The mystery company we were talking about yesterday is E-Future Information Technology (EFUT). It’s a Chinese company. What does it do? Lots of stuff, but basically it produces supply chain and related business software, which is a relative novelty in China, and with retail sales growing at 10%+ per year, and considering the size of the market and the size of EFUT itself, this company is a very, very early day opportunity.
It has just 2.63M shares outstanding, of which 13% is held by insiders. 2007 revenues were 12M and it generated net cash of 2.3M in that year (although it had a substantial loss due to no less than four takeovers). So it’s market capitalization is not even 40M!
It is also 51% owner of a very promising B2B (business to business, for those that don’t remember the haydays of the dot.coms) website, and it will come under it’s full ownership in the future (and no, no new financing is necessary to establish that). That website seems to be already well on its way to establish itself as a prime tool for companies looking, and hooking up with, suppliers.
Software, no matter how big the market, is a one-off sale, but EFUT has done something smart, it let’s it’s clients enter into a service agreement, providing maintenance, updates, trouble-shooting, and the like. They give a one-year deferral for the contract, hence revenues come in with a lag.
Since it’s customer base is expanding rapidly, it not only gets immediate revenue from the initial sale, but an ‘afterburner’ in the form of recurring service contract income a year from that date.
Financially, the company seems in good order. They are sitting on plenty of cash, and their business generates a host of cash-flow already.
They have a really impressive client and partner list, containing Kimberley Clark, IBM, Samsung, Proctor & Gamble, Johnson & Johnson, Ford Motor, and a host more. We will do a more in-depth analysis in the weekend.