Touching on my technology sector risk:reward matrix that I published yesterday (2012 Technology Sector Risk/Reward), Blue Label Telecoms (BLU) came out with an updated trading updates yesterday indicating that "...core EPS will exceed the comparative period by between 31% and  41%. Basic EPS growth is expected to be between 36% and 46% and HEPS, in turn, is expected to equate to comparative growth of between 38% and 48%. The growth at these various levels of earnings is directly attributable to the non-recurring income received."

What the non-recurring income is, I don't know? That said, I am guessing that it is relating to the Multi-Links debacle in Nigeria where Blue Label was putting together a 'loss of income' case against the firm. Perhaps it is a fairly large out of court settlement relating to that?

Still, Blue Label is quite honest in explaining how the trading update is basically only relating to the non-recurring income, thus the underlying earnings is more than likely flat. This is a lot closer to what I was forecasting for the Group, but I still like the pre-paid inelastic (airtime and electricity) cash-generative nature of the Group's revenue streams with optionality from its local IP and Indian and Mexican operations providing potential blue sky.

Another little share that I have liked for a while (and, in fact, own) is Rolfes Holdings (formerly "Rolfes Technology Holdings"). Rolfes (RLF) released a trading update yesterday indicating that H1:12 EPS and HEPS are expected to be between 13% and 19% higher.

The Group's growth area has been its agri-chemicals segment, but its pigments exporting is likely being effected by a strong ZAR and European problems.

Overall, though, still a very good trading update and, personally, do not intend to sell this shares at these levels or anytime soon.

Moving from trading updates to cautionaries, staff resourcing firm, Topfix (TFX) issued a cautionary yesterday as it had "..into discussions which, if successfully concluded, may have a material effect on the share price of the Company."

See my earlier article here where I point out a lot of what I am extending below: Turnaround, Problems & Asset Management.

Topfix has a misnomer in the market as being labeled a construction company or a renter of scaffolding (could it possibly be the misleading name?!?). And, while c.20% of the Group's revenues come from this, the rest of revenues and the majority of profits come from labour broking into the blue collar industries relating to this.

Thus, much like ADCorp, Workforce, and Paracon, Topfix is trading under the dark cloud of the potential banning of labour broking.

Still, assuming this is just political rhetoric and does not come to pass (a big assumption!), Topfix's last reported Tangible NAV per share was its FY 11's TNAV of 67.8cps. Its HEPS actually grew during this period to 6.8cps (FY 10: 3.1cps) and the share price rose on very light volumes from the low 30c range to its current 47c. TFX's PE ratio is very reasonable 6.9x.

Topfix is still trading at a 30% discount to TNAV and has profitable operations. When I last chatted to Topfix's CEO, Marais Webber, late last year, he was quite a straight shooter and sounded fairly optimistic regarding Group prospects. Between himself and PSG, over half of Topfix's shares are accounted for.

Thus, perhaps, this cautionary relates to a takeover and delisting of Topfix by PSG, Webber, or both? Perhaps it relates to Webber buying PSG's shares, which would push his holding over 35% and thus trigger a manditory takeover offer to minorities at the same price?

And, with a 30% discount to TNAV and profitable operations, any price below 67.8cps would be an attractive price for a big buyer vying for control of Topfix, yet still at a premium to the current share price.

Still, that said, the lack of liquidity of TFX with its large bidding spreads, large overdraft, fragility of definition of tangible NAV, labour broking ban event risk all combine to make me decide to sit this one out.

I think you can do worse than take a punt on TFX, but I am not going to.

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