The FRE SP is clearly being manipulated or managed. This is good...

The FRE SP is clearly being manipulated or managed. This is good for holders at present but bad for new buyers if there are any.

The SP seems to want to go under 10c and has threatened it a number of times in recent weeks but the white knights come along and save it at the last minute presumably to protect their portfolio or for other reasons not apparent. Remember that this company, if it does not become cashflow positive shortly will run out of cash by June 09 and will need to do a cap raising or substantially increase it's revenues and profitability.

The best case scenario is for FRE to lose $4M in FY09 preserving $4M in cash by Q4 FY09. To do this it will need to make $4M in FY09. If you assume a 30% margin to make the $4M you would need an overall revenue of around $14M, about a 300% increase over FY08 revenue. If revenue increases then so will costs probably add another $2M PA to the cost base requiring a revenue of $20M (revenue increase of 420%).

FROM THE FRE FY08 REPORT

Revenue from ordinary activities increased by 4 per cent to $4,848,000. This included an 11 per cent
increase in sales revenue, boosted by licence fees from Tesco for the commercialisation of the new
converged mobile technology.

At Jun 30 08 it had $8.1M cash, historically it has lost $8M PA for the last 2 years. Revenue growth last year was 4% and that included about 11% of it's revenue as a one off payment from Tesco for Mobile Wifi licensing so real revenue actually declined by about 7%. Indeed in the last quarter of 2008 tells the story, the revenue was only $900,000, projected forward this would equal about $3.6M in revenue for a full year.

There are about 3 weeks until we get a 4C quarterly report from FRE, I think this will be D Day for the SP and where it will end up. If there are no improvements to the $2M per qtr cash drain and no noticeable cashflow increase then the market will sell it down and no amount of manipulation will stop it going under 10c.

Given it's recent poor financials and despite it's recent good announcements (Tesco Mobile Wifi, MobileLink, Pakistan Telecom, no forecasts though remember) this is a very risky stock right now to buy in the 15c+ range.

I would not be surprised to see a cap raising announcement in the next few weeks along with a delayed 4C, a flurry of recent positive announcements and a potentially damaging upcoming 4C indicate that now is the time to get in a cap raising at around 15c. Post 4C would see a cap raising at 10c if the market punishes the SP after the 4C.