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Inductor

1,247 Posts.

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21/11/16

21:36

Post #: 20776313
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Originally posted by elphamale ↑

Hi all,

@towkay wrote 'A midst all these tumultuous discussions, where is elphamale? Would elpha like to share his thoughts on the current status of XPE, if u r still around?'

Sure, glad to share a few thoughts with you and others. Sorry that I haven't contributed for a while - have been busy with other commitments, including finding my son a suitable school to attend next year along with a quick tour of SE Qld to assess/inspect three other investments.

Have also been gathering my thoughts and have had a number of 'offline' discussions with various Xped shareholders (including our two largest, another 'Top 20' and an individual who represents a large number of proxies) in an effort to ensure that future decisions being made at Board level represent the interests of all shareholders, and not just those who seek ‘over the top’ financial reward for their efforts.

A wide range of topics were discussed including ways to improve corporate governance, investor communication, raising capital with minimal damage to the bottom line and the current scrip, and lowering General and Administrative expenses (G&A) until sufficient revenue is being generated to cover the increasing costs.

Can honestly say I am encouraged by the discussions had thus far and will continue to encourage other shareholders and members of the Board to review some of the proposed resolutions prior to the AGM. I hope to provide an update shortly as to where things are at, however the intention at this stage is to put forward a co-ordinated request to Athan and the Board (prior to the AGM) that I/we believe will represent the views of the majority. Stay tuned.

Have noticed that there has been a fair amount of banter by a number of HC posters suggesting that the previously proposed CR at 2.9c with a free option was withdrawn due to a lack of interest from Professional and Sophisticated investors. Well I'll let you in on a little secret..... I am vehemently opposed to raising any capital with local fund managers and their associated Profs who's morality on the subject of investing has been questioned many times due to the inevitable P&Ds that occur soon after their participation. If you would like more information on this, then I suggest that you refer to a post from @TenxX dated 7th Nov and also recall the broker data and the effects on the SP immediately following ‘big news’ post the April 2016 relist i.e. when the ‘US Tech Giant’ MOU was announced.

Hint: Macquarie and/or their clients and other large Profs were invited to participate in the April relist CR (discounted to 2.5c) and dumped their shares for a 40-50% profit in a matter of hours upon re-listing. This onslaught suppressed the share price until retail shareholders (including moi) could digest the overhang of supply, after which time the SP ran to 11c. These so called Professional investors sold out way too early in hindsight, and I remember Retail investors feeling extremely vindicated in their decision to increase the size of their investment while the Profs were selling, at least until the Lisa Zhang bomb was dropped a couple of months later and communication with investors gradually sank to an all time low.

So after I was provided with the details of the recently proposed CR, I wrote to our two largest shareholders and expressed concerns about raising capital through Athan’s established local contacts and their clients. I explained the effects of doing so would only add to the increased volatility that we have seen since the April relist and therefore it was not in the best interests of all shareholders. I also mentioned that the company would be unnecessarily diluting the scrip by a further 12% (which is significant IMO) should it progress with raising capital of up to $7m at a discount near 52 week lows, adding that it would not be in the best interests of all shareholders to allow the issuance of an ‘open cheque book’ style arrangement (refer to Resolutions 10 & 11 that have subsequently been scrapped).

Finally, I suggested that management may want to look at securing a genuine cornerstone investor or two, and ideally at least one that could also act as a strategic partner. I honestly believe that our Top 20 shareholders should include an established independent organisation, preferably a tech. investment group who understands the sector well, shares our vision and passion for great technology and has a genuine interest in the company's long term success - and therefore would be far more likely to hold on to their shares i.e. instead of dumping on market for a 30-50% profit the next day and biding their time for another rinse and repeat.

The more I think about it the more I am inclined to believe that Athan was concerned about the company’s ability to access capital during a Trump administration, remembering that the CR was around the time of the election result when fear was in the air and the markets plummeted until Trump delivered an unexpectedly gracious, calming and diplomatic speech which sent market’s soaring (no pun intended).

At the time I reckon that management had an inkling that the news we received on Friday was coming, and so they sought to do exactly what they did back in April - that is go to the local fundies through Sanlam Private Wealth and encourage them to give us their money (in exchange for discounted shares with a free option) and with the hope that they could make it worth their while within in a matter of days.

However I am aware that other well researched investors also wrote to the Board during this time and protested against the timing and format of the CR plus Resolutions 10 & 11, and so my feeling was that the Board have taken our collective concerns into account (serving as an effective court of appeal in this instance) and have since put a stop to the original CR proposal and scrapped Res. 10 & 11.

And although the latest alternative is far from ideal in my opinion (not a fan of CNs by any stretch - particularly the interest component), it does reduce the shenanigans caused by the issuance of cheap shares to a glut of non-strategic professionals. The CN option also bides the company time until the proposal is either scrapped, replaced with a better offer or voted on at the yet to be confirmed EGM. My preference is that the Board and management will continue to push for a suitable strategic partner to take a stake somewhere closer to fair value (upwards of 5c). So c’mon Athan or Martin, you know the technology is state of the art and I’m sure you guys can achieve an outcome that is in the best interests of all shareholders. And btw....what was the feedback from the US Investor Roadshow presentation?

FA

Apart from the odd bungling of certain events over the last few months (IMHO), the FA has continued to improve particularly on the business and technology development front (refer to Oct.31 Investor presentation, Friday’s announcement and also the company update provided earlier in the week).

The hills are alive with the sound of MOU's, Chinese translations for the Xped app and the successful deployment and integration (with the Xped app) of the Customer Registration cloud service on the Microsoft Azure platform.

View attachment 344549

In terms of the above wheel and spoke diagram, we trust that the identities of the two yet to be named MOUs will be revealed very soon. I am also very curious as to when the company intends to provide an update on the 'Tier 1' Smart Home Lighting solution and the proposed Bluetooth solution with our yet to be named auto audio accessory company. If all this is announced prior to the end of the year, then it could be a Merry Xmas for shareholders after a turbulent year of ups and downs.

It is also rumoured that Telink's intention is to include ADRC as a standard feature on the 8269 SOC, and not as an optional feature (upon request) as others have suggested. And although neither company has provided any confirmation on this point (at least to my knowledge), I think that what we might see is an ultra low cost SOC being manufactured for the Asian market, with the relatively low licensing fee generated from each fabless unit sold (let's assume 17.95% of 30c to be conservative) being offset by the huge volume that is IMO likely to be generated (due to the ultra low cost high tech combination) from 2017 onwards.

It is therefore not unreasonable to expect that Telink (being a fabless co.) could again triple or even quadruple its total output for 2017 (remembering that over 100 million Telink units was forecasted for 2016 across 9 different product lines). Therefore tens of millions of unit sales for the ADRC enabled 8269 SOC would be a nice little earner for Xped in 2017/18, although this is only one of a number chips and gateways that ADRC will eventually be available on (including a number of chips with Intel branding if the latest rumours are to be believed).

And although I believe that substantial revenue and profit can be generated from the firmware/hardware side of the business in due course, the key to Xped's success in the early years will be achieving volume, adoption and market saturation of ADRC enabled chips & gateways (and to a lesser extent revenue and profit from this side of the business).

Why? Because the company has already eluded that their planned rivers of gold will be created via service based product registration, cloud services, digital coupons, device data capture and analytics from industry, business and consumers using millions of ADRC enabled products.

TA

I was actually hoping that either @HudsonDesign or @trader_10 would provide an honest opinion on the bullish ramifications from Friday's enormous green candle (without an upper wick) on heavy volume rallying from multi-month lows and a potential double bottom.

But alas, these two characters (as different as they are) are of the same ilk in the sense that they rarely post Xped charts when the charts themselves indicate fresh demand. I suppose they are mindful of the fact that their recent attempts at creating doubt via TA (including but not limited to after the first bottom at 2.8c back in August) were not only excessively biased to the downside (as per usual) but also missing one key event that many of us knew was due to arrive sooner or later. And full credit to @Inductor . By using his unique geomathematical progression analysis, he was able to predict this key event for us all in advance, as illustrated in his Swiss Mountain range chart below.

View attachment 344597

Thus De and Felix’s first mistake IMO was assuming that things were going to carry on the way they had been the last several months i.e. more red candles than you can poke a stick at. But in their defence, anyone who relies on a combination of TA , macroeconomics and ignoring the improving company fundamentals while focussing on the (admittedly unnecessary) curveballs thrown our way, could be forgiven for naturally assuming the worst.

Folks, I make point of this because this is what the market does to people. It conditions even the most seasoned traders and investors into believing that because the SP has been correcting for the last six months, the fundamentals must also be in a consistent state of decay. Then without warning an extremely positive (if not game changing) announcement is released and then BAM!!! Everyone (barring the doomsayers) suddenly realises that the fortress isn’t crumbling after all. We saw the same thing happen with BRN, IAM and other junior tech. companies recently.

I was totally amused by some of the positive comments posted on Friday from people who only moments, hours or days prior appeared to be either ‘lost at sea’ or ranting with a defeatist attitude (egged on by the doomsayers and troublemakers no doubt). I never provide financial advice of any kind but if I was to write a book one day, then I would suggest that people may want to consider taking a longer term approach with their investment strategy. This does not mean walking away for six months with your head in the sand (on the contrary).

As investors I believe that we should continue to look for any cracks in the ceilings and walls but also try to put them into perspective, particularly if one is investing their hard-earned from the outside looking in. Be pro-active and try to do your bit to help repair those big or little cracks when the need arises.
Reach out to your employees (in this case management and the Board of Directors) instead of complaining to your fellow citizens. But if there are definite signs that the fortress is crumbling beyond repair, then by all means do what you have to do to protect your capital.

(my apologies, but it appears that the TA has been taken hostage by the FA for a moment - now how did that happen? )

-------------------------------------------------------------------------------------------
Five Signs Of A Crumbling Economic Fortress:

View attachment 344651

1. The fortress is small and underdeveloped and has little or no cash at bank.

As you may know, Xped has patented technology that is ready for commercial exploitation. It also has approx. $9m left in the kitty, with the expected sale of Sokoria to contribute a further AUD$1.3m based on the current exchange rate (which appears to be heading lower for the time being). That equals 4 quarters or 12 months at the current cash burn rate before the well runs dry, and does not include any proceeds from the proposed CN and SPP. The question for investors is where do we think Xped will be by then in its quest for IOT glory, given the last six months of progress as per the below?

View attachment 344609

2. The fortress is unable or struggles to raise capital.

Not an issue for Xped as I explained earlier. Assuming it is approved by shareholders at the EGM, the SPP at 3.3c will likely be oversubscribed based on what is in the pipeline, including the identification of the two mysterious MOU’s (and in time licensing agreements with their respective clients), the completion of the porting of ADRC to Telink’s 8269 SOC, launch of the ADRC enabled 8269 SOC in the New Year and subsequent revenue generation post launch, additional revenue via JCT’s new channel partners and resellers - plus up to $1.2m in orders via tenders and proposals, completion and integration of the Codium acquisition generating additional service based revenue (i.e. high margin and no inventory) for the company, and hopefully the identification the 'Tier 1' Smart Home Lighting solution OEM and the auto audio accessory company (the latter rumoured to be linked to our new Chinese JV partnership).

3. The fortress is not well built (poor design/materials/workmanship on a weak foundation) and therefore gains no commercial interest from more established fortresses.

Not an issue for Xped as far their current partners are concerned. The design is revolutionary (refer to the ADRC and RML reference manuals as a starting point if you are unconvinced) and the materials and workmanship thus far looks promising. THE largest fortress in the land has a keen interest in our fortress and has been extremely co-operative thus far - and we even managed to lure one of their leaders to pledge his time and allegiance to our cause.

4. The fortress has a flawed defence plan (uneconomic business model).

IMHO it is far too early to say whether Xped's business model will be a success or not. However based on past presentations, independent analysis and my own research over many months, I would suggest that Xped’s business model has the potential to be extremely lucrative, particularly due to the variety of proposed services that are currently in various stages of development or being fine-tuned in time to meet the anticipated demand for our revolutionary tech.

However it is ultimately up to management to defend the fortress and the wealth of its citizens i.e. making wise decisions that take into account the interests of all shareholders and not just the king, otherwise the king and his friends may wind up with all the riches and the shareholders may end up being diluted out of any upside. We may only be citizens of the realm, but collectively we also own a significant part of the fortress.

5. The leaders of the fortress who have skin in the game are selling out and/or moving on to greener pastures.

No sign of this at Xped, keeping in mind that not all Director shares are in escrow, and any SPP will most likely see our three largest shareholders add to their holdings, even if only slightly.
----------------------------------------------------------------------------

So....while there are no signs of a crumbling fortress (contrary to popular belief...until last Friday), am thinking that we may see another rally toward the double digit mark by January's end and then perhaps another retrace back to the mid-high single digits (who knows for sure). But if you truly consider yourself to be a long term investor and you continue to see improvements in the FA , then you really shouldn’t freak out too much about the gyrations in the SP (with the caveat that unnecessary curveballs on certain issues are not welcome and should not be tolerated).

Personally I am not a fan of people who use Warren Buffet quotes to justify their investment strategy (and I have not even read any of his books so I shouldn't comment). However the following video is a short one of him commenting on people who worry about corrections, which I found interesting and pertinent to this discussion.

Finally, here is some TA for consideration (my interpretation only).

Daily chart.

The first thing to note is the nice reversal in price, RSI, medium and slow stochs from oversold levels. The same goes for most other indicators (not shown). Importantly none of these indicators are anywhere near overbought status. Combine that with Friday’s bullish green candle (very long body with no upper wick) on excellent volume & bouncing hard from a double bottom, and it becomes clear that there are plenty of good reasons for the rally to continue into the 4s (and possibly low 5s) this week IMO.

Friday was also the largest one day gain (in percentage terms) since 8^th Feb when we were still listed as RYG. If these aren’t the signs of a major reversal then I don’t know what is. Either way, I am full to the brim with XPE shares until the next SPP, but in the meantime am happy thta I've been able to maximise my voting rights for the upcoming AGM.

View attachment 344603

Weekly chart.

Note the bullish hammer on the highest volume we’ve seen in 8 weeks and following the half yearly cycle correction (24 weeks to be exact). Stochastics, RVGI, RSI and most other indicators are only now beginning to rise from their oversold levels and thus I believe it is time for a significant run north assuming the FA continues to improve and no more nasty curveballs are accidentally pitched at shareholders. The MACD however is still converging so I won’t be discouraged if the expected rally takes a few more weeks to get going in earnest.

View attachment 344606

Well that’s all I have for now and hope that something in the above opinion piece (not advice of any kind) can at least be of some benefit when conducting your own research and analysis.

GLTA

Cheers
Elpha

Expand

Love ya' work, Elpha.

Nice to see FA back on the agenda for long termers, rather than the hysterical, continuously repolarising rants of TA.

Great synopsis, mate.

XPE Price at posting: 3.5¢ Sentiment: Buy Disclosure: Held
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