WA contract value as estimated by WA Government looks low. I assume that there is nothing included for SMS volumes as the Government probably won't predict these things. Government says it is a 2 year contract and estimates revenue at $966k over 2 years. Government also estimates 400 schools to take it up. This implies approx $1,000 per school per annum for revenue. I would expect that this is for licence fees only for basic product. I would expect there to be an installation charge as well, which would show additional revenue (and profit).
In June 2007, there were 350,000 SMS messages sent by approx 300 schools. This works out to be 1,166 per school for the month. Assuming June was an abnormally high month due to the freaky weather in NSW, let's pretend that the average is somewhere closer to 250,000 for 300 schools (I think this is probably very conservative), but this works out to be 833 per school per month.
Using an even more conservative figure of 600 messages per school per month and with an estimation that 400 schools will sign-up this would work out to be about 240,000 messages per month. Assuming 9 months per year and this works out to be 2.16m messages @ (say) 15c each, this alone is worth $324k of revenue before the licence fees.
I would expect the actual revenue to be received by MGM to be at least double that suggested by the Government... which can only be good for us holders.
Re the annual accounts and the financial performance, yes there was a loss of $783k, but this was after expensing $153k original IP, $220k for non-capitalised R&D, and $231k for USA and India expansion, given $605k of other expenses.
The company is making major reinvestment in its business both in Australia and overseas and this can only be good for the long run.
With the WA contract, I wouldn't be surprised to see a small profit in the 2008 year, and a much larger profit in 2009 (once US and India really start cracking).
New product launch is due on Monday (per the Annual Report) at the Australian School Bursars Association. Hopefully there will be announcement about this telling us what it is. I really hope it is a new product that has an easy sell into existing schools and brings new revenue.
Management of MWR do not over-spin things and seem to be very conservative. Their actions speak for themselves and they appear to just be focused on getting on with the job. I'm looking forward to the September quarterly.
Share price only needs to get a little higher before small company funds can start buying the shares, and then I expect a quicker increase in share price.
DISCLOSURE: I hold
Cheers Marvin
MWR Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
