Alphinat Inc.(NPA.V) – Bottom fishing a SaaS governmental software stock?

[Tara]

Alphinat Inc. (NPA.V)
President & CEO: Philippe LeCoq, 514-878-2520
plecoq@alphinat.com


- Governmental contract with recurring revenue stream
- Provides exposure to the new “SaaS” trend
- superb volume and liquidity this week
- On just 545k of revenues in Q4, they declared 139k of profits
- Gradual rollout amongst several governmental departments
• Revenue
• Commission des Normes du Travail
• Justice
• Transport
• Services
• Artistic and literature
• Agriculture territory protection
• Sogique
- Insiders own the vast majority of the float
- Insider buying recently
- Market cap under 1M$
- Have not seen any lawsuits pending
- No long term debt



What makes this company interesting?

Alphinat has penetrated the lucrative and steady income flow of the governmental sector. Alphinat was awarded IBM’s “Top Star” award for on-line government solutions and chosen as a “best internet practices solutions” by the OECD amongst solutions from 189 countries. They are showing signs of profitability at an early stage of deployment, with on-going implementation, and if successful, could copycat to other provincial governmental agencies throughout Canada. One can catch this entity at the verge of profitability with an extremely low market cap. Their success could attract takeover bids of larger software players.





The company issued a press release april 20th on Canada News Wire, saying the Quebec Labor Commission has been nominated for an award in regards to its use of Alphinat SmartGuide solution, and that it will be further deploying this solution this spring 09.

See the following for the full press release (but it is in French I must say).

http://www.newswire.ca/en/releases/archive/April2009/20/c3171.html




Alphinat Float breakdown: 35.5M shares outstanding

• 9.2M , issued during 2004 IPO as a CPC company, to a few prominent people, mostly from Quebec;
• 16.8M , in the hands of the Lecoq family, upon the 2005 transaction which gave birth to Alphinat as we know it;
• 4.4M , issued in 2008 for financing purposes to Curtis Page and other known people to the company;
• the rest is rather complicated and requires detailed review of several press releases;

Thus, the free float is small, any other governmental contract announcement can/should provide an abrupt change to the stock price. If not, the market cap will continue to make it a takeover target.


Why I think they can be a takeover target?
• Governmental contracts provide absolute assurance of payment in recession;
• they have a recurring revenue stream.





The Quebec government currently has between 5 and 10 ministries in the implementation phase of the SmartGuide suite. There are over 250 ministries in the Quebec government alone, so lots more to come.

The sales breakthrough will most likely will come from the awaited French Government contract, for which they have been making demos/prototypes since september 2008.

Read in between the lines:
• Austin Page (the father) makes place for his son (former power broker) Curtis Page on the board of directors

• Curtis Page participated heavily in the private placement last year at 8 cents

• Curtis Page is now the Vice-President and if you examine the insider trading properly, you will see that just before the blackout period of this quarterly release, he was swapping shares from his cash account to his RRSP account. Now why would you do that in March? In december, yes, to create a tax loss perhaps, but in march, when you are 1 year away from filing the 2009 tax return, it makes no sense. The only reason I can see, is that he wanted to transfer shares in his RRSP, to shelter them from capital gains. Why? Because a large contract is in the wings, or the company is about to be taken over. But that's my opinion only, don't take that to the bank.

• then you have the other director Ste-Marie loading up before the blackout period as well. These guys are not transferring and buying for nothing, especially in this kind of unfriendly environment

Remember they are touting the Canadian Federal government, but probably got slowed down by the elections. They are touting another province as well, one can only guess which one, but from the directorship and their background, one is tempted to say Ontario.


Fresh off the press, here is an extract from page 1 of the latest MD&A dated yesterday, in the “business operations”
Section(new potential customer = government of Switzerland):

“In February 2009, the Quebec Government renewed it’s annual maintenance contract for SmartGuide for an amount of $187,400. During the quarter under review, the Company completed proofs of concept with government agencies in France and in Switzerland, working in partnership with established systems integrators. Alphinat continues to pursue it strategic focus on the Government of Québec and prospect in new markets through partnerships. “


The large system integrators they are referring to, I believe, are the previously announced:
IBM, Bull & Berger, Atos Origin
http://www.bull.com/about/customers.html
http://www.berger-levrault.fr/pageLibre00010052.html
http://www.answers.com/topic/atos-origin

And I wonder if any of the above could be interested in purchasing the company as a whole, since it is currently trading under 1M$ market cap.



Of course, once again, the above is simply my personal understanding and not to be construed as investment advice. I’m not a broker, promoter, director, manager or employee of the aforementioned company, just a shareholder. Some typos could of occurred , do your own due diligence.

[garilou]

Hi Tara,

One needs good nerves to stand a -28.57% drop in one day.
Sure... only 2 cents....
And I freak when one of my stocks goes down 4%!

I guess you are used to such ups and downs.
It's another world for me.
But since you've been talking about this stock since April, you still have a hell of a nice gain, probably between 200 and 300% !

Is 5 cents still a good buying price?
Please tell me how you manage to get the shares at all. How many can you get without paying 4 or 5 commissions?
I own  a penny stock too, (but not quite in that price range though),  there is a proper daily volume, at least 5 to 10 times what I own, and still, when I wanted to sell 1/2 of my position, it took me 2 days, and I had to take off my "all or none" restriction, so I paid the commission twice.

On the TSE, one cannot place "all or none" orders anymore.
Is it the same for that type of stocks?
At 5 cents a share, I guess one would want to buy at least 10,000 shares.
What type of order should I give, since there a plenty of days without 1 share beeing traded?

What does it mean when I see for Wednesday:
Volume: 35.0
$Volume: 2
#Trades: 2.


2 cents also make a big difference if you own 20 000 shares of Bombardier, but they are easy to get rid off.
Really, volume is what scares me most.

Please, give me some advise on that question.

Thanks,

Louise

PS And please do not complain that I ask to many questions and that I give you headaches! You are the specialist in penny stocks on this forum.

[garilou]

Thank you very much Tara for this beautiful reply (content and appearance).

You really know your stocks, and you know how to explain.

I have learned a lot, although some parts of your reply, I should have been able to find out by my-self.

My fees are also low: 9.99.
I have a pretty high risk tolerance for my US margin account, and use that margin to trade in my almost always empty CND margin account, but I tend to protect my RRSP as much as possible, and keep it pretty conservative.

It sure looks attractive... I guess this would be a very long term "Buy and hold", and I could not buy this in my RRSP.

I have sometimes complained at SSP for recommending stocks that were almost penny stocks, and had so little volume, but the situation was different: the time between a buy and a sell order was pretty short, and if one wants to follow the system properly, one should be able to sell right away, and re allocate the invested capital between the different stocks in the portfolio, which was sometimes difficult if one of the stocks was hard to buy or to sell.
But this case is totally different.

Although you systematically went through all my questions, one seems still unanswered. I guess you could reply just by a "Yes" or "No".

Assuming I would want 50 000 shares: would I give a single order, at a limit price with a long time limit?

Except if I want to follow strictly the SSP strategy. I seldom buy my whole position at one time, I prefer to wait some time to watch the trend.
These days, trends are very short timed.

Thanks again,

Louise

[ge]

My fees are also low: 9.99.

My fees are 50% lower with disnat-direct...$5...the trade.

[garilou]

ge,
This is a little off topic, but the fees are not the only thing to consider when choosing a broker.
I guess this could be an interesting new topic, if people are ready to disclose and discuss the broker they have choosen. As a matter of fact I think it was already discussed:
http://www.superstockpicker.com/forum/index.php?topic=55.msg114#msg114
but it could be refresh, this is a very old article.
Do you have access to the 2008 Brokers Survey? (published in March 2009)
http://www.theglobeandmail.com/report-on-business/article718641.ece

If not, I guess I could post-it somewhere else, because as said, this is not the right place to discuss that.

Louise

[garilou]

Hi Sara,

I am not used to so little volume stock, and still less when it is a penny stock, so my question my seem stupid, I am sorry. (And I do not want to give head aches again  ).

How come could you explain that with all those good news, the price went so much down this week?

You often talk about insiders buying back. Could this be the reason of the decline of the price? From what I can see, the insiders have only  bought in the past year, but in the past month, they have bought only at 0.06.(One at 0.07)
Assuming I would want to buy, should I give an long term buy order at 0.06 ? I guess this is not exactly what you would hope, on the other hand, I think that even at 0.06, you are still making a profit, aren't you? But I do not think that those ups and down make much difference to you: you are waiting for the "big bang"!
I have been following this stock since you first started this thread.
The perspective of the company of a possible buyout makes it attractive.

Thanks for your patience,

Louise