Wednesday, October 17, 2007


DFNS has a little bit of action today.

It hit a low of .55 today and has been in the .55-.56 range. Sometimes the ask bumps up to .58.

I bought 2,000 shares yesterday at .56 for my IRA and last week bought 1000 at .58 for my IRA.

Not much has changed from my post a few weeks ago.

I feel the company needs to come out with some positive news prior to their Q3 to get the thing moving. If no announcment comes I feel that a disappointment could be in store for Q3 #'s and could send the stock to the .40's.

If we do get an announcement I think we could be in the .60's prior to Q3 and move up nicely from there should we get a positive Q3 announcement.

The company should do $17-18 million in revenue for the year. It has roughly 29 million shares outstanding. So a .60 stock price would put the Price to sales at roughly 1. It has a book around .20 so Price to book is around 3. They have earned .035 roughly for the year so far I would think they could do .07-.08 for the year depending on how Q3 is. At .07 EPS for the year a .60 stock price would be 8.5x P/E. Growing at the rate that DFNS is growing at least this year I would think a 12x PE would be reasonable for them. Which would mean roughly .84 share price. I think if they could earn close to .10 EPS for next year and get a 12x PE you are talking over $1.20 share price. Which if they get the orders wouldn't take too much.

The question though is can they keep expenses under control? If they have a breakeven or losing quarter for Q3 this stock will probably go down to the low .40's if not lower. It has been a stalled stock as of late and a lot of people are feeling antsy so that is why we have drifted down as we have.

I still have a lot of faith in DFNS. I think their investor relations is lacking for sure and should offer more support that way. But that is one of the drawbacks as well when the CEO owns the majority of the shares.

This month will determine whether we see low .40's or mid .70's+.

Have a good day
Steve Hoven

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