ERG 0.00% 3.9¢ eneco refresh ltd

re: Outstanding bargain?

  1. 710 Posts.
    Firstly Informer I appreciate your posts. It is important to study both the positives and negatives of the company.
    However you seem to ignore the positives.
    I agree with Salus this is HIGH risk but again the risk element diminishes when one bothers to research.

    The losses are explained but too often the nature of them completely ignored by those with a hidden agenda.
    The auditors would not allow ERG to book as revenue the shares taken up in joint venture companies offshore as payment for licensing ERG's world-leading technology.
    If ERG did not receive cash for its technology, or the shares received were not listed anywhere, the company could not book any value for them. It did not matter that the joint venture companies had won some of the biggest ticketing contracts in the world and had $60 million of cash in them.
    It was a tough call. ERG has invested heavily to create its world-leading technology and now it could not book any benefit when the technology won major contracts.

    In the interests of accounting clarity - a major issue with analysts - managing director Peter Fogarty and ERG directors decided to clean the slate.
    "If we were not going to include new issues of shares from joint venture companies in revenues, the logic was we had to take out the other ones to have consistent accounts," Mr Fogarty said in Melbourne this week.

    As for cashflow ERG has made it quite clear why it needs Bab*ock & Brown.

    "We've been running Rome, Singapore, San Francisco and Berlin all in the same three-year period."

    Which means there is a traffic jam of projects approaching which, given that cash outlays are heaviest in the early stages, means ERG is facing a potential cash crunch.
    The company is striving to obtain project-specific bank support for the various projects and also structure milestone payments into the contracts to alleviate this problem. Fogarty says ERG, with reasonable timing outcomes on projects, will be earning $300 million of recurring income by 2004. Again, it's about timing.

    One of the big tenders looming is for a smart-card system covering the whole of the Netherlands, and ERG has the support of a group of Dutch banks because their joint venture, Banksys, uses ERG technology

    That contract will require an outlay of between $600 million and $1 billion but, because the banks will fund it, the contract will be cashflow positive for ERG from the start, if it wins the tender. What is helping in Europe is that major intermediaries like MasterCard and Europay are requiring banks to all be on smart cards by 2005 or they won't back card-based debit transactions. The banks need a smart-card system and ERG's is the most attractive.
    As for Sydney ERG will definitely have the contract reawarded.
    100 million plus compensation for delay to contract is expected to flow to ERG's non written down consortium ITS---if the judge rules that Cubics appeal (holding 3 months) is not valid---source Patterson Ord Minnet.
    To answer the question therefore on the convertible notes.
    Is simply this---the 250 million raised originally by the convertible notes was put to good use in creating revenue from which the entity extracts revenue---and from that revenue--- earnings, profit...

    The notes themselves make no call on ERG the company---if ERG were to default it clearly states the business operations of ERG and it's standing as a company would not be affected.

    The Notes will bear an interest rate of 7.50% per annum on their issue price of $13.50. Interest will be payable in two equal payments, half-yearly in arrears on 1 October and 1 April each year. The first interest payment was made on 1 October 2000 and the final interest payment will be paid on the Maturity Date (of 1 October 2005).
    (e) Security
    The Notes are not secured by any charge over the assets of ERG or any subsidiary and so constitute unsecured liabilities of ERG.

    Informer I am not following this company blindly. You mention transparency as being a major negative regarding the overall integrity of the company but again seem to focus on ERG as if this problem was only perculiar to ERG alone.
    As for losses how much did Newscorp lose last financial year? Why didn't Mark Westfield go after Rupert with the same enthusiasm? What a joke!!!

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