| Subject: Facts, fundamentals, forward analysis.30/1/2002. |
Author:
Steve Bonkers.
|
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Date Posted: 13:46:12 01/29/02 Tue
I know exactly what ERG are doing, it is called interoperabilty and multi application, ultimately moving to having every single detail known about a person on one card, drivers licence, passport, fingerprints, medical records, it will work with any system anywhere in the word, there are three major consortiums all vying to become the standard, the reality is however no one consortium can do it on it's own---hence that is where you need interopereabilty CAT has it and so does ERG, looking right out into the future a slice of the entire worlds transaction systems, the stakes are high and it is a cuthroat competitive business. (naturally--With so much money at stake.
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Erg are leveraged to all of the above, there are risks in over gearing, revenue at this stage as you correctly state is uneven, reading the recent shareholders letter carefully, Peter Fogarty states, it will be 2 to 3 years on average for a contract to become profitable, note there is also a technical difference between profit and profitabilty---two very highly misused terms on BB's, what the M.D. is stating is (as I read it) that on the way to getting a profit or becoming profitable on some of the newer contracts, the revenue will be there to service the debt, the fear in the market is not that ERG aren't growing, the fear is that they are growing too quickly. Along the track what that means essentially to ERG the share as opposed to ERG the company, is plenty of volatility in trading it, till the revenue streams become solidy recurring and annuity like, most other businesses are following this pattern, a number of stocks in the tech sector are and even in the more traditional sectors one such company that comes to mind is AMPanother would be Suncorp Metway, I had Suncorp Metway instalment notes when the Asia crisis hit in 1998----and you couldn't even give the notes away---I rang up on the very day the newspaper story broke and bought some more SME notes. (I regret not keeping them and exercising into shares--for Suncorp Metway have performed exceptionally well. This is the house analogy that you prompted my memory on with your post. Some may state that it is not a fair comparison to make with either AMP or SME.
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1)It is not a fair comparison to state ERG is the same as Liberty One either at it's all time low of 36.5c, any thinking person knows that is not the case, totally different modus of operation, between Erg and a now defunct company, nor would you compare it to Onetel, that never ran at a profit for ERG does, a certain institutions number one pick (Onetel) for small telco's not so long ago and for all of 2000 they were bearish the banks, they were bearish on Commonwealth Bank at 24 dollars---give it a break!. LOL Here we are in a lending boom just two years later, that was accurately forecasted wasn't it?. Two views to make a market!.(They were right on Woolies---but then I picked that one too---touch of the ego in me demands I say it!LOL.)
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2)Banks the world over have become more efficient are driven by the technology that companies such as ERG have, they are an intergal part of the payment system and in terms of equity the big banks both here and overseas show up in the top twenty shareholder lists of ERG CAT Intellect, Keycorp et al, if the analysts at stockbroking organisations don't know how to value ERG the banks do! LOL The above can be readily checked by a perusal of the company announcement sections of the quoted companies. Telstra has 50% equity in KYC---not so much (opinion) for the resultant capital gain that goes with share ownership--simply as a future money spinner for it as it searches for new and vibrant revenue streams, that are already beginning to show up on it's balance sheet and to make a difference for here and now.
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SYDNEY: October 12, 2001
"ECard Pty Limited, a company jointly owned by the ERG Group, Telstra and ANZ today announced the launch of the see Sydneycard - the first smartcard for the Australian travel and tourism industry"
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Is there a way to acertain the accurate value of the assets, you have asked. Yes J.B Were have given a DCO valuation for ERG of 49c per share, they have valued Proton that can interact with all the world transaction systems for 49c--trillions of dollars in commerce per year, thats why I do my own analysis of stocks--LOL. (see points above.) One of the things the management needs to do is become more transparent, reading some of what Michael Slater had to say before leaving (in the paper he stated the financials were fine.) is that much of the information is trade sensitive and the business of smartcards as we know and as stated above is highly competitive. J.B Were have stated the NTA is almost 25% greater than 37c, Ive given on the thread a couple of share based ratio's, in the immediate extreme the 31 million dollars that has been deffered but not disallowed needs to be more fully explained, having a look at it and I rang Shaun Duffy too and his reply did not fully satiate my thirst for knowlege, (very nice person to speak to and he was very helpful)(still like you have some doubts that need clarification) to the best of my ability after reading Ergs website and annual report--I have just found the truth in the fine detail of the wording on the Erg website.
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The below article states to me quite conclusively the 31 million dollars is cash and an upfront fee for licensing the technology in Germany to the De Te Card joint venture company--for twenty year term. In all cases except one the word fee is used as a noun see the references below and read and understand the etymology. The word fee is far more embracing than the word cash for the dictionary states the 14th century use of word which we still use today in the conveyencing industry "Fee Simple" then compare that with the statement made by ERG that they have also retained the rights literally meaning "ad finitm" the word is even of a greater significance than the above, for Geoffery Chaucers time it mean't and still does without limitation to transfer of ownership--meaning the De Kart consortium cannot onsell it to another partie for 20 years. (unless ERG approves) In fact if you read attentively every definition of the word fee and then read Peter Fogarty's words you can see the fuller meaning of the agreement and you will understand.
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What does that mean for holders and traders of ERG? It means instead of a p/e ratio of 58 and earnings per share of 0.72c a p/e ratio of 9.5 and earnings per share of 4.235c based on the close of the 28/1/2002.
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http://yourdictionary.com/cgi-bin/mw.cgi
Entry Word: fee
Function: n
Related Word: consideration; charge, cost, expense, price
Text: Synonyms WAGE, emolument, hire, pay, pay envelope, salary, stipend
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Main Entry: 1fee
Pronunciation: 'fE
Function: noun
Etymology: Middle English, from Middle French fe, fief, from Old French, of Germanic origin; akin to Old English feoh cattle, property, Old High German fihu cattle; akin to Latin pecus cattle, pecunia money
Date: 14th century
1 a (1) : an estate in land held in feudal law from a lord on condition of homage and service (2) : a piece of land so held b : an inherited or heritable estate in land
2 a : a fixed charge b : a sum paid or charged for a service
- in fee : in absolute and legal possession
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Main Entry: 2fee
Function: transitive verb
Date: 15th century
Inflected Form(s): feed; fee.ing
1 chiefly Scottish : HIRE
2 : [^9]TIP 2
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Main Entry: contingency fee
Function: noun
Date: 1945
: a fee for services (as of a lawyer) paid upon successful completion of the services and usually calculated as a percentage of the gain realized for the client -- called also contingent fee
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Main Entry: fee simple
Function: noun
Date: 14th century
Inflected Form(s): plural fees simple
: a fee without limitation to any class of heirs or restrictions on transfer of ownership
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Main Entry: fee splitting
Function: noun
Date: 1943
: payment by a specialist (as a doctor or a lawyer) of a part of his fee to the person who made the referral
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Main Entry: fee tail
Function: noun
Date: 15th century
Inflected Form(s): plural fees tail
: a fee limited to a particular class of heirs
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Main Entry: greens fee
Pronunciation: 'grEnz-
Function: noun
Date: 1909
: a fee paid for the privilege of playing on a golf course -- called also green fee
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Main Entry: service charge
Function: noun
Date: 1917
: a fee charged for a particular service often in addition to a standard or basic fee -- called also service fee
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Main Entry: user fee
Function: noun
Date: 1967
: an excise tax often in the form of a license or supplemental charge levied to fund a public service -- called also user's fee
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Date Of Media Release 22/08/2001
The Group advises that card.etc, the joint venture company including DeTeCard (100% owned by Deutsche Telekom); VDV (the Association of Public Transport in Germany), ERG, ACG and others has concluded a licence agreement for ERGˇ¦s MASS technology. The licence is exclusive for Germany (but excludes Berlin and Brandenburg ˇV the rights to which ERG has retained) for a 20 year term. ERG is entitled to an up front licence fee and ongoing maintenance and card fees during the term. In addition card.etc has received a binding commitment from the central German banking authorities that it will be awarded Germanyˇ¦s first banking licence allowing the company to issue smart cards for multiple applications in Germany. The licence, to be issued by the Central Bank of Germany, is believed to be the first licence of its type in Europe.
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The other concern was do the 75.5 million shares issued to the consortium add on to the 848 million shares on issue last net profit 6.1 million. It clearly states in a press release dated. See words in bold type below, the 75.5 million shares will be held in escrow for the periods stated. Erg is projected to grow this coming year by 150% so if that happens and so far it is, the dilutionary impact by the times those dates come will be offset by the intrinsic value created. (It might give short term traders the heebie jeebies leading up into it a week or two beforehand but I don't see it as a dampener on the share price in the immediate extreme. Certainly dates to record however and to be aware of. (Maybe through misunderstanding that may have happened recently for if you halve 75.5 you get 37.75 (fairly close to the low of 36.5.)(Personal opinion is any rumour will do to pick up cheap stock--re the worlds payment system worth trillions.) The option exercise price for Visa is not stated nor is the performance criteria cited except to state they are 5 to 7 year service levels.
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The short answer to your question though is yes the 75.5 million shares are added to the 848 million tradeable shares.Additional to the 848 million, there are further underlying directors options and so forth a figure of 923.5 million shares is obtained, factor in the remaining Motorola convertible notes 5.8 million in number that are exercisable into 17,486,797 shares adding that figure to the 923.5 equals 940.98679. Adding 8 million options (if certain performance criteria is met.), it does not state what the conversion ratio is assuming 1 for 1-- 948.98679 x 8.4% = 7.971489, haven't added up all the directors options yet will do so later, it does state the figure of 8.4% is approximate, I'm sure but cannot conclusively state untill I check, that it would as ERG have filed in the media release equate to 8.4% of ERG's capital, a close look at the wording once again however confirms that as the word "issued" has been omitted, the options quoted have not been exercised yet.--see below
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Date Of Media Release 10/01/2002
During the period of the rights issue the Motorola convertible note holding was also rationalised. As a result Motorola have converted 4,350,000 notes to ordinary shares (13,050,000 shares) which have been sold on market. A further 8,000,000 notes (24,000,000 share equivalents) have been sold to two separate institutional investors. Motorola has retained a balance of approximately 5,800,000 convertible notes (17,400,000 share equivalents). The end result is that Motorolaˇ¦s holding in ERG has reduced from 18,178,989 convertible notes (54,536,967 share equivalents) to 5,828,989 million convertible notes (17,486,967 share equivalents). An appendix 3B was lodged on 13 November 2001 in relation to this matter.
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The same media release relates to the query concerning all the rights not being taken up---ie a shortfall of 20 million, perhaps without wishing to speak on Shaun Duffy's behalf (as I do not have that right) That right is his and his only,(Magna Carta) I would conjecture as it states in the press release Motorola sold on market and two parcels were placed with undisclosed institutions. The amount in question roughly tallies, the figure the institutions exchanged at I will search trade data for as it will give powerful support for the share price, if it is 36.5--ERG is well supported. In fact the figure cannot be any lower than 36.5 for that is as low as ERG has traded, ergo, extremley strong robust and powerful support exists now for their are ready buyers from the retail sector to support the buying institution(s)Not that the buying institution minds as while the share price is weak it is picking up ERG with a forecast p/e of 9.5 with the 31 million cash included, in fact even better than that, for ERG is growing (see above by 150% and six months have nearly elapsed since the last profit report--next one due March 11th as much as their is panick selling from the herd, responding to rumours and innuendo in the mainstream press and on internet bullboards, not substantiated in fact or cited either from the main page of the ERG website or the official company announcement section of the A.S.X.
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Hi to forum,----Cheers!,--BK. | |
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