re: agm note - california gold Hrock I noticed in your client...

re: agm note - california gold Hrock
I noticed in your client update you forgot to mention the impact of the recent Californian legislation changes.

At from January 1 next year all NEW red light camera contracts in California have to be based on a fixed fee contract. This means that red light camera companies can no longer charge on a fee per citation basis from next year on NEW contracts. This legislation was brought in to alleviate public concerns that red light camera companies had a conflict of interest if they got paid on a fee per citation basis.

However all existing contracts and any future changes, increases etc have been grandfathered such that any contract signed before Dec 31 2004 can still be based on a fee per citation basis

The legislation change has created a unique oportunity for Redflex as they are currently the only company that can currently meet the stricter Californian requirement
which require a photo of both the number plate and the drivers face. Most states only require the number plate.

Most of the cities are not actually in favour of the new legislation as it requires them to take a portion of the risk in having to pay a fixed fee reguardless of whether the fines cover the fixed fee or not.

As a consequence i am expected a rush of contract signings in December as Californian cities rush to beat the deadline.

Scanning through news articles on the web over recent months I am pretty confident that between 6 and 10 news contracts will be signed in december, could be more. This will add between 100 and 150 approaches to redflex's already large backlog of 200 and substantailly increase their exising lead in the digital redlight market in the US

Should also be pretty good for the shareprice in the short term.

As i have said before on this forum RDF has entered a stage of very significant revenue and profit growth which will mean much higher share prices in the future.

This was highlighted in a recent Intersuisse report which showed NPAT for the next 2 years as
2003/04 4.2M
2004/05 12.7M

I would also expect 2005/06 to be in excess on 20M with the trend continuing in future years

I am a significant holder with no intention of selling as stock in the next 12 months unless forced too via a oportunistic takeover. I certainly would not accept a takeover bid but my fellow shareholders could be persuaded by a $2 to $3 offer in the next 6 months