Diligent Boardbooks IPO

[Halebop]

Diligent provide more certainty of profitable execution than Xero. For me the build up in expenses retarded the profit performance somewhat this quarter. Was expecting a little more profit but had anticipated lower expenses. Cash flow continued to be solid and with pending receipt of the note repayment am guessing cash will hit US$30m by the last quarter. They have come a long way from almost going broke a few years back.

The market wants to see the sales and infrastructure build up generate sales momentum. $7m'ish this quarter was OK but am expecting the new offices to start generating additional new business growth. The real trick will be to translate current sales performance to mid cap / mid tier organisations where high customer volumes intercepts with a need for low cost governance processes. The mega cap companies make for sexy reference points and bragging rights but are a relatively small opportunity.

[The BOWMAN]

So what is the current EPS for DIL?

[kiwi_on_OE]

4cps, for the six month period ending June 2012

That's US cents. Also might want to take into account nearly 40m convertible shares/options on top of the 80m shares issued. I don't know the conversion terms.

[Balance]

That's US cents. Also might want to take into account nearly 40m convertible shares/options on top of the 80m shares issued. I don't know the conversion terms.

All up, 119m shares when all options and conv notes are exercised.

[Everwood]

Does anyone know the third quarter release date?

[Jay]

Down 9 cents so far today, is this just overall market down or is the result not as good as expected???

[Halebop]

Down 9 cents so far today, is this just overall market down or is the result not as good as expected???

Pretty low volumes and the share price range bound after a strong run. Think the market is just wanting confirmation of sales momentum. Not long to wait for the next announcement...

[Halebop]

https://nzx.com/files/attachments/164926.pdf

First decline in new sales Q3 for quite a while ... Wonder if the low hanging fruit as been picked and cost of sales will increase? ... still a long way to go to justify the PE Ratio of more than 50

Year on Quarter and Year on Year comparisons are a more sensible benchmark as quarter on quarter is a cr@p shoot. The worst view of New Business growth is Year on quarter at +29%. With new revenues higher and new customer counts flat, the 'low hanging fruit' got bigger. 'Margin pressures' so far are self inflicted and are biased towards growth aspirations (sales and account management is getting more headcount growth than IT).

This is reflected in the opening of new markets and is seen in the regional new customer year on quarter comparisons, with an embryonic Asia/Pacific up 261% and Europe up 77% versus Americas at 5% - New sales in Americas 4,000 (Previous 3,900) vs 1,600 (900) Europe vs 750 (200) Asia/Pacific. I suspect the market splits are broadly comparable in terms of size of opportunity so there is plenty of growth to tap. Important to note that even 5% American New Business growth is still equating to rapid revenue growth as the base is low.

The PE of 50 is a very backwards view. YTD revenues are up from US$11.5m to US$30.2m (annualised $45m).

Suspect the only issue today was that the market has convinced itself that growth should be $8m or $10m. While I'd have preferred to see a number starting with a seven rather than a six, growth is rapid and operating leverage is being achieved. The opportunity for rapid growth will only be available once and with profitability already proven it's a case of carpe diem. Using their profitability to fund expansion into markets that are under-served by competitors will prove itself in short order.

[Jay]

Down further today so far -8c
Is this just cause the whole market is down (DOW etc) or due to possible less spending/purchasing of their product especially in the states due to current market conditions (-DOW etc again)????

[CJ]

Looks like it has bounced back in the afternoon.

I'm with Sparky. People are profit taking since the spectacular growth seems to have slowed. The McEwen report had a 'take profits' recommendation over the weekend so readers may have seen the falling price and jumped in.

In my view, they are still growing rapidly and we can expect to see a dividend next year so growth plus income. My only disappointment with the share is they haven't found a new market for their existing technology. If they could add on an additional market (ie. traveling salesmen??) it would be seen as a positive.

Disc: Hold (am considering taking profits at some stage as am over weight but feel the price is now to low)

[Jay]

Thanks CJ did not know about the report, but yes has gone up 1cent now as at time of writing

Well finished in what looks to me as the bottom - closed higher than it opened, but lower than yesterday by 1c therefore were some getting back in??

[CJ]

Sparky - Have messaged you my 'paraphrased' comments.

I also note that PIE funds and Milford both reduced when the price was higher though they were sitting on very large paper gains and were probably well overweight.

There is still life in DIL yet.

[CJ]

Looks good in my opinion but Market hasn't jumped (and when down when just the revenue were reported earlier).

The good thing is they are managing to grow revenue without increased costs which is one of the benefits of a SAAS business - the incremental cost of a new customer is nil except for a bit more storage/bandwidth costs (nominal). If revenue keeps growing but costs stay static, then it justified its high PE.

Disc: hold.

[PlatnuM195]

In the investor presentation there was some mention of dividend policy. Hopefully that's somewhat good news.

[CJ]

In the investor presentation there was some mention of dividend policy. Hopefully that's somewhat good news.I am pretty sure they said at one point that they needed US$20m in the bank before they could pay a dividend. They should have that by year end so expect a full year divided??? It would be a vote of confidence from the Board that they will be cashflow positive going forward.

[CJ]

It already files US forms so mayne they are just referring to US matters relate to paying a dividend. Dual listing would be interesting. Especially after seein what the ASX listing did for xro.

Might be too small to get attention in the US?

[binary]

I'm new to the forums and have a holding in DIL and have to say the latest announcements are interesting. It seems now a dividend is inevitable which can only be good for the share price. Has to be one of the more exciting stocks on the NZX.

Lets hope for another good day and a breaking of that $4 barrier!!

[CJ]

Welcome Binary.

DIL is definitely an exciting stock to own.

It has tracked sideways recently which was interesting since the Revenue announcement a month ago was good. What people didn't realize till yesterday is that growth came without increasing costs. DIL is much further along in the growth process than Xro for example who also released their results yesterday.

Dividend is defiantly on the cards which is interesting for a high growth tech company.

[Everwood]

It already files US forms so mayne they are just referring to US matters relate to paying a dividend. Dual listing would be interesting. Especially after seein what the ASX listing did for xro.

Might be too small to get attention in the US?

There is article in the nbr today titled (Diligent mulls Nasdaq listing) which is available to subscribers. I'm non subscriber, but it would be interesting to see what happens to stock if it is listed on the Nasdaq.

[CJ]

There is article in the nbr today titled (Diligent mulls Nasdaq listing) which is available to subscribers. I'm non subscriber, but it would be interesting to see what happens to stock if it is listed on the Nasdaq.I'm blocked too. Cant be much else in the story or else they would have to disclose to the market.

[Everwood]

I have a login, so I've cut and pasted the choice parts. It would seem that the journo may be lurking here looking at comments, unless there are other share investor websites I'm unaware of!.

Thank you for that.

[kizame]

I cannot believe there are 120 companies growing faster,incredible,what an amazing market the US has.

[CJ]

I cannot believe there are 120 companies growing faster,incredible,what an amazing market the US has.
Not to put a dampener on DIL but the Fast 50, at least in NZ (from what I understand) is based solely on Revenue growth over 3 years even if that first year is very small. It has no reference to profit (I think XRO won once), size of business or anything.

Pulse Electricity won this year in NZ. Look at there thread to fine out about their quality.

[Balance]

Not to put a dampener on DIL but the Fast 50, at least in NZ (from what I understand) is based solely on Revenue growth over 3 years even if that first year is very small. It has no reference to profit (I think XRO won once), size of business or anything.

Pulse Electricity won this year in NZ. Look at there thread to fine out about their quality.

Means DIL comes in for attention.

Attention means little except when the company is really performing - that's when the attention will turn to investment interest.

Just takes a few fund managers in the States to buy and where are they going to get $20m worth of DIL stock?

I believe that's where DIL is at now.

"The most beautiful rose blooming in the desert will never be fully appreciated. Taken out of the desert and propagated in a population centre, watch the same rose become a sensation."

[Lizard]

Just takes a few fund managers in the States to buy and where are they going to get $20m worth of DIL stock?


Well PWC probably have $1m coming up to sell on behalf of Ross Asset Management, so better get in quick... :)

[Balance]

Well PWC probably have $1m coming up to sell on behalf of Ross Asset Management, so better get in quick... :)

FNZC is advising Pwc - lovely deal for them?

$4.2m x 1% brokerage = $42,000 or more.

[CJ]

Means DIL comes in for attention.Completely agree. Hence my opener "not to put a dampener"

[binary]

It's encouraging to see such high demand for DIL.

With this run can we see DIL hit $4.50 by the end of next week.

Lets all Hope

[Balance]

It's encouraging to see such high demand for DIL.

With this run can we see DIL hit $4.50 by the end of next week.

Lets all Hope

Just hit $4.38 (on 1,000 shares).

$4.50 by end of this week is a given.

[CJ]

$4.50 by end of this week is a given.Are you sure you didn't mean lunchtime? @4.45 so just missed.

[Balance]

Are you sure you didn't mean lunchtime? @4.45 so just missed.

$4.50 - bingo!

[Balance]

Looks like it is flying and directors and management have been buying.

Takeover to happen? The scenario at the IPO (which was a disaster) is that Bloomberg and Nasdaq were keen to buy the company but DIL held off to get more clients onboard and therefore a better price.

Posted in Oct 2009 - back into the picture again?

Takeover that is?

[Everwood]

$4.60 now. Is more good news coming?

[Balance]

$4.60 now. Is more good news coming?

On 800 shares?

Someone is pushing this stock along.

Fine with me but hi, whoever it is - make it more convincing! Just like the buyer who took out all the stock at $4.40!

Fact is - XRO can go to $6.00 with a cash burn profile (i.e.. buying market share), DIL should at least be $7.00.

[Xerof]

Gee, I remember the days we were looking at a $2.00 T/O price target, and it wasn't that long ago either.

Onward and upward.....

[777]

Page 1 on this thread is worth a reread.

[Halebop]

Just supply and demand at work I think.

The quarterly profit of $2.9m is almost half the profit for the last 9 months (and quarterly EPS of around 2.4 us cents fully diluted). If you project continued new business growth and margin expansion, the forward PE is probably in the teens (Looking forward 12 months and extrapolating that quarters earnings to annual). So unless growth stumbles, valuations don't look demanding.

Being a growth company despite a poor operating envrionment, Diligent's share price performance also appears inversely correlated with markets (price appreciation stalled when markets improved and money could be made from cheap/value shares).

[Xerof]

Don't get me wrong Sparky, I still hold....just commenting on the marvelous rally of the past couple of years....much more than I had looked for.

despite his error of judgement in not declaring his closet contents, and producing such a disaster of an IPO, Brian Henry was indeed correct with his expectations of exponential and parabolic growth for DIL

[Halebop]

@Halebop - what do you pick as the EPS for this year? 9c?

If I was to guess based on the last Q-10 then NZ$0.09* seems a reasonable target.

*Edited currency

[binary]

There are also a number of other board book suppliers you could add to that list, however my holding is based on DIL having a superior product and a track record of growth. If DIL continue to offer a superior product and a quality service around that product, then that growth will continue.

With any luck IBM or Oracle will recognize this and attempt a takeover.

[binary]

I agree with you that the growth rate appears to have stalled somewhat however growth has increased significantly in the European and Asian markets and whilst DIL still has a very small client base in these markets, if these growth rates continue then DIL will significantly increase their revenue.

Couple this with the decreasing costs associated with revenue generation and I feel that DIL still has significant growth in it.

[binary]

If you look in the Q2 quarterly report, you will see that Diligent employed three new R&D staff. This suggests a new product is likely. In all likelihood, this product will be able to be sold to current clients. This would allow a substantial increase in profits for relatively little expense.

Further adding to growth prospects

[Halebop]

...Or maybe DIL offer far, far more?...

Users prefer only having to carry a Ipad rather than laptop - remote access to a sharepoint site works better with a laptop or PC. 3rd party Browser support in Sharepoint also a very recent innovation and pretty crap, particularly if your sharepoint deployment is advanced and IE-centric.

Sharepoint is complex to configure, requiring IT people to have admin access. Separation of internal support from board only data is a primary and risk mitigating reason for purchase of Diligent.

Diligent is easy to use and a lot of sharepoint deployments are not - directors are not day to day employees so access, training and deployment is an issue. Many companies do not have sufficient after hours IT support which is why Diligent's multiple time zones and 24 hour support looks so good to users. Don't under-estimate the director demographic's propensity for tech-tardness.

If you are using Sharepoint you are probably using word and excel documents. The collaboration features of these technologies are regularly mucked up by non expert users. Diligent's collaboration offer like the rest of the product is designed for the unskilled.

[Halebop]

See my post on recent results where the growth rate had stalled somewhat. Subsequent to that the sp tanked. Methinks the recent sp appreciation will be "mums and dads" getting in and/or unwise holders topping up thinking this is a good buying opportunity. I think this would show in TA? Anyone?

I think recent performance is just more of the same (Four year weekly log chart using corrected Yahoo data)

4213

[Xerof]

And there is a fair bit of idle ex-FPA money sloshing about looking for a nicely upwardly trending stock to put in the portfolio

[Balance]

In response to Begie-me-ole-mate's question, I thinkth DIL's track record now (not before) speaks for itself.

Who and where are its competitors? Miles behind and in no real position to catch up.

So what are DIL's competitive advantages?

Try ease of use, stringent security, cost efficiency, superb backup, support and IT service - and stickability of customers. And now, real economies of scale.

Where's the proof?

A growing client base - 2,350 customers worldwide in all continents, 412 NYSE companies (or 12.7%), 242 Fortune 1000 companies etc.

What's the outcome?

Exponential sales, margin and profit growth.

Inevitable that sales cannot grow by triple digit every year but profits can.

With the world as its oyster and a client base that any self-respecting company would die for, there is a lot more potential yet for DIL to tap into.

What is DIL's single biggest weakness?

The fact that it is at this stage still a single product company.

This is however both a real opportunity then for a company like Nasdag or Bloomberg to acquire DIL and use DIL's customer base to 'push' their other products.

It also means, as Binary has pointed out, a superb opportunity for DIL itself to develop or acquire other products to push through its blue chip and broad customer base.

Plus - Nasdaq listing, cash piling up to provide many options to reward shareholders etc. Dividends and/or a share buyback inevitable in next announcement.

How's that for a ramp???

[Baddarcy]

Sellers are a bit MIA at the moment...

[Balance]

Sellers are a bit MIA at the moment...

Why would you sell a potential $10 stock for less than half price?

Just as those who sold at $2.00 at the beginning of the year sold theirs at less than half today's price?

[iceman]

Sellers all but absent at start of trading today. Should continue its steady upwards trend !

[Balance]

Sellers all but absent at start of trading today. Should continue its steady upwards trend !

The word in the street is that there's huge buying interests from overseas.

Local fund managers are scrambling for stock too as they really cannot afford to be underweight or not in the stock.

$5.50 by Christmas is my bet - am looking forward to two major announcements from the company before end of the year.

[iceman]

This from the NBR yesterday "and media reports the company is mulling a Nasdaq listing also bode well for the shares since US tech companies tend to trade on higher multiples than Diligent

[Balance]

Bal, caught the ramp on post #358 ... Brilliant. Enjoyed it emensely. But I'll stick with my XRO holding in this space for now.


No sweat, Belg-me-ole-matey.

Nice to see both delivering for shareholders and investors.

[Baddarcy]

Sellers are a bit MIA at the moment...

Sorry false alarm.... there they are...:-)

[binary]

Anybody else see this http://www.americanownews.com/story/20219399/the-law-firm-of-levi-korsinsky-llp-launches-an-investigation-into-possible-breaches-of-fiduciary-duty-by-the-board-of-directors-of-diligent-board

Insider trading?

[Xerof]

Hmmm

snouts in the trough?

I dont know process in the US, perhaps things are a bit quiet in litigation?

if theres no Company response, Binary, perhaps worth going via NZX to ellicit a 'please explain'?

nice pic of Leeza G, but must have been taken in the 80's........surely........:eek2:

wasnt she caught 'attending' to that Coro St actor, instead of the phone lines, in one those Telethons we had last century?

[CJ]

Smells like one of those typical bottom dwelling opportunistic lawsuits that occur in the USA all the time, usually triggered by minor technical issues rather than serious malfeasance.Agree - unless they get enough people, they wont pursue it and it will fall from the radar. If it was anything serious, you would expect an NZX notice (given their early days, I am sure they would disclose anything material).

[karen1]

Think you're right Sparky, for anyone "concerned" just google the legal firm mentioned in the link above, Levi & Korinsky, and you will find pages of "shareholder alerts"

[robbo24]

Think you're right Sparky, for anyone "concerned" just google the legal firm mentioned in the link above, Levi & Korinsky, and you will find pages of "shareholder alerts"

Just looking at their webpage it looks more like a scam than anything else.

[Xerof]

Is Bernard Whimp a partner?

[janner]

Is Bernard Whimp a partner?

What more can one say..

:t_down:

[percy]

What more can one say..

:t_down:

Different Henrys I think.Bernard's brother changed his name to Henry,while the Henry's is their family name.
Would you believe bernard has 2mil HNZ shares.Don't know whether he got them all on one of his lo-ball offers.Maybe Gk accepted !! ???

[Xerof]

Yeah, Brian and Gerald Henry... No relationship to Simon Henry, brother of Bernard Whimp....

sorry, you mistook my comment, I referred to Whimp in the context of being a partner at this NY law firm in an attempt to low ball DIL shareprice.

maybe too cryptic this time eh?

anyway, seems first impression was right - spurious litigation remains an industry on Manhattan Island.... A mate of mine has filled in their form seeking further info, so will see what evolves.

percy, Whimp indeed got his HNZ via his infamous mail out low ball offers. Ironically, he would have been under water for a while when the price was in the doldrums. Doing OK now though

[CJ]

Couple of bits of news in the past few days.

Pie managed funds announced it had reduced its holdings at it thinks they are fully valued

It gets added to the NZX50: https://www.nzx.com/companies/NZX/announcements/223621From PIe Funds latest newsletter, they are back in. They must have sold in the $3.25-3.50 range and now bought back in over $4.50. Bought back in based on improved margins being higher than expected.

Good vote of confidence in the stock.

[CJ]

ASB has just allowed margin lending on DIL - only 40% but shows they have a certain degree of confidence in the company. By comparison, they still dont allow margin lending on XRO, but FSF is approved up to 65%.

[CJ]

They took their sweet time.I must admit, I just got Novembers statement and was surprised that it was 0%. I would have though any NZX50 company that wasn't in decline would at least have some margin facility. XRO, the $900m company no one can figure out proves me wrong.

[Baddarcy]

Just had a quick read of the report attached today. Could be just seeing what i want to see...but these comments stood out for me:

1) Company currently listed in New Zealand
2) Ability to move beyond Boardbooks

Lastly a thought, given they are listed in NZ...why are they talking to analysts/investors in NYC?

[Balance]

Just had a quick read of the report attached today. Could be just seeing what i want to see...but these comments stood out for me:

1) Company currently listed in New Zealand
2) Ability to move beyond Boardbooks

Lastly a thought, given they are listed in NZ...why are they talking to analysts/investors in NYC?

Getting ready for the Nasdaq listing?

Plus, nothing to stop US fund managers buying DIL.

[CJ]

Just had a quick read of the report attached today. Could be just seeing what i want to see...but these comments stood out for me:

1) Company currently listed in New Zealand
2) Ability to move beyond Boardbooks

Lastly a thought, given they are listed in NZ...why are they talking to analysts/investors in NYC?I think they have already hinted that they may seek a US listing (I assume dual listing). And they really do need to develop a second product now that the first is generation surplus cash.

So no real surprises.

[Halebop]

...People will have to do there own research but from memory inorder to uplist to the Nasdaq from the OTC the shareprice must be >$5 for a set period of time...

They could do an ADR (American Depositary Receipt) where each receipt equates to "x" DIL shares. A high ratio like 5, 10 or 20 shares per receipt is common.

I'd suspect they'd need to create a buzz to generate any share price benefit - high growth companies can attract quite high valuations on the NZX because there are few local alternatives (Remember WHS in the early days?). Unless they were planning an acquisition and wanted new capital I also think an existing shareholder would need to sell down into a secondary US IPO to provide liquidity, maybe promoting mixed messages.

[Baddarcy]

They could do an ADR (American Depositary Receipt) where each receipt equates to "x" DIL shares. A high ratio like 5, 10 or 20 shares per receipt is common.

I'd suspect they'd need to create a buzz to generate any share price benefit - high growth companies can attract quite high valuations on the NZX because there are few local alternatives (Remember WHS in the early days?). Unless they were planning an acquisition and wanted new capital I also think an existing shareholder would need to sell down into a secondary US IPO to provide liquidity, maybe promoting mixed messages.

Just a thought...but do DIL have enough shares for that? According to FinData they have a little over 83m.

[CJ]

Unless they were planning an acquisition and wanted new capital I also think an existing shareholder would need to sell down into a secondary US IPO to provide liquidity, maybe promoting mixed messages. Given tehy have now gone cashflow positive on ever increasing margins, they no longer need additional capital. An acquisition would be dangerous as it would be difficult to buy a company with a growth rate as high as their own.

Non of the existing shareholders have a large shareholding (ie. over6%) with the US investors in the top 20 holding about 25% between them. Surely they would be hesitant to dispose of a large part of their holding suggesting only say 5% could be issued into the US - not much to attract professional investors.

Obviously this is why they are taking advice as it isn't as simple as a company that does a capital raising because it needs the capital.

[Halebop]

Just a thought...but do DIL have enough shares for that? According to FinData they have a little over 83m.


Given tehy have now gone cashflow positive on ever increasing margins, they no longer need additional capital. An acquisition would be dangerous as it would be difficult to buy a company with a growth rate as high as their own.

Non of the existing shareholders have a large shareholding (ie. over6%) with the US investors in the top 20 holding about 25% between them. Surely they would be hesitant to dispose of a large part of their holding suggesting only say 5% could be issued into the US - not much to attract professional investors.

Obviously this is why they are taking advice as it isn't as simple as a company that does a capital raising because it needs the capital.

Section 13 of the 2011 annual report outlines that the 30m 10c Preferred shares plus accrued interest convert to shares on a 1 for 1 basis.

As per prior announcements and the 2008 annual report they are owned by Spring Street Partners and Carroll Capital Holdings.

[CJ]

Halebop - goes to show nothing beats research. That seems to answer that question and wont dilute existing holders if they dont issue new shares.

[Balance]

I'll take the plunge here and say a dual listing is looking unlikely. I now feel the vibe that a wholesale jump to the Nasdaq will occur, leaving the NZX listing behind.

The downside is loss of a great company on the NZX.

The upside is that Diligent will be $10 a share of equivalent value in today's money in around a year or 18 months. Americans will pay much much more for the growth and earnings than NZers will.

Tend to agree with you.

The NZX has served its purpose for the Americans and it's now onto the big stage if that's possible. The end game is for DIL to be noticed by one of the big players and be taken out. You cannot do that with a NZX listing.


Loaded and waiting as Belg-me-ole-mate will say.

[Balance]

In the mean time we head back towards the all time highs! 470 today so not too far off!!

Well, it's $4.85 - an all time high and from all indications, heading higher?

[Halebop]

Dividend? I doubt it will come to that.

I don't want to dispute your knowledge of tax matters which I rely on my accountant for, but are you sure that tax rules for investors will kick in if the company changes bourse? Can you point to me the rule that applies?

http://www.ird.govt.nz/toii/fif/how-taxed/

http://www.ird.govt.nz/toii/fif/calc-methods/calc-method-fdr/

[Balance]

Why would you sell a potential $10 stock for less than half price?

Just as those who sold at $2.00 at the beginning of the year sold theirs at less than half today's price?

$5.00 today.

Still some sellers at half price.

Looks like they are selling to the American fund managers who are attending the roadshow and wondering why they have not heard the story until now?

[CJ]

Given how spectacularly DIL has run, and the potential for it to run even more, there could be many New Zealanders who started out with modest holdings in DIL that could end up with holdings worth well in excess of 50k. So for that reason alone I hope they do not delist from the NZX any time soon!I understand that the $50k is the original purchase price (not market value) in which case this wont be a big issue for previously small holders of DIL who own no other overseas shares. [edit: the de minimus test is based on original cost. the actual annual calculation is based on opening market value]

Now at 5.05 and no sellers until $5.25 (only 700 shares)

[Xerof]

Yes, David is absolutely right.

They could perhaps apply for an exemption from FIF, but highly unlikely to be granted.

Fwiw, I don't see them deserting their NZ shareholder base. I think what will happen is the Conv shares will be converted and used as the 'flotation device' onto a US board. I say this with no detailed knowledge of US listing requirements - it just seems a sensible way to proceed. They are not going to need more equity, so can't see any logical reason to issue more shares, at least right now anyway.

for those who are caught by FIF, I can highly recommend Sharesight.com, get the expert version and it does everything for you. Cheaper than an accountant IME at 40$ per month

or use an accountant that has the professional multiclient version...

[Xerof]

CJ, not correct. Its based on opening price each financial year

[CJ]

CJ, not correct. Its based on opening price each financial yearThe exemption is based on "total cost" per s CQ5(1)(d) and only applies to natural persons.

The calculation itself is based on opening price each financial year.

[Xerof]

Yes, CJ, you are indeed correct in that regard. I was assuming the position of someone who is already 'caught' by FIF

[forest]

If DIL moves to the NASDAQ and delists from the NZX, then it will be classified as a foreign holding and will fall under the FIF rules [Quote David B].

David are you sure that it depends on where a company is listed and not where the company is registered what makes it a foreign company?

Dil is registered in USA and therefore I would have thought it is a foreign company already.

[Balance]

If DIL moves to the NASDAQ and delists from the NZX, then it will be classified as a foreign holding and will fall under the FIF rules [Quote David B].

David are you sure that it depends on where a company is listed and not where the company is registered what makes it a foreign company?

Dil is registered in USA and therefore I would have thought it is a foreign company already.

Who cares?

A listing on Nasdaq means another 100% at least on the sp.

Happy to pay my tax on 5% of that - i.e.. 1.5% of the book value every year.

[forest]

Who cares? [Balance]

I am happy to pay my taxes. But I care because it is important to get it right and my accountent explaint that the place of registration matters. Can anybody with more accounting knowlege put some light on this please?

[CJ]

Dil is registered in USA and therefore I would have thought it is a foreign company already.Well your no Gump. It should already be subject to the FIF rules. There is no NZX exemption that I know of and it would be very unlikely for the US company to be tax resident in NZ.

Expanded:
Tax residence is the key test.
Test for residence is Incorporation, Head Office, centre of management, Director control. My understanding is the answer is Delaware, NY, NY and NY. A call to their investor centre should confirm that they aren't a tax resident for purposes of the FIF rules (I assume they should get that question regularly).

[Anonymous]

The exemption is based on "total cost" per s CQ5(1)(d) and only applies to natural persons.

The calculation itself is based on opening price each financial year.

CJ, am I correct that the exemption is based on 'total cost' at 'peak balance' during the financial year. I.e. if the 'total cost' for FIF shares was zero at start and finish of financial year but you had >$50k of total cost at one time during the year then you would pay still pay FIF?

[CJ]

CJ, am I correct that the exemption is based on 'total cost' at 'peak balance' during the financial year. I.e. if the 'total cost' for FIF shares was zero at start and finish of financial year but you had >$50k of total cost at one time during the year then you would pay still pay FIF?The test is "at any time in the year" so you would be caught. Where you are doing lots of trading, I think a FIFO basis applies to valuation. I may be wrong but there is probably also a rule that you dont jump into and out of on an annual basis so once you are in, it might be more difficult to get out of than just selling to below $50k cost (again I maybe wrong but I would expect this sort of anti avoidance rule to be in there).

Note: please confirm for your own purposes. My purposes are simple in that the original cost of DIL is below $50k so I have never looked into in depth.

[Anonymous]

Note: please confirm for your own purposes. My purposes are simple in that the original cost of DIL is below $50k so I have never looked into in depth.

Thanks CJ. In relation to your last point (and I realise we are talking about something that hasn't even happened), even if your original cost was below $50k it may be enough to push you over the threshold with any other overseas investments you have.

In relation to forests question, and I may be way of mark here, but DIL could currently be classed as a CFC (controlled foreign company) which I think affects taxation as even if it is a foreign company.

[CJ]

Thanks CJ. In relation to your last point (and I realise we are talking about something that hasn't even happened), even if your original cost was below $50k it may be enough to push you over the threshold with any other overseas investments you have.
DIL is my only 'overseas' direct investment. I use management funds for my overseas exposure as I have enough trouble with the 100 or so NZ companies, let alone looking into 1000's in Australia alone.

[voltage]

It would be interesting to see a copy from first nz capital to see how much it differs from Craigs.

[lowrolling]

I've heard unconfirmed reports that Diligent has had a re-rating from First NZ Capital, with a target price around the $6.40 mark. Is there anyone with access to First NZ research who can confirm this?

$6.70* Confirmed.

[Balance]

FNZC has an excellent following with this company, do proper research on the company's prospects and has successfully guided its investors all the way from 38 cents to the current level.

Knowing FNZC, they will be looking to lock in some serious corporate fees by securing a takeover for Diligent by working with their well-connected overseas partner, CSFB.

Think of the fees to be earned : $416m market cap now x 5% x takeover premium!

You read it here first.

[Balance]

Some significant differences of view between the brokers, I think my broker Forbar at at around $3 - less than half the FNZC valuation - differences in estimated forward growth I imagine.

Forsyth Barr who has agreed to contribute part of the $60m settlement on the great work they did analyzing and offering Credit Sails to their clients? And Feltex?

[Balance]

I use Forsyth Barr research and I didn't know they had any research on Diligent. A quick search of their website doesn't bring up any research reports?

You may be confusing them with Xero, which they do cover, and have a target price below that of the current market price. (Was in the mid $3s, now mid $6s)

I think you are right.

But then, it's Forsyth Barr so their analysts probably confused DIL with XRO?

Just like they did confusing Feltex with Cavalier, and the Titanic with Credit Sails?

[Balance]

Stock is now $5.10 bid and it looks like volume buyers are coming in.

DIL has been successful getting US funds to buy in?

Sellers are backing off and I suspect those who sold at $5.00 are now probably buying back in for the ride to $6.00?

[lowrolling]

Iceland, Iceberg, so whats in a name?

:-)

In defence of Forbarr, their recent report on PGW was excellent, in my opinion. Their new guy, James Bascand (who I think is the son of the Bascand from Harbour Asset Mgmt) did that.

I took a couple of papers with James at university, good kid and seemed quite onto it.

[CJ]

Wow - up another 20c at the opening of the market today (admittedly on only 7000 shares traded in the first 20 mins of trading).
I wonder if if can top XRO for the top tech company on the NXZ in 2012. Probably a bit to far away to top FPA performance this year.

[Balance]

Wow - up another 20c at the opening of the market today (admittedly on only 7000 shares traded in the first 20 mins of trading).

One gets the feeling that there are big buyers of the stock from the US roadshow coming into the market, and the sellers are all backing off.

And this is all before a listing overseas.

[Dej]

For those of us who have missed the boat a bit, would it be worth while investing now?

Asking purely out of interest, I personally dont have the funds to do so :(

[Balance]

For those of us who have missed the boat a bit, would it be worth while investing now?

Asking purely out of interest, I personally dont have the funds to do so :(

It's not a boat, it's an Ocean Liner!

Well, I am not selling and have no intention of doing so until DIL is listed overseas or is taken over.

[Balance]

What Balance said, except I'd still be happy to hold Diligent in US Dollars.

This is a great company, with a great future, especially if they bring in new products (they are a one product company at the moment).

I am hugely reluctant to throw figures around on what this company could be worth with another product, with increasing margins and lots of cash on hand, with even a move to the Nasdaq a possibility.

But if I told you at the beginning of the year when DIL was $1.95 that we'd finish at the end of the year on $5.50, you'd laugh at me and call me a crazy clown.

Now, DIL is in the NZX50, broker houses will offer margin on DIL stock (I don't do margin, but I can see the upside for some) and it can point to some serious earnings growth.

How many NZ or Australian companies have a product/service which is proven, is competitive, is building up incredible momentum and plays in the global arena?

Very few and DIL is one which stands out.

When you find one, don't be in a big hurry to sell or take your gains.

But don't overstay either - agree with STC that DIL needs another product/service though.

That is the company's key weakness at this stage. Hope they plug that weakness soon but not for the hell of it.

[Balance]

I've heard unconfirmed reports that Diligent has had a re-rating from First NZ Capital, with a target price around the $6.40 mark. Is there anyone with access to First NZ research who can confirm this?

STC - thanks for the tip off BTW.

You are a champion!

[Halebop]

For those of us who have missed the boat a bit, would it be worth while investing now?

Asking purely out of interest, I personally dont have the funds to do so :(


I think you could probably still buy now, but being fully cognizant of the risks involved and the current high share price that is largely market driven. If market sentiment changes, then the price could suffer a sharp reversal. If you were buying now you would want to set a firm level at which you would quit the stock to limit any losses if things actually did turn to custard.

At $5.50 the current share price is at 92% of my minimum valuation and a little over 34% of my all-planets-aligned valuation. Although DIL is certainly getting more expensive I purchased more this week when it crossed $5.00 because the technicals were sound and the valuation versus the economics of their business model still appears compelling.

Valuing/Discounting high growth shares is problematic and most people err on the side of caution when determining termination points so if we can assume that new business growth isn't at its peak there is plenty of upside risk at current prices.

[blobbles]

Security is another issue. It is not a weakness for Diligent, but it does represent the greatest "out of left field" threat to their business.

This is why Diligent won't adopt Android in any hurry - the iPad (though it is not everyone's taste in the corporate world) is ironclad compared to the threats facing Android tablet users.


Really? I severely doubt this is the case STC. Where do you get this information from?

I don't know heaps about their product, but from their site it claims you can access it via a browser. It is most likely the information can be stored in the cloud (on secure servers operated by Diligent) or directly on the iPad when they don't have a connection. But as it can be viewed via a browser as well, information will almost certainly be accessible from an Android device too.

I suspect they haven't developed for Android yet, not because of security issues (which are both the same as for the iPad/Android systems, as far as I can see, mainly around physical security of the device) but because they don't want to develop for 2 platforms yet (increased costs) and that the iPad environment offers less compatibility issues and a more premium experience overall.

Unless you actually have confirmation from someone at the company about security issues?

[Zaphod]

I suspect they haven't developed for Android yet, not because of security issues (which are both the same as for the iPad/Android systems, as far as I can see, mainly around physical security of the device) but because they don't want to develop for 2 platforms yet (increased costs) and that the iPad environment offers less compatibility issues and a more premium experience overall.


I agree. Developing for the iOS platform is in some respects simpler, as the highly controlled environment provides consistency in terms of screen resolution, CPU capacity, memory etc. where-as the Android ecosystem is much more open and consequently has a greater variety of such issues you need to take into account.

We need to remember too that users can side-load applications onto iOS devices thereby bypassing Apple's App Store and consequently the rigorous checks that they conduct.

As it stands, I would be much more concerned about security on any back-end systems that store user data. Why attack a single device when you could obtain the confidential data of thousands of companies? A breach of that nature would have a much more profound effect than a single instance on an end-user's system.

Ultimately though, they need to develop for both platforms simultaneously as Android continues to gain ground for the tablet form-factor, or move to a purely web-based delivery platform using HTML5.

[blobbles]

Got a link to that report STC?

I haven't read the report but I think its a bit of a stretch to claim insecurities as a reason for not developing software for Android. They allow access through PC's, which have so many security vulnerabilities its not even worth thinking about. If they are using this as a reason, I will consider selling my shares in them as they obviously don't know what they are talking about, which bodes terribly for their future as an IT centric company.

Both iOS & Android run applications in a sandbox (sandbox in a sandbox sometimes) with a clear indication to the users of permission requirements and excellent protection against breaches. They both use similar unix kernels with enhancements for their own OS.

As I said previously, the security they should be most worried about is physical device security. Its one hell of a lot easier to steal an iPad than hack into it. They therefore should have military grade encrypted file protection with strong potentially double password access into the boardbooks application if they want to be hardcore about security. Like Zaphod said, security of their servers is probably the most important point of failure but as it is a single point of failure, its fairly easy to secure against and detect problems. But I would also suggest that access to the data is also severely restricted to a few people who are NOT allowed to own shares in any companies they count as customers - the reason being that an insider trading breach(s) would be a bigger blow to their business than any application programming flaws.

[kizame]

09:56a.m.
DIL
24/12/2012 09:56
GENERAL

REL: 0956 HRS Diligent Board Member Services INC (NS)

GENERAL: DIL: Preferred Stock Dividend

Preferred Stock Dividend

24 December 2012

Diligent Board Member Services, Inc.'s (Diligent) Board of Directors has
declared a cash dividend of US$0.011 per share on its Series A Preferred
Stock, payable on January 2, 2013 (US time), which in the aggregate amounts
to a dividend of US$359,338 to the Series A Preferred Stock holders. This
dividend is payable pursuant to Diligent's Certificate of Incorporation.

Spring Street Partners LP, one of the holders of the Series A Preferred
Stock, has advised Diligent that it is waiving its right to the dividend
which amounts to US$239,557, and it directed the Company to retain those
funds. Mr. David Liptak, the President of Spring Street and the Chairman of
Diligent's Board of Directors, commented, "In recognition of our appreciation
for the excellent performance of the stock over the last year, Spring Street
Partners has elected to waive its right to this dividend payment and thereby
reward the Company for its performance and enable the Company to reward
employees with cash bonuses. We are strongly committed to Diligent and will
continue to support it as the leading provider of board portal software
worldwide."

The Board of Directors of Diligent and Mr. Sodi, its CEO, thanked Spring
Street Partners for its generosity and continued support and investment.
End CA:00231621 For:DIL Type:GENERAL Time:2012-12-24 09:56:19

Am I missing something here or is that a very generous gesture?

[CJ]

I believe they waived it last year too. The value in the prefs is not in the minimal dividend. A bit of goodwill will no doubt go a long way when they ask to move the listing to the Nasdaq.

[binary]

Very odd trading today in DIL

[binary]

That or somebody trying to drive the price down.

Surely the fees would wipe out any potential gain from that though.

[robbo24]

yes, all those trades for just 1 or 2 shares apiece (according to my Forsyth Barr client account online).

Computer trading system run amok?

I saw this too - it went on all day and seemed to give the appearance that the share price was decreasing over the day.

Made me think of s 11B Securities Markets Act 1988:

11B False or misleading appearance of trading, etc

A person must not do, or omit to do, anything if—

(a) the act or omission will have, or is likely to have, the effect of creating, or causing the creation of, a false or misleading appearance—

(i) with respect to the extent of active trading in the securities of a public issuer; or

(ii) with respect to the supply of, demand for, price for trading in, or value of those securities; and

(b) the person knows or ought reasonably to know that the person's act or omission will, or is likely to have, that effect.

I'm interested to know why this was going on all day and who/why - especially with a 5 year prison/$300,000 max sentence...

[binary]

Looks like DIL is focusing on growing the European market.

http://www.linkedin.com/jobs/c-Diligent-Boardbooks-Limited

[JohnnyTheHorse]

First post here, been a long time reader though.

I believe DIL will be the most exciting stock on the NZX for the first couple of months of this year (After that, I think PEB may be taking that crown :p). Here's a run down of everything we can hopefully look forward to in the next month or two:

Quarterly Report - Due Tuesday 15th Jan
This will hopefully show continued record profits from DIL and reinforce their potential growth (and therefore the share price). Will also be good to see how their growth is tracking in EMEA, as they have certainly started to focus on that area. Although in saying that, wrongly or rightly, it appeared Mr Market wasn't a huge fan of the last quarterly report.

Annual Report - Prelim due late Feb or early March
Once again, this should provide an overview of another fantastic year of record profits for DIL.

Dividend Policy Announcement - Due "early 2013"
DIL is currently sitting on around 30mil cash and has now proven that it has strong and ever increasing cashflow. It has been speculated for a while now that DIL may start paying a dividend this year. A dividend now is certainly a strong possibility. However, it is also a possibility that they believe this money may be better used to push further growth and expansion. Either way, I'm happy with their choice.

NASDAQ Listing - Due "early 2013"
As i'm sure you all know, a NASDAQ listing has been rumored for quite some time now. I now believe that it is almost a sure thing. They have certainly been considering it for some time. Those making the decision will surely own a good number of DIL shares. They will know that the price will skyrocket with a NASDAQ listing as DIL will happily trade with much higher multiples there.

New Product - Due ???
DIL is often criticized for being a one product company. Well, I believe that a new product will be announced very shortly. New R&D people were hired some time ago... to make a new product! I'm not surely exactly what this product will be, however having a second product should increase cash flow. If this product is an add-on, and can be sold to existing clients, even better!

Should be an exciting couple of months for us! Would be great to hear your opinions on all of this (I know a lot of this has already been discussed before here).

Disclosure: DIL is my largest holding.

[JohnnyTheHorse]

There have been quite a few big sellers around in the past week or so, with quite a few large sell orders in place. It appeared that a lot of the sales were by one person (letting out parcels of around 5000, then topping it back up once partially purchased). None of the days have had particularly large volume, but it's encouraging to see the price stay fairly stable. One would say it's a natural rest after a very good run. I guess there's two scenarios here:

1) Some big fish knows something we don't ahead of the announcements due shortly.
2) Some institution is profit taking after a very good run.

I'd say scenario two is much more likely. I guess they have to sell a percentage of their shares in DIL to lock in profits, yet still have a good chunk left in. Pure speculation of course!

[binary]

Someone getting out in advance of a poor announcement wouldn't be too concerned with price stability. They'd want to lock in profits and do it quickly before others started to cotton on. There's enough liquidity to soak up 100,000 shares in one day, or half a million dollars.

I'm more inclined to believe your second choice on profit taking. It seems more logical after the run that DIL has had.

I think the profits takers are jumping the gun a wee bit early. With the quarterly report out next week and a dividend and/or Nasdaq listing announcement imminent I think the run may not be over yet.

[lastmoa]

[QUOTE=SparkyTheClown;389172]I like the way you think, and I agree with the suggestions you make. It accord with the whispers being traded around knowledgeable investors and brokers I've bumped into. Particularly regarding a new product seen as more of an Add-On rather than a whole new product.

With regards to your 'new product' comment - whilst it would be great for the company to have another revenue stream could the extra tech hirings be to port their software to the android and windows environments? From what I read Boardbooks is restricted to Apple OS devices. Even Samsung outsells Apple now and that's not even comparing Android to Apple.
I am a DIL shareholder and in for the long haul. The new disruptive business model of SAAS (when you have a good product that can be monetised with subscriptions) is what I like.
I agree with your comments, re NASDAQ listing. Makes perfect sense.

[JohnnyTheHorse]

Only 2 more trading days (including today) until Tuesday morning's likely announcement. Fingers crossed......

Will be great if they release all announcements that day, not just the quarterly report. If not, I'm sure the Nasdaq listing and other things will be announced within the next month or so.

I was looking at the US Investor Roadshow presentation. I liked how it said "currently listed on NZ stock exchange". The word "currently" surely indicates the Nasdaq listing is a matter of when, not if.

[lastmoa]

[QUOTE=dellow;389927]

FIrst NZ disagree regarding Android. They believe that DIL will want to minimise security risks, and so they are happy to stay with the iPad and iOS as their platform of choice for tablets.

While you might argue marketshare and similar, the question is - what do the executives and directors use?

I think its a lot easier to stick with iOS in that regard.

Who knows, maybe they will move to include Android and Windows 8, but would it really be considered a new product if they did?

Only 2 more trading days (including today) until Tuesday morning's likely announcement. Fingers crossed......


Hi Sparky
No, I would not see adding other platforms (Android, etc) as a new product. Whilst security is an issue with any of these SAAS companies, having your product solely on Apple does not negate that, contrary to popular belief. From what I see, the issue with security goes back to the reliability of the cloud provider. (as in Xero using the reliable USA provider, Rackspace, etc). How the user safeguards their device, not the cloud data, is there responsibility. I just think that opening this 'obviously popular' software to all platforms is a no brainer, if the tech challenges are not insurmountable for whatever reason.
Anyway, like you said, best of luck on Tuesday. I do think the move to NASDAQ is likely and the company may be better appreciated.

[JohnnyTheHorse]

"Mr Sodi expects more upside as the popularity of his firm's Boardbooks product extends on to other platforms such as Google's Android and Microsoft's Windows, and as it looks to grow sales in Europe."

Source: http://www.nbr.co.nz/article/diligent-ceo-sodi-mulls-use-cash-sees-growth-come-bd-130787

From what I have read in their reports etc, I am still expecting a new product that isn't simply a crossover onto other platforms. Not only that, I see huge potential for the current Boardbooks to be used in many applications that they currently aren't focusing on.

[PlatnuM195]

From my own anecdotal experience, the penetration of Android tablets in the workplace still pales in comparison to iPads. At my own workplace, almost all upper management uses iPads to the point where I.T. now supports them extremely well.

In saying that, I do believe there will be a time when it will be worth investing in other platforms such as Android and Windows. However, as of now I believe that iPads are becoming even more prevalent at work due to some trickling down effect. Management prefer iPads, I.T. supports them, in-house apps get developed for iOS then more people use iPads etc.

[CJ]

One more day until DIL report back on their 4Q sales, and possibly outline their thoughts regarding DIL's cash pile, and a NASDAQ listing.So what is a good result and what is a bad result. Unfortunately for a stock like DIL, an increase isn't enough. Or will the sales number be irrelevant if they announce the NASDAQ listing?

From memory, they dont announce their margins in the quarterly releases, only the sales growth?

[CJ]

STC - looks about right. Anything lower than 13.2 is not good as it will mean 2Q of shrinking growth. If they get above $14m then the good times should keep rolling.

Ideally I would like them above 13.5 though it is hard to tell now they have reached that size where increased sales equals increased margins.

[Baddarcy]

Looking at the numbers over the last year or so, quarterly revenue has increased by $1.7m, $1.7m, $1.9m and $1.7m. So my pick is for an increase of ...wait for it... $1.7m, which would bring quarterly revenue to $13.5m or annualised to $54m.

SO while $$$ revenue increases have basically flatlined at $1.7m per quarter they have managed to keep cost inflation (deflation for the last quarter) to well below that, resulting in increasing returns.

Given how much they talked about the 40% margin last quarter i would be disappointed if they didn't give us an update on that also.

On a slightly different note, most commentators are of the opinion there will be a dividend this year, anyone brave enough to advise their expectations? USD 10c?

[JohnnyTheHorse]

On a slightly different note, most commentators are of the opinion there will be a dividend this year, anyone brave enough to advise their expectations? USD 10c?

That would sound about right. Really depends on whether they believe their pile of cash is better spent on further growth, or whether it is best to reward shareholders (or more likely somewhere in between). Paying a dividend would be a great vote of confidence for the company.

Lets hope tomorrow is a day of some huge announcements!

[Baddarcy]

No surprises in the report, basically as expected numbers wise and no news on new products (just another big hint) and nothing about capital reviews (again another hint where they talk about how much cash they have) or any further listings.

I'm a bit disappointed to be honest, numbers are fine, but some commentary on plans would have been nice.

[CJ]

The growth seems to have gone from exponential down to linear with new revenue per quarter stalling around the $6.4m. margins should be increasing as it shouldn't cost them any more to service those extra clients.

I didn't expect any other announcements, this update has always been very high level and focused on sales only.

Nothing to move the share price either way in my opinion. a very slow creep upwards over the next few months until we get more news.

[JohnnyTheHorse]

As said, all was fairly expected and predictable. Looks like we will have to wait for the real share price moving news, although I can't see it being long. Big thing that stood out for me in the report was the hiring of four R&D professionals.

[NZSilver]

We are pleased to announce Diligent's results for the Fourth Quarter ended


December 31, 2012.





Diligent achieved New Sales for the Fourth Quarter of 2012 of $US 6.4 million


($NZ 7.6 million) and totalled $US 26.3 million ($NZ 31.4 million) for the


Full Year 2012, an increase of 143 % compared to the prior year.





As at December 31, 2012 Cumulative Sales have increased to $US 52.3 million


($NZ 62.5 million), an increase of 103 % compared to the same period last


year. To exceed $US 50 million in Cumulative Sales is a significant milestone


for the company and demonstrates Diligent's continued Sales growth momentum.





Diligent produced Revenue of $US 13.6 million ($NZ 16.2 million) for the


Fourth Quarter of 2012, an increase of 109% over the Fourth Quarter of 2011


Revenue of $US 6.5 million. In addition, Revenue for the Full Year 2012 was


$US 43.7 million ($NZ 52.3 million), an increase 143% compared to the prior


year.

[Halebop]

The soft North American New Business results was the reason for the flat New Business $ but were offset by strong a Europe and a very strong Asia Pacific (+36% and +398% Respectively) which are both growing off a low base. But even flat New Business still translates to high overall growth. It appears the strategy to get going in Europe and Asia before competitors was the correct one.

I'd be surprised if North America was near saturation so suspect competitive pressure, probably discounting, was a feature. Many of the mega-corporations are probably now captive so economies of scale (or deep pockets) or niche strategies will play a part in who wins in the mid-market. Expect to see some niche players and the cash strapped close or get acquired over the next few years.

Diligent will need a strong share price both to survive as an independant and because aggregators will be forced to bid up (potentially using share issues) to compete on scale. I wonder if we'll see Diligent in the aggregator category?

[JohnnyTheHorse]

Diligent ceo shrugs off new sales drop (http://www.nbr.co.nz/article/diligent-ceo-shrugs-new-sales-drop-dw-p-134551)

Not on an IP with access to this right now, so can someone who does outline what the article is about? Are there any blatant hints for the future?

[CJ]

There is still significant quarter by quarter growth! It is just the growth in the growth that see,s to have stalled.

[JohnnyTheHorse]

Cash balances increased from US$9 million to US$33.4 million for 2012. Thats around NZ$29 million for 2012. Theres ~84 million shares on issue, so thats an EPS of 34.5 cents. Current market price is ~$5.50, so that gives a P/E of around 16. This sounds way too low, where have I mucked up? If I haven't, maybe I need to buy some more!

[CJ]

Cash balances increased from US$9 million to US$33.4 million for 2012. Thats around NZ$29 million for 2012. Theres ~84 million shares on issue, so thats an EPS of 34.5 cents. Current market price is ~$5.50, so that gives a P/E of around 16. This sounds way too low, where have I mucked up? If I haven't, maybe I need to buy some more!your mixing up earnings and cashflow but I think most here will agree (just look at the 2013 stock pick contest) that DIL is undervalued.

[PlatnuM195]

Cash balances increased from US$9 million to US$33.4 million for 2012. Thats around NZ$29 million for 2012. Theres ~84 million shares on issue, so thats an EPS of 34.5 cents. Current market price is ~$5.50, so that gives a P/E of around 16. This sounds way too low, where have I mucked up? If I haven't, maybe I need to buy some more!

It looks like a good chunk of cash flows for 2012 (at least from the HY report) were deferred revenues and thus not applicable to usage for P/E calculations for the FY12 period. Not too clear on these things but I think that's how it goes.

[kizame]

The trading for this stock is the same as a year ago,a very flat period for a month or so Jan-Feb with very narrow bollinger bands,and interestingly it broke out on the upside last year,so hopefully the same is instore.

[Baddarcy]

Its a bit rough and a bit simple but my little calculation that i use to convince myself holding is the right thing to do is as follows:

Increase in revenue has been steady at approx $USD1.7m per quarter for the last 5 quarters now, so assuming this will continue (and there hasn't been anything that indicates this won't) we are looking at an increase in revenue of $USD6.8m, convert this at 80c to NZD gives you $NZS8.5m.

Take that $8.5 and multiply it by the profit margin they advised last year of 40% gives you $NZD3.4m, then just for fun divide that by 52 weeks and you get approx $65,000.

Any company that has for the last 5 quarters been increasing it's profit by $65,000 a week probably isn't a bad buy (depending on your entry prooce of course :-))

[kizame]

An interesting calculation,nice.

[zigzag]

Cash balances increased from US$9 million to US$33.4 million for 2012. Thats around NZ$29 million for 2012. Theres ~84 million shares on issue, so thats an EPS of 34.5 cents. Current market price is ~$5.50, so that gives a P/E of around 16. This sounds way too low, where have I mucked up? If I haven't, maybe I need to buy some more!

When doing these calculations, you need to count what the yanks call the "preferred stock", as well as the "ordinary stock" Both catagories count as equity.

[JohnnyTheHorse]

your mixing up earnings and cashflow but I think most here will agree (just look at the 2013 stock pick contest) that DIL is undervalued.

Ah yes, I thought that was where I had gone wrong. I'm pretty tempted to pick up some more, some big announcements should be made soon (lets just hope those announcements are positive though!).

[CJ]

I'm pretty tempted to pick up some more, I am already overweight in DIL due to the large increase last year but feel free to push the price up as high as you like to top up your holding.

[Jay]

Couldn't agree more CJ
Go for it I say :-)

[Baddarcy]

Not very tidy, but not a big deal in my opinion. The special committee appears to have addressed the breach in awards in a proper way. It does not appear to be an issue warranting further investigation.

https://www.nzx.com/companies/DIL/announcements/232132

Agreed, the way they have phrased it, it sounds to me like they had some serious money issues at one stage and started issuing share options instead and got a bit carried away. Good that they are now dealing with it in a professional manner, the last thing a company needs is to give the market the impression they are cowboys. Look at PGC for example.

Given the options went to the CEO i don't have a problem, the more incentive he has to get the share price up the better !!

[lowrolling]

An article posted in the NBR states that US investors are worried about the liquidity of Diligent.

A share split could be a possibility.

[Baddarcy]

Would you be able to exapand on what that would mean for current DIL.NZX shareholders if that were to take place? Cheers.

"usually" share splits have positive effects on the share price, consolidations the reverse. So i see any talk about a split as positive.

[Xerof]

Good on the executives of DIL for self-regulating and clearing up the irregularity

don't be too hasty with your praise - remember this 'anomoly' was only brought to light by litigation lawyers in USA, threatening class action......the executives and Board have reacted only due to the issue surfacing in the public arena.

[Baddarcy]

Fair enough. Stock seems to be suffering a bit for it today.

We all know that won't last long...

yeah just the market giving the stock a bit of a rap over the knuckles. Not undeserved really. The article on stuff.co.nz won't be helping either.

historical issues don't concern me too much, as long as they are put to bed and don't happen again. I'm in this stock because of the growth and the future not the past.

[Halebop]

It's typical for a fast growth company to make mis-steps like this. It is rare to match high growth with robust infrastructure and process. Dell had a torid time of things in it's early days as growth outstripped ability to manage quality and service.

DIL has made a bit of habit of governance gaffs though - from material disclosures at float time, not enough to independant directors and now executive compensation. I hope the irony that they produce a governance product does not escape them?

Maybe it points to a future area of innovation - how about a customisable governance rules engine so the system highlights gaps as they occur (there are similar offerings for risk management that could probably be acquired/emulated/modified)

[Baddarcy]

Quote from NZ Herald

"Brian Gaynor, whose Milford Asset Management funds own 9 per cent of Diligent's shares, said he did not consider the error as major and understood the difficult period the company went through post-IPO when the share price reached a low of 13 cents.

Gaynor said he only hoped Sodi could now be remunerated properly so Diligent would not lose him to another company."

[G on]

I am fairly new to this forum but I am unable to find info on what the effects would be when/if DIL delists from NZX and lists on another exchange eg NASDAQ.? As I don't have any shares outside NZ & Oz I would appreciate any links that explains this more in the line of managing the share holding and trading rather than effect on price. Am i correct in thinking that I would have to have ASB Sec as a holder? of the shares?

[kizame]

Quote from NZ Herald

"Brian Gaynor, whose Milford Asset Management funds own 9 per cent of Diligent's shares, said he did not consider the error as major and understood the difficult period the company went through post-IPO when the share price reached a low of 13 cents.

Gaynor said he only hoped Sodi could now be remunerated properly so Diligent would not lose him to another company."

Then I would say he has a vested interest in making a comment like that,he has unitholders to think of.
Not that i don't think what he is saying isn't correct,just that his opinion should be kept in context.

[JohnnyTheHorse]

http://www.iir.co.za/index.php/technology-in-the-boardroom

Great to see DIL approaching sales in this way, can be an effective way to reach large amounts of potential clients.

[lastmoa]

Interesting Johnny - this seems to be held in Jo'burg.

[kizame]

Yes, I think the Diligent strategy of focusing on Asia and Europe has been a wise one. The USA market is ultracompetitive, and Diligent have faced competitive pressures there. Yet they seem to be raking it in for Europe and Asia.

All eyes now on the end of Feb when DIL are due to announce annual results for the year ended 31 Dec 2012, and any other corporate news they deem to be pertinent :-)

Here's to:

- A nice special dividend to all shareholders since they have lots of cash (or a share buyback since that is more tax efficient)
- An announcement that involves move to the Nasdaq, probably with a share split for liquidity :-)

Ok here's a question,Sparky. If Dilligent offer the best product and are the world leaders(socalled) then why would they find the US ultra competitive,I don't get this,and why wouldn't Europe/Asia be just as competetive?

[Halebop]

Ok here's a question,Sparky. If Dilligent offer the best product and are the world leaders(socalled) then why would they find the US ultra competitive, I don't get this,and why wouldn't Europe/Asia be just as competetive?

I've read reviews that suggest Diligent offer the most expensive product, so if discounting or price pressure entered the equation it would have an impact (either on margins as DIL discount to match or sales as they hold the line on price but let volumes suffer). The CEO suggested there was margin pressure from existing customers extending licenses to subsidiary boards (the inference being at a lower/scaled unit price). However I don't believe this pressure would exist if they were the only provider?

Most competitors are either small or in start up mode (I looked at the "Team" bio on a recent boardbook startup and it read like "3 middle-aged guys who know how to code Java"). It seems likely that few if any are profitable or operate at scale and resources are likely to be constrained. Because Electronic Board Papers had their geneisis in US legislation, most are US-centric. Small, unprofitable startups are not going to make the leap to Asia or Europe unless they are backed by deep pockets. So Asia and Europe have less competition at present and therefore margins are better.

There will be a shakeout - maybe also some disruptive practice as weak players compete for survival. The weak will shut or be aggregated and some sort of major-player-oligopoly situation likely to prevail (probably some margin expansion as well). Depending on how easy growth is and how wide margins are, this may be years away or may have started already.

In one scenario Diligent could be "just another player" in the USA however at present I'd suggest they are the market leader in the USA and in the long run I think shareholders would benefit from them being aggressive there too.

[kizame]

Thanks Halebop and Sparky for your informative answers.It seems strange and archaic(sp?) that those 3% would want to go back to paper,in my view you can't beat technology.
For instance when i first bought my smartphone I couldn't believe how hard and frustrating it was to use the touchscreen keypad(so small)but now I think the sun shines from it's little screen.

[CJ]

It seems strange and archaic(sp?) that those 3% would want to go back to paper,in my view you can't beat technology.Just look at the composition of some Boards, predominately grey hair and the rest are bald.

[Halebop]

Just look at the composition of some Boards, predominately grey hair and the rest are bald.

...and that's just the ladies... :ohmy:

[blobbles]

I've read reviews that suggest Diligent offer the most expensive product, so if discounting or price pressure entered the equation it would have an impact (either on margins as DIL discount to match or sales as they hold the line on price but let volumes suffer). The CEO suggested there was margin pressure from existing customers extending licenses to subsidiary boards (the inference being at a lower/scaled unit price). However I don't believe this pressure would exist if they were the only provider?

Most competitors are either small or in start up mode (I looked at the "Team" bio on a recent boardbook startup and it read like "3 middle-aged guys who know how to code Java"). It seems likely that few if any are profitable or operate at scale and resources are likely to be constrained. Because Electronic Board Papers had their geneisis in US legislation, most are US-centric. Small, unprofitable startups are not going to make the leap to Asia or Europe unless they are backed by deep pockets. So Asia and Europe have less competition at present and therefore margins are better.

There will be a shakeout - maybe also some disruptive practice as weak players compete for survival. The weak will shut or be aggregated and some sort of major-player-oligopoly situation likely to prevail (probably some margin expansion as well). Depending on how easy growth is and how wide margins are, this may be years away or may have started already.

In one scenario Diligent could be "just another player" in the USA however at present I'd suggest they are the market leader in the USA and in the long run I think shareholders would benefit from them being aggressive there too.

Diligents strategy is sound to not compete on price and offer a premium product.

Thing about the people that will use this. Are they likely to want a cheaper product that is harder to use and less secure? No.

The users of Diligents products are the heads of companies, CEO's, directors, managerial staff etc. They simply won't worry about Diligents price (which is around $28k a year) if they have a product that works. Probably most of them are wearing a suit that would be half the price of Diligents product.

Diligent isn't going after the small companies with its product. They are hitting the big boys and doing it well.

[blobbles]

Oh yeah, not sure if others have found this:

http://www.greatboards.org/pubs/Board-Portal-Buying-Guide-final.pdf

A good overview of Diligent and its competitors :-)

[JohnnyTheHorse]

https://www.nzx.com/files/attachments/169861.pdf

The latest investor presentation. Quite a few not so subtle hints that a new product is coming and that they are looking at moving beyond boards.

[blobbles]

platform - some environments might use Android or Windows, in which case they would exclude Diligent which is iPad only


I think you will find Sparky that it is also a windows product, not just iPad/Mac. Which makes sense as this is where it came from!

[blobbles]

https://www.nzx.com/files/attachments/169861.pdf

The latest investor presentation. Quite a few not so subtle hints that a new product is coming and that they are looking at moving beyond boards.

Uhhh.... did you read the same one as I did? Where in there is mention of a new product? Maybe I missed a page...

Oh I see it, this one quote:

Significant opportunities to grow beyond the Company’s current market

Gotcha.

[kizame]

The ability to move beyond boardbooks. page 24. Investment Highlights I think maybe he was refering to.

Interesting but only two vague hints as to Maybe an expansion of product offering. Not quite a few,JohnnyThe Horse.
It's good to refer to facts not exagerations.

[JohnnyTheHorse]

I counted more than two, couple of which weren't "vague". Take your bad attitude elsewhere :t_up:

[winner69]

kizame --- did you just get told off

[kizame]

kizame --- did you just get told off

Yep! back out to the garden shed,will talk to the cat,he likes me.

[The Rocket]

Yep! back out to the garden shed,will talk to the cat,he likes me.

I have been reading about everyone coming up with what dil are doing I think they are trying to sell the company to interested parties after seeing the invester presentation. I think they are using the road show as a vehicle to sell the company and to get their information out there about their successful business record. For big fish with deep pockets to see and hope for one or more bites before they reach a peak in fast growth (2 years I think). I think they are holding off the dividend as long as they can because it makes a sweeter takeover if they are cash rich. If a buyer does not turn up they will go to plan B and list on the Nasdaq also Mark Weldon is an interesting new member to dil he is a man you want for this sort of thing all I know for sure something big is about to happen.

[kizame]

Interesting,yes,I tend to forget about Mark Weldon,I try not to speculate as from past happenings with other stocks you tend to get let down,But as you say,so much is going right with this company either way it's a pretty good story thus far, and looking ahead.

[binary]

Surely it would be the other way around - list on the Nasdaq, and then encourage takeover offers?

I would tend to agree. The inevitable sp boost from listing on the NASDAQ would make a potential takeover far more lucrative for shareholders.

The fact a number of DIL management hold alot of stock they will look out for their own best interests as well as shareholders.

[CJ]

Looks like we know who Mr. Dump-5000-share-parcels-at-a-time is now...So by transferring shares from his company to himself and his wife for zero consideration, he is able to fall out of the SSH regime, even though combined they hold over 5%.

[CJ]

You missed the entire meaning of my post: I did get that. I just moved onto another issue.

CCH started with 5,611,008 - 6.8%

Now CCH holds 3,016,122 so no longer SSH
But he holds 1,000,000
and wifey holds 600,000 both of which got for free!!!!!

so as a combined unit (lets face it - he controls them all), they are still over 5%. So really Carroll Capital/Mr Carroll/ms Carroll only sold 542,994 shares. Mr/Ms Carroll may have sold more since but we will never know as they have circumvented the SSH rules.

And this happened on 20 November - do you really have 2 months to make a disclosure - I thought it had to be done asap?

[JohnnyTheHorse]

Not many buyers around. 624 shares at $5.30, 150 at $5.10 and 3,200 at $5.00. Could be a good buying opportunity if it falls much lower (trading below bollinger bands currently I think).

[lastmoa]

Yes Diligent has 'turned the corner' and is now cash positive in the enviable SAAS space. If Xero turned off it's expansion plans and just concentrated on NZ/Australia it would be there too. But it is choosing to seize the 'first mover' advantage and put the pedal to the metal.
I hold both stocks and are bullish on both (even at current NZ$ prices).
I would like Diligent to show us any plans for an extra product(s), extra platform coverage and/or expansion of markets outside the US. They are in an enviable position and I like both Xero and Diligent for 1/ the space they have gained huge traction in, and 2/ the varied paths they are both taking .. both exciting and makes for an exciting time ahead.

[The Rocket]

I note that there is an article in the NBR this morning about Xero holding $85m in cash after its recent December placement raising $60m.

http://www.nbr.co.nz/article/xero-has-85-million-cash-first-cashflow-report-bd-135183

I contrast that with Diligent that holds approx $35m, possibly $40m in cash, though this is entirely due to earnings growth.

I don't diss Xero because I like to see success and Xero has grown admirably. Yet I am far more comfortable with Diligent's position given it doesn't need any more money and is actually making money now.

Less than one month now until the likely annual update from DIL on earnings, and any likely announcement on corporate changes.

Ithink Diligent will be taken over before it lists on the Nasdaq in a perfectworld it would be Nasdaq first, takeover next but if I wanted to buy Diligent Iwould want to buy it before that. Diligentmight go to 7.50 on the Nasdaq and a takeover would be to high then but a takeoverat 8.00 is on. If that was the price per share it would seal the deal and forthe directors all there shares would be cashed up and most would stay with thenew company. I am sure some people would be offered shares as part of theirpackage deal. A major shareholder tried to sell 600 000 shares for 5.50 (thegreat 5.50 cap for Dil) so the buyers stayed away thinking they will not goabove 5.50. It seems strange Dil told us last year how the company would bedivided up if there was a takeover and who gets what. The major shareholderswho brought at 10-60 cents know the big ups are nearly over and selling therenumber of shares they own would be hard I think some want to cash up. Thedividend should of been paid after the fourth quarter results but they areholding off as a cash sweetener to the new buyer. Mark Weldon is in the companyto take them through this stage. I thinkthe next major announcement from Diligent will be a trading holt a takeoveroffer and the directors will say they have accepted the offer and recommendshareholders except the generous price offered

[Roadrunner]

Ithink Diligent will be taken over before it lists on the Nasdaq in a perfectworld it would be Nasdaq first, takeover next but if I wanted to buy Diligent Iwould want to buy it before that. Diligentmight go to 7.50 on the Nasdaq and a takeover would be to high then but a takeoverat 8.00 is on. If that was the price per share it would seal the deal and forthe directors all there shares would be cashed up and most would stay with thenew company. I am sure some people would be offered shares as part of theirpackage deal. A major shareholder tried to sell 600 000 shares for 5.50 (thegreat 5.50 cap for Dil) so the buyers stayed away thinking they will not goabove 5.50. It seems strange Dil told us last year how the company would bedivided up if there was a takeover and who gets what. The major shareholderswho brought at 10-60 cents know the big ups are nearly over and selling therenumber of shares they own would be hard I think some want to cash up. Thedividend should of been paid after the fourth quarter results but they areholding off as a cash sweetener to the new buyer. Mark Weldon is in the companyto take them through this stage. I thinkthe next major announcement from Diligent will be a trading holt a takeoveroffer and the directors will say they have accepted the offer and recommendshareholders except the generous price offered

Some interesting comments on here of late.I have no doubt that those original Wall St investors would be looking at an endgame further down the track and Rocket you could well be right with your analysis.The percentage gains that they have made on their original shrewd investments could never be repeated.I too was surprised that the dividend(or similar)was not announced with the Q4 statement and I do believe that Mark Weldon was taken on for a specific reason.The statement that came out of the blue a while back now regarding policy and proceedure in the event of various possible future events was an intriguing one.Nonetheless,although we are all speculating and DIL are keeping things close to their chest as you would expect I have every confidence that the news, when it comes, will be magnificent for all.I`ve been involved with DIL on an off since the 65c days and what a ride it has been but I feel sure the best is yet to come.Good luck to all you Diligent investors and get ready for take off...again!!

[Balance]

Market is nervous as there have been no news re capital initiatives, listing overseas and now, potential for DIL to make investments which could be out of their sphere of expertise.

DIL will not be the first company to think they can do no wrong and spend the cash accumulated on a bad investment - so there are valid concerns.

Meanwhile, the options situation showed that DIL was careless with corporate governance. So anything else lurking in the background?

My opinion is that all's well so treat this as a buying opportunity.

[kizame]

Moosie, I notice you posted a chart on the xero thread,have you noticed how closely Diligent is tracing the same path,I don't think i can overlay one chart over another for comparison,on incred chrts but is interesting.
I think it appears the two stocks are slowing a bit maybe in dil's case to let PE catch up a wee bit,and in xero's case just not getting too far ahead of whats actually happening with sales. just a wee theory.

[winner69]

Moosie, I notice you posted a chart on the xero thread,have you noticed how closely Diligent is tracing the same path,I don't think i can overlay one chart over another for comparison,on incred chrts but is interesting.
I think it appears the two stocks are slowing a bit maybe in dil's case to let PE catch up a wee bit,and in xero's case just not getting too far ahead of whats actually happening with sales. just a wee theory.

Sparky says XRO is worth 10 bucks .... wonder what DIL will be when XRO is 10 bucks

Then again it could be a close race

Wont post a similar chart of Baycorp I have from yonks ago when they were at 20 times sales as well .... at least punters got lucky when the greater fool theory worked ... some aussies bought them out and the punters realised their gains (if they didn't get sucked into taking the aussie shares instead of cash) before it all ended in tears

[kizame]

I don't ascribe any value to Xero. I can't! It doesn't have positive earnings. I can use comparative valuation techniques for an idea on Price/Sale, P/E and potentially subscription models, but I can not estimate an intrinsic value.....

I do think DIL is worth $10 to me should someone want to make a takeover offer. This was in response to "The Rocket's" comments above (post 561). I would be loathe to sell up at $8 given the likely revenue streams from new products and the benefits of a likely Nasdaq listing. They have loads of cash on hand too (profits, not invested capital)

Thanks Sparky and winner for the comparitive charts,xero definately has more air under the share price,but as you say Sparky,not based on much except sales.Totally agree dil is the better choice IMOP and I hold so we will see.

Last year about Feb 20th the price started to move again,then from July a big consolidation period.

[Dej]

Just remember, if it all goes sour, you'll have to explain to friends and family that you lost money because you listened to some guy on the internet called Sparky the Clown.

Hes told me this many a time :eek2:

[CJ]

One company that Rod keeps referring to is Yammer amount others. From memory similar SAAS companies to DIL and XRO trade at about 20x revenue in the US (ie. I think Yammer was bought by Microsoft at over 20x Rev). In which case, XRO is cheap and DIL is real cheap, especially if it lists on the Nasdaq.

[Halebop]

I have a preference for DIL because profitability is established however on a revenue model I think Xero has a bigger opportunity in front of it if they get execution right. XRO could also buy or encourage growth via the microcosm of third party vendors that feed off the core product. These factors probably explains the price differential but also involves significantly more execution risk for XRO.

My preference for DIL is because it appears to be somewhere between cheap and moderately priced for less risk while still providing prospects for growth upside.

Other than providing cloud based software, I also don't believe the two companies have much in common - different customer demographics, different sales models, different growth strategies, different economics. Suspect the only reason comparisons are being made is because they are pretty much the only options available in the NZ market.

[lastmoa]

Sparky and Moosie - Thanks for your insights in comparing Xero against Diligent, taking into account current SP's.
I'm a holder in both stocks (the largest part of my portfolio) so closely follow what they are doing/achieving, thus far.
I do agree that Xero has had a stellar run and a consolidation period (maybe even a downward correction) will probably be healthy for this stock. Diligent seems to be trading sideways too but I do feel it is now ever close to another (justified) upward burst.
Yes, Drury is very focused on global expansion and this, rather than a move to profit, can be met less enthusiastically with some investors, especially at the $7+ SP.
Agree with your comparisons but positive (and holding) on both, although saying that I did take a large chunk of profit from Xero as I do feel it has a ways to go before we see another meaningful upward movement. Can't say the same for Diligent. 8-) Will look for another Xero entry when it arises.
With both companies in the SAAS space, and collecting good subs from happy REPEAT customers I am bullish on both. Can't think of another sector I would feel as positive in.

[JohnnyTheHorse]

http://www.banktech.com/management-strategies/the-boardroom-goes-paperless/240148366

[Monty]

I am a relatively recent investor in Diligent (April 2012). Does anyone know when the 2012 annual report will be released? Is the report usually released before, during or after the market closes. And is there any information or whispers about the rumoured NASDEQ listing?

[JohnnyTheHorse]

I am a relatively recent investor in Diligent (April 2012). Does anyone know when the 2012 annual report will be released? Is the report usually released before, during or after the market closes. And is there any information or whispers about the rumoured NASDEQ listing?

The prelim annual report will be released on Tuesday the 26th of Feb. DIL usually release announcements before the market opens, or during pre-trading. I imagine the Nasdaq listing will be announced then as well, but I could certainly be wrong.

[Monty]

What are the advantages of listing on the Nasdeq? And what will be the impact on small shareholders such as myself. I dont intend to sell my shares as I think their SaaS business model and 97% retention is a licence to print money. Would DIL remain listed on the NZX as well?

[JohnnyTheHorse]

Tech companies such as DIL trade at much higher multiples in the US as far as I know. Many people on here believe that the SP will be around $10 by the end of the year if it does list on the Nasdaq. I don't think there will be any impact on small shareholders. DIL could dual list, or delist from the NZX. I believe that delisting from the NZX is the most likely option (in that case it will cost you a bit more to sell your shares eventually, but thats peanuts compared to the advantage of being on the Nasdaq).

[Halebop]

Some of the funds holding shares will have no mandate to invest via the NASDAQ (i.e. Funds dedicated to Australasian or New Zealand shares). I think there would be a few quiet words spoken and any Nasdaq listing would be concurrent with an NZX listing. Additional compliance costs would be modest as they are already supporting a dual reporting regime so the main extra cost would be exchange related fees.

[zigzag]

Milford Asset Management has been one of their main institutional supporters for several years,and I'm not sure that their brief extends outside of Australia/New Zealand. At a shareholder meeting about three years ago, Brian Gaynor specifically asked a question about this issue. However at that time a Nasdaq listing was a long way off and he was told it was not a subject they had addressed at so far.

[lastmoa]

Good post Moosie. Yes, the buyers have dried up but there is also no desperate push (yet) on the seller side. A good opportunity to shake any weak holders out before an announcement. I am looking for an opportunistic entry to add to what I have.

[JMKC]

The trading halt relates to accounting irregularities around stock option issuance. Nothing to do with a NASDAQ listing.

[Balance]

Cancel options so restated accounts will show better results.

That's my reading.

[Halebop]

And why was it that the Americans discovered/prosecuted this and not our own New Zealand authorities?

The US system effectively privatises prosecution by providing a profit motive to law firms, particularly when the problem is a procedural one (like this) and low down the list of priorities for enforcement agencies. By motivating law firms to do the policing there is a lot more resource on the job. The downside is the USA is therefore much more litigious.

[Balance]

And I've never seen the share price move in the wrong direction yet! When was the last time you saw the NZX or the FMA launch an investigation into that?

It will not happen - FMA and NZX launching investigations into unusual sp movements.

Both entities are staffed by has-beens or losers who cannot make it in the real world of commerce, law, accounting and/or finance.

I have met a few of them and they are no match for anyone or any firm with a good lawyer.

Save your breath.

PS. Really stunned me when one of them pulled out a packet of peanuts and starting munching on them when we were talking.

[Balance]

A bit ridiculous letting the Americans police our stock exchange. As has been said many times before, the FMA needs a big time overhaul, it seems to only issue speeding tickets!

Nope - only speeding tickets to those they can bully.

Put a QC, a well-connected individual or firm in front of them and watch them munch on the peanuts and make repeated trips to the washrooms.

[Baddarcy]

Looks like we might get a little bit of a drop once the halt comes off.

Personally i can't believe anyone would be silly enough to dump stock based on historical failings, especially when they will have no effect what so ever on the firms current position or outlook.....just a little bit of egg on the face.

About 5 mins after the halt comes off looks like a good buying time to me.

[CJ]

Looks like we might get a little bit of a drop once the halt comes off.

Personally i can't believe anyone would be silly enough to dump stock based on historical failings, especially when they will have no effect what so ever on the firms current position or outlook.....just a little bit of egg on the face.

About 5 mins after the halt comes off looks like a good buying time to me.We already knew there were historical issues so the market perception is already built into the price.

Any changes to historical financials are irrelevant when it is valued on its future profitability/growth.

[Blendy]

do we know when this halt is due to be lifted?

[Halebop]

Cancel options so restated accounts will show better results.

That's my reading.


Yes, I've been dwelling on this. I think you are right. The saga is a bit embarrassing for Diligent nevertheless.

Do they have to expense the implied value of the options? If they wish to leave the impacted executives in the same position then re-issuing options would have a higher implied cost. Also, which financial period would be impacted? If there is a higher rather than lower cost, it might be better to restate earnings than impact future results?

[Balance]

I also have met quite a few of them and don't agree. Like all organisations they'd love to do more but like all other organisations they do not have unlimited resources. They are very young organisation and are growing their skills quite quickly. Give them another couple of years and you'll see more of the value they add.

If I could buy shares in the FMA - I probably would. :)

You can. Buy the NZX.

[Monty]

Diligent have put out a statement at the NZX.


The Board has now received the Report and is reviewing it with its advisers and auditors. The Report does not make clear recommendations as to any adjustments to be made. Rather the Report raises complex accounting issues for consideration as to how previous years and the current years accounts may be affected by Diligent having issued options in excess of caps in the Plans to employees and cancelling those options. If a restatement is necessary to reflect these matters, then the Board of Diligent will move to do that.
The Board of Diligent has yet to form a final view as to whether any restatement is required and if so, the extent of that and over what financial years. Diligent will continue to work through the detail of the matters raised in the Report with its advisers and auditors. Diligent will update the market as soon as possible. In the meantime Diligent has applied to NZX for an extension to the trading halt for a further day while it seeks to reach a conclusion.


And trading suspended for another day. Has anyone got a view on whether there will be a neutral or positive or negative impact. I think there will be a minimal impact at best. I intend to hold my modest number of shares long term regardless. I wonder what the commentary in preliminary annual report due to be released next week makes of all this.

[CJ]

Monty - there should be no impact as we were already informed about this a little while ago. This is just making sure the accounting reports are correct.

Typical of a big 4 firm - " report does not make any clear recommendations". There is always a reluctance to, as one of my old managers use to say "put your c##k on the block".

[lastmoa]

I see no material impact, with these compliance issues, on the business moving fwd.
I expect to see some initial nervous sellers which hopefully will give me chance to add to holding.
We all knew about this issue and bringing this to action tidies up this unfortunate affair once and for all.

[CJ]

I see no material impact, with these compliance issues, on the business moving fwd.
I expect to see some initial nervous sellers which hopefully will give me chance to add to holding.
We all knew about this issue and bringing this to action tidies up this unfortunate affair once and for all.I think the only thing we dont know is how are they going to compensate those that have had their options cancelled. I assume the holder and the company will be no better/worse off so again, no material impact.

[JohnnyTheHorse]

Eat those nervous nellies up!

I've been looking for an opportunity to top up, so looks like my patience will pay off. Any guesses how low this will go?

[JohnnyTheHorse]

Yeah, one would expect a bounce back on Tuesday. Especially if they mention a dividend or Nasdaq listing!

[lastmoa]

Agree. With the upcoming earnings report I do see it as a blessing that they will clear this known issue away before Full Year release.

[binary]

I would expect traders to be all over DIL the next few weeks. Chance to make a quick profit for them whilst the rest of us will finally see some movement...... hopefully upward on some good news.

[JohnnyTheHorse]

Might not get the bargain I was hoping for.

[Blendy]

well, that wasn't so exciting after all.

[lastmoa]

I hear you Sparky. Think a few of us were on the open, prowling. 8-)
Still a good buy at these prices, I reckon, with the cancellation of some options and the upcoming Full Year report. Still might be a bit of a dip before this release, based on depth.

[Halebop]

Am surprised by the open but there you go. But then again I'd prepped some money "just in case" and maybe I wasn't the only one? Depth doesn't look like much on either side of the ledger though.

Guessing we only have a week or so to wait for the preliminary results. Results shopping list:
Evidence that the high margins of the 3rd quarter are sustainable
EPS Circa NZ 9.5 cents (Not sure if legal costs this quarter had a material impact?)
Commentary on sales strategy and resourcing for growth across Europe and Asia
Prospects for North America
Progress or timing of new devlopment / product extension
Costs associated with addressing recent option issues and re-issue of options

I also think the board should receive some suitable feedback on getting their governance in order. Not the best sales pitch for their product!

[JohnnyTheHorse]

Full year preliminary results are out on Tuesday, so there isn't really much time for it to drift south. The buying depth has been very similar to what it is now for weeks, yet the SP has held relatively steady. I would be surprised if you pick it up for cheaper than $5.30 from here.

[Balance]

Man Mr Kenneth Carroll is persistent in his drive to sell down his share of Diligent. If I was his broker I would love him to bits, so easy to sell those 5,000 share blocks these days and cap the SP from rising!

Consider those who sold DIL at 50 cents and $1.00 etc who kept the sp from rising.

At that time, depends on whether you believe in the shre or not.

If you do, great buying opportunity.

If you don't, you will be regreting it like those who sold at those 'keep the sp from rising' levels.

[lastmoa]

Strange to see the DIL trading this morning. Sure is a dry-up of buyers here. Downward pressure prior to tomorrow announcement. Guess if you believe in what news will be released its a fab buying time. I am heavy but can't help but hover a few more at these levels.

[Blendy]

Strange to see the DIL trading this morning. Sure is a dry-up of buyers here. Downward pressure prior to tomorrow announcement. Guess if you believe in what news will be released its a fab buying time. I am heavy but can't help but hover a few more at these levels.

Yes I agree. I thought everyone would be snapping these up at this price. Ah well, I just did. Hope it pays off!

[JohnnyTheHorse]

It happens every time around announcement time. I had a strange gut-feeling today there will be no NASDAQ announcement tomorrow, but maybe a week or two on. Doubt a dividend will be announced either. I'm playing the wait-and-see game here.

My gut feeling is that there will be a dividend announced tomorrow, but the Nasdaq will be announced in a few weeks. Certainly could be more downside if neither is announced tomorrow. Hmmm, do I pick some more up now or wait another week or two in the hope that the SP drops further. Not long left to decide!

[CJ]

I would say they will announce the div, if there is one. Or else they need to explain why there won't be one - which is the Nasdaq listing or some other use for the cash.

They have indicated in the past they would pay a div when they are in the position they are in now so to be silent is non appropriate in my view.

[Sideshow Bob]

Probably not 'new' news, but might have scared a few yesterday and not a good look:

http://www.stuff.co.nz/business/money/8335244/Diligents-oversight-could-be-costly

[Balance]

I'm sure they will be able to find a suitable solution that will be reasonable to both the board and Sodi. It is embarrassing to say the least to let millions go like that, but perhaps it was timed well enough for tomorrow's announcement to totally overshadow it?

Should not a problem for Diligent shareholders to agree to an equivalent compensation package for Sodi.

Who is going to begrudge him after the hundreds of millions of dollars of shareholders' wealth he has created (with his team) for shareholders?

We are not talking here about Rakon where the directors and management have destroyed hundreds of millions of wealth.

Different story for the directors however. If they want to show leadership, let them forfeit 2 years' directors' fees for this cockup.

Especially Mark Russell and Rick Bettle - fancy being so cowardly as to not front up to the media!

As for Mark Weldon, you can be sure he is distancing himself as far away as possible - rather than front up. Confirms that he is a freeloader.

[JohnnyTheHorse]

Interesting and very valid views there Sparky. If neither is announced and there is SP weakness then I will be poised to pounce!

[Monty]

I remember someone saying that the preliminary report was released last year on the 28 Feb 2012 which was a Tuesday. I suggest the report will again be released on the 28 Feb. I know it will be released this week.

[JohnnyTheHorse]

The ball is certainly in the buyers court this morning - just hit $5.25 with pretty much no more buyers in sight! I'd say the recent issues have delayed the report, I would expect it by the end of the week.

[JohnnyTheHorse]

I just couldn't sit on my hands for any longer so I added to my holding at $5.20 today. Still not a whole lot of buyer depth, but lets hope I've managed to pick the bottom! If not, I guess a few cents downside is nothing compared to where I expect it to be in 12 months.

[JohnnyTheHorse]

For those interested: "Paperless systems save DHBs money"

http://www.nzdoctor.co.nz/in-print/2013/february-2013/27-february-2013/paperless-systems-save-dhbs-money.aspx

[lastmoa]

For those interested: "Paperless systems save DHBs money"

http://www.nzdoctor.co.nz/in-print/2013/february-2013/27-february-2013/paperless-systems-save-dhbs-money.aspx

Johnny - I read in this article :
Mr Sinclair says the portal can be accessed with any tablet device, smart phone or lap top.
Board members at both DHBs were reimbursed up to $759 if they purchased a new device to view the papers on.

I thought that boardbooks was only available on the Apple platform and not Android, as yet?

[JohnnyTheHorse]

That did catch my eye. As far as I know you are correct, although I'm pretty sure they are working on launching it on other platforms. I guess the article is either wrong or they are part of a beta test or something? Could almost be worth a phone call...

[Mobius]

Protip: "Web Browser".

[Dej]

Protip: "Web Browser".

A bit off topic, but Happy First Post Mobius :eek2:

[Mobius]

Cheers! I was firmly on topic though: Boardbooks content is delivered by application OR supported web browser.

[CJ]

Johnny - I read in this article :
Mr Sinclair says the portal can be accessed with any tablet device, smart phone or lap top.
Board members at both DHBs were reimbursed up to $759 if they purchased a new device to view the papers on.

I thought that boardbooks was only available on the Apple platform and not Android, as yet?As Mobius correctly points out, Broad boards was first offered via the web. It really took off when they launched an iPad app which made it even more portable and easy to use.

Reimbursing - this is really just taking the piss. Did these directors not have computers already? Do they not get paid enough.

[lastmoa]

US article on cloud uptake : http://www.ecommercetimes.com/story/77395.html

Encouraging for Diligent if they can get traction there, if they haven't already. I just remember only ready about figures across Fortune500 companies.

[lastmoa]

Yep, I hear you Sparky. Whilst the article does cover USA it does indicate a gradually understanding of what benefits in cost savings and productivity utilising cloud products can give. I sure this mindset can apply outside of USA in Europe and Asia too. Maybe someday even stock analysts will understand its potential too :)

[JohnnyTheHorse]

5:30pm today - just found out.

Can I ask how you found this out? You know what they say, all the best companies release announcements after market close on a Friday :p. My first thought was that it may be a fairly negative report if they are doing this, but maybe they are giving people the weekend to catch up on some big news?

[Baddarcy]

This calculation was in an article on stuff last week. My guess is that a resolution to the problem is going to be in the report.

Personally i hope they just issue some stock, otherwise its going to be bye bye to the dividend we have been expecting.

Either way i also just hope they get on with it sort it out and move past the problem so we can get back to what actually matters here....growth !!

-------

"The announcement didn't go into detail, possibly because the detail was the financial equivalent of a stool sample in a doctor's waiting room.

What it did say was that, in 2009, an option award to Sodi exceeded the maximum allowed by 1.6 million share options, and a 2011 award exceeded the cap by 2.5 million.

Trolling through previous disclosures, it is apparent that these options have become hugely valuable to the chief executive. The 2009 options have a strike price of US14.4 cents, while the 2011 options have a strike of US75c.

The strike price is how much it costs to buy a share when you exercise the option. It was set at the market price of shares when the award was made.

So, the 2011 options convert to a right to buy Diligent shares for about $1.10. With a current market price of $5.35, the deal would amount to a profit of more than $4 a share.

Multiply that by 2.5 million and the 2011 option award could be worth more than $10m.

Add the 2009 options, which would convert at about 20c to produce a gain of $8m, and it looks like the award would be highly significant for Diligent's chief executive."

----------------

[CJ]

Did a quick check back and DIL always announces it's reports at 8:30 am or soon after. Something is definitely up if they're releasing it a bit later than normal, at market close and the start of a weekend...Or it could be that they wanted to do it this week but given the issues, they choose the last time posible to get all the i's dotted etc.

Having said that, normally the price drifts up in anticipation of great news, it has been drifting down recently.

[robbo24]

Having said that, normally the price drifts up in anticipation of great news, it has been drifting down recently.

That being said, CJ, do you think some people will be kicking themselves that they didn't buy in come Monday?

[BobbyMorocco]

Did a quick check back and DIL always announces it's reports at 8:30 am or soon after. Something is definitely up if they're releasing it a bit later than normal, at market close and the start of a weekend...

My thoughts are that this is more likely to be a bad sign rather than a good one. Perhaps DIL are trying the old trick of trying to slip one past the keeper by making an announcement after the market closes on a friday afternoon, when most people have shut off their computers and have already wrapped their lips around a cold one.

DISC: Hold

[lastmoa]

I'd say DIL is a pretty safe buy with its profits. Better odds than not it will go up again on announcement.

Agree Moosie. I am a holder in Xero also, and whilst I see big things there am comfortable with DIL. Xero is now at all time high with a marketcap of over $900mill.
DIL seems to have been being held down by persistant seller(s). Positive news should allow positive strong movement upwards.

[Halebop]

To me the only way they avoid restating is by taking the hit in a not yet stated period. The size of any hit will probably depend on the the value of options issued. As it is a paper transaction, as long as the number of options issued is not materially greater I don't see it as important from a financial perspective. Desipite this it could very much impact reported financial results because the share price is so much higher than when the options were first issued so there will be some perception to manage. Importantly, from a governance perspective they need to provide evidence of improvement by articulating the changes made to mitigate further governance risks. Barring the previous point, my mind is mostly past this issue so I want them to stick to the business of rapidly growing the market!

[CJ]

To me the only way they avoid restating is by taking the hit in a not yet stated period. The size of any hit will probably depend on the the value of options issued. As it is a paper transaction, as long as the number of options issued is not materially greater I don't see it as important from a financial perspective. Desipite this it could very much impact reported financial results because the share price is so much higher than when the options were first issued so there will be some perception to manage. Importantly, from a governance perspective they need to provide evidence of improvement by articulating the changes made to mitigate further governance risks. Barring the previous point, my mind is mostly past this issue so I want them to stick to the business of rapidly growing the market!Surely the simple soloution would be to get shareholder approval to issue new options, that have the same terms as the cancelled options. That would not need a restatement.

If they planed to fix by giving cash, then it definately would need restatement as the expense booked in prior years would be far lower than the cash award given now.

[JohnnyTheHorse]

I don't think I'd read too much into it being released after market close, as CJ said. They are probably just wanting to get it out before the weekend for us impatient investors. I also don't really think that DIL would expect that the market would miss it, surely we aren't that stupid! Call me blind, but I really can't see anything that could be so negative to warrant reporting after close. I've been proven wrong before though...

[Halebop]

Surely the simple soloution would be to get shareholder approval to issue new options, that have the same terms as the cancelled options. That would not need a restatement.

If they planed to fix by giving cash, then it definately would need restatement as the expense booked in prior years would be far lower than the cash award given now.

Think you misread. I too don't think it needs re-statement - hence the reference to a "not yet stated period". I just don't know if it will be the year just passed (but not yet reported) or the one just commenced. As a new options issue of a similar quantum would require a vote suspect they could only work around getting the numbers into the year just passed by reserving it in some way. Not sure an auditor would buy this but from a PR semantic it is better to get it into the past.

Would not agree to a cash-out unless the holders were willing to surrender value.

[Halebop]

DIL has to cpmpete with Microsoft, Adobe, IBM, Oracle, etc who all have equivilent software offerings that can be installed on existing customer infrastructure or in cloud infrastructure at a lower TCO...

Tell me how a solution is deployed to Microsoft sharepoint at a lower cost of ownership? I don't buy the logic and think you are misjudging the strength of drivers that prompt customers to choose Diligent.

[Halebop]

Apologies Tumeric...

I posted your reply instead of the one above.

What about tax? It's not as simple as this...

I'm not following either. Are we talking tax on income earned from selling in-the-money options? In the USA that is the sellers problem.

[robbo24]

http://www.boardbooks.com/wp-content/uploads/2013/03/Diligent-Board-Member-Services-Preliminary-FY12-Results-Analyst_Investor-Presentation.pdf

Is this it?

[binary]

Well no real news sadly. I'm picking the downward trend will continue.

[JohnnyTheHorse]

Well no real news sadly. I'm picking the downward trend will continue.

I think a certain clown may be smelling a potential takeover bid soon?