watch

This is one to watch.

FY05 was very mixed for Netcomm. They made a small loss for the first half but came home with a wet sail making $1m net profit for the second half. This equates to earnings of 1.3c/share.

The end of year reports were very upbeat with the CEO saying that "Netcomm anticipates a stronger year in 2005/06" (ASX announcement 18.08.05). Marketing deals such as that announced today should reinforce this view.

Therefore, I am looking for half year earnings of 1.3c/share. Given their sector has a p/e of about 15, I would expect a re-rating from the current 15c to around 40c. A full re-rating may need confirmation from 2nd half earnings so a steady increase over the next 6-9 months may be the order of the day.

Currently Netcomm is unfashionable, but they are cash-flow positive with directors buying on market. For both of these reasons I regard them as low risk.

IMO a fairly good bet with a possible 200% upside.

Do your own research and watch the market for confirmation that first half results will replicate that of the 2nd half of FY05.

cosmos