re: a superstar in the making it&e (ITE)Hi AA,Understand you...

re: a superstar in the making it&e (ITE)

Hi AA,

Understand you reticence ....post NHE--now GLX, and the lessons learned...... Such is the issue with Oil, Management Fights, Gulf of Mexico, and Hurricanes .....

Secondly, I truly admire your resilience and determined thoughfulness to Build Your own knowledge and Defences-- and learn from the Pain of a previous share pick....

You come across to me AA, as a person who has learnt to internalize what is True and not just superficially think you 'know' something....

One of my favourite sayings ....is to get to that stage..... where you:...." know that you know that you really know" ... and then as Buffett says you swing for the rafters....

Applaud your move to get to that point-- whre you invest only on "sure bets" and "lay ups"...

--Of course here is the honest and true rub... Can we ever get excellent Returns and ELIMINATE 100% of risk....??...

Answer..... Probably not entirely. In fact lets be more honest... "no".

The truth is ....that we can only ever.... "manage risk" and "mitigate risk"-- whilst investing in equities-- if we also want superior consistent returns....

And so we get back to the: " Reward versus Risk".... trade off.....

The best investors-- by definition try to ....as many times as possible-- have their cake and eat it too, as much as is possible....but even the best can get blind-sided....

Personally I find Peter Lynch ....one of the more ...."intellectually Honest " ....well known Professional Investors in this respect.....

He (Lynch)-- admits to having picked some duds... but of course his multi-baggers far outweighted and out-scored overall-- the duds....

-It is also like saying.... does Tiger Woods.... every play a bad golf shot ...??-- or even play.... a bad hole... ???

Answer: Yes.

But Tiger, plays far less bad holes.... than everyone else, and hits some excellent.... and most importantly CONSISTENT .....rounds of great Golf scores.... whihch far outweigh the bad holes he ever plays....

Okay lets run with you-- and keep it simple....

And then I will share with you AA --only with you AA,..... a little Secret..... that I have found ....can make you a very tidy ...repeateable-- Bundle... but only as I say... just-- b/w you and me....at the end of this post....

Worst Scenario....??

.... Hmmmm .....

Okay let's not say 7...Contracts-- but let's say instead one totally falls through-- and say 6 contracts....--and not one --not one-- extra contract.... to be won.... from any of the afore-mentioned sources .... in my previous posts--by mid March....

And instead let us not plug in 6.5 or 6 or even 5,5.... but instead, plug in $4.5 milions-- per deal-- which ....btw I reckon you WILL be very pleasantly suprised to the upside....

--But in spirit of playing along; let us stay with your current ..... errrr..."worry wart wish"-- (just teasing)-- to be a realistic pessimist...to assess your Downside and margin of Safety....

Now I am not descending to the depths of your depressive weather forecasts AA, re the Tier One style Contracts-- and descending to Tier Three etc.... --the tiddlers-- because this point was---repeat.... was ......covered at the it&e AGM-- and to ensure I heard it right--I double checked afterwards... with two seperate directors....at different times after the meeting... to verify same.

So anyways.... we will run with.... a measly $4.5 millions .....per Contract--Up Front not including Service Agreements or implementation Revenues as bookable or for purposes of back of this Beer Coaster at the PUB.....

-errr, AA, you must understand--- I bristle as I write this, coz it is so missing many of the significances and synergies-- and goes against everything....!!!--- which I have learned-- re this methodology-- but anyway will run with it anyway.....

Okay then, .....do we agree that Break Even is about a tad less than 15 millions... and is trending down...??

Okay I will again be a:-- "worst case scenario kinda guy".... and say that a couple of naughty ITE Sales Execs maxed out the company AMEX 's ... while in Paris..... and errrr .... well the (ITE guys--- had some expensive nightly entertainments-- ahem.....quite necessary for corporate networking and everything-- ahem....-- and unfortunately-well anyways.... -break even costs goes up by ... an extra ....(gulp)-- try explaining this to the Boss--)--- $3 Millions dollars....-- Errr boss the guys were only trying to impress the French Madamoiselles with French Champagne....

So we have (gulp)-- $18 Millions.-- as the much Higher Break Even.... Cost number....

So what do we have now....???

4.5 millions times 6 contracts = $27 Millions.

And add to that the Residual Incomers from already exising Installed Clients-- like last years-- and call this $10 Millions to be conservative--...(about same number as last year-- possibly added another 12 %... which is very conservative--) --

So we now have... $37 Millions .... On the Top Line ....

Okay, why do we now.... not ... get all stingy and Mr Monty Burns (The Simpsons) like... and shave .... $2 Millions off the Top Line--to average it down....--just ....for... shucks..... THE SAKE of it .....!!.

So we have a $35 Millions Top Line....

Following the Back of Beer Coaster math so far...???

And we have a -- $17 Millions EBITA......which coz of Tax Credits ....will be close to the NPAT.

But let us just Again....not admit that we can escape the Tax Man in entirety--- and drop another..... $2 Millions off that EBITA ....number.

Again ....not 'the point'---- but there we have it.....

-So NPAT is # $15 Millions.

NOw let us scrub the PE of 27...

Far too High..... eh AA.... !!!!!!

And stick to a PE of ....your number....of a PE 15.

-.....Which it WILL NOT--...repeat NOT be... but again .....I defer to your desire....AA... for a bit more... of good ol ..... Doom and Gloom.....

So what number--market cap do we now have.

I believe the Cannon calculator says a Market Cap-- based on everything being slashed to the blazes-- of-- $225 Millions--.... yes ... ??!!??

-So what is..... the CURENT (ITE) Market Cap..... at the Curent Share Price of 15 cents---it is I believe-- about $30 Millions-- .... yes...??...

-Okay then. Let us simply divide the variables.

225 (Projected market cap) divided by 30 current market cap -- is a factor/multiple of 7.5.... yes...??...

So 7.5 times (x)-- 15 cents-- is I can see: = $1.125.

Let us again round down to $1.10.

Now if that was achieved by say end of March... we would be probably happy-- and yes I know--my Shed is getting ready... yet again--- for the Crownies.....

even if that was halved-- there we go again-- you really do get into this Doomsday Scenario Spirit AA--!! --

We can now smash the Base Bottom number down again-- to half-- namely 55 cents-- that is a Capital Gain-- on ONLY--- the Half notion-- of "only" 55 cents" -- an additional 265%+.....on the current share price.

Voila.

Now is this (ITE) .....a Margin of Safety Bargain .....or an Over Priced High Risk chancey Investment....???

Re. The secret I was going to share....will leave it for a New Year present....errr..what about in one weeks time-- but it (The Secret)-- has one of its kernels and truths-- in this sort of concept which ITE embodies-- -- it is a variation of a 'Pareto Principle'--,ixed with a arbitrage of cogniitve dissonance/perception-- quite simple-- AA, --and it is not obviously a bald share pick ....-- .

Keep well and safe over the Festive Season AA, and everyone else as well....

Happy New Year,

Kindest Regards,

Robbo .

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Kindest Regards,

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