+ Watch NTWK
on My Watchlist
The Company provides global information technology solutions.
Charts, insider buys and shrinking deficit all indicate a bottom here.
NTWK is signing deals left and right on new search technology. Q3 may be disappointing depending on when they decide to finalize the recent deals, but Q4 and 2012 will see a rise to a target of $1.60
Wow. Absolutely crushed in the market last week. Probably deserved to drop less than that, IMO. All this company does is ink deals to grow revenue. Almost every news article with the ticker is good news (with the exception of last week obviously). The political issues causing the longer sales cycle will smooth out eventually. Plus, it's not like the revenue decrease projected by the company is lost forever - it just got postponed for a quarter or three. With the inclusion in the Russell Microcap Index, it's going to be on the map of more investors, and will eventually get the respect it deserves. Will top the current 52-week high of $2.39 sometime in the next couple years - respresenting a 157% gain from the $0.93 price today.LONG NTWK!
Touted by RedChip, a known stock promoter. Any stock that has to pay to get the word out is crap.
Its cloud technology
1. Earnings announcement on 2/10:-Revenue at $10.4m and eps of .04 were right on target-Cash increased by $2m-Cash from operating activities was $5.3m, greater than 50% of the $10.4m in revenue-Margins were 66%, 37% and 18% from gross, operating and net, respectively-Comparing the first 6 months of FY11 to FY10 assets increased by $9m, liabilities decreased by $3m-NetSol recommitted to guidance of $40-44m and eps of .15-.20. -With $18.4m in revenue for 6 months and .08 eps, revenue for the next 6 months will be significant. Taking the mid-point of guidance at $42m, that would mean $23.2m to go or quarters of $11.2 and $12m for the 3rd and 4th qtrs respectively. EPS mid point of .18 would need .05 in each quarter. Even projecting the maximum number of shares, they should easily hit .07 each quarter. Additionally, NetSol's guidance tends to be conservative; in 2010 they forecast $33-35m and achieved $36.8m.-Revenue sources: License, maintenance and services. This quarter's services revenue of $5.2m and maintenance revenue of $2m are the highest of the last 10 quarters. License revenue of $3.1m is the lowest of the last 4 quarters. This is because services generally preceed licenses. License revenue flows when the software is installed and turned over to the client. The next two quarters will have very large license revenue as many of the orders sold last year are installed.2. The 10q filed on 2/10 had a number of positive trends, here are four that bode well for the future:-The new generation of NFS “R2” demonstrations and workshops with key global clients and partners is being very well received. Hence, the outlook for the new generation solution appears to show much promise. -GMAC – China, the implementation of first R2 for Wholesale Finance (WFS) is on track setting a strong foundation for growth. Two other key modules (CMS / CAP) are in the development stage and are expected to be marketed in fiscal 2012. -The Kingdom of Saudi Arabia is investing billions in healthcare, education, IT, infrastructure and many other new sectors. This makes it a most promising market for the Atheeb NetSol joint venture. -Noticeable new interest emanating from the Latin America markets for NFS™. 3. The Earnings Conference call with CEO Ghauri on 2/10:-4th consecutive quater of profitability, expect that to continue thru the year-The proposal to increase ownership of the Pk subsidiary from 58% to 76% is still under review by the Pakistani SEC-Shares outstanding are 51.1m, 1m in warrants and 7.8m options with strike prices between .65 to $5. They expect to end FY11 with 55m shares outstanding. (Hopefully at some point, like now, they could take some of their building cash and buy back $3m to $4m in options.)-NetSol has the highest delivery capability ever-The SmartOCI procurement engine for SAP has testing going on for 500 clients and has keen interest from SAP customers-SAP - through an Agreement with SAP NetSol is planning to expand marketing in Europe and globally of the NFS core financial suite (This is significant as I believe SAP has a product for auto leasing.)-CEO Ghauri highlighted the SANY increased NetSol preferred partnership worldwide, but also mentioned they had sold enhanced services and solutions to SANY in 2Q-CEO also mentioned lease soft upgrades for two European banks-Chinese wholly owned subsidary should be complete by June and their new office space will be three times the current Bejing space.-In Saudi Arabia CEO stated there are several opportunities they are working on with great potential-In Latin America CEO stated there is huge potential to tap that market, and it will start to happen in FY 2012-Technical headcount in Lahore has grown from 585 to over 600, with 180 working on NFS. Overall headcount rose from 760 in Q1 to 802 in Q2-CEO stated that if there was any reason to upgrade guidance they will, otherwise they are very comfortable with current guidance. They are also very bullish on the long term outlook.Q&A's in the call brought out some of these answers:-The partnership with the Saudis is quite strong, it is much more significant since they did not have an IT partner to develop solutions. CEO is VERY BULLISH-R2 - 2 modules will be ready by June and will begin marketing them probably in May. -GMAC China is implementing R2 Wholesale now, 80% done.-Expect NetSol will begin marketing R2 in the US in 6-9 months, when the timing should be right for the US market which is still in recovery.-Regarding growth going forward, they said this is the strongest backlog in company history, a lot of revenue is still to come from it. Expect additional sales to add to it, they are a growth company with "limitless opportunities." Asian CEO Salim Ghauri said all they need to do is execute, everything else is in place-CEO Najeeb Ghauri said he expects gross margins to hit 70%, revenue will be stronger, and he expects VERY IMPRESSIVE year end numbers!-He also confirmed they are just coming to the inflection point of the new R2 software ramp. He said NetSol has clear advantages in every corner of the globe.4. The RedChip Investors call on 2/17 had much the same basic information that CEO Ghauri shares when he makes calls on fund investors as he travels. Here are a few things that I thought were new or needed highlighting:-Smart OCI is about to be launched - the target market is 5000 SAP customers-Their prime target industry is Financial -All major Fortune 100 auto companies in China are using NFS-13% of all big ticket leasing in China is now done on NFS. Big ticket leasing is ships, railcars, aircraft, etc-Revenue: 80% of revenue is from NFS, no more than 5% from one customer, 2/3 of revenue from Asia-Never lost a customer-Quality competencies: CMMI level 5, ISO 9000, 20001, 27000-Can run the business from any of 4 locations: Lahore, US, Singapore, Bejing-Recurring revenue stream comes from maintenance. Every license comes with at least a 5 year contract for maint. 25% of all revenue is recurring from maintenance-Guidance: "AT LEAST $40-44m"-R2 is being developed with on demand cloud based services-"GMAC implementation in China is going quite well"-NetSol has a strong competitive advantage, not the least of which, is because of the 6 years remaining on the Pakistani tax holiday5. Two other observations:-The Ghauri family, employees, and insiders of NetSol own 23% of the stock. The three Ghauri's bought 1.4m shares last year, including 279k on Dec 10 at $1.50. CEO Najeeb also bought another 100k shares on 2/4 for $1.97-NetSol is developing a global partnership model. Once they sell NFS to a Fortune client be it Mercedes, SANY or GMAC they are then seeking to go everywhere with that client in the world. It is working with Mercedes to a significant degree and is beginning with SANY and GMAC. Very significant implications long term. Each major country usually installs a suite of NFS licenses, each NFS license is around $1.5m, R2, the NFS follow-on will average over $2m per license.
Growing business in a growing sector. Low debt, solid cash flow, with a business model that has low overhead and an easily expandable client base. This is a relatively low-risk small cap that is already in gear for growth.
For those of you in this in real life, what do you plan to sell this stock at? I'm thinking $2.25 if it makes it there.
In RL @ .78
Cluster of insiders
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