To OTC Journal Members:
 

Comments in the BLOG

Today's postings in the BLOG included commentary on BPTR and ZAPZ. Both companies are doing extremely well. ZAPZ is turning back up on news they have $200 million in orders for the Smart Car, and the chart is looking much better. BPTR delivered outstanding year end results on Friday. On Monday, the stock traded the highest volume in its post turned around history. Despite the high volume, the stock did not make a lot of upside progress on the price. With numbers akin to what they reported, I am comfortable waiting indefinately for higher levels.

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.

Today's edition contains a new idea which I believe is the next BPTR at an earlier stage. The company has a long history of increasing revenues and profits. In the past six months they have ejected some old baggage, cleaned up their debt, and are poised to deliver substantial earnings growth. For anyone who jumped into BPTR in the $.65 to $.70 range, DSEN is for you.
 

DataScension (OTC BB: DSEN); An Undiscovered Gem

The estimate for world wide spending on market research in 2005 is $19 billion. Of that $19 billion, about $12 billion will be used to fund scientific surveys.

One of the global leaders in the business of conducting surveys is JD Power & Associates. Have you ever wondered who they are? They're mentioned in many TV commercials. Advertisers often claim JD Power and Associates rank their product or service as Number 1.

JD Power and Associates is probably the premier independent market research company in the world. They have over 550 consultants in offices all over the world. When advertisers make claims, it's because JD Power and Associates did the market research.

Demand for services at JD Power has grown over the last two decades as companies become more dependent on market research for making critical decisions. For example, before Jack in the Box introduces a new sandwich, they do extensive market research on whether the product will be accepted. Car manufacturers take surveys before they decide what colors to offer in new models. Nearly every consumer product introduced on a large scale has some preliminary market survey data acquired before final decisions are made. These are multi million dollar decisions. In this lean and mean highly competitive environment, marketing executives cannot afford to be wrong.

The technology used to compile marketing surveys is highly scientific. Data is gathered through multiple channels. Focus groups are used where consumers get to experience the actual product and provide feedback. Internet surveys are growing in popularity.

However, the largest single component in marketing surveys remains telephone interviews. Most of the $12 billion expected to be spent in 2005 on market research will go directly to telephone surveys.

When JD Power is retained to design and conduct a survey they outsource to other companies to gather the raw data. One of their go to organizations is today's idea: DataScension, symbol DSEN on the OTC BB.

DSEN is relatively unknown to stock market investors, which is one of the reasons I like the company. They are based in Southern California, but most of their surveys are conducted from a the state-of-the-art facility in Costa Rica where they have over 600 employees. They should deliver about $9 million '04 revenues (when we see the final numbers), and are on track to deliver about $12 million in '05. Their growth has been 100% organic.

The company has about 400 work stations at its facility in Costa Rica you see in the picture alongside. They conduct outbound marketing surveys, and handle incoming customer service issues. They don't try to sell anything. They just conduct surveys.

Over the past 10 years much of this business has flowed to India based companies. The tide is turning back. Companies like JD Power are becoming concerned about the quality of research and customer service coming from the Far East. The time zone difference problematic, but the language barrier is much worse. A full 30% who have outsourced survey services to India have left. Have you ever called tech support for your Dell Computer and had a hard time communicating with the person on the other end of the line? If so, you understand the problem.

Business is flowing back to this side of the globe, and DSEN is capturing that business. DSEN offers some of the best paying employment in Costa Rica, and therefore is attracting highly educated personnel. Their staff includes many with professional training.

In addition and perhaps even more importantly, DSEN can offer survey services covering the growing Latin Population in the US in their native language. Marketing experts will tell you the Latin market is the fastest growing consumer segment in America. A Spanish survey is considered a special service, which allows DSEN to charge 20% higher fees with no additional cost. India based companies cannot compete with them.

Their customer base reads like a Who's Who of Fortune 500 companies and the best market research firms on the planet. A short list is shown alongside. Their facilities are state-of-the-art and impressive.

During the course of 2004, 50 potential clients took the time to visit their facility in Costa Rico to watch them in action. Of the 50 visitors, 49 subsequently signed contracts.

Over the course of 2005 DSEN will benefit from the migration of outsourced surveys from India back to our half of the globe. The data on which hundred million dollar decisions are based has to be the best it can be. DSEN delivers the best at a reasonable cost.

Furthermore, DSEN will benefit from the growing Latin Population in the US, the hottest growth demographic for marketers today.

Six months ago DSEN was a subsidiary of a public company with several other entities. The capital structure was cleaned up, and the other unsuccessful entities have all been ejected.

As it exists today, DSEN is a newly reborn lean and mean company. They did a small financing in December which allowed them to eradicate some old debt. For you dilution hawks, the small financing they did will result in a maximum 200,000 shares being sold into the market monthly for the foreseeable future. The market should be able to easily absorb this supply.

'04 year end numbers will come in at about $9 million in sales. The company will report substantial non-cash losses from write downs, clearing the way for future profitable quarters. They will be cash flow positive from operations.

Since turning the corner to '05, the company has eliminated about $50,000 in monthly overhead. This means an additional $150,000 should flow directly to the bottom line each quarter.

You are looking at a weekly chart. As you can see, the price has improved somewhat since the September low. The stock has been trading sideways between $.40 and $.60 since October. The higher price levels shown in yellow ($.94 and $1.20) are technical "logical profit objectives", or LPOs. These represent longer term upside targets to aim for. More on LPOs in future editions.

After the market closed today, DSEN announced March was on track to be the highest billable monthly hours in company history. In addition, the company disclosed it was starting to see revenues from diversified product offerings. The company is now offering web based surveys and is employing its massive infrastructure to handle incoming customer service calls.

There are only 16 million shares I&O. This equates to a market value of 9.1 million. This profitable company is trading at 1x annual sales with a 33% organic growth rate.

I expect '05 to be a breakout year for the company. This company will benefit dramatically from the flow of business back from India, its unique positioning for services to the Latin American demographic, providing services directly to Latin American countries in the Southern Hemisphere, and diversifying their services to more fully benefit from their impressive infrastructure.

Where else can you find a $9 million market cap profitable company with 600 employees? DSEN is it. In my opinion, this one has a shot at being the next BPTR.

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