Embark, page-16

Everyone is worried about overseas contracts. Yes very important, but even more important is what the existing business is doing and how profitable it is, as this will be used as a base to value future wins overseas. The last cashflow report and their end of year financials were disappointing. There could have been more detail as to where money was being spent, as the market had priced in that the business was generating $2m in free cash flow per annum, which was backed up by the broker reports. My calculations suggest that they are making around $1m per annum. The next cash flow report will be key. We need to see management meeting investors expectations rather than just talking up the business. Also there was no business update at the AGM, very lazy as a lot of companies provide a detailed update of operations and if possible give guidance.

I think Embark is being run well and look to be kicking some goals, but at the end of the day this is a start up and the concept needs to be proven. It has a lot of potential though.

If they can show cashflows indicating that the business is making $1.5-$2m per annum and do another deal overseas, this will be an amazing buying opportunity. Its still a business with great recurring revenues, but one that needs to be managed better. Time will tell but I am not selling at these levels.