors.

[Ferg]

Indeed - some great posts and some great reminders from everyone here. Lesson learned so I guess "fool me once..." applies. Plus there is no other way to spin what happened - it is clearly a bit of a cluster. Like you Muse I also sold ACF, but for two reasons: I just got burned on HCL and I wanted to avoid being burned on another small cap (with the attendant risks you mentioned) and b) more importantly the gain from ACL subsidised the loss from selling HCL, ignoring the time value of money.

[percy]

Indeed - some great posts and some great reminders from everyone here. Lesson learned so I guess "fool me once..." applies. Plus there is no other way to spin what happened - it is clearly a bit of a cluster. Like you Muse I also sold ACF, but for two reasons: I just got burned on HCL and I wanted to avoid being burned on another small cap (with the attendant risks you mentioned) and b) more importantly the gain from ACL subsidised the loss from selling HCL, ignoring the time value of money.

Yesterday I sold ACF,JYC and some more ATP.,
Sold half of my HMY on 8th Feb,and all my HCL on 14th Feb.

[Rawz]

Yesterday I sold ACF,JYC and some more ATP.,
Sold half of my HMY on 8th Feb,and all my HCL on 14th Feb.

What have you been buying, Percy?

[percy]

What have you been buying, Percy?

Nothing in Aussie.Brought the funds back to NZ.
Ready to pounce on any earnings upgrade result.

[silu]

Ouch. Looks like I chose the wrong weeks to go bush and incommunicado.

[Sideshow Bob]

Couple of the days lately over 3 million shares gone through.

Over halfway through today only 35k.

[Rawz]

I see there is a new substantial holder.

[Sideshow Bob]

I was hoping someone buying in who had some sort of synergies or potentially taking over.....

I think JWT stands for "Just Wendy & Tony".....:mellow:

[Sideshow Bob]

HY Announcement

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02779031-3A637722

[Rawz]

Looks like they will do at least $23m revenue in H2

[Sideshow Bob]

Looks like they will do at least $23m revenue in H2

Slipping to new (recent) lows though.

Even though the board are "highly confident" that cost savings and improved sales means the business will deliver improved results in future periods.

Well it couldn't be much worse than the last one......

[Rawz]

Slipping to new (recent) lows though.

Even though the board are "highly confident" that cost savings and improved sales means the business will deliver improved results in future periods.

Well it couldn't be much worse than the last one......

The worry everyone will have is the fact they missed out on those contracts in the middle east. Something wrong with the product? the price (already margins are super low)?

The big contracts make or break HCL

[percy]

This order is being supplied ex stock,which is positive.
I no longer hold.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02794803-3A640463

[Sideshow Bob]

This order is being supplied ex stock,which is positive.
I no longer hold.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02794803-3A640463

Provided at least some positive news for the 1st time since their shocker HY.

Market likes it and better volume through already. Been in a slumber for the last month.