The Long Case for Netsol

Description: NetSol (NTWK) provides asset management software and business process/IT outsourcing.   Headquartered in Calabasas, California, NetSol Technologies has operations and offices in London, San Francisco, Sydney, Beijing, Bangkok, and Lahore.  Its flagship LeaseSoft product is used to facilitate automobile leasing worldwide.

Market cap. (midday 10/13/2008): $38 million

Revenue outlook: NetSol reported strong results for its fiscal fourth quarter, which ended June 30, 2008.  Revenues increased 23% year-over-year and 16% sequentially to $10.5 million.   At the time, the company forecast 30-35% revenue growth in 2009.  I’m looking for something a bit more moderate in light of the economic downturn.  The company remains optimistic. 

In an October 7, 2008 investor conference, CEO Ghauri reiterated that backlog and order flow remained strong.  About 7% of revenue comes from Pakistan, which I view as “at risk” due to the political situation there.  However, it is conceivable that efforts to stabilize the government could actually benefit this small part of NetSol’s business.

Earnings outlook: last quarter, NetSol earned $2.1 million, or $.08 per fully-diluted share.  The company projects EPS (fully-diluted) of $.40-$.45 for 2009.   Just weeks ago, CEO Ghauri stated in the earnings release: “I am extremely pleased with our fiscal 2008 performance and believe NetSol has never been better positioned as we look to leverage the opportunities we are seeing in the international markets for fiscal 2009.”  A lot has changed since then, but at these prices the risk-reward is compelling.  Investor-friendly management also helps.

Balance sheet: NetSol has about $6.28 million in cash, and no long-term debt.  NetSol remains operating cash-flow positive, and is unlikely to experience a liquidity squeeze.

DISCLOSURE: Long NTWK.  I bought most of my shares Friday at $1.27-$1.32.

Comments

[Charto:]

By far one of the best overall companies I see for a long term play, it is definitely a steal at this price level with the prospects for earnings growth in the forward looking statements imo, at this price I am a buyer and you should be too even in this market time to load up all that I can afford.

2008 Oct 24 12:58 AM