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  1. #1
    Member TheBossMan's Avatar
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    Default HCL HighCom Limited (Prev XTEK Ltd (XTE)

    I've been accumulating this little gem since its float. From an issue price of 50 cents (3 weeks back), it went upto 90 cents, and is trading at 60 cents now.

    I like the firm for the following reasons:
    - Homeland security - an industry that is set to grow in Asia Pacific region in the next decade
    - Significant industry experience in the Board, Senior management, and technical personnel
    - Good product set and ongoing investments in R&D
    - Dividend payout ratio of 40-50% of net profits

    Anyone else in it?

    Cheers


  2. #2
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    Hi TheBoss,

    I have been meaning to start a topic on this one but you beat me too it. This is what I wrote on sharescene a couple of weeks ago:

    "From a fundamental perspective, last fin year they made NPAT of $1.7m on $14.5m sales, so a NPAT margin of 11.7%.

    This fin year they reckon they have already identified sales of $20m of which $14m are committed. And in the AFR last friday they said this did not include routine business. So considering we are only 1/4 of the way into the fin year I'm thinking the full year sales could be around $25m or even better?

    If they could maintain the same margin on sales of $25m they could have EPS of around 7.2c?"

    These figures are just rough estimates, I could be way off. However I can't see this stock been negatively affected by the economic cycle. In my view, it should continue to benefit from increased spending on security by the public and private sectors.

    cheers
    Mark


  3. #3
    Member TheBossMan's Avatar
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    Hi mark100.

    You're right about the $6million in advanced stages of negotiation. During economic downturn, I expect more spending by government on security-products, due to increased unemployment, shifts in policies etc. Under such circumstances, Govt. may actually organise special events for the feel-good factor, resulting in demand for XTE.

    I like XTE also because of the scope in related diversification. (reselling american products, annual maintenance contracts, moving towards technology-based security etc.). I'll be writing to the firm asking for its scope & any presence in New Zealand, although I realise that the primary market is Australia.

    Am I right with the current market capitalisation as approx. $20 million?

    I can see the share price touching $1 in a year from now.

    Cheers

  4. #4
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    There are 40.5m shares on issue, so Market Cap is currently $24m. Historical pe is 14 with solid growth expected

    cheers

  5. #5
    Member TheBossMan's Avatar
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    What is the right P/E for such a firm? How do you benchmark it? I'll dig some stuff from US companies tonight and see what comes out of it.

  6. #6
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    Its a bit hard. I tend to focus on companies with forward pe's under around 12. I think anything under that is ok value provided its in a growing industry.

    Last year XTE had sales of around $14m. They claim they already have that much locked in for this year and we're only 3.5 months into the year. So I'm expecting them to post solid profit growth this year which should push the pe under 10.

    cheers

  7. #7
    Member TheBossMan's Avatar
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    Bring out the champagne & cigars, here's the latest announcement:

    XTE wins defence contract for the supply of bomb disposal robots (worth $15 million).

  8. #8
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    Expect SP to touch at least 70 cents today

  9. #9
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    hmm. 10% increase to 68.5..almost there.

    I've asked XTEK to confirm if the $15 million includes the "potential $6 million outlined in the prospectus". Will post the reply here.


  10. #10
    Member TheBossMan's Avatar
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    It has been 2 days and there's no reply. Usually I get replies from most firms within 48 hours. Personally, I dont like to deal with firms that dont respond quickly to small shareholders. I'll put this down to teething problems of a newly-listed company. If I dont hear by COB tomorrow, I'm out of this stock.

    On the plus side, it is good to see the SP stabilising in 60 cents margin, despite the overall negative mood in the market. This represents a 20% gain from its listing price.

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