Raising capital at Contel

Contel Corporation Limited, a company listed in singapore. It is a ODM/OEM maker of digital media products, is driving its margin-focused business strategy on four fronts – revenue stream, product range, clientele, and geographical market reach.
Recently there are people who recommend me the stock due to its low P/E and high growth story.
However, I would urge caution at putting money into the company contel.
Below is the reason using the FY2006 annual report as reference.
It seems like contel is in urgent need of capital As shown in the annual report, it has US$6 million at the end of last year. To solve their problem, contel has issued convertible notes to Advance Opportunities Fund and collected S$26.5 million in the process. At first glance, it seems gd as contel does not need to pay interest on the notes. But it is clear that in the past months, Advance Opportunities Fund have converted all the notes into shares. So in short, they are actually raising funds through the issue of more new shares. Basically, the cost of capital is the highest for equities as compared to bank loans or bonds. An investor will expect 8-10% return in the long run for the shares.
My question is, why cant contel borrow S$26.5 million from the banks and pay the normal interest rate? With the conversion, there are now 417 million shares outstanding and the minority shareholders’ stakes are diluted.
However, the worst part is this:
Suppose Advance Opportunities Fund did not sell any of the shares after the conversion, it should be holding 167 million shares. With this amount of shares, it should be a substantial shareholder. However, I have yet to see any announcement of this nature!! This has led me to conclude that Advance Opportunities Fund has been selling away the shares that it converted in the open market so that it will always hold less than 5% stake at any one time. Seems that Advance Opportunities Fund is not too eager to hold on to the shares.
The historical P/E for the company at the current price of $0.24 is about 4. This value is quite low and i believe that is the part attractive to investors.
But one have to understand that for this low P/E story to hold, contel have to grow its bottomline by 20% or more. Below is a simple example why this is so.

In the FY2006 annual report, its revenues are US$178.9 million.
Assuming there is a revenue growth of 30% to US$232.57 million in FY2007 and the net profit margin remain unchanged, the estimated net profit will be US$13 million. With the current outstanding shares of 417 million, the estimated EPS is US$0.031 (S$0.0465) and the forward P/E is 5.16 at the current px of S$0.24. So I will say that the current price is a bargin ONLY IF it can achieve a net profit growth of 20% or more.
Besides, there is no free cash flow to speak about for the past 2 years and the profit margin is low.