Doc, Here are some abbreviated thoughts (and updates from the...

Doc,
Here are some abbreviated thoughts (and updates from the co) on the above as I am still stretched for time I'm afraid:

-the 3.9 mill for the FOUR MONTHS to April and a profit before tax of 1.8 mill for the 10 MONTHS to April indicates nothing more than a loss of 2.1 mill for the half year which was the result of write downs and the poor performance of the IT services business (since scaled down)

-this tells us that (given they had updated the market prior on a 0.8 mill profit for Jan -Feb) that they earned around 1.5 mill in NPBT in both March and April. The company said they also expected May and June to SIGNIFICANTLY contribute to further profit. I was a little sceptical as to what that could mean and contatced the company who informed me that it would in fact be significant and that May had been their largest month for revenue in the history of the company. This augurs well for the full year result.

- the defense contract will be a significant contributor to revenue and profit this year. However the co believes that the loss of this revenue next year (it will recur on a 3-4 year cycle) will not stop the company from growing revenue and profit in coming years. They expect the scaling down of the IT services area will prevent similar losses in the first half in coming years and the new QLD Govt education appointment and an expected success in an upcoming Vic Govt education tender should offset the Defence contract completion.

Even if we forget about this year (which has the potential to put the co on a PE of 2.5-3.5) at current prices we can look back to previous years and make some assumptions. The company seems very confident of its position and is a stronger organisation than a year ago.

Last year the co (Optima itself ) made a profit of 4.2 mill, however this was hidden as the Optima business only contributed to 2 months of the Optima ICM figures (post takeover). Optima had grown revenue in each of the last 4 years and grown profits before tax from 2 mill to 4.2 mill. So we are not dealing with a loss making operation although as mentioned this has been masked by the old IOCOM business so far. It appears Optima ICm have taken the hard decisions and they tell me they expect the IT services section of the business to be breakeven from here on in.

So even if we go back to last years figure for Optima of 4.2 mill pre-tax we have OPI sitting on an after tax multiple of around 3-4. (not taking account of their tax assets). A majority of their revenue is contracted through Govt departments who give preference to australian companies and Optima is the Australian leader. The PE of the company compares favourably to other hardware sellers in Australia bearing in mind that Optima itself has been consistently profitable and a business like Netcomm (who has is just turning profitable) is on a PE of 8. A PE of 8 for OPI on this coming years results would see it at 25c plus.

Once OPI can prove itself to be a consistently profitable business we should see some room for a PE upgrade ..........perhaps not to the level of Dell (PE of 36 I think!) but perhaps 10-15.

Hope that answers some questions.

Ed.