WDT - Wellington Drive Technologies

[emearg]

The fact the directors and chairman have been buying up pretty big over the last few months makes me think there may indeed be some gold at the end of this rainbow. If there was no chance they could make and sell their motors profitably these insiders wouldn't be wasting their money.

It seems they need to achieve some seriously large volumes to make this business profitable. The volumes are building so maybe this dog will have it's day...

Personally I halved my holding a month or two ago as I became incredibly concerned about them becoming insolvent. Then they announced they had secured a big injection of cash from Hunter Hall and the rights issue so I bought back what I had sold plus a few more.

I will be taking up my $5,000 worth next month.

This one isn't for the faint hearted but I think it is worth the risk.

[h2so4]

In terms of growth? Their losses are outstripping their sales $2 to every $1. They will need all of the 9.65m in new capital just to keep the doors open until Christmas. Maybe they can turn it around. But turn arounds seldom happen. Pass on this one.

[xpress]

I think the share offer was to give all shareholders the same option of buying shares that was offered to major shareholders. I think it is nice to see this happening - although at the moment you can buy shares on the market for the same price. I have been buying more shares lately. As long as the current "trend" (increasing sales) continues I believe that they will become profitable. I think that a big chunk of costs over the last year or two are a result of the fast growth in business - most people who run businesses will tell you that you need to spend money to grow your business, it's a bit of a chicken and egg thing.

[Lizard]

...although at the moment you can buy shares on the market for the same price..

Actually, if the price remains below 10.2cps for the period from 6-12 November then you will receive shares at below the current 9.4cps. Shares are to be issued at the lower of 10cps or 10% below the average closing price of that 5 day trading period.

[zigzag]

Perhaps in another country, in a bigger market, WDT could have raised the capital a lot quicker and in larger tranches, instead of having to raise it in dribs and drabs in little old NZ. I hope there will be some kind of update along with the SPP documentation.

[Lizard]

Okay, decision day; am I going to take up any spp shares?

So far, since paying far too much for my WDT shares a year or two ago, I have avoided participating in cap raising. (Probably should have since most of them could have been sold shortly afterwards for a fair gain! But have this one in long term investment portfolio).

I doubt that WDT will make a significant profit (probably actually a small loss) in 2010. My best guess for 2011 is that they achieve NPAT of $7m assuming no major business disasters. Based on shares on issue of 648m post raising (conservative, since 75% uptake in spp seems unlikely), that's 2011 eps of 1.08cps. Put it on a P/E of 15 and the shares would be trading at 16cps post result. I'd want at least a 25% pa return on investment - so working back from 16cps over 2.5 years (now till profit announced), need to get shares at no more than 9.2cps. Based on the last 5 days trading, that looks okay. Although institutional holders might try and push the price around next week to make sure small holders don't get a better deal than their 10cps.

Big question as always for WDT is will this be the last cap raising? The calcs are only valid if it is and it looks a bit tight. Plus, despite strong growth in revenue, WDT have a record for over-optimism rather than conservatism.

[Nevl]

Okay, decision day; am I going to take up any spp shares?

So far, since paying far too much for my WDT shares a year or two ago, I have avoided participating in cap raising. (Probably should have since most of them could have been sold shortly afterwards for a fair gain! But have this one in long term investment portfolio).

I doubt that WDT will make a significant profit (probably actually a small loss) in 2010. My best guess for 2011 is that they achieve NPAT of $7m assuming no major business disasters. Based on shares on issue of 648m post raising (conservative, since 75% uptake in spp seems unlikely), that's 2011 eps of 1.08cps. Put it on a P/E of 15 and the shares would be trading at 16cps post result. I'd want at least a 25% pa return on investment - so working back from 16cps over 2.5 years (now till profit announced), need to get shares at no more than 9.2cps. Based on the last 5 days trading, that looks okay. Although institutional holders might try and push the price around next week to make sure small holders don't get a better deal than their 10cps.

Big question as always for WDT is will this be the last cap raising? The calcs are only valid if it is and it looks a bit tight. Plus, despite strong growth in revenue, WDT have a record for over-optimism rather than conservatism.

In the same position though today I just took the chance to take up my allocation. Not happy to see the price rise in the last few days however!! Usually WDT makes a positive announcement in the month after a cap raising however. My average price is somewhere around the 12cps now.

Will be interesting to attend the next AGM. Am hoping for some more news on sales but still think they are being too timid and need to start targeting the consumers not the manufactures. Own brand WDT products.

[Lizard]

Well I guess if the insto's decide to push the price to 11.5cps next week to make sure the spp is at 10cps, it provides a bit of profitable arbitrage - take up the allocation and sell the equivalent number on market. No scaling to catch you out this time as far as I can tell.

[Nevl]

REL: 1400 HRS Wellington Drive Technologies Limited

ADDRESS: WDT: Chairman's Address - EGM November 6

I am pleased to open the meeting and welcome you all today.

The business of this meeting is to consider and, if thought fit, to approve
the placement of 85 million shares at 10c per share to funds managed by
Hunter Hall Investment Management.

The placement

I will begin by summarising the background to this placement.

As previously advised to shareholders, Wellington has been conducting a
search for a suitable cornerstone shareholder. In conjunction with an
investment banking advisor the company has undertaken a substantial search
process. While this generated a good degree of interest, the board concluded
that it would not be possible to secure a capital injection on better terms
than those offered by Hunter Hall within a timeframe compatible with the
company's cash requirements.

I draw your attention to three key aspects of the placement that shareholders
should consider:

1. The placement, in conjunction with the smaller follow on institutional
placement and the Share Purchase Plan, should provide Wellington with the
capital it needs to reach profitability;

2. The pricing of the placement - 10c a share - is at a small premium to both
the average price of Wellington shares in the period before the placement was
announced and to the current market price.

3. The Independent Expert's report concluded that the placement is fair to
non-Hunter Hall shareholders in Wellington.

Hunter Hall is Australasia's largest ethical fund manager and has been a
significant supporter of the company for five years. Also, Hunter Hall is
already Wellington's largest shareholder. The proposed placement will lift
their shareholding to 31.6% of the company, prior to the issue of shares
under the proposed Share Purchase Plan. I note the Independent Expert's
report concludes that

"...while the commensurate increase in HHIM's relative shareholding will
technically provide HHIM with the ability to unilaterally prevent the company
from following some courses of action, we do not believe that effective
control of WDT will pass to HHIM if the Proposed Allotment is approved."

Directors believe that the placement to Hunter Hall is an excellent outcome
for Wellington and have no hesitation in recommending it to shareholders.
Shareholders will note that several Directors have purchased shares on market
since the announcement of this placement to Hunter Hall.

Trading Outlook

I now have a few words about Wellington's recent trading and the outlook for
2010.

During August and September, Wellington traded in line with the guidance
provided in the company's interim result release in August. As we move into
the final months of 2009 some of our larger customers have revised down their
projected orders for the last quarter of the year, with this demand in some
cases being pushed into the first few months of 2010. In addition, like many
New Zealand companies doing business on the world stage, we have been
adversly affected by the continued rise of the New Zealand dollar. When we
gave full year guidance in August we assumed a NZ/US rate of 65c, based in
part on advice received. As we now know, the New Zealand dollar has continued
rise and is now above 71c. As a result we now expect that for the full year
revenues will be 5% below the bottom of the previous guidance range at
NZ$23million, with approximately 3% of this shortfall due to the higher
currency.

Margins are improving and the effects of the reductions in overhead costs
made in the first half year are coming through. Some further cost reductions
have been made since then. Sales have grown significantly. Consequently, the
company's net loss, before exchange rate variations are considered, is
expected to remain within the previous guidance range at NZ$14.5 million,
although in the lower half of it.

I point out that while short term demand from major customers remains
volatile and difficult to forecast, the underlying trend of strong sales
growth is continuing. Looking out to next year, Wellington expects sales
growth to be driven by both expanded sales to existing customers ,and by
sales to new customers as the Commercial Refrigeration market continues to
switch to high efficiency products. In the past few weeks we have received
some substantial orders from new customers for the early part of 2010.

2010 will also likely see the first volume sales of the new line of
ventilation motors that Wellington has developed for its OEM customer. Small
sales of some of these products have already been made, and the remaining
products in the range are in the final stages of testing prior to release for
production around the turn of the year. Sales are expected to build steadily
in 2010 and become more significant over time. Over the medium term,
Wellington believes that its Ventilation business can become a significant
second 'leg' for the company.

Directors and management retain their strong focus on taking the business to
profitability as soon as possible.

Up to date, the company has been investing to obtain customer relationships,
to develop new products, and to establish manufacturing and distribution
infrastructure. Given the market position now reached, the Board has
determined that further expansion of product line and infrastructure is not
required for profitable operation to be achieved, while still preserving
Wellington's global ambitions. With the company stabilizing in this way,
there will be a substantial reduction in operating expenditure in 2010. This
will lower the company's breakeven point, aid the drive to profitability and
reduce operating cash consumption.

While 2009 has proven to be a challenging year that has not resulted in the
level of growth expected at the outset, Wellington has made significant
progress in building its business and in setting the company up for
substantially improved commercial outcomes in 2010 and beyond.


Not bad, nothing new. Interested in seeing who the new customers are and volumes but nice to see that they are tracking along as predicted. The currency is tough but the new factory in China will help there. Funny that the main customers are in the States when Europe is the one making all the noise about climate change. Would be nice to get Tesco's or Carrefour doing what Walmart are doing.

[h2so4]

Not bad, except. New customers cost more money. And saving cash by cost cutting their infrastructure building etc. may slow the ability to meet increased demand. Is WDT running out of options to stop the cash burn?