HIT - HiTech Group

[Lizard]

This is my craziest punt stock of the season due to its low market cap ($1.55m at 5cps!) and lack of liquidity. Have decided to give it a thread in the hope that the HY result will be worth writing up here later!

HiTech is a recruitment business, specialising in ICT. They listed too late for the tech boom and languished from the listing price of 70cps down to a low of 1.5cps. However, they have remained borderline profitable and never gone back to the market for more cash.

I picked up 100k at 2.5cps after coming across them on the net-net thread, so it's not going to make or break the bank! However, I am interested to see how it plays out, given the difficulties the liquidity imposes.

At last report, they had cash of $535k and other liquid assets in excess of liabilities totalling $1.5m. They reported a small profit last year ($136k with normal tax). However, this year is likely to see a substantial increase on that.

Firstly, at the agm they reported a 49% increase in first quarter revenue and $200k NPAT for the first quarter alone (plus gains on listed investment assets). They also forecast FY NPAT of $500 - $750k, though I would not normally take too much notice of a forecast that early in the season for a minnow like HIT.

Secondly, the federal tender database shows a dramatic increase in contracts awarded to HIT - 2009 year jul-dec period showed orders totalling $1.1m, while for the 2010 year jul-dec it sits at $5.2m... given that last year HIT total 12 month revenue ran at $5.5m and AusTender showed contracts for about half of that, the AusTender indicator is for a pretty impressive increase. If the pattern continues (and so far January has $1.2m of orders), then it is likely HIT revenue will at least double and perhaps triple, with NPAT at least $750k and perhaps closer to $1m mark.

So I am interested to see both how the half year result is tracking and how far the share price can move. Ideally, it would be good to see a dividend paid, and up to 1cps might be possible, although this would be more likely at FY.

However, ridiculously cheap as it is, no stock gets this illiquid without a reason, so there has to be a reasonable chance I'll get my fingers seared - if not by the result, by the lack of a market for the stock!

[macduffy]

Wow!

And I don't mean Woolworths!

That is a brave call, Liz.

Only 31m shares on issue with 61,000 traded in January and only 501,000 in the last twelve months. Far too illiquid for me but if it comes good it could well be a multi-bagger.

Good luck!!

[drillfix]

Hi Liz,

I can see why Macduff goes wow.

There has only been 1 trade of 18,000 shares done between Feb 1-2010 until Oct 27-2010

Looks like its been a busy month this month though with 4 trades :P

I know you are good at these sort of plays and you seem to pick well, but dont really know if I could be brave as you on this one.

Good luck here and I look forward to reading how things pan out for you.

[percy]

Nice to see the momentum building.Looks as though we are "poised" for the upturn.

[Lizard]

Thanks for the responses - and glad to see it was percy buying the other 400k shares traded in the last year!

It really is a bit of an extreme experiment... I've had to put off posting a thread until at least the share price doubled so that the market cap was actually above $1m!

[percy]

[QUOTE=Lizard;335039]Thanks for the responses - and glad to see it was percy buying the other 400k shares traded in the last year!

Wish it had been me,but it took me months to get a very modest parcel of only 26,000.

[percy]

A bit lucky to buy another 37,500 shares at 5cents 21/2/11.Thought the result was a bit late coming and thought it may be poor as it was late.Well Lizard 'you have done it again'.What a cracker.Well spotted,and thank you.

[Lizard]

Hi percy,

Arrived home last night from Cambodia (fantastic place!) and am relieved to see you are okay!

Yes, look like HIT is going to deliver. Will write some more later!

Liz

[Lizard]

If the pattern continues (and so far January has $1.2m of orders), then it is likely HIT revenue will at least double and perhaps triple, with NPAT at least $750k and perhaps closer to $1m mark.

I just pulled up this thread and noticed I never really got back to updating after the HY result... which was well on track at $379k NPAT, although nearly $200k came from gains on investments. Pleasingly, the directors decided to back my earlier NPAT forecast with one of their own - for a FY NPAT of $700k-$1m.

Share price has been pretty much static - currently last traded at 6cps, but with a spread of 4cps bid, 7.4cps offer. Market cap approx $1.8m. Liquidity has improved only marginally in the past 6 months, so further proof that trading on a forward P/E of around 2 is insufficient reason in itself to move a share price!

The AusTender database has become difficult to compare, as it appears some major purchasers (e.g. Medicare) are no longer being included in the database. However, the remaining data is still showing very encouraging trends and the web-site is showing a record level of vacancies for the period I've been watching it (currently sits at 72 advertised positions).

While this remains a crazy punt, I'm certainly curious to see where FY comes in and whether it will be enough to move them up. Fingers crossed for a dividend - the one thing that is virtually guaranteed to move even the most illiquid and tightly held of stocks!

[percy]

Yes very illiquid.I have been highest bidder for I think 2 months now.Trying to improve from well positioned to "perfectly" positioned.At least thanks to you I am positioned.!!!!