....not much action these past few weeks--about a third of normal activity. It appears that everyone is more or less waiting for the earnings to come out in August. I agree with all of the above reasons that all have stated. I do not think that the dilution will be that severe as simple states. The dilution will be held down and I don't think that there will be a buy back though either. By 2012 YTEC will have about 20-25 million shares os. The buying will begin sometime within the year or next and then watch out because it will be steady climb. If one has the time to wait and hold--then now is the time to get in. jmo--regards, Ivan
Nice analysis. I'm glad the company is spending the capital for POS installations now. I expect the POS part of the business to be a cash cow in the relatively near future (>= 2yrs). POS = recurring revenue. Look at the chart for CADA, whose primary source of revenue is from POS. Now consider that YTEC also does IT solutions for several of China's big banks. The combined potential for both these facets of their business is truly mindboggling given the expected continued growth of the Chinese economy. This will be a volatile growth stock for a few more years, but those of us in it for the long haul should still sleep well knowing that management is working hard at making this a multibillion dollar company soon...
Look at slide #19 forecasting 7.8 million POS in China in 2012. YTEC's slide #10 projects 26,000 POS this year and 60,000 in 2009. Most likely by 2012, they will have 120,000 POS. If each one is bringing in 10,000 a month in sales, which currently they are bringing in more than 7,000 per slide #20, this would be $20 a month profit or $20 times 12 times 120,000 equals 28.8 million a year earnings from POS alone. With 17 million shares which should go to 20 million with the incentive plan for the previous merger, this is about 1.50/year in earnings on POS alone. Remember 10,000/month is a low number given that credit card use is booming.
How do you think they are going to get to 120,000 units? Do you REALLY believe that the shares outstanding will only be 17M, that's laughable. They acquire companies with shares, read their annual report and you will see in every year 2008, 2009, 2010, etc. they give almost a million shares away to senior management for meeting net income objectives (which are NOT high). The shares outstanding I expect to be 50M by 2012 at least.
2 Reasons why YTEC will be trading single digits to low double digits for at least a year:
1) Negative cash flow from operations. The only way this company generates cash is by selling more and more shares.
2) See #1 above, this means DILUTION.
I understand the principal that YTEC is trying to do, but until the company is able to generate free cash flow it is a strong no-no to invest in. Think about it, YTEC plans to DOUBLE the POS machines by next year, do you really not think that will not have a negative effect on cash and earnings??? While I like the potential of this company I do not think that potential will be realized until at least 2010, maybe 2011 as your stating.