WDT - Wellington Drive Technologies

[GR8DAY]

winner........what is a "share purchase plan" and how do you think it will effect the share price?

[winner69]

A share purchase plan is when the company gives shareholders the opportunity to buy more shares in the company.

In this case Hunter Hall are to take 85 mill shares at 10 cents and WDT prob thinks its a good idea to offer other shreholders some ahres at 10 cents as well.

That 85 mill shares Hunter Hall doubles the number od shares they have at the moment so they will end up with more than 30% of the company - about 10% more than they had before - that is how much existing shareholders interests have been diluted by - no wonder they think they need to offer you some more

Interesting article in the SMH this morning that says most of the recent capital raisings have ripped off retail investors .... but some retail investors have made windfall gains (like the writer who has made $214k gains on his portfolio of $40k) ,,,, but further down the track they have less of the company than they originally had
http://www.smh.com.au/business/aroun...0915-fo18.html

Hard to see windfall gains from a SPP with WDT

[Lizard]

I try to look at WDT periodically to see if it ever looks like a good investment. Given the revenue growth rates, it has potential...

However, the crux is that it is difficult to ascribe value until the company becomes self-funding and ceases to raise new equity. Picking the last capital raising before profitability seems like a possible fundamental entry (and perhaps before positive free cashflow - but best I don't complicate my argument!).

So my questions at this point are "will this be the last capital raising?" and "will they book a profit in 2010?". Looking at the accounts, the current proposed cap raising looks likely to get them through to at least HY 2010. Which may be all they need if things are running on track. But will second half be profitable?

The figures in the interim report have me dubious. Looks like they were hoping for 25% gross margins on the motors in the second half with new, lower cost, inventory, but currently only sit at about 15%. Operating costs for the year to date are at $8.9m (ignoring forex losses) - they claim these will fall in second half due to restructuring, and forecasts suggest about $6m second half. Therefore I'd pick at least $12m op costs for FY 2010, plus the $2.1m in D&A. So to book a positive EBIT, they need to cover $14.1m of expenses. At the (more optimistic) 25% margins, that means sales in 2010 have to escalate to at least $56m - about double current year forecast. This is possible, but seems tight - and unlikely that they'll blow everyone away with their result. More likely to disappoint (again!) with a loss of $2-4m for 2010.

So could be waiting another 12-18 months for the potential to emerge - no wonder they want a cornerstone shareholder like HHL as defense against hostile takeover. After throwing over $80m of capital at this business over many years, it would be a shame to see NZ investors give it away for less - they can probably get it there eventually - if they're not forced to issue new equity beyond this round. Beyond the "break-even" mark, their sales growth should make for an eye-catching profit increase. But might be waiting another 2 years or more to see it...

[duncan macgregor]

PGL, Good to see rational debate for a change on the forum. Nobody is ever right all the time, so we must expect to get it wrong sometimes. When i get it wrong it costs me up to the time it hits my stop loss then I get out regardless of how right I might feel. All good investors never buy in a downtrend, WDT is in a downtrend. All smart investors have a stop loss, WDT hit every stop loss in the book. To trigger the enthusiasm of the gullable come up with a new product, then exploit them for all they are worth. That is the reason that I selected WDT and CER in the bad share competition and was third. The chinese dont recognise patents like we do. The kid next door has a chinese buggy with a motor that is an exact replica of a honda with no names or numbers. Honda parts can be fitted. Remember the old austin engine in the sixties, Datson made a car with the the exact same motor which was just another nail in Austins coffin. WDT have created huge losses for their shareholders, promised the earth and delivered very little. I really would be very surprised if they ever show a profit I think as an investor who cares better prospects else where. macdunk

Thats what I said nearly four years ago. Since then its been a downtrending share asking for money from the gullable and showing bigger losses and promising the earth. Macdunk

[Lizard]

MacDunk,

Summary of WDT revenue:

FY02 $0.3m
FY03 $0.8m
FY04 $0.9m
FY05 $1.8m
FY06 $7.1m
FY07 $10.7m
FY08 $14.5m (reporting period changed)
FY09 $27.1m (forecast)

While you could say that they've extracted money from the gullible to get here, at least they have managed to produce the goods and investors still hold a stake in the outcome. They've typically increased revenue by 75% pa over the last 8 years. Eventually, they will achieve the scale to become profitable. Sometimes I have a suspicion we NZ investors undermine our own market and businesses with our overly-cynical attitude.

In a market more willing to provide new capital for development, the dilution would be less and the early investors better rewarded. Furthermore, if investors are not supportive in providing development capital, then that is one less reason for a company to take up a listing.

Whether a company should or shouldn't be supported in the capital markets comes down to whether the returns on capital invested are ever there and over what time frame. In WDT's case, it looks like the answer might be positive - but in a very long time frame for that early capital. More recent capital has a much better chance of seeing a positive return within 2-5 years.

For the active traders though, the sweet spot probably falls about 6 months before the sales growth kicks into the profit line and we're not there yet.

[Capitalist]

Agree Lizard. I was a relatively early investor in WDT - I sold a couple of years ago.

Sadly scientists in all their guises (bio-tech et al) are crap capitalists and they will not be getting any more of my money.

[Balance]

.....hunterhall are hardly going to throw $8m at any company without firstly having done their due diligence..............................surely????

Didn't Hunter Hall do their dole in NZS?

Likewise in Feltex.

Wouldn't treat them investing in anything as indicative of future success!!!!!

[kizame]

Crikey!!! A company turning over 10.7 and 14.5 million big ones respectively,AND still not profitable??? Where does it go? Paper thin margins?
Don't know this co.but at a glance at those figures,I don't think i would want to be IN.

[Awamoa]

I see they are calling on the shareholders for more funds.
This is starting to become tiresome without starting to see profits or shareprice growth.

[zigzag]

I see they are calling on the shareholders for more funds.
This is starting to become tiresome without starting to see profits or shareprice growth.

BUT -Check out the growth in revenue. Lizard's post a while back illustrated the rapid growth these guys are achieving. I hold, and will be taking up my full entitlement under the SPP. That said, it is coming down to the wire regarding turning that growth into a decent return for shareholders.