lumpy earnings, page-6

Morley and TBE,

I've been thinking the same. ETC were confident June last year to estimate $48m NPAT. Therefore there appeared to be a good formula that they applied to estimate NPAT 12 months out given its growth was significant.

Up until now I think ETC's revenue matched a typical software coy in sales and licence fee renewals.

It may be however that ETC is changing its income mix ie with the Chinese gas deal, in that it appears to be a toll arrangement rather than predictable reoccuring licence fees. Hence it is more difficult to predict the NPAT 12 months out.

In terms of a good story the market does some times take a long time to accept the facts. I recall Mt Gibson Iron. It was trading at 20 cents and the coy had sales and volume, good mgt and prospects. It took a little while even during the iron ore boom for the market to accept this story.

The price topped out at over $3.00

ETC has a good story with new government contracts of substantial value and good prospects. I'm not sure about mgt with its 30m options release, but I suspect the various governments have looked into the company officers as part of their due dilligence.

I think it was trying to appease the mkt with its $10m cash in the bank story, and to a degree it backfired.

There are a number of risks political and others but going forward it will be cash flow. In some respects it does not matter what the NPAT is unless there is good positive cashflow to match.

I like ETC with some reservation and will hold and accumulate on dips.