I just had a look at NSP when it came up on a couple of...

I just had a look at NSP when it came up on a couple of fundamental screens.

For a micro-cap, they certainly go out of the way to keep the market informed. Superficially, they also look cheap. However, a closer look and things don't really stack up all that well.

For instance, they recently announced a FY profit of $3.29m. But $2.95m of this is a "paper gain" from the valuation of their BioInquire acquisition. Furthermore, most of this acquisition value seems to have been based on the intangible assets (IP) acquired.

In the investor presentation they point to 17% revenue growth, but note 3 to the accounts show that all of this growth (and some) comes from growth in government grants received. Actual sales and service revenue decreased.

And while they report an operational profit of $890k, they also capitalise about $1.14m of their R&D.

The reality is, these guys have been burning through cash at a pretty stiff rate - a rate that may have slowed, but seems unlikely to have stopped, despite their assertions in their last cap raise prospectus to the contrary. They will also need to issue shares to the vendors of BioInquire and possibly additional cash in March 2011.

For 2011, they are forecasting a big increase in revenue to $5.8m and operational profit of $1.8m, so perhaps there is a story here. Yet I'd have to question the reliaibility of company forecasts after looking at the Feb 2010 forecasts for the June 2010 year... in the announcement of 18 Feb, they indicated a revised forecast of $4m sales for NuSep plus $1.5m from 6 months of BioInquire. It is difficult to see how this tallies with the total $1.6m sales actually reported. Even allowing for the $800k of government grants, they still came up $3.1m short.

It's not clear to me where they expect the rapid growth in revenue will come from this year. Will be interested to see what they have to say at the agm.