insights on qtg

I have written some notes on company Q Technology Group Ltd.
DYOR no advice given.
QTG has two main businesses, namely CCTV distribution and API Services and Solutions.It develops and sells proprietary security systems,components and software for surveillance and alarm products.It is a value added reseller of high-end security products including detection,alarm and surveillance systems.The group has 207 employees.I have seen the API locksmith service vans 131key.I see QTG as a turnaround situation or possible Takeover/merger.

Financials/Shareholders.

The basis for the evaluation of the company is to look at the history/shareholders and financials.The recent history of the company is it started with the Q Video Systems side of the business for CCTV security surveillance applications.This side of the business generated $22.6mln revenue for financial year ended 30/6/11.The next side of the business is API Locksmiths, which was purchased in late 2010 for $13.92mln.The integration of this business caused some heartache for the company and in the year end accounts 30/6/11 $4 mln in goodwill was written off.The API locksmiths business is now fully integrated.So the combined businesses should generate around $45-50mln for the full year.So far from the half year report and cashflow comment they have generated $36.7 mln for 9 months to 31/3/12.This leads me to the profit outlook for the year which is expected to be a small profit for the full year 30/6/12.One thing to point out is that QTG carries a fair amount of debt being a drag on profits.I then looked at this debt and found it comes from 2 sources GE Capital and the major shareholder in QTG Helmsman Capital Funds.The basis of the debt has to be looked at in light of where this debt comes from.The total Debt is $11 mln of this debt $5.4mln is owed to GE Capital and $5.6 debt is owed to Helmsman Capital.With this debt the major shareholder Helmsman has financed half and it would be in their interests to keep the company performing.
Looking at the holders Helmsman Capital Funds 28.6%,Cornish Investments 6.9% and Cherryoak Investments 5.6%.A rights issue was performed in May 11 at 4c a share.In the past in late 2010 there was a vote by holders against the issue of shares for debt in relation to Helmsman Capital Funds.This would have diluted existing holders if it went through.
Also on the financials the net assets are 4.4c and this values the company assets on the books at $8.7mln.If we look at the purchase price for API Locksmiths being $14.92mln which is roughly half the size of the business various valuations can be considered.Going forward QTG is working hard to reduce costs as stated and maximise cash flow and to unlock shareholder value.A good Australian company employeeing Australians.