To OTC Journal Members:
 

Comments in the BLOG

I posted a BLOG on Callisto Pharma (AMEX: KAL) which was focused primarily on the technical side of the stock. It hasn't exploded out of the gates, but is holding a respectable 11.5% gain from last Friday's entry point. There is also a new BLOG posting on Health Sciences Group (OTC BB: HESG). The best sugar substitute in the world has been picked up by a major grocery store chain, which bodes well for sales. Additionally, those that followed my last BLOG on HESG know I suggested waiting patiently for a $.75 entry level. Thanks to the last two day drubbing in the markets, it has arrived. Now is the time to add this one to your microcap portfolio if you like the company. You should have gotten your free sample of SUGRtm by now, and can therefore form you own opinion of their flagship product.

To use the BLOG, simply go to the home page at www.otcjournal.com - the BLOG will scroll down automatically on the right side of your screen. The most current journal entries appear in the middle of your screen. Check back frequently for updates particularly when stocks are moving to overbought or oversold levels or in volatile markets. Your questions and postings do not automatically appear, so don't bother posting the same question multiple times. I personally go through to moderate and respond to every question.

Here's an update on one a lot of us own:
 

BrandPartners (OTC BB: BPTR): Capstone Pegs Stock at $2

It's been a long time since I reported anything on BrandPartners despite the fact that many of us, including the parent company of the OTC Journal, have put hard money into the stock based on a fundamentally undervalued situation.

I have had several discussions with senior management over the past two weeks, and finally feel I have enough information to share my thoughts about the current state and future of the company.

BPTR traded fairly well for us during the October '04 to March '05 time frame as the market began to appreciate the company's extraordinary turn around. BPTR turned $33.7 million in sales and $9 million in loses in CY'03 into $50.6 million in sales at $5.6 million in profits in CY '04. 50% growth- $.14 per share in earnings.

This year has been a different story. Through June of '05 vs June of '04, BPTR has delivered $27.1 vs $26.9 million in sales (less than 1% growth), and $2.5 million in profits ($.07)- right in line with '04. In short, at BPTR there is no growth so far this year.

Management has not provided me with a formal forecast. However, after several discussions, I believe I have enough information to provide a guideline. In my view, 2005 will be roughly the same as 2004 with perhaps 5% to 10% top line growth, and about the same as '04 in earnings. Profit margins could be down a little in '05 as BPTR has invested a substantial amount in projects that should represent significant growth opportunities in 2006. Despite the no growth scenario, the stock is still trading at a PE of 5- undervalued by any measure.

Today, just before the market opened, BrandPartners issued a press release which highlighted a new direction in merchandising. BPTR disclosed it was getting significant order flow in the digital display arena. Digital point-of-purchase displays are starting to show up everywhere. They are attractive and dynamic. Advertisers can push changing content through digital screens, creating a potential source of ad revenues for BPTR.

By way of example, BPTR is in discussions to install digital displays in sub-prime lending locations. Local restaurants could then be sold advertising on the displays, and BPTR would enjoy a revenue split with the store owner, thereby creating a recurring revenue model.
 

Growth Should Return in '06

BPTR has been investing in the future, and substantial growth could return to both the top and bottom line in 2006. Growth could come from a myriad of different sources, and the company is in discussions on a number of mega projects as follows:

• BrandPartners Europe: BPTR has invested a substantial amount of capital in its new European operations. The ramp up time is lengthy, but this division's pipeline is starting to fill up, and it should be just a question of time before substantial orders start to come in. There are no guarantees, but they have been very successful in the US to the tune of $50 million annually, so I like their chances.
• Graffico Subsidiary: The BPTR Graffico subsidiary was established this year to pursue the burgeoning sub prime financial services industry. There are thousands of these businesses in the US, and for the most part are in need of an image upgrade. These stores provide an ideal environment for the new digital imaging market. Several huge projects are in the pipeline here as well.
• Rebuilding of the Gulf Coast: BPTR has a number of existing clients whose banking facilities were wiped out by the hurricanes. The company expects to enjoy substantial new business from the rebuilding process, but the level is impossible to quantify at this time.

Capstone Investments Rates BPTR "Strong Buy" With $2 Price Target

Perhaps one of the reasons for BPTR's anemic performance is the company's inability to get its message out. I follow everything associated with BPTR, and it took me some time to uncover this report.

Boutique institutional brokerage firm Capstone Investments rates BPTR a "strong buy", and places a $2 price target on the stock. Analyst William Gregozeski sees $57.53 million in revs this year, and $.12 per share in earnings. He is forecasting $71.29 million in 2006, and $.14 per share in earnings in CY '06. EPS is a little lower in '06 as a percentage of sales because profits will be fully taxed for the first time.

I believe his estimate is high for '05, but I also believe his profit estimate for '06 is probably a little low. I have obtained permission to provide Capstone's August 23, 2005 research update on BPTR. You can access it one of two ways- simply Click Here, and you will be taken directly to the report, or visit the BPTR archive section from the "Current Profiles" button on the left hand menu bar at the home page.

Here's a long term look at a chart of BPTR going back to 2003 prior to executing their impressive turn around. In the short term, there is technically nothing positive to say about this chart. Gregozeski sees $.70 as support, and $1.20 as resistance.

From the Fall of '03 to early '05 this stock rebounded beautifully. January through March of this year the stock peaked, and has been grinding slowly lower ever since.

I believe the anemic nature of the stock is directly reflective of their flat growth curve in '05. In '06 it could well be a different story. Stocks generally trade today based on perceptions of where the company will be in six months. Therefore, if BPTR can start to deliver some evidence of growth in '06 this year, the stock could start to garner some attention and start moving back up the charts.

If there is such a thing as a microcap value stock, BPTR is it. On track to deliver $.14 per share in earnings this year, the stock trades at a 5 multiple.

In the stock market equation of downside risk vs upside potential, this one is unusual. In my view, the downside risk is minimal from the $.70 level. The upside potential side will need to come from renewed growth and better market awareness.

I believe this stock is a strong buy as well, but only for those who have at least a six month window in time and won't be impatient if the stock continues to trade quietly. After the phenomenal '03 to '04 performance, it is reasonable for the company to have a quiet year as they implement the next layer of growth strategy.

Look for major rewards for long term investors on this one. I'm am going to hold our 100,000 share position at $.60 for another six months unless something changes with the market or the company. We're just arriving at the point where we would be taxed on long term capital gains, and I believe we might as well shoot for a real gain.

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

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