To OTC Journal Members:
 

Trading Alert- ActionView International (OTC BB: AVWI)

I started studying ActionView back in September. When I first looked at their business model, I was struck by the elegant simplicity of their point-of-purchase advertising technology.

Sometimes simple is best. Sometimes being first to market with a simple but highly effective idea puts you at the front end of a steep growth curve.

When I first looked at the company I couldn't help but be reminded of another simple idea I followed in the 90's. Koala Corp (NASDAQ: KARE) came public at that time.

Koala came up with the simplistic idea of manufacturing and selling fold down baby changing stations for public restrooms. The changing tables folded up into the wall like an ironing board or a murphy bed. A parent could walk into the bathroom, pull down the changing table, place the baby on the table, and change a diaper. A simple and elegant solution for a parentally challenging public problem.

Today there are Koala changing tables in public restrooms all over the country. They're in every nearly every department store, restaurant chain, and airport.

The stock was trading at about $2 in 1994. From 1995 to 1996 the stock traded into the $10 range.  From 1996 to 2001 the stock traded into the $16 range. This time period represented the steep end of their growth curve, and investors made 8 times their money over that explosive six year period.

Sales accelerated rapidly because of the size of their customers. One sale to a Nordstrom department store or a Denny's restaurant chain represented installations in hundreds of restrooms nationwide.

The company has since fallen on hard times. Their business model was flawed over the long term. There was no significant recurring revenue model. Once they penetrated their market and made the sale the fun and profit was over.

ActionView International has the same kind of simple idea, with one major improvement. Their business model is totally focused on the recurring revenue theme, and once the company hits critical mass cash flow and profits should be prolific. Early returns from product testing are startling, and the company is starting to climb the steep end of its growth curve.
 

The ActionView Point-Of-Purchase Sign

Pictured here is the revolutionary ActionView point-of-purchase back lit scrolling sign. It's been five years in development, and there are several patents pending related to the technology.

This sign is capable of scrolling 13 different high color, high impact, computer generated images. Studies indicate the presentation generates a 47% content retention rate, vs 17% for its static counterpart. One day you will see one close up- they really grab your attention.

The signs come in several sizes ranging from the 2'x4' shelf top version to a 9'x12' wall installation. The signs are portable, can be made to match any decor, and easily programmable with a PDA or laptop.

60 percent of all buying decisions are made at the point of purchase. Advertisers know this, and struggle with the challenge of getting their product in front of the consumer at the optimal moment when a buying decision is made. ActionView signs solve the problem.

There are about 75 ActionView signs currently installed worldwide. The early test returns are remarkable.
 

The Early Test Returns

Several tests were recently completed at Woolworths', Australia's leading grocery store chain. The company boasts over 500 locations. The tests were conducted in a store located in Adelaide (Rundle Street Mall location).

Two different products were tested. The results were as follows:

• When a Cadbury's Nut Chocolate Bar was advertised, sales increased 50 times over normal levels.
• When Gillette Razor Blades were advertised, sales increased over 10 times.

When an ActionView sign was in place and advertising the product, weekly unit sales skyrocketed to 2,000 units per location, a twenty fold increase in results.

Based on the early returns from these tests, it appears the ActionView signs generate a prolific response at the holy grail of advertising- the Point-of-Purchase.
 

Breaking News: ActionView Installing Twenty Five Signs in Dubai

Today, just after the market closed, ActionView announced it had received a purchase order for and was beginning the installation of 25 signs in the newly finished World Trade Center in Dubai, United Arab Emirates. Pictured here, this recently opened $300 million shopping and convention center hosted delegates from 122 countries at the 2003 International Monetary Fund meetings.

ActionView participates in the advertising revenues generated by the signs. According to the press release, ActionView expects to enjoy net earnings of about $500,000 annually from the advertising fees generated by the signs.

As in the Koala example mentioned earlier, a single agreement can yield placements at multiple locations. Many of the stores within these chains have enough floor space for several signs. ActionView is currently test marketing and in discussions with the following:

• Woolworth's of Australia (500 locations)
• Shoppers Drug Mart (825 locations)
• Cineplex Odeon (135 locations)
• Canadian Tire (636 locations)
• Vons Supermarkets (325 stores in California)
• Home Depot (1000 plus stores)

Investors Are Catching On

As you can see from the chart, investors are catching on in spite of the company's low profile. In fact, today's news release is the first real public disclosure the company has put out since coming public through an RTO (Click here to learn about RTO's).

Volume began surging in this stock around the end of August. In July shares barely averaged 25,000 per day. According to Yahoo! this stock now averages 125,000 shares per day. Recent higher volume days have approached one million shares.

The company's business model is based on a flow of advertising revenues. The company provides the signs. Retailers provide the locations and the customers. Each sign is capable of scrolling ads for 12 customers at a rate of $250 per month. At 70% usage, each sign would spin off about $1,000 per month in positive cash flow on an ongoing basis.

ActionView believes it can have 1200 to 1500 signs in place by the end of its first full year of commercial activity. The first four or five months of advertising sales recoups the initial investment. Once achieved, high profit margins and strong cash flow are the net result.

The placement of 1200 to 1500 signs seems reasonable, as one sale with the right partner could equate to the placement of 500 plus units, just as it did with Koala.

There isn't a lot of hard financial data available on the company at this time. The first look at the company's financial condition will come with the filing of a September quarterly report, but that will only reflect one month of operations. The December quarter will be far more revealing.

According to the SEC filings there are about 22 million shares issued and outstanding. At $.90, this equates to a $19.8 million market value. I certainly wouldn't describe the stock as undervalued, but the market is clearly voting its belief there will be substantial growth.

Fortunately, the stock has taken a brief breather in its solid uptrend, and almost pulled back to the support line. In light of today's news after the close, it seems highly unlikely the support line will be violated in the short term.

Here are my thoughts on this trading alert:

• Buy up to $1.10- A break above $1.04 would take the stock to a new all time high- if you've been watching VTSI you know what can happen when stocks break to new highs.
• Price Target- $2 over the next six months.
• Stop Loss- A drop below $.75 would suggest lower levels are imminent.

For additional information on ActionView, their toll free investor relations phone number is 888-889-0888. You can also visit the company's web site at: www.actionviewinternational.com/

Here is the complete text of today's news release for your review:
 

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