NetSol Technologies, Inc. (NTWK) Research Update Released
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New York, NY - February 26, 2014 (www.investorideas.com newswire) Taglich Brothers released an updated research report on NetSol Technologies, Inc. (NTWK) and reiterated a Speculative Buy rating with the 12-month price target lowered to $5.95 per share from $6.30 due to diminished sales. The report noted the following key investment considerations:
With an estimated 8,300 potential customers, growth potential for the company’s 2nd generation platform NFS Ascent is substantial. Globally, the company has captured less than 1% of total potential customers (180+). We estimate 3% of the potential auto-finance customers in Asia are NetSol customers.
In FY14 deal size may shrink, but growth of Asian financial leasing should drive modest sales of the legacy NFS platform. In 2012 (latest available data), financial leasing in China increased by 66% due to slower economic growth, making leasing attractive versus than a purchase.
In 2Q14, sales (reported on 2/13/14) decreased by 26.3% to $8.7 million. The loss was ($0.18) per share, down from EPS of $0.28 per share. The downturn was due to customers’ delay of legacy NFS orders in anticipation of the validation of its new NFS Ascent offering. We projected sales of $9.3 million and a loss of ($0.18) per share.
We reduced our FY14 EPS projection to a loss of ($0.42) from (0.07) per share, on sales of $40.2 million (prior was $45 million). The reduction reflects 1H14 results and continued customer delays until the implementation of three NFS Ascent platform reference customers are completed. The hiring and training of 300 – 400 new employees will increase operating expenses by 20.8% to $19.5 million.
In FY15 we project EPS of $0.50 per share, on sales of $60.7 million, down from projected EPS of $1.00 on previously estimated sales of $66.2 million, reflecting a slower than anticipated ramp of large NFS Ascent deals. At February 2014 only one of the three reference customers are running NFS Ascent. Until all three are completed a full sales ramp will likely diminish FY15 sales from our prior forecast. We project gross margin recovery to 50%, up from 38.2% in FY14 but below 54.8% in FY13.
NetSol Technologies, Inc., headquartered in Calabasas, CA, is a global provider of information technology and enterprise application solutions including credit and finance portfolio management systems, SAP consulting and services, custom development, systems integration, and technical services for global Financial, Leasing, Insurance, Energy, and Technology markets.
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