Entertainment Media & Telecoms Corporation Ltd (ETC) is a big handle to swallow along with what the company is really about.
The first part of the company's name gives you the idea that entertainment is a major factor in its business.
Not so, the key word is technology and the ability to keep track of products and equipment used in businesses.
The company describes itself as being involved in mobile technology consulting, the development of mobile communication technologies and the sale of telecommunications products and services.
The media involvement comes from its exclusive interests in mobile media applications and services - specifically in the areas of digital photo imaging and identity authentication.
Ferret received his signal about the company's prospects from Nick Harris, an analyst and authorised representative working for ABN-AMRO Morgans, who has put a target price on the stock of 71c and a value of $1.09 overall.
Yesterday ETC shares changed hands at 42c.
Mr Harris has made a project update and reaffirmed a previous guidance for FY09 of $48 million net profit.
The China National Gas Tank project has commenced and is expected to generate $20m in FY09.
"We (ABN-AMRO Morgans) are forecasting $15m, but had previously flagged a weak exchange rate may impact guidance," Mr Harris said.
"Chinese contract volumes are ahead of our expectations and appear to have offset the negative exchange rate impact.
"ETC is currently trading on an FY09F P/E of 3.9x and an FY10 P/E of 2.0x.
"While some risk still remains we believe significant value exists and expect the stock to re-rate as the market becomes more comfortable with cash generation," Mr Harris said.
Yesterday, the company released its own update on the China National Gas Tank project.
Directors announced that printing of the nexcode security suite-enabled ID cards for the China National Gas Tank project had commenced.
ETC receives an agreed amount in USD for every nexcode supplied.
Consequently, this is an important milestone as this contract will generate $US$200 million over the initial five-year term.
In addition, ETC expects to generate $20 million ($US$15 million) in the 2008/09 financial year from this contract, says director Peter Dykes.
SHARE PRICE MOVEMENTS
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Shares of ETC yesterday edged up 2c to to 42c. Rolling high for the year is 55c and low 17c. Earnings per share is 2.4c and p/e ratio is 17.50. The company has 432.7 million shares on issue with a market cap of $181.7 million.
In March ETC reported a half-year net profit of $8.1 million and declared it would maintain the $48 million net profit forecast for the 2009 financial year.
This is up 59 per cent on the previous corresponding period and up 24 per cent on the previous half year.
The results provides a strong base for the company as it transitions into a major national security technology provider through its success achieved in the previous six months as follows:
* Completion of 100 per cent acquisition of Nexbis;
* Signing of the Malaysian Government Immigration Contract with annual revenues of $60-$80 million;
* Signing of a Memorandum of Understanding with the Road Administration Department of Vietnam; and
* Signing of a Technology Licensing Agreement with the Chinese Government with revenues of $US200 million over a five-year period.
ETC has positioned itself for strong growth in revenue and profits in 2009 as the new government contracts generate significant cash in the current half.
Directors are pleased that the company has been able to achieve these half-yearly results without a contribution from the Malaysian Government Immigration contract.
BACKGROUND
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Entertainment Media & Telecoms Corporation Ltd joined the Australian Stock Exchange list on April 4, 2000.
The company's main objective is in mobile technology consulting, the development of mobile communication technologies and the sale of telecommunications products and services.
ETC also has exclusive interests in mobile media applications and services, specifically in the areas of digital photo imaging and identity authentication.
ETC's subsidiaries include Sapio Consulting and EMT Malaysia.
On December 5 the company signed a Technology Licence Agreement for the China National Gas Tank project which is now unconditional.
Under the terms of the TLA, ETC will provide its unique award-winning technology for the purpose of customer authentication for the project for an initial five-year period, with an option for an additional five-year extension.
It is estimated that there will be 150 to 220 million individual purchasers of gas cylinders in China over the next five years and every customer will be required to have an identification card, which will bear the nexcode technology.
It is a 40-year Co-operation Agreement with The General Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China as a national safety standard initiative.
It covers the LPG gas tank market across all 31 provinces in China.
ETC's role in the project involves the issue and tracking of customer usage using National Security Suite-enabled ID cards
Meanwhile, Sapio Consulting is a European developer of mobile communication technologies with a 10-year history of developing applications and end-to-end solutions which operate in any mobile network environment and on multiple mobile operating systems.
Sapio's pioneering mobile solutions enable complex services such as real-time betting, file sharing of rich content and content/data retrieval applications to be widely, securely and easily delivered to customers and mobile end-users.
The company has its regional Asian headquarters and technical development hub Kuala Lumpur.
ETC Price at posting:
40.0¢ Sentiment: Buy Disclosure: Held
