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I'll be publishing a new BLOG
sometime
between now and tomorrow morning on BrandPartners (BPTR)- Q3 earnings
were a break even, and the market for the stock has sold off today. I must
admit, the Chicken Little mentality in this market is wearing me out. I
am reserving comment on BPTR until after the company's earnings
conference call- 2:00 Pacific today.
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.
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TelePlus (OTC
BB: TLPE): Serving the Underserved and Making Money |
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Telecom has been out of vogue on
Wall Street in 2005, which is exactly why now is the time to look at the
right ideas in this group. As I see it, the market needs leadership. It
has been the year of the energy shock for investors. Commodity stocks have
been the only profitable haven.
A bubble year for commodities is
bad for the rest of the market. It's simple: What's good for commodities
is bad for the economy. When biotech, telecom, computers, health care,
chip stocks, and others have a bubble year, it means the economy is doing
well. When commodity prices rise, it hurts the economy. Rising oil and
natural gas prices act like a tax with no benefit to consumers. Inflation
rears its ugly head, and investors simply get scared.
Now that the bubble has burst on
energy stocks the market needs new leadership. I'm not sure where it will
come from- biotech is one of my favorites for a 2006 bubble. Telecom is
another. This sector has been beaten down badly in '05 and is ripe for
a rebound.
Hence today's idea. This company
is growing by leaps and bounds and just turned the corner to profitability
for the first time in Q3 of '05. Numbers came out after the closing bell
today, and you are getting a first look at a company delivering outstanding
growth and turning profitable for the first time in their history.
Teleplus (TLPE From
Now On) is making money the old fashioned way. You might even think of
them as a throw back company. Most of their business is in Eastern Canada
(Quebec and Ontario).
TLPE provides telecommunications
services to the $32 billion underserved North American market of companies
and individuals that would prefer not to do business with a behemoth phone
giant with a 12 step voice mail program to a live customer service rep
that can't help you anyways.
TLPE actually has field representatives
that call on potential customers. They target a geographic region, spend
capital on traditional advertising such as print, TV, and radio, and actually
visit potential customers. Imagine that in today's world.
Net result of their efforts: 25,500
accounts equating to $6.8 million in revenues for the September quarter.
Since this is primarily a numbers
story, let's get straight to the hard numbers.
Here's what the bar chart is telling
us:
-
Revenues for Q3 '05 were $6.8 million,
up from $3.3 million in Q3 '04- an increase of 104%
-
Revenues YTD for '05 were $13.2 million,
up from $8.1 million in '05- an increase of 62%
-
EBITDA Profits for Q3 '05 were $424k,
up from a loss of $162k in Q3 '04.
-
EBITDA Profits for YTD '05 were -$828K,
up from a loss of $684k one year ago. Therefore, losses as a percentage
of sales dropped considerably YTD.
In my view, of greatest importance in
these numbers is the dramatic increase in revenues in Q3 combined with
turning the corner to being cash flow positive. This is a major step forward
for this company.
There are a number of different components
to their business. They have a network of 23 kiosk stores throughout Ontario
and Quebec that sell wireless services and hardware. They are moving into
the red hot MVNO (Moblie Virtual Network Operator) market business that
has proven so successful in Europe. They have a second to none back office
infrastructure that was originally developed by AT&T Canada which they
acquired.
However, their core business comes
from traditional phone services to smaller underserved businesses and individuals
with Tier 2 and Tier 3 credit or no credit history at all. The minority
business just opened. The 19 year old college student. The individuals
with English as a second language.
The behomoths of telecom have
gone after the long hanging fruit- However, there is a embarssment of wealth
higher up in the tree for those who know how to climb. TLPE knows how to
climb.
This segment of the market, estimated
to be in the $32 billion annual range for North America, is the fastest
growing and most underserved. Simple human interface- a throwback business
model, is working in this unique market segment.
TLPE has set out some ambitious
goals for the next three years. Based on continued implementation of their
current business strategy, TLPE expects to grow to $128 million
in annual revenues by 2008, and deliver $13.8 million in EBTIDA earnings.
Based on Q3 '05 results, TLPE is now delivering $27.2 million
annually.
The company will have to improve
its top line by about 80% year over year to achieve these results. Since
TLPE
is just coming off a 102% growth rate quarter over quarter, they are proving
they can get it done.
At $128 million in revenues,
TLPE
expects to deliver $13.8 million in EBITDA profits. I like
to look at companies with the I and T taken out of EBITDA. The I and T
stand for interest and taxes, and these are both hard expenses you have
to write checks for. Taking out just the non-cash expenses gives us a better
picture of their cash flow. I will explore this further in a future edition.
As you can see from the chart, TLPE
had
a big month in July. The stock ran from $.15 to $.55 over
about 10 trading days. It traded huge volume. Since then, the stock has
simply faded along with every other non energy microcap.
There are 84 million shares I&O,
equating to a market value based on today's closing price of $19.3 million.
Based on September's quarterly performance, the company is currently delivering
$27.2
million in annual revenues.
Therefore, the company is only trading
at a value of 70% of current sales. The market is awarding less than zero
value for the $.5 million they made in Q3.
In any sort of decent telecom environment,
the market will generally award a value of 2 to 3 times sales for stocks
in this group. If they are profitable- more. Telecom companies often have
a value ascribed to them per recurring revenue customer. For TLPE,
each customer is delivering about $1,000 in annual revenues. The market
is valuing each customer at $758.
Here's a list of compelling reasons
to own TLPE at the current level:
-
Growth rate over 100%
-
Turned cash flow positive in Q3 for
the first time in company history
-
Is serving a grossly underserved market
in North America
-
Stock has come down 60% since the July
high
-
Company trades for 70% of current annual
sales
-
Industry group is out of favor, but
should swing back in '06.
If you want to own performance in an
out of favor group, TLPE fits the bill perfectly. When the market
swings its attention back to this sector, you will be in position to notch
big gains. As long as the company remains cash flow positive, your long
term risk is minimal, making for an easy long term hold.
In the short term, the market for
this stock could surge at tomorrow's open. Delivering your first cash flow
positive quarter on a 100% increase in sales is a strong achievement. For
this reason, OTC Journal members get the 'first look' at today's
stellar earnings release.
Here is it is for your review:
| Press Release Source:
Dermisonics, Inc.
TelePlus Q3 Results
– Turns a Profit from Operations; Sales Climb 104% to $6.81M; YTD Sales
now reach $13.2M (62% increase)
MONTREAL- 15 November,
2005 -- TelePlus Enterprises, Inc. (NASDAQ OTCBB: TLPE) (http://www.teleplus.ca)
is pleased to announce its results for the 3rd quarter and YTD 2005.
TELECOM RESULTS – PULLS
OVER $557,785 IN EARNINGS
Telecom sales for the
3rd quarter reached $3,704,267. Telecom EBITDA (defined as earnings before
depreciation, amortization, interest expenses and taxes) was positive $597,642
and net profit (before corporate overhead) was $557,785 (which is 15% of
sales) as compared to no EBITDA and no net earnings contribution for the
same period a year ago. Total number of subscriber lines at the end of
the quarter reached 25,500. Telecom results include full quarter of operations
of Freedom Phone Lines, Avenue Reconnect, Inc and Telizon, Inc.
WIRELESS RESULTS – IMPROVES
OPERATIONAL EFFICIENCY
Wireless sales for the
3rd quarter reached $3,101,927 as compared to $3,339,948 for the same period
a year ago. The decrease in wireless sales results from the recent consolidation
in the number of TelePlus stores which was done to increase operational
efficiency of the retail division. Wireless EBITDA was negative $173,058
and net loss (before corporate overhead) was $270,380 as compared to a
negative EBITDA of $165,434 and a net loss of $222,986 for the same period
a year ago. Total number of wireless handset sales for the 3rd quarter
reached 10,921 handsets, an increase of 2.5%, compared to 10,652 handsets
for the same period a year ago. On the other side, same-store-count handset
sales increased by 8.8% for the quarter reflecting the increased efficiency
generated through the recent store count consolidation.
CONSOLIDATED RESULTS
– EARNINGS (FROM OPERATIONS) REACH $287,058 FOR Q3
Sales for the 3rd quarter
increased by $3,465,884 (or 104%) to $6,805,832 as compared to $3,339,948
for the same period a year ago. Gross profit remained unchanged for the
3rd quarter at 29.6%. Removing Corporate costs1 which equaled $485,753
for the quarter the Company had a positive EBITDA from Operations of $424,217
(including Corporate costs, EBITDA was positive $83,877) and net profit
from Operations of $287,058 (including Corporate costs net loss was $198,695)
for the 3rd quarter as compared to a negative EBITDA of $162,434 and a
net loss of $222,986 for the same period a year ago.
Sales revenues for the
year to date ended September 30th, 2005 increased by $5,040,597 (or 62%)
to $13,224,633 as compared to $8,184,034 for the same period a year ago.
Gross profit as a percentage of sales increased to 30.2% versus 26.6% for
the same period a year ago. The Company had a negative EBITDA of $823,572
and net loss of $1,524,545 for the year to date, as compared to a negative
EBITDA of $684,523 and net loss of $836,472 for the same period a year
ago. The Company’s EBITDA loss as a percentage of sales decreased to 6.2%
from 8.4% a year ago. The Company also generated $294,570 in positive Cash
Flow from operating activities versus using $710,061 in cash for the same
period a year ago.
Q3 A TURNING POINT
“Third quarter results
are a turning point for our company as we successfully achieved a positive
EBITDA for the company overall and achieved positive earnings from operations
for the first time in over two years. It is important to note that that
all expenses not included in EBITDA results (which equaled $282,572 for
the third quarter) are all non-cash items and do not affect or relate to
our operations. In particular amortization and interest expenses which
equaled $143,227 for the third quarter are related to the debt we raised
to finance our acquisitions. As we pay our debt off, these non-cash expenses
will not reoccur and therefore improve our results in future quarters,”
stated Robert Krebs, Company CFO. “Another important indication of the
strength of our operation is the generation of positive cash flow from
operations. On this I am pleased to announce that we generated a positive
cash flow from operations of over $294,570 as of the third quarter of 2005
as compared to using $710,061 in cash flow for the same period a year ago.
This is the second quarter in a row that we generate positive cash flow
from operations,” added Krebs.
For more Q3 analysis
and description of the Company’s business investors may download the latest
CEO letter from the following address:
http://www.teleplus.ca/download/CEO_news%20letter_Q3%2005.pdf
This press release is
available on the TelePlus’ Investor Relation's site for investor questions,
commentary and feedback. Investors are asked to visit http://www.agoracom.com
and select the TelePlus Investor Relations HUB. Alternatively, investors
can e-mail their questions or comments directly to TLPE@agoracom.com or
asked to be placed on the TelePlus investor e-mail list to receive all
future press releases directly.
1 Corporate costs include
certain executive compensation, lease cost for the corporate office, corporate
travel and entertainment, accounting, certain legal and Investor Relations
related costs
About TelePlus http://www.teleplus.ca
TelePlus Enterprises,
Inc. (“TelePlus”) is a provider of Wireless and Telecom products and services
across North America. TelePlus Connect, Corp. - is a reseller of a variety
of Telecom services including landline, long distance and internet services.
TelePlus Wireless, Corp. - operates a virtual wireless network selling
cellular network access to distributors in the United States. TelePlus
Retail Services, Inc. - owns and operates a national chain of TelePlus
branded stores in major shopping malls, selling a comprehensive line of
wireless and portable communication devices.
The statements which
are not historical facts contained in this press release are forward-looking
statements that involve certain risks and uncertainties, including but
not limited to risks associated with the uncertainty of future financial
results, additional financing requirements, development and acquisition
of new product lines and services, government approval processes, the impact
of competitive products or pricing from technological changes, the effect
of economic conditions and other uncertainties, and the risk factors set
forth from time to time in the Company's SEC reports, including but not
limited to its annual report on Form 10-KSB; its quarterly reports on Forms
10-QSB; and any reports on Form 8-K. TelePlus Enterprises, Inc. takes no
obligation to update or correct forward-looking statements.
CONTACT:
Institutional IR Inquiries
Retail IR Inquiries
Investor Relations
AGORA Investor Relations
514-344-0778 ext. 222
866-699-3388
http://www.teleplus.ca
http://www.agoracom.com
info@teleplus.ca
TLPE@agoracom.com
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