afr - article

Market Wrap
Minnow in overdrive as investors gamble on tenders

Ben Woodhead
545 words
17 June 2005
Australian Financial Review
First
31
English
© 2005 Copyright John Fairfax Holdings Limited. www.afr.com Not available for re-distribution.

Stock watch

Investors gambling on the outcome of a pair of Queensland and Tasmanian education department tenders have dragged software minnow MXL Limited out of the shadows in recent weeks.

The surge of interest has sparked a near doubling of the perennial loss maker's share price since the middle of March and prompted the Australian Stock Exchange to twice slap it with a speeding ticket.

Historically, MXL has maintained a low profile. With annual sales that have bounced around the $400,000 mark and a series of losses of more than $2 million over the past three years, the company has done little to draw attention to itself.

Its core technology is a student and trainee information management package known as eMinerva, which comes in secondary, tertiary and corporate education flavours, and its Australian customers to date have included fitness centres and accounting firms.

The software can be used to manage student and course information, and marketing, and is being broadened to incorporate curriculum management.

In February MXL showed a strengthening performance when it turned in half-year sales that outstripped its result for the full 2004 financial year.

However, sales revenue for the period still topped out at $432,000 and the company remained in the red, albeit with a narrower half-year loss of $1.6 million.

Nevertheless, MXL has caught the eye of investors with a taste for riskier bets. Its share price has risen more than 80 per cent from 8.5 ¢ since mid-March and has traded between 14 ¢ and 16 ¢ this month on the basis of that speculation.

"The real potential for MXL is that there are quite a lot of outstanding tenders at the moment that it's in with a chance for.

"If they can land one of these contracts it's going to have a big impact on its valuation," Aegis Equities Research analyst Robert Gregory said.

Two in particular, covering Queensland and Tasmanian public schools, have pulled punters in as decisions are expected on the contracts at the end of this month and the end of July.

Mr Gregory estimated that the Education Queensland contract was worth up to $16 million, with about half to be paid upfront a major kick for MXL if it secures the deal.

He rated MXL as a contender but also acknowledged that even if the company snaffles the win, there is uncertainty over what exactly its prize will be.

"The first thing is that there is a fair bit of uncertainty about the timing. These sorts of government deals can take a long time to finalise," Mr Gregory said. "The actual scope that was set out in the initial tender may change as well."

The lengthy decision process on government deals means that MXL may face a long wait before its next shot at a major contract if it misses out on the Queensland and Tasmanian projects, making the company an "above-average risk".

It is also targeting opportunities with the New Zealand and Brunei education ministries, but Brunei has only just released the tender for its student management system and NZ will make documentation available this month.

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A comment on the above is that there is a lot going on both here & particularly O/S that are already in the dare I say pipeline.