The fact the numbers don't add up was disconcerting...hence just that alone made me sell out nearly all and just keep a very small specky holding...if they can clarify this I expect sp will recover...Interestingly for 1st qtr shareholder report they had on same day BRR interview to cover off results...they didn't do this on this occaision...no doubt due to bad news delivered in the report...pity as need to front up and be transparent to keep support for the company..an explanation of the results on BRR would have helped...as if looks like they are trying to hide things you will have sp hammered like it was today..the report and way numbers were presented also makes it look like that..
What this quarter has revealed (if one reads b/w the lines) is that a lot of the Sonnet business has turned out to not be so good....warranty claims included! Hence, sounds like now knowing this the $38m revenue forecast sounds no longer attainable. However, more key metric for me is EBITDA forecast of $4m and whether this is attainable..They stated H1 EBITDA was $2.3 m, yet they reported in Q1 it was $930k an $610k this qtr...which is $1.5m (where the heck does $2.3m come from!), which means sounds like might still be on track to achieve EBITDA forecast which is positive....but given the inability to reconcile the numbers they state in the report on a number of fronts is disconcerting...
Lower revenue and ebitda for Q2.....they did state they had some one off revenue in notes for Q1 but this doesn't explain fall in EBITDA....or fact qtr on qtr growth predicted hasn't materialised...due to Sonnet contract problems...ie quality of business and contracts acquired..
So what they have revealed is quality of contracts for Sonnet is not as good as one though, hence ST to MT revenue impact...
The positive for me is that Asian business is continuing to grow (KAZ Singapore business more likely to have less hidden surprises as KAZ ran a well drilled operation)...as the future growth driver for CXN is the Asia story....and particular China..Having FCP in advisory capacity is also positive in my books for small speckie coy like CXN and worth the 2.5% management fee (which is paid for in shares)..
They have talked for some time about making a payments acquisition which makes sense as part of their strategy...no doubt they will do this through largely share scipt offer as done in the past...I don't have a problem with this and expect it will be largely share script based transaction...
In conclusion....Look forward to some clarification from CXN on those numbers in Q2 report as make no sense and feel there is more a story to tell..As if they can do that I will consider loading up again...as still like the Asia story...just not the Australian business story (re: Sonnet business)...
It is a speckie and if we were 100% confident they would make it, it wouldn't be trading in the 2's....but they need to quickly improve their reporting as their delivery of the Q2 report gets an F.....
