Further to my previous post, NBS management said the following...

Further to my previous post, NBS management said the following to the Lodge analyst on August 21:

"The implementation of both the Malaysian Immigration contract and the
China Gas Tank project has gone very well."

Similar claims were made to RBS Morgans and Foresight.

As I said in my previous post, printing for Malaysia apparently began before April 1, yet despite 3-4 months of work on a contract that was supposed to generate $60-80mill a year, NBS booked only $3.3mill in revenue. When you combine this fact with the company's recent reply to the ASX inquiry that "the ramp up on the Malaysian contract has been slower than expected", I think the question now has to be asked whether the company intentionally mislead analysts following the release of the preliminary results in August.

And why wasn't the start of printing for Malaysia even mentioned in the full year results? Has NBS' core Malaysia contract, its most important contract, the contract that would most help it win new contracts, effectively been put on ice?

Surely the dramatic short fall in Malaysia revenue plus the fact that ramp up is "slower than expected" is material information that should have been disclosed to the market last FY at the time the "slowing event" occurred?

I'm also starting to wonder if the Sovereign Key found out about problems with the Malaysia contract before NBS management. Sovereign Key began heavy selling in May, but when NBS announced it had received its first Nexcode cash on June 15 (which now seems to have been from China, and not Malaysia), it also said it was expecting more cash before the end of the FY. This cash, famously, never materialized. But this expected cash was for Malaysia. So, it is possible that as late as June 15 NBS management still expected the Malaysia contract to come good.

I also find it slightly incredible that the revenue shortfall from Malaysia was suddenly "offset" by an enormous amount of new work from China. I mean the offset was perfect: Malaysia revenue was $20mill+ below what analysts had been told by the company to expect, but China was $20mill+ more than analysts had been told to expect. Did this "offset" occur after June 15 (i.e., in the final week of the FY)? Was this "offset" in fact new work? Or are we to believe that NBS revenue recognition policies are flexible enough to allow the company to bring forward receipts for work in FY09 that is earmarked for FY10?

In any event, I'm reliably informed that Dykes recently told a fund manager that the cash that is owed for the China contract (i.e. roughly $40mill) will come in very soon. Apparently the only hold up is the PRC 60th anniversary celebrations which finish this week. While I don't believe for a second that the PRC celebration is the reason for the delay in China cash (i.e., it is just an excuse), I think we can take the time frame of a couple of weeks seriously. This is to say, given that China is on a 90 day billing cycle, and given recent purchases of stock by management, I think we can conclude that management genuinely expect the China cash to come in in the next week or so. Management may well be wrong in their expectations (they evidently have been wrong before), but I don't think we need doubt their expectations.

If this cash comes in this will be a company defining event, and I don't believe for a second that the company will hide this good news from the market. So punters with an appetite for risk might want to position themselves now. There could be a 60% one day gain to be made on the news.

But for investors or those with a longer term horizon, I think the only sane course of action at this stage, given the company's history of possibly intentionally misleading the market, is to wait for official confirmation of cash receipts before buying. Without confirmation of cash soon, the SP will probably crash to single digits over the medium term (especially given that the consulting part of NBS business is being wound down).