re: Ann: Nexcode cash receipts increase cash ... Hey splain,...

re: Ann: Nexcode cash receipts increase cash ... Hey splain, great posting!

The risk of non-payment from government clients on multi-year security solutions of such significance is just about nil if the technology delivers all the benefits that were promised.

The cashflow suspicions are not unfounded given my personal experience with ARR, though that was a one off build for an Indian telco, not an ongoing relationship to manage the system.

ETC will be continuing to provide printouts of their barcode and systems to administer/maintain the solution over many years. If the government department didn't pay, it would quickly find itself without a security solution for whatever it was applied to.

Could you imagine Vietnam having their Drivers License issuance interrupted? Or Immigration documentation for example? Come on, its very unlikely. Nexcode is an operationally critical solution.

Money will be paid on time.

One thing I forgot to add in the other thread about the cashflow, if ETC had not been frenetically hiring new staff ( I believe somewhere in the order of 30 positions were advertised over last few months), then the cashflow would beb significantly higher.

30 people at an average FTE cost of 100K = 3million plus recruitment costs of about 1/3 of that = 4mill

They have also been locating into offices around the world. I understand they have established new offices in Vietname and China. Add another 1mill to that.

So they are also investing in growth. I believe if they communicate this point it will be well received.

48m is in the bag, I believe the cash will be in due course.

This really is a fantastic story unfolding.
I was a little peeved at having tp ay 28 cents, but it is already looking like a bargain. At a PE of 4.3, it is as cheap as they come, especially when management have said they were "comfortable" with a Lodge Partners forecast of 100m NPAT for FY2010.

I have said this before, but this one offers expanding PE and profit growth.

Give me a sanity check. What am I missing?