Q Technology Group Limited ("QTG")

[steve fleming]

Lots of very interesting opportunities around at moment.

Some more interest emerging in the spec market, and QTG represents an interesting high risk spec opportunity, and one of a few that I have been buying recently.

Market cap = $1.6m

Net Assets = $6.7m

FY12 EBIT / revenues per below :

"Our remaining business is QRSciences Security Pty Ltd, operating two businesses QVideo Systems (QVS) and Q Alarm Supplies, with offices located in Melbourne,Sydney, Brisbane, Adelaide and Perth, The company has a strong reputation forservice excellence, high stock availability, fast and reliable delivery, expert technicalsupport and end-to-end turn-key solutions


The company is a leader in the supply of all video and camera security needs –analytics-embedded video encoders and wireless transmitters, megapixel and IPcameras, robust video management software, integrated video analytics,comprehensive access control technology, and world class alarms.
This business achieved growth of 8.6% with $24.5m in revenue and an EBIT of$1.0m in difficult market conditions. "

Latest update:

"QVS, the trading entity of QTG, is trading in line with budgets and is delivering positive operating cash flowto the group. With the cost reductions initiatives now completed in QTG and QVS, which included a reduction in the sizeand complexity of the QTG board and staff reductions across all parts of the company, the board is confidentof the cash flow in the next quarter. The company is in compliance with all banking covenants, statutory and creditor requirements. "

Obviously risks attached to a restructuring play, but minimal bank debt remains ($2.1m) secured against debtors ($6m), but with a m/c of $1.6 it is priced as if it was already insolvent (which is always a possibility!).

Cheap entry to a market leading business that operates in a sector with reasonable growth prospects.

Picked up a million of these over the last couple of days in order to get a small exposure to potentially large upside (ie if it goes from $0.008 to $0.05 it still has a m/c of only $10m)...but happy to take the write off as well if it doesn't play out.

[steve fleming]

4C out today confirmed that QTG has been Cash flow positive for the last 3 months.

Revenues approx. $25m

Market cap = $2m

[trackers]

Looks pretty good technically, cheers Steve, plan to look into this one further

[Entrep]

Looking good. Less debt, NTA discount and some profit. $3M cap.

[steve fleming]

Good quarterly...EBIT and cash flow positive

strategies in place to further drive revenues and margins through FY14

debt refinanced / under control

market cap remains under $4m

[ozzie]

They don't sound too enthused about the future in their Annual Report though:
"As a listed company we lack the required scale to carry the ASX listing costs and related overheads and deliver satisfactory earnings per share.
We will continue to seek opportunities in the coming year to unlock value to shareholders either through merger with similar synergistic businesses or divestment. "

[steve fleming]

So lets just summarise where QTG is at:

* QTG continues to partner with more and more quality international brands. This will increase sales by enabling QTG to offer a greater depth of products at different price points.

* These major international brands (ie Bosch) obviously are getting more confidence in the QTG distribution capabilities (five offices Australia-wide and more than 50 employees, a technical service centre and a national distribution centre)

*in addition to these global brands QTG has re-launched its own in house brand to the Australian market of the newly developed QVS Alumia cameras, which will also provide QTG an improved product mix to grow revenues and profits.

*QTG has recruited staff and put together products that will enable them to compete in the higher volume, medium to large scale project market, as well as the small to medium client base that QTG is already servicing.

*the next step is for QTG to focus ongoing service and maintenance of the systems to generate annual recurring revenues (which is the exact same strategy is HIL)

*as noted in the market update:"Our business is in a much stronger market position to take advantage of growth prospects in the market and management are excited by the market opportunities going forward."

So.......all this points to the business having genuine momentum behind it, with Management fully in charge of its destiny and with a number of avenues to drive sales and margins. Procurement / inventory management has been improved, and in Rob Rosa they have a respected, passionate and enthusiastic industry veteran driving the progress.
The fact that sales and profit are growing, cash flows are increasingly positive suggests that the momentum is accelerating rather quickly.

....turnarounds always take a long time, and the same with market re-ratings, but everything is pointing to QTG developing a business that deserves a market cap far higher than its current $3.5 million.

[steve fleming]

Mcap of $3.3M, PE of 34 and NTA value of 4 cents per share.

$24M (forecast) FY14 revenue with a profitable bottom line and further expansion incoming through new deals.

Smells like another multi-bagger like NEA/MBE/MKB/MNW coming along with a rerating. Mcap should at least match revenue imho so that's a big step up!

What's the unlisted options/net debt situation like SF?

Disc - not holding but on watchlist for awhile now.

Hi Moosie

2.7m options outstanding to the COO; and net debt of $1.3m

Given its cost structure, its not going to have the scalability that some of those mobile/tech plays have

But given this age of big brother, where there are CCTVs on just about every street corner, and security systems are becoming more sophisticated, it is positioning itself to grow into a solid technology focussed business.

[NZSilver]

Hi guys what's there website - Id like do check out their products and do some research - website link from DB had broken links

[percy]

Hi guys what's there website - Id like do check out their products and do some research - website link from DB had broken links

try www.qsecuritysystems.com.au

[NZSilver]

Cheers Percy

[Huang Chung]

Wonder if HIL would look at taking out QTG?

Could do it without raising a sweat if they wanted.

[Corporate]

Nice posting guys. Does anyone know anything about the major shareholders?

[steve fleming]

A private equity fund owns approx 26%

next largest shareholder with approx 10% is Chris Cuffe, is a prominent ex- fund manager who is now involved in many philanthropic activities

http://australianphilanthropicservices.com.au/chris-cuffe

[Joshuatree]

Private equity fund being Helmsman i think who paid 3.1c a share and also loaned funds to QTG going by my rough notes .GWA proposed takeover in 2012 but cherry picked the API division paying basically what QTG had bought it for.. Re 2 and a half years later QTG is finally cash-flow positive. How much of the loan from Helmsman is left if any i don't know and i hope I've got my facts right here.Be int to know how much Helmsman are driving things and if they are getting impatient here.

[Corporate]

Cheers guys. Do you have a general view on management? Seems to me like they a prudently growing the business since the spin off and keeping cost down.

Do they have any skin in the game?

[NZSilver]

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11257325

[Joshuatree]

http://www.sourcesecurity.com/companies/search-results/company-search/pa.cctv,c.australia,t.distributors.html?page=2

Looks pretty competitive out there with close to a hundred suppliers of CCTV in Aus

[NZSilver]

Thanks JT for that,

Even though very small company (MCap 3-4 mil ish) Seems good discount to fundemental value, growing buisness, profit, possible take-over target, good progress with re-structure. Going to sit sideline but will be close to the buy button! cheers SF for the heads up again.

[steve fleming]

Interview with the COO - Rob Rosa

*Expecting higher PBT for second half
*Market buoyancy has returned
*major project work getting traction
*"business has increased since coming back from the main break"

http://www.securityelectronicsandnetworks.com/articles/2014/05/09/qss-joins-american-revolution
-------------------------------------
“We had a pleasing half year result at the end of Dec of 13.1 per cent sales revenue growth and a net profit before tax of $A534k,” says Rosa.

“We are growing and we aim to make QSS a profitable entity especially after the rough ride the old business had. There is a new confidence in the business and all the staff can see that we mean business and we are on the right track and our aim is to increase the profitability for our shareholders of QTG.

“Our aim for the next half is similar numbers but a larger NPBT component to ensure that we continue to build on profitability for shareholders and also to re-invest in the QSS business for future expansion and growth.”

And how are your plans progressing on the major projects front – it’s early days but is there interest in the market for this side of the business?

“Absolutely,” says Rosa. “We have already been asked to take part in the design, configuration and pricing of 4 major sites and we are working diligently to undertake this. Early days for sure but we also have Jake Lennon in QLD who has now been promoted into Major Projects for QLD, FNQ and NT. We have just employed another BDM candidate in NSW for the project space who already has runs on the board with providing DVTEL and AD style solutions.

Finally, how does the market feel to you early-2014? Is there a lift in QSS business overall?

“From QSS’s perspective we are going great guns,” says Rosa. “Our sales staff are quoting at a very aggressive rate. We feel the buoyancy in the market has returned and we feel excited and positive about 2014. The signs are there and even in the slower states, we are creating momentum by offering training courses on IP and other products so we have noticed that business has increased since coming back from the main break.”

“There is a new confidence in the business and all the staff can see that we mean business and we are on the right track and our aim is to increase the profitability for our shareholders of QTG”

[NZSilver]

Steadily moving upwards - sell depth disappearing, good fundementals, looks promising. Security expo recently held http://securityexpo.com.au/

"Q Security Systems (http://securityexpo.com.au/exhibitor/q-security-systems/65)STAND: F8
Q Security Systems is a direct seller and distributor of surveillance and monitoring equipment including CCTV cameras - digital video recorders and security video management systems. In the past 3 years we have become one of the largest and definitely the fastest growing businesses in the Australian CCTV industry."

[NZSilver]

Popped through 2.5 to 2.7 on unusually high volumes.....