re: results out. Maybe I should have kept my mouth shut......and...

re: results out. Maybe I should have kept my mouth shut......and waited for 20c. Anyway, seeing as someone has shown a bit of interest here's a very hastily prepared summary I came up for someone last night. You'll note from the first paragraph that I am now officially "surprised" LOL

If we get to 20c I'll be in there. These long suffering IOCOM shareholders appear to have no comprehension of how well their company is turning around.

Ed.

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OK.....let's have a look at this result. I'm not going to try and predict how the market will react as I'll set myself up for a fall , but let's just say that if it falls I'll be surprised.

After a quick read through the report the main points of interest to me were as follows:

-Optima have indicated to me that they expect the IT services to be either breakeven or mildly profitable going forward after incurring costs in integrating and scaling down this part of the business in the first half. You can see from the revenue that this part of the business made up less than 1% of revenue, so in the interest of keeping things in the context of the business structure going forward much of what follows will be in terms of the Optima Computer Technologies business (OCT) which is basically the money spinner for OPI.

-The company lost money in the first half due to the IT Services shambles with Powerlan (since scaled down) which means that the 2nd half result is in fact better than the reported full year result. Another reason why I will focus on the performance of OCT. The IT Services business has been highly scaled down and now is more just a servicing centre for the OCT hardware sales.

-OCT earnt a PBT for the year of $6.36 mill dollars which equates to $4.45 mill (4.5 cps) after tax. I see this as the underlying result......up to expectations but I was expecting tax assets to be utilised for an even better reported result (more later)

-OCT has grown revenue at a compound rate of 27% in the last 4 years in a poor IT environment and 34% the last 2 years. Profit has grown at 37% compund over the last 4 years and 46% the last two years. OCT has only been part of OPI for a year or so and these reults have not been obvious in reported results due to the overhang from the old Iocom business . Should this sort of performance justify a higher PE than 5.5? Ed says "yes".

- one of the first tech stocks to pay a dividend , along with NTC (who I rate as higher risk due to lower barriers to entry).

- market share in computer sales increased from 4.1 to 5.6% in the last quarter. Notebook market share was 2% with a new range distributed through Dick Smith and a target for 10% within 18 months has been set.


Growth Prospects:

-further capital raisings very unlikely following the payment of a dividend (albeit a low payout ratio to allow for growth funding), no debt to speak of, 7 mill in cash and an undrawn 4 mill in credit available

- expansion plans in the retail notebook market, into New Zealand and they expect a positive result from a Vic Govt tender for Education in Victoria by the end of September . The existing QLD Govt contract was only announced in March so will be a larger contributor next year. The Dept of Defence contract while profitable was very low margin and the one-off nature of this sale (on a 4 yr cycle) will not be of great significance going forward.



-Buying agreement signed with Quanta, who manufacture all the major notebook brands except Toshiba, allowing Optima to compete on price with the majors. Here's a quote from an article:

Later this year, Optima will build a configure to order (CTO) production facility in Sydney in conjunction with the company, which expects to do $10 billion in sales globally this year. “They make most of Dell's, IBM’s, HP’s, Compaq’s and Sony’s [notebooks]," said Stuart McCullough, general manager of sales, at Optima. "There’s only about three or four manufacturers in the world of this stuff and the difference is in the perception of the badge. They’re the largest Tier 1 manufacturer in the world and have great technology for thin notebook styles. They’re the Rolls Royce of notebook manufacturers....Compaq or HP like you to think that they made their own,”

SUMMARY:

Optima has indicated to me that they aim to be profitable in the traditionally weaker first half this fin year. Even if we factor in a mildly profitable first half (I'm guessing here but say 1 million or 1 cps) and the same second half as this year (around 4.5cps) we get what I believe to be a conservative EPS of greater than 5cps for the next financial year. This is perhaps more representative of the underlying result for this year if we exclude once off charges.

As I have mentioned above OCT is expecting a positive result from Govt tenders in Victoria by the end of September. It also has large tax losses from the old Iocom business which are NOT accounted for on the balance sheet. They are in discussions with their accountants on how these can be utilised in future.

Certainly not the great value it represented at the start of this thread but I can't see much better value in the IT sector myself.

In the hands of the market now on what sort of PE Optima commands. Given its standing now as a growth stock and a dividend paying tech stock I wouldn't consider a PE of 15 out of the question eventually. I'd sooner pay 80c for an Optima share than an Etrade share on a PE of >70 I can tell you


Ed.