Tiny Qonnectis is at present in an embryonic stage, but seems to have an interesting product with great potential. Their flagship product connects energy and water meters to the Internet via Qonnectis' own server and users' website, providing 24-hour real-time accessibility as well as the opportunity for instant data comparison and updates as frequently as every 15 minutes. This avoids the costs of traditional meter-reading methods (i.e. reading by eye or the more recent "drive-by" technology). The new technology has already saved one early customer a reported 180,000 after it spotted a water leak and alerted the user. Early adopters include utilities such as Scottish Water and Generale des Eaux Lyon, plus public sector clients such as the NHS, the RAF and various District Councils (the list is numerous, so please see QTI's press releases for the whole picture). In November 2005 QTI announced a distribution deal with Compteurs Farnier of France, providing potential access to the USA and Canada in addition to the French market.

The business case for QTI seems strong: the product is inexpensive and provides cost savings both in terms of labour-saving and of cutting wastage. Sales include an element of subscription on a five-year basis; it seems logical that satisfied customers will both increase their number of meters in use and come back for further subscriptions after the five-year period has elapsed. The potential market is huge. The real question is, when will QTI achieve break-even?

CEO Mike Tapia previously built up the Talisman remote/drive-by meter-reading business, which was then sold to Severn Trent Water Co around 1997.

Does anyone have any figures on the Talisman sale, or perhaps on Compteurs Farnier? It would be good to get some idea of the current market.


EDIT: New charts added, 21Dec2007.

The HB analysis issued in July got the EPS figure (-0.51p) spot on although it underestimated turnover (100k compared with 109.4k) and overestimated gross profit (52k compared with 31.9k).

ST, jma don't forget that they hsve recently recruited a Sales team which may have shaved off some of the gross margin.

Good point Silvermede.

Some of you may be interested to know that I've just doubled up my holding as the quote early this morning to buy was 1p, which seemed to me to be a bit too good to miss. We're not talking about a huge investment, but it'll be good if the SP ever takes off!

In between times, the quote went up to 1.19 and I thought I'd missed the opportunity, but my broker, TDWaterhouse, was fantastic in getting me 1.0p when I called them to try to get a better price than the online offer. I even offered 1.05p over the phone as a concession, and still they managed to get me 1p.

Maybe a few of you will be able to get a better price than the indicative spread.

Posted over the road by GWR7:

"The gross margin was affected by the shipment problem which reduced the turnover in the half year to June, all as identified in the interim report. The turnover lost then has been picked up during this half year, on top of that growth is reportedly accelerating."

Am awaiting MT's reply.

Morning all,

I have received a reply from Mike Tapia.

He is very positive about the gross margin and expects this to increase over time through a combination of cost-cutting and the introduction of higher-margin services. The increase in manufacturing costs due to production issues was only temporary. An element of the reduction in gross margin is due to QTI having sold vital consumables and accessories made by other companies for which QTI only takes a 10-15% handling charge, as is standard industry practice. This reduction should be eclipsed by the cost-cutting and higher-margin services to be rolled out over the next 12 months.


Hope this helps.
ST.

will have to come back to the market again for cash by the looks of things...turnover tiny compared to loss and not much cash left...this looks very risky...looked at this a while back as a pure punt...glad I never bought any

Here's an idle thought: could QTI be on for the first 1 million annual turnover in the near future?

Consider:

- Scottish Water revenue could be worth 250,000 p.a., based on 60K turnoever in the last quarter of the last financial year (ending June 2006).

- Pubs industry roll-out to 2,000 sites over 3 years, means possible 600 units in first year; at Hoodless Brennan's estimate of 1,500 per unit, this is 900,000.

- Other customers continuing to place new orders.

- New products coming on-stream.

Mike Tapia's comments in his statement about the outlook :

"Sales are continuing to increase and the cost base is tightly controlled.
Overall, the outlook is positive and we are confident that this financial year
will be one of significant progress towards our aim of achieving profitability."

All IMO, PDYOR.

Treble, you may be right about a forthcoming cash call - I hope that news of increased t/o may boost the SP and reduce potential dilution, but WDIK.

It's speculative, but I'm happy with it.

I bought thinking this tecnology must be right but reading the latest accounts at the end of what appears to be a very successful year the turnover is stated as 109.425 .... much praise is lavished on Scottish water co-operation, training of their staff etc but growing at 82% pa. how many years will it take QTI to be profitable.

So gentlemen of the boardroom, are you charging enough for QTI's services because I as a holder expect to make money out of my investment which already shows a 50% paper loss in a few short months.

Tipton11

Doent know if this is helpful, but probably not what you might like,
Long term chart suggests price .06p
shorter/medium term same , suggesting, .62p. might get a bounce back to 1,50/ 1.60 area
just my opinion, im wrong more often than i am right, so please be sure to dyor.

jkd ... thanks for your note ... it made up my mind for me so decided to leave the directors to their cosy little welfare operation and sold at .75p

Tipton, I have learned you have to be very patient with these minnows as they can take a long time to break through to profitability.

I wish you better luck in the future.

ST - one curious feature of the latest results when compared with the unaudited first half results released in March is that if turnover/sales costs for the first half were 66,983/(29,043) then for the second half they were 44,442/(48,510) - i.e. sales costs were higher than turnover in the second half. As, according to the trading update released in July, orders were higher in the second half it seems reasonable to assume that, without the distortions produced by the extraordinary factors affecting the second half, turnover for the year would have been of the order of 150,000.
Have you had any recent indications of the renewal rate? I would expect this to be very high.

JMAC, you are probably right. As to the renewal rate, what do you mean exactly? Clients buying the smart metering package get a five-year subscription to the service, so it will be a while before meaningful numbers of renewals start filtering through. If you mean repeat business from existing customers in the process of rolling out smart metering to a number of sites, I believe there is a general atmosphere of confidence about this, but I have not heard of any figures.

Obviously if all goes according to plan, there should be some kind of snowballing of revenues; most encouraging so far is the pub sector contract win (RNS: 25May2006) I discussed in an earlier post, which could be worth 3 million over three years, and which hopefully gives a guide to what can be achieved.

soul trader .... thanks for your note ... it is interesting how AIM shares have failed to recover from the May correction, perhaps frustrating would be more appropriate.

Tipton I see you decided to sell theses shares. likely as not they will go up now although i wouldnt want you to feel dissapointed with my comments, for as i said more often than not i am wrong. very often these patterns do not fulfill their target levels and reverse on themselves. now you tell me , i hear you say.
good luck to you .

Tipton, I agree it's frustrating. One aspect of investing in companies of such small market cap is that they do not react in line with the broader market; QTI didn't lose any value during the slide earlier this week, for example.

Such companies can remain overlooked for a long time because the market s looking for evidence of profitability (or they are simply too small to appear on most peoples' "radar"). I believe QTI will show this, but it is a matter of time and patience, and this is something worth bearing in mind when investing in very small companies on AIM.

JKD - On the "radar" note I would argue that QTI might not be a good stock for technical analysis due to low trading volume. It's the proximity to profit that will drive this one. Actually there has been enough good news this year released to justify a bit of a positive rerating, IMO, but again there is not the interest from the market and that's something we punters have to live with.

On the positive side, that at least gives us all plenty of buying oportunities and hopefully the chance to get the biggest baggers by being there ahead of the crowd.

All IMO, WDIK, etc.

A bit of a skid today on turnover of just 76K shares:

QTI Bid: 0.5p Offer: 1p Change: -0.25

Offer price via online trade currently 0.8p. Makes me wonder what the MM's are playing at - is there a stock overhang?

0.75p 500k T trade at 16.10 indicated as a sell but looks like a buy,

You're probably right, JMAC, given that brief window in which one could have bought online for 0.8. Pity all the rest of us had to take a hit though!