LZ,The board don't explain themselves all that well. They have...

LZ,

The board don't explain themselves all that well. They have confused shareholders regarding overseas operating businesses and overseas investments.

The company's foray into the Ukraine as an investment in purchasing 2 coal properties was a disaster. The properties were purchased at the wrong end of the last coal cycle, and when coal demand dropped off these undeveloped properties were left as a lazy asset on the books with no way of being sold, and no market to make development of the properties economical. these two properties have been sold in recent times as we have antered a strong demeand for coal. The second smaller property loked very promising and past management was looking at maintaining a 50% ownership in the mine during constructiona and operations. This was just sold as it was viewed as too risky. Now CCI basically has no investments or projects which it is loking to develop which could potentially bite it if the project was to turn pear shaped. this now makes the stock far more prdictable in terms of revenue, earnings and growth.

Now onto Overseas operations. The operations in the Ukraine have grown strongly and over the past 2 years have turned in stellar results. This is the most profitable past of the whole CCI group. If you look at the segment report you can see CCI Ukraine has brilliant margin with around 1.3M in profit coming off revenues of less than 4M. This is a mature and growing arm of the company and has been operating successfully for 13 years now.

The Indonesian operations are far less developed with the foray into this market less than 5 years old. The superintending division is doing very well and is growing very quickly. The second business in Indonesia was a strange fit, and with the recent change in the board it was decided not to develop this business. the company incurred a loss of about 300K in closing this business which is pretty insignificant in the grand scheme of things.

So now we have CCI Pope, (this is the strongest growing arm of the company in Australia, and has some brilliant prospects as the demand for diagnostic testing increases with large industry looking for an edge in reducing maintenance periods), CCI Aust (About to enter a purple patch of coal volume growth which will drive profit margins sharply higher), CCI Fluid Tech (A small but growing division servicing the Hunter Valley region in the area of Hydraulic maintenance), and CCI Ukraine (as mentioned above)

The Indonesian business is currently run under the umbrella of CCI Aust, but in the future it is planned for CCI Indonesia to become a stand alone business similar to CCI Ukraine.

Growth of 13.5% in revenue led to 74% growth in EBIT in 05/06. CCI are talking of revenue growth in the range of 10-15% again for 06/07, so i am expecting NPAT to be up by around 70% again this year, particularly as there will be more inherent growth, and also because the company has commented on processes becoming more automated and costs being reduced.

The upcoming earnings forecast will be the most important announceement made by CCI in a long time, and in my opinion will provide for shareprice growth to continue well beyond the 40c region.

Regards,

Cheerful