An interesting article from the 5th April:


Only one way to go at Intelligent

05/04/2007

Long-standing subscribers will not need reminding about Intelligent Environments (IE). I tipped the shares here just over two years ago at 11.6p, only to see them hit an air pocket and fall to around 3p over the following year. They are now back to 10.88p (spread: 10.5p 11.25p) and I am tipping them again. Quite simply, all the promise I saw in the shares two years ago is about to become reality in 2007.

There are two particular reasons for buying the shares now. One, a cross in 3.9 million shares on Wednesday is believed to have cleared out Close Brothers, whose remaining stock was seen as a potential overhang: the stake is believed to have gone to insurer AXA, which announced a seven per cent stake some weeks back. And two, the 2006 figures are due to be announced on 17 April. I believe the trading statement accompanying them will be hugely positive for the share price.

IE produces e-banking software. In the past year it has picked up or implemented a host of new customers sometimes directly, sometimes through some very productive partnerships with card services and software businesses. Top names now include Barclaycard, Royal Bank of Scotland, HBOS, First Data International and Principality Building Society. IEs NetFinance product allows instant online applications from customers and immediate decision-making, real-time account management, integration with call centres and internal workflow, and connections to many other distribution channels.

The company turned in a small profit at the halfway stage to the end of June last year and recently announced it was set to deliver a maiden full-year profit. Importantly, it is now starting to generate cash around 600,000 of it in the past year and appears to have finished 2006 with 900,000 in the balance sheet.

The statement on 17 April should make excellent reading. Principality Building Society went live with NetFinance last month and there are a number of other customers who will make a big impact this year. Gauging the precise numbers depends in large measure on the progress being made with Barclaycard, but house broker Dawnay, Day is forecasting a profit of around 700,000 for 2007 and 1.2 million for 2008. That translates into earnings of 0.5p and 0.75p per share respectively.

The numbers almost certainly err on the side of caution (and why not after the events of the past couple of years?). IE generates huge margins on its software. The problem, to date, is that there have not been enough customers to cover overheads. Now revenues have crossed the profitability threshold. That means most of what follows will drop straight through to the bottom line.

At the current price, the company is valued at about 18 million. There is scope for a quick 50 per cent uplift and further progress thereafter. This is one to pick up in the coming week before those figures on 17 April.