Armarda 1Q 2007 results on 11th May 2007, mixed results

At first glance, I am delighted to see profit edge up by about 33% compared to Q1 2006 despite a drop in revenue.

However, at closer look, a few warning signs appears.

Core Business
1) Compared to the previous quarter, Q4 2006, profit actually went down by about 65% from HKD 3.3m to 1.5m. This is due to a dip in core business by 47% from HKD 2.2 to 1.2m. Profit had been plunging quarter after quarter in since IPO. I had thought the surge in Q4 profit signifies a long awaited U-turn in poor core business performance. The current Q1 dip may just implies that all is not well ... yet.

Share of profit from Brilliant Time Limited (BTL)
2) Ever since profit from BTL had been recognised since Q3 2006, the 25% share of profit from BTL had flucluated around 1.1m HKD. This quarter plunge of 75% to 0.285m HKD came as a rude shock to me. Is this another baby Armarda in the making? (It listed in 2004 with a backing of strong (non-recurring) IT services contracts from large banks).

Looking forward
1) Until the profit from the joint venture between Armarda and PRC Fesco Group can be recognised, Armarda's profit is still far from being stabilised.

2) Quoted from the published financial statements, "... The Group foresees some orders in the area of Core Banking, Risk Management and Oracle Financials from the 2nd and the 3rd tier banks in the PRC will be captured in the remaining quarters of FY2007." Much need to be seen whether I can believe in these words. They had blamed their poor performance since IPOs about difficulty in securing new contracts from 1st tier banks in PRC because the latter cut down IT spending due to IPO activities. However, post IPOs, Armarda had yet clinched anymore (management had since admitted near impossibility now given current fierce competition) deals from these 1st tier banks.