Stock Research: Redflex (ASX:RDF)

Redflex Holdings Limited is an Australia-based company engaged in traffic management, road safety, defense, transport, security and communication products. The Company provides red light and speed photo enforcement systems and back office processing services in Australia and US.

Share price: $2.70
Market Cap: $240m
Year end: June 30th

Pros

- Strong market leader
- High operating margins
- Excellent recurring revenue

Cons

- Need to check debt and cashflow
- Stated ROE 15%
- High CAPEX
- NPAT $10.6m -> P/E 22 (trailing)

Current Forecasts

EPS(c) PE Growth
Year Ending 30-06-09 15.2 18.0 33.3%
Year Ending 30-06-10 19.9 13.8 30.9%

Growing fast but need a higher margin of safety...share price ~$2.30

Stock Research: QMASTOR (ASX:QML)

QMASTOR Limited is engaged in the provision of operations, marketing, logistics and commercial software and services for the bulk material industries, particularly mining.

Share price: 34 cents
Market cap: $14m
Year end: 30th June

Pros

- Software group, selling to mining industry.
- 2008 a breakout year
- 2009 revenue forecast to grow 80% to $9m
- Recurring revenue streams via software licenses.

Cons

- Hard to judge their competitive position.
- Cash generation not great.
- 2009 EPS forecast 3.25 to 4 cents, vs 3.05 cents in 2008. Heavy investment in R&D and international investment costs.

Stock Research: ASG Group (ASX:ASZ)

ASG Group Limited (ASG) is a provider of information technology (IT) services to the users of mid range computers for enterprise systems delivery. The Company provides solutions to address clients business requirements in the areas of infrastructure and applications management outsourcing, Oracle e-Business suite implementation and support, applications development, business intelligence solutions, systems integration, IT service management and specialist technical services.

Pros

- Strong recurring revenue
- Decent competitive advantage
- Many government contracts
- Operating margins ~14%

Cons

- Facing economic headwinds
- Capitalises software development costs
- Poor operating cashflow
- Impossible to raise operating margins materially as ASG are a management consultancy company.

Valuation

- Share price as at 26th Aug 2008: 90 cents, market cap $116m
- Forward P/E: ~9

Bottom Line

- A GARP share, with no obvious share price catalyst
- Would like to see an improvement in cashflow
- Would like an even larger margin of safety with the share price

Company Watchlist

DQ Entertainment (LSE: DQE) - Manek Growth
Animation and game art content production company

Rensburg Sheppards (LSE: RBG)
Fund manager with good performance

RWS Holdings (LSE: RWS) - Liontrust
A group engaged in the provision of intellectual property support services to the pharmaceutical chemical medical telecoms aerospace defense and automotive
industries.

Ora Capital Partners (LSE: ORA) - Blackrock UK Smaller Companies

The growth and development of businesses in which ORA has or acquires either a significant minority or a majority shareholding. ORA's holding generally results from participation in the formation of new businesses or from acquisitions.