S2You make some good points.Oncard is certainly cheap, with a...

S2

You make some good points.

Oncard is certainly cheap, with a market cap of just $33million, cash at approximately $24million, the market is valuing SmartPass and Buffet Club at just $9million.

Considering that SmartPass made $5million just the other year, and that Oncard are once again able to earn 'market returns' on their float, I would suggest calling ONC cheap is an understatement - and that's before we even consider any profit from Buffet Club.

For mine, Management and transparency are two key issues.

Given their controlling stake (some of it indirect), management seem to take for granted that they can do what they want without concern for repercussions. Case in point - The CEO is paying himself almost $500,000. Though $500k isn't that much for a successful listed company, for a business being valued at $9million, my opinion is that the pay is too high.

On transparency, my belief is that SmartPass is an incredible asset likely to generate a significant profit once the national license comes through (along with foreign ownership rules). That being said, you wouldn't have a clue as to the value of SmartPass, progress on the national license, foreign ownership rules, or the sale process, relying on management commentary/announcements.

Despite my reservations, I think ONC is simply too cheap to ignore.

At some point I believe management will sell SmartPass (they suggested as much two years ago, and continue to dangle the promise of it in recent commentary - despite no actual commitment).

If and when a sale happens I suspect management will consider a significant dividend/capital return (The CEO has stated on several occasions that being the third largest share holder, he would love a distribution).

Assuming a sale on 15 times earnings (which I think is reasonable considering that SmartPass is a growth business and that listed Chinese stocks trade at north of 20times), ONC would receive in the vicinity of $37million cash. Adding the existing $25million, I think there is every chance of a distribution higher than the current share price (and we would still have the Buffet Club business).

On catalysts, I think there are a couple coming up:

1) National License - the last batch came out around the Chinese New year last year. This year the Chinese New Year is Feb 10.

2) Foreign Ownership rule - if this is positive, SmartPass can consider a broader range of potential buyers

3) An actual sale process - I believe that simply announcing that the company is undergoing a sale process with some broad expectations would bring considerable interest in ONC.

In any event, those are my thoughts; There is room for improvement, but the business is so cheap that it cant be overlooked. Coupled with the possibility of a national license around the corner, I think an investor would be mad to sell now.

Best of luck to everyone, and Happy New Year.