Our Analysis: There are times when the phrase “too good to be true” is not true, and you have really found something of value. In the case of IBSG International, It is too good, AND true. After scouring the microcap universe for the most undervalued situation, we have finally found our best candidate yet. 

Who is IBSG and what do they do?
IBSG International, Inc. (IBSGI) is a holding company with four software subsidiaries: 1. Intelligent Business Systems Group, Inc. (IBSG), a provider of turn-key digital service center software; 2. Secure Blue, a Sarbanes-Oxley (SOX) and security software solution provider, 3. Intelligent Business Systems Development Inc. (IBSD), a software development, maintenance and data storage company and 4. IBSGI UK, LTD. (IBSGI UK), a consultant company focused on development of informational technology (IT) projects for multi-national corporations. IBSG offers BizWorld Pro, a copyrighted and trademarked e-commerce platform, as a solution to enhance the operating efficiency and create revenue for State Small Business Development Centers (or their profit making equivalents), business associations (e.g., Chambers of Commerce) and Fortune 1000 corporations through the licensing of its unique turnkey digital service center software. This software provides a broad range of digital budgetary, administrative and commercial services (B2B, e-commerce, government to business and enterprise business services) on a single platform.

The Fundamentals:

IBSG is growing revenues at an outstanding  51%  when comparing  6mo. 2008 to 6 mo. 2007.  The company recently announced  guidance for FY 2008 of $0.50 -0.60 eps , and revenue of  $18-22 million. That translates into  IBSG trading somewhere around 2x expected eps. Book value for IBSG is $2.60/sh, and cash is .617/sh. To see the full key statistics see: http://finance.yahoo.com/q/ks?s=IBIN.OB

There has got to be something wrong, right?
The biggest issue we see is that IBSG has issued over 2 million shares for services in 2008 as per the most recent 10-Q.  We view this to be a poor management decision since the value of the shares are so depressed, and paying in cash would have been a much preferable alternative, since that stock is usually sold into the market rather quickly, and leads to shareholder anger since  those shares diluted earnings by somewhere around $.06/share  for the year if the company's profit projections hold true.

There is a high accounts receivables number, which stands at $24 million, or about 1.2x  annual revenues. This is attributable to the fact that they sell to government agencies, and are notorious for paying slow, but they do pay.  That, and a whopping $500 loss last quarter for a stolen laptop.

The Bottom Line: We believe that IBSG should be at  trading much higher levels, and with some management discipline, we can see a reasonable valuation of 8- 10x earnings, but we believe that 6 x earnings is more reasonable until management stops issuing shares for services,  and  until they improve their listing to either the NASDAQ or the AMEX.