Defenx Share Discussion Threads

[stewjames] 23/10/2001 19:25

Looks very, very interesting. Not sure if my broker will trade these shares though.

Any idea where I could find a balance sheet?

[stewjames] 23/10/2001 19:00

In the UK:
PLM - low PE, strong asset position, reasonable though slightly disappointing operating performance, obvious growth sector in the future (data storage)
DSN - around breakeven, again strong asset position, business performing very well considering the sector they're in

In the US:
NUFO - big discount to cash, bigger discount to assets BUT lots of negatives as well (cash burn, unprofitable, lawsuits, sector!). This one probably won't be as obvious and I admit to a certain amount of gut feel here. Also expecting them to get a hammering tomorrow when they release likely poor earnings, creating a fantastic opportunity.

Also DAG as a more speculative play, though not 'til the mid 20s.

I currently hold a few NUFO and DAG. In all cases, they're close to the price I would invest but I'm looking for further falls. My aim is to make 20-30% returns over 3-4 months (hopefully catch a wave, but that's what I'm happy with) so I'm looking for the seriously undervalued situations with a history of volatility rather than the potential huge windfalls. I'm also extremely risk averse!

[outsider] 23/10/2001 18:41

Pleased at your comment Stew James, as I have noticed you seem to have strict criteria (hopefully like myself) for selection.

What are the other 3, if you don't mind me asking?

[stewjames] 23/10/2001 18:32

I agree with you, outsider. It's just my way to concentrate on the negatives. Do that and still like the share at the end and you're onto a winner!

This is one of only 4 shares I'm serious about buying at current prices at the moment. Just a case of waiting to see which one bottoms out first.

[alsfar] 23/10/2001 18:23

Outsider - On balance I like what I see. The Voice over IP/DSL market will be very big. This is the 'killer' application for broadband. All the CLECs will want to offer this to their customers and all their customers will want it. I have already dipped my toe in for 10,000 shares. However, I will probably not look to buy more until some positive news flow happens.

[outsider] 23/10/2001 18:22

Well they have just booked a £3.4m order for there DectGem product.

They also say: "We are starting to see opportunties to sell a number of our other new products"

Without an acquistion what is the downside? I suspect many are factoring a loss in the current price, which would on your calculations leave it with a Nav of circa £18m compared with £12.5 Mkt cap....Furthermore it's markets have a further 12 month timespan to improve.

But no one can argue, if a earnings enhancing acquistion, is made the companies prospects can be transformed. I suspect it would have to be cash as shares wouldn't make sense.

Furthermore partnerships are also possible.....the main point being there are a lot of Telecom companies that are bombed out at the moment & if DFX are shrewd enough there are plenty of rich pickings/opportunities out there.

All speculation, but any share has that to some degree ;-)

[outsider] 23/10/2001 18:06

alsfar

I agree new products are the future.

But I must also say again a £15m acquisition(s), could transform this company. £15m is more than the current Market Cap & still the company will have little or no gearing!!

[outsider] 23/10/2001 17:57

Stew James, I think £15m down from £42m is over cautious. I'm looking for £10m (down from £15m last half) for this half & maybe £12.5m for the second.....not unreansonable having looked for clues in the Chairmans statement.

Also what about the cash, Cash goes along way in current markets, it could certainly add a new dimension to the business & a very reasonable price, the management have already proved they are acquisitive.

[alsfar] 23/10/2001 17:51

Outsider - Your point about the managements previous track record is a good one. However, single call routers are relatively low tech consumer products (I believe this company was originally an MBO of an Amstrad division. That is the managements real commercial background). This company's future now relates more to Voice over IP/DSL type products. Success depends heavily the quality of the acquisions they have made. In that market, they will be up against the likes of Nokia and some other very significant players. If the call router business continues to stand up, it will buy them time. However, for real gains in this share, it is the new ventures that matter. The city knows that.

[stewjames] 23/10/2001 17:45

Here's a little tinkering with numbers:

Assuming operating profit takes the form
Revenue*v-f=operating profit (f are fixed costs, v is a kind of margin but not quite!) then using the H1 and H2 performance last year produces f=9.2M, v=.4 That would put breakeven revenues at around 22.5M for the year. Achievable but perhaps not as straightforward as you might think. For reference, H2 revenues were just over 15M, down from 29M in H1.

15M revenues for the full year (suitably overcautious I feel) would produce a loss of around 3M.

Not meant to be anything other than a first approximation.

[outsider] 23/10/2001 17:37

Stew James, yep saw that...but having just been in Volex which had 85% gearing & made a good turn, I am much more comfortable with this one.


Monty......the same can be said of Volex when I bought those at £1.57 & £1.61

[monty burns] 23/10/2001 17:29

I like the possibilities, but you have to say nobody else does - the price has gone nowhere but down.

So I'm not buying them..,....

[outsider] 23/10/2001 17:27

Are the management any good?

1) They made £8m+ on £42m t/o last year

2) They have done the acquisitions to a large degree in shares

3) They are searching for other (other than uK) markets for the single line dialer

4) They are conservative....no dividend £6m+ write down of goodwill

5) They seem to have planned ahead, hence the up & coming products in high growth markets



I suppose we all have to decide

[stewjames] 23/10/2001 17:27

Don't forget the high level of creditors relative to debtors knocks 5M of the current asset position, reducing the discount somewhat. Certainly pessimistically priced. Still undecided whether unfairly so, personally.

[alsfar] 23/10/2001 16:43

Agree, seems the current valuation is a wee bit ridiculous. However, the stock seems short of friends in the city. Why is that? Doom and gloom still seems to be the concensus, but I'm not sure why. Seems more than a little overdone. I reckon one piece of unexpected good news could flag a significant change in sentiment. One key question has to be, are the management any good?

[outsider] 23/10/2001 16:30

This company also made £8m+ Operating profit for 2001, However it decided to write down the goodwill on previous acquistions.

The other negative is reduced business for single line diallers......but......it expects some of it's other products "to contribute significantly to revenues in the coming year"


Downside pretty limited because of the cash & strong balance sheet, upside who knows?

Unlike many shares this one has not been dragged upwards by the recent rally .....worth checking out imo.

[jasey3] 21/10/2001 07:33

CHECK OUT EINSTEIN TV ,, EPIC EIC ,, THIS BABYS FLYING

[alsfar] 18/10/2001 00:31

StewJames - A few links of possible interest. I think your question would require a crsytal ball. First half will be poor, Second half who knows? Depends on 2 factors (a) How successful the core business remains, (b) Whether there is a telecoms recovery to support the new business.

As with DAG, I think the main point is, at the current level down-side must be limited and a short term recovery in sentiment could deliver gains. I note even RED is up today. If that terminal turkey is up, sentiment must be improving. Only my opinion of course.



07:20:10

06:40:54

[stewjames] 17/10/2001 13:19

Cheers, alsfar. I'll check the links out.

By 'expected' I meant by the analysts, though I do of course take the 'professionals' views with a large pinch of salt!

[stewjames] 17/10/2001 11:56

Quick question - are they expected to show a profit this year?

[alsfar] 17/10/2001 11:34

Healthy volume so far today. Company fundamentals suggest well undervalued. Core 'call router' business in decline but still earning, meanwhile Voice over IP/DSL products coming to the fore. Price hasn't moved yet from (approx) all time low. Has to be an excellent opportunity to get in. Note: Market cap is now only £14million at 20p/share!!!

[bangers for bucks] 17/10/2001 10:30

somethings brewing anyone any ideas?

[ydderf] 17/10/2001 09:36

Looks like this is soon gonna fly - 250,000 just went through !