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Strategies & Market Trends : Value Investing

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From: gcrispin	2/21/2008 9:19:25 AM
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This won't be everyone's (or perhaps anyone's) cup of tea, but I've ben buying NTWK, a microcap Pakistani software company, this week. In the CC last week the company stated that they will achieve twenty-five to thirty percent organic revenue for fiscal 08 that ends June of 08. The company is also projecting is also projecting diluted 08 earnings to be in the range of 28 to 32 cents. The stock currently sells at 1.84, so the PE ratio is around seven. Even more interesting is the fact that the US traded umbrella company owns 62 percent of Pakistani Netsol, which trades in Pakistan. The valuation of the Pakistani division is 100 million dollars. The sixty two million dollars of ownership is higher than the enterprise value of NTWK which is 47 million dollars. NTWK derives fifty-two percent of its total revenues from the Pakistani divison, which sells principally to the Asian and Middle East markets. The other forty-seven percent comes from European and N American sales. The sum of the parts which I figure to be 85 million in value is significantly less than the market cap of Netsol. Her is a link to the slides of the latest earnings presentation. The Q and A of the audio portion is particularly revealing. It can be found on the website. It should be noted that only ten percent of Netsol's revenues come from sales in Pakistan. netsoltek.com Of course, the reason you can find a company with a PEG ratio of .38 selling for half its value is because it's located in Pakistan. However, I believe the elections has somewhat lessened the risk in that country. Below is a fair assessment from the WSJ. online.wsj.com In the meantime, Netsol continues to grow. Recent PR indicates that this Pakistani IT company is a somewhat of a gem despite the recent dislocations in its country. biz.yahoo.com biz.yahoo.com biz.yahoo.com

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