HCL HighCom Limited (Prev XTEK Ltd (XTE)

Hi major: did you notice the latest news :)? Another Defence contract!!

All your questions are good. Let me see if I can respond:

You're right that XTEK's earnings in 2005 ($1.7 m) is not huge for a major supplier of Olympics. From what I know, most firms that are started by ex-police/defence personnel tend to keep it simple, small, and retain full control, rather than go big-bang. It has taken fresh faces and some global events for XTEK to float.

Total shares would come to 51million and at conservative earnings of $2.2 million (easily achievable considering the fact they're getting contracts signed that weren't signalled earlier), it is trading at 2006 P/E of 15. Current P/E is 13.

Global homeland security firms trade at P/E levels of 18-20. That puts XTEK at 76 cents [8D](or) at current earnings and market cap, around 88 cents.

XTEK is not only investing in R&D, but acquiring patents and commercialising the products.

Sales: the only issue for XTEK is that the sales will be lumpy. Large government contracts go through tender boards & RFP processes - lot of lead time, but that is usually factored in the gross margin.[^]

I havent called the company yet to ask about capital raising.

Their prospectus is on their web site (www.xtek.net). and the original owners did not sell down. 12 million (25%) is still around. In fact, the CEO and other staff have voluntarily placed their shares in escrow for a year.

Keep the discussion going. I'll do some financial statement analysis in 3 weeks' time and post more.[8D]

Disc: proud shareholder of XTEK

Well it seems Major's concern was well warranted with XTE. The share price has been on a downward spiral since the AGM. I sold out when the capital raising was mentioned and took a loss.

In FY05 they made NPAT of $1.75m. However at the AGM after about 6 pages of bullsh1t they quietly mention that the half year will show a loss of $1.75 - $2m due to seaonsonal factors, order delays etc.
Yet they then go on to claim that they will still show profit growth for the full year.

I note the proposed capital raising has been pulled although they intend to raise $7m via a convertible note issue in the future.

I await the interim result with interest. If they are on target to show profit growth over the FY05 result they may be attractively prices at present. However, I find that a bit hard to believe given the interim loss they are forecasting.

well, how things change in one year. I was obviously very bullish, but I failed to take into the account the mgmt. quality. Luckily, managed to get out with a small profit.

Reminds me of a quote "poor managers in the right industry" will still screw things.

However, is it time to keep this in the watchlist? capital raising and restructuring are complete, new faces in the board, and more importantly Higgins buying 150,000 shares on market. Is it a signal of good times to come or is it a ploy to keep shareholder interest alive?

Disc: do not hold and will not buy until I'm convinced of profitability and mgmt. commitment to clear strategy.

Mark100,

Are you still following this one?

I remember looking at it when it floated and couldn't quite figure out where the value was at 50cps. Slightly different proposition here at 4.5cps and with a change of management. (Would have been an even better proposition when it was being specialled off in April at 0.7cps).

Market cap $3.7m
NTA of $2.88m (including $1.34m cash)
FY09 NPBT of $709k
FY09 Revenue $13.4m

Chairman's letter of 29 September (Annual Report) indicated that ytd is tracking ahead of last year - although first half wasn't an earner last year, so would have to hope so.

Might still be a trash-trade in it at these levels?

Hi Lizard, I haven't followed for several years so I'm not much help to you

Quote:

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Originally Posted by Lizard

Mark100,

Are you still following this one?

I remember looking at it when it floated and couldn't quite figure out where the value was at 50cps. Slightly different proposition here at 4.5cps and with a change of management. (Would have been an even better proposition when it was being specialled off in April at 0.7cps).

Market cap $3.7m
NTA of $2.88m (including $1.34m cash)
FY09 NPBT of $709k
FY09 Revenue $13.4m

Chairman's letter of 29 September (Annual Report) indicated that ytd is tracking ahead of last year - although first half wasn't an earner last year, so would have to hope so.

Might still be a trash-trade in it at these levels?

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It's on my watchlist Liz.

Came up a couple of months back when i did a scan of profitable companies with a m/c of less than $5m - wasn't a terribly long list!

Good little company - although sales may be lumpy year to year. Costs seem to be under control now.

Its quite a waiting game for these illiquid small caps to re-rate....i don't know if i have the patience for another one!

Hi Steve,
I got lucky with LRG the other week, so it might have made me a bit over-confident in picking another micro-cap.

Have just discovered the Austender website contracts search function - could be a good way to keep advance tabs on XTE's order book, since the vast majority of revenue is from Aus defence/police.

First qtr looked on the slow side in terms of value, but only takes a couple of bigger orders to move it, so I'll take another look in December. There was reasonable value of contracts written in second half last year, some of which will carryover as revenue this financial.

Reviewed the latest AusTender wins for Xtek and looks a bit light c.f. last year. Will depend upon the exact timing of invoicing larger orders, but my current thinking is that they will be struggling to post a profit in first half. AGM presentation didn't do anything to change that view, although there's always the possibility for a comeback in the second half if they get some more UAS orders.

Anyway, have sold-out my small trade for now and going to stand aside until at least half year.

Quote:

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Originally Posted by steve fleming

Good little company - although sales may be lumpy year to year. Costs seem to be under control now.

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Well per the announcement today costs were not under control!! - "the operational expenditure is too high given the revenue that XTEK can expect in a cyclical downturn year".

Large cap raising coming (30m new shares vs 93m shares on issue) to fund a small acquisition.

Strategy seems to me to be all over the place and XTE look a bit desperate in trying to secure some revenue diversification.

However Directors seem keen with some big buying recently.

The wins on AusTender for them were dire earlier this half, but have picked up a little of late. However, still very little of any significant value - no robot sales that I can recall.

I have stayed well clear since then.

Btw, Bruce Higgins was on XTE board for a while (after leaving RDF/C4i) but seemed to give up on them and moved on to focus on LGD where he is doing a good job. He seems to be a positive influence and perhaps one to watch?