Below is a note i wrote for clients on the RDF AGM, obviously...

Below is a note i wrote for clients on the RDF AGM, obviously have given my clients some time to digest it before i hand it round on here, hahaha however here it is.....

Redflex Holdings AGM Wed 26th Nov 2003 Price 90 cps.

As per previous company forecasts, Reflex (RDF) is now achieving significant growth in its Traffic/Red light operations in the USA. In November 2003 RDF achieved the mile stone of 200 cameras installed in the USA. RDF is currently running at a 15 camera installation per month budget with another 200 cameras contracted to be installed at present. The month of November has also brought RDF US$1 million in revenue and currently exceeding FY04 revenue budgets. However, as Chris Copper (Chairman) pointed out, it costs RDF $100,000 per camera to install. Chris Cooper then used this point to lead into the fact that the company will again need to look to raise capital. Currently they have debt finance of US$3.3 million with NAB which they have almost completely drawn down. RDF is a week into a share purchase plan offered to share holders from which they have already received A$1.3 million in applications. In addition to the share purchase plan RDF received approval to raise more capital at a 20% discount to sophisticated investors. The passing of the resolution caused considerable questions from share holders who asked why they were only getting offered their share purchase plan at a 10% discount compared to the possible 20% that sophisticated investors could receive.



Chris Cooper when asked by a share holder, “will RDF just need to keep doing capital raisings each year to keep up with growth, or will these cameras start paying for them self’s”, he advised that currently RDF could use its own balance sheet quite comfortably to budget 6-7 cameras a month but in the interest of share holders and the company it would be ridiculous to pass up such growth opportunity.



Other points to note –



1. RDF uses 7% of revenue for R & D
2. Took a $1.3 million dollar loss on contracts RDF made in USD, due to major movement against the USD. Now have insurances in place that will stop this form happening with such a large impact on the bottom line.


With what I suggest will be an obvious share placement to sophisticated investors to be on the horizon, stock dilution risk will be hanging around. However once the company has acquired the required cash RDF is in great place to take full advantage of an industry that is going to just keep on growing in the USA. Even if a capital raising does occur and the stock wobbles around with dilution risk it will is still moving on extremely strong growth and hence I recommend a BUY.