Having recently heard about this stock I took it upon myself to perform some simple analysis of the direction it is going, and the results surprised me a little. Have a read and any opinions on this would be greatly appreciated!
The following are extracts from the QED annual report, with reference to its investment in Transaction Solutions International Group (TSI)
“The Company (QED) currently holds a 19.95% investment in Transaction Solutions International plc (“TSI”). The investment in TSI is classified as available for sale and is carried at fair value. The Directors have sought independent advice regarding the fair value of this investment as at 30 June 2006. Based on that advice, the Board has determined the fair value to be $6,300,000.”
Fair value? The following is why I tend to disagree (again from the annual report)
“In June 2006, TSI successfully raised £5,000,000 (approx A$12,000,000) from UK based institutional investors in return for an 18.53% interest in TSI. The funds raised are being used to accelerate TSI’s growth strategy by acquiring new electronic payments hardware, financial transaction switching infrastructure and working capital. Coinciding with the capital raising and in anticipation of an AIM listing, all shareholders of Transaction Solutions International Pty Ltd and Securitrans (TSI’s joint venture partner based in India) rolled their shareholdings into a UK registered company, Transaction Solutions International plc. QED now holds a 19.95% interest in this company following completion of the capital raising.”
Effectively QED says its 19.95% share is worth 6.3 million AUD, and the Capital Investors are saying their 18.53% share is worth $ 12 million AUD. Notice the anomaly?
Now this becomes important, as the closing market cap for QED today was $ 7,617,521 (SP of 3.2 c)
This suggests that the shares are at least 57% undervalued, and this ignores the rest of QED’s business. I think the shares should be trading above 5 – 6 c. Furthermore I think this will happen when the TSI IPO comes up on AIM in a few months time. We will then have a quantitative value on the TSI shares.
As I said earlier, any opinions would be appreciated on this.
QED Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
