OEC 0.82% 60.5¢ orbital corporation limited

orbital off nyse but eyes profit

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    Orbital off NYSE but eyes profit
    By NICK BUTTERLY
    04jul04

    ORBITAL Engine made headlines this week when it was announced the company would lose its prestigious listing on the New York Stock Exchange and be downgraded to the second-rung OTC Bulletin Board.

    But it's no longer all bad news coming from the Balcatta-based engineering firm.

    Chief executive Peter Cook is close to burying the ghost of Ralph Sarich and the myth of the orbital engine.

    The company delivered its first profit since 1993 in the second half of the 2003 financial year and is expected to report a profit of about $3 million for the financial year just ended.

    Contrary to what many still believe, the company does not make an orbital engine. It never has.

    Orbital provides engineering services and markets a fuel-injection system that grew out of research for the aborted orbital engine project. Mr Cook has never met Mr Sarich and to the best of his knowledge the 1980s high flyer turned property developer has no shareholding in the company.

    "I think fundamentally shares (in Orbital) are undervalued," said Robert Gee, an analyst for Perth broker Patersons Securities.

    "I think Cook has done a tremendous job in the past two years rescuing the company and turning it around . . . it would have been nice to stay on the NYSE but really, given their size, they shouldn't have been on there in the first place."

    The ASX-listed Orbital took a second listing on the NYSE in 1991.

    There are three criteria a company must meet if it is to trade on the world's most famous stock exchange: it must have a share price of more than $US1; it must have a market capitalisation of more than $US50 million; and it must have a combined market capitalisation and net asset value of more than $US100 million.

    Orbital fell down on the last two criteria. The company's net asset backing is next to nothing and its market capitalisation is about $US35 million.

    "The NYSE is 20 times the size of the ASX. How a little company like Orbital could expect to sit on the NYSE and still be welcome . . . we were just a minnow lost in a tank of sharks," Mr Cook said.

    "Yes, there was prestige associated with it, but prestige itself isn't a legitimate objective."

    Mr Cook said the company would save about $70,000 a year in fees associated with trading on the NYSE.

    "A lot of Australian companies have seen fit to disentangle themselves from dual listing. It causes a lot of problems," Mr Cook said.

    Orbital's fuel-injection system, which is said to be cleaner and more efficient than others, has recently won new customers in places such as India as governments seek solutions to growing air-pollution problems.

    But Orbital's holy grail is to win a contract with a large vehicle manufacturer such as General Motors.

    "There are a lot of people who continue to watch this space because they are believers in the direct-injection technology," Mr Gee said.
 
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