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CHANNELDEX: Channel round-up - who's who on the ASX

CHANNELDEX: Channel round-up - who's who on the ASX

e-commerce

SecureNet Limited

(SNX $4.99)

Security and e-commerce solutions provider SecureNet has the potential to be one of the few listed Australian technology stocks to establish a significant international presence, and resulting recurrent revenue stream.

SecureNet's fundamentals are solid with its Hong Kong and China joint ventures, while its Australian operations continue to perform well. Speed to market and securing a pre-eminent market position that is defensible against competitors will be key to its performance. It should cross that point in the next 12 months in Hong Kong and China, while across the rest of Asia it could take 18-24 months. The company may further strengthen its competitive position through the acquisition of small local competitors.

The company remains well-positioned to fund expansion. It has more than $120 million in the bank, plus a positive operating cash flow. Share price volatility will remain as SecureNet establishes a recurrent ongoing revenue flow that will justify its market capitalisation - this is still more than three years away.

Net profit for SecureNet is forecast at $3.6 million, up from $1.5 million the previous year.

Volante Group

(VGL $1.24)

A "significant turnaround" has seen Volante Group, a leading B2B technology and services provider, post a $3.12 million profit after tax for the half-year to December. This was an increase of $2.11 million from the corresponding period in 1999. Part of the profit improvement can be attributed to the merger with AAG Technology Services on November 1, which in effect doubled the size of Volante.

The company predicts it will achieve or exceed the $7 million profit forecast for this financial year, and claims it is a $400 million business in an $8 billion marketplace - leaving ample room for growth. It is also hunting for small businesses to add to its IT services and consulting arm, Netbridge Systems Integration. Volante plans for its procurement businesses Applied Micro Systems and VIT, having achieved revenue and earnings growth of 50 per cent, to top $1 billion in revenue in the next three to four years. Overall, the company expects at least 15 to 20 per cent revenue growth in the coming year, while the market expands by 10 per cent.

Consensus estimates for Volante Group show a 268 per cent increase in net profit ($7 million) for the year to June 2001, followed by a 38.5 per cent rise in 2002 to $9.7 million.

Software

Technology One

(TNE $1.28)

Technology One delivers integrated enterprise solutions developed for specific vertical markets. Historically, the company's core product has been a financial management system Finance One, which is used in more than 300 corporations and government departments nationally. Finance One's contribution to group revenue is expected to fall from 70 per cent to 45 per cent-50 per cent in the next 12 months as the company places emphasis on other products: higher education and universities (Student One), retail (Retail One), human resource management (People One), wholesale and distribution (Sales One) and local government (ProClaim One).

Unlike most Australian software companies which choose to capitalise their R&D, Technology One allocated 21 per cent of its 2001 revenue to R&D, all of which is fully expensed. The company believes that if it were to capitalise its R&D, this would have a significant positive impact on reported profit.

This year, Technology One has signed a multi-million dollar deal to install its student administration system, Student One in Sydney's University of Technology and will provide its financial management software, Finance One, to Whitireia Community Polytechnic in New Zealand. In addition to its New Zealand office, Technology One has opened another office in Malaysia as its entry into Asia. Currently 95 per cent of group revenue is derived from Australia.

Recently, Technology One announced that first half net profit is 40 per cent up on the previous year. Consensus estimates for Technology One show a $7.8 million net profit for the year June 2001 (up 35 per cent) followed by a 34 per cent rise in 2002 to $10.5 million. Technology One is aiming for 30 per cent compound growth in net profit per annum. Slowing economic growth, however, may present a challenge.

Integrated Research

(IRI) $1.41

Integrated Research develops, sells and supports systems and applications management software marketed under the Prognosis brand. Established in 1988, Integrated Research now sells its Prognosis product to blue-chip companies in more than 40 countries. More than 90 per cent of IRI's customers are foreign-based, and more than 96 per cent of revenue in 2000 was earned from international sources.

The Prognosis range is an integrated suite of 31 systems management products providing cross-platform capabilities and seamless management from server to application, network to desktop. The product provides real-time and historic reporting, sophisticated automation and escalated paging, animated mapping and network analysis, application management and in-depth performance tracking.

Revenue for the first half (2001) increased 43 per cent to $13.7 million, while net profit rose 40 per cent to $2.6 million. With a number of initiatives under way to build Integrated Research's new business revenue and the continued strength of its core Compaq NonStop Himalaya business product range (sales revenue increasing by 45 per cent over the same period last year), the company expects increased revenue and profitability in the second half of the financial year.

Integration

Data#3 Ltd

(DTL) $0.67

Data#3 Ltd aims to be a "one stop shop" for IT requirements. The company's IT solution framework comprises three broad areas: computing solutions, networking solutions and application solutions sold to more than 2000 customers in various industry sectors such as banking and finance, legal and healthcare.

Recently, Data#3 Ltd won a $3 million contract from Australia's largest security company, Chubb Security Holdings Australia, for provision of Microsoft licensing across Australia and New Zealand. The decision follows a complete audit of the security giant's desktops by Deloitte Touche following two years of Chubb acquisitions. Chubb said it liked Data#3's Microsoft licensing e-commerce site that allows complete and accurate tracking of all software purchases online. Most recently Data#3 won a 44 million contract with Queensland Alumina.

Increased competition and the pending slowdown in economic growth has contributed to a 77 per cent drop in the share price in the past 12 months. Consensus estimates for Data#3 Ltd show a $0.5 million profit in 2001 off a 7.6 per cent rise in revenue to $140 million. Net profit is forecast to rise $1.9 million in 2002 off $150 million in revenue.

Biotechnology

Circadian Technologies

(CIR) $3.82

Circadian Technologies offers diversified exposure to the booming biotech sector. The investment company has interests in a variety of companies dealing with everything from gene scanning, cancer diagnosis and obesity drugs. Circadian runs a lean operation with a smart investment philosophy - world class science with billion dollar markets. Upside exists in the possible float of its Syngene investment, which deals with DNA diagnostics. Circadian normally rewards shareholders with entitlement options in floats.

Other positives include research projects dealing in prevention of cancer tumour growth and access to several Stage 2 projects as a result of a 19.2 per cent stake in Amrad.

A strong performance in 2001 is expected from Circadian's current investments: Axon Instruments, Optiscan Imaging and Metabolic Pharmaceuticals.

Importantly, Circadian is trading at an 18 per cent discount to its asset value, which does not attribute value to the company's research projects.

KAZ Computer Services

(KAZ) $1.35

On 31 January 2001, KAZ settled the acquisition of Australian Administration Services from AMP Life. The acquisition is expected to boost revenue in 2001 to $125 million from $61 million previously, increasing to more than $200 million in 2002. KAZ is the largest ASX listed IT outsourcer in the Asia Pacific region.

Recently, Arthur Andersen arranged for client Colliers Jardine's property management accounting system to be housed in one of KAZ's six data centres. Also, KAZ has recently expanded its Victorian IT outsourcing activities representing a 150 per cent increase in the number of systems under management over the past 12 months. KAZ aims to extend its market share in the Asia Pacific region for IT outsourcing and business process outsourcing. KAZ is forecast to report a $12.5 million profit in 2001 (+199 per cent) rising to $21.0 million in 2002.

Small Caps

SmartWorld Corporation

(SWC) $0.64

SmartWorld Corporation's (formerly IHG) share price has almost doubled since mid-January. The company develops home automation and Internet home gateway technology. Its core product is the Jeeves home automation system, which enables home owners to monitor security devices and control lights, electrical appliances, air conditioning and hot water services. Jeeves has been installed in homes in Australia, the US, Japan and seven other countries. The product is marketed and distributed by a number of companies including Honeywell and Hitachi.

The Internet Home Gateway connects home devices and appliances to the outside world via the telephone network, broadband cable, satellite, wireless device or power line, allowing multimedia communication access to homes by telecommunications and power companies.

Recently, SmartWorld subsidiary SmartAmerica and Avaya Incorporated agreed to jointly market residential structured wiring systems and gateways to the global home market. As part of the agreement, Avaya has the right to acquire an equity interest of 10 per cent in SmartAmerica for $US10 million within the next six months. SmartAmerica also provides a range of DSL high-speed Internet services to the US market.

Channeldex is brought to you courtesy of investment company Burdett Buckeridge Young. Contact them on: (02) 9226 0000. Photograph: Jerry Kara


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