Newsletter

Titan Global: Numbers Can Be Sexy

October 28, 2006
Volume VII, Issue 85
Home Page : www.otcjournal.com
Email Questions or Comments To: editor@otcjournal.com

To OTC Journal Members:
 

Titan Global Holdings (OTC BB: TTGL): Numbers Can Be Sexy

Most microcap investors seek out ideas with exciting, sexy stories. We all want to find the little start up that discovers the cure for cancer in the tiny lab, or develops a killer computer app in the garage which goes on to make millions. That is the bread and butter of the microcap investor.

So as not to disappoint you loyal followers, I have provided a sexy introduction. Look at the picture. If you're a guy, you have to agree this picture is just plain hot. It makes a certain statement. Apologies if you are a women- I can't be everything to everybody every time.

So- there's the sexy, but it's all you're going to get. The rest of this story is only sexy if you think numbers, and I mean huge numbers by microcap standards, are sexy. I think huge numbers are very exciting- especially if they translate to big profits.

So try this on for sexy and exciting- how about $28.8 million in revenues against a $35.6 million market value. If the company is doing well, sounds like a cheap stock, right? Have I got your attention?

Well, let me make it a lot more sexy and exciting- what if I told you the $28.8 million in revenues was for the last quarter? What if I told you this company is generating $112 million in annual revenues against a $35.6 million market valuation- now are you getting excited? I am- pure numbers can really excite me.

If you've done the math in your head, you have probably realized by now if this stock can simply trade at a mere one times sales, you will triple your money. You are now probably wondering what this company does.

Titan Global has two distinct lines of business, and neither of them are sexy. They just generate numbers. Here they are:
 

Printed Circuit Boards (PCBs)

You are looking at an image of a printed circuit board, or PCB for short. Every electronic device has them. The worldwide annual market is estimated to be in the $35 to $40 billion range.

One of TTGL divisions manufacturers these guys to the tune of $20 million in annual sales. The division is profitable according to Friday's post close release, and is expected to deliver about $25 million in revenues next fiscal year, which started September 1, and be even more profitable than last year.

TTGL's PCB's are used primarily in military applications. It's defense sensitive stuff, so naturally in this world their business is growing.
 

Pre-Paid International Calling Cards

Pre-paid international long distance cards might not be the sexiest story, but here's a sexy number: 30 million. That's the number of prepaid calling cards TTGL sells every year through a distribution network that boasts 60,000 retail outlets in the US.

TTGL is number 2 in the prepaid calling card business. They are exclusively international, and primarily serve the massive latin American population in the US that make like ET and "Phone Home". It is a huge business.
 

A Change is Gonna Come

There are two reasons this company with its $112 million in trailing revenues and 30 million pre paid calling cards only trades at $35.6 million market value. 1. Because few investors know about the company, and 2. Because they have been losing money over the past year, and have a weak balance sheet.

Based on the company's post close news release on Friday, a change is gonna come. Their fiscal year started on September 1, and for the coming fiscal year the company forecasts it is going to achieve $140 million in revenues and turn a profit of $17.5 million EBITDA.

If you are wondering about EBITDA, it stands for earnings before interest, taxes, depreciation, and amortization. I'm not a big fan of EBITDA measurements. I prefer looking at positive or negative cash flow. This gives you a better picture of the health of the business.

In the case of TTGL, they won't have a lot of taxes thanks to loss carryfowards, and interest should be relatively small. Depreciation and amortization are non cash. Therefore, if they do achieve $17.5 million in EBITDA, the majority of it will be positive cash flow. That's a very impressive turn.

The balance sheet does show negative shareholders equity, but it's a bit misleading. They carry $9 million in debt from the purchase of the calling card division. However, the debt converts into shares at $1.50 (nearly twice the current market) if the division makes a lot of money. If it doesn't, the debt is forfeit. Either way, the shareholders win. Take the debt off, and you have a much healthier balance sheet with positive shareholders' equity.

So, how is TTGL going to change from a money loser to a money maker? There are a couple of main drivers: First, simple organic growth thanks to strong orders in the PCB business. Second: Enhanced margins in the calling cards- their margins are going up dramatically as they have built out their own network, instead of reselling for AT&T and Sprint. Third- going into the MVNO business (Mobile Virtual Network Operator).

They are now offering pre paid cell phones to go with their pre paid long distance. Here's the problem with selling pre paid cell phones- the cost of customer acquisition. What TTGL is doing is brilliant- they are picking up customers for prepaid cell phones by putting a little advertising tag on each of the 30 million pre-paid long distance calling cards they sell each year. Now, they not only sell the long distance time, but they also sell the phone to call from; all with no marketing costs- it's called leveraging your asset.

So, where does this stock deserve to trade if TTGL really delivers about $15 million in positive cash flow in fiscal 2007? From an EPS point of view, it would translate to $.33 per share- $6.50 if they have significant growth. Or, how about a mere one times sales? - that would equate to about a $3 stock price.

The chart you see measures the stock's performance on a weekly basis in 2006. As you can see, on a weekly basis it is trying to break above the 3x3 moving average. Traders call this a "bread and butter" indicator.

Friday's post close news is a bold statement. We won't see hard financial performance until about mid January when their first quarter numbers come out. However, Friday after the close was the first time they ever came out with a positive forecast of this nature, so the market should respond favorably.

Nearly $30 million in sales every three months and 30 million cards sold annually- those numbers are pretty sexy, and in a strong market the company has simply got to be worth more than the mere $35.6 million where it trades today.

This is a no brainer up to $1 for a triple in '07. SSL- $.60. The market will give them the benefit of the doubt for a couple of quarters, and the stock should trade up as favorable evidence builds and investors start to believe.

Here is Friday's news for your review:
 

Press Release Source: Titan Global Holdings, Inc.

Titan Global Holdings Announces Record $140 Million Revenue Guidance Forecast for Fiscal '07

Friday October 27, 4:01 pm ET

Company Anticipates $17.5 Million EBITDA Due to Expanding Market Share and New Product Offerings from Leading Telecom Division

DALLAS--(BUSINESS WIRE)--Titan Global Holdings, Inc. ("Titan") (OTCBB: TTGL - News), a high-growth diversified holding company, today released revenue guidance for fiscal 2007, projecting record-setting revenues in excess of $140 million, with an estimated $17.5 million in earnings before interest, taxes, depreciation and amortization ("EBITDA").

The forecasted growth reflects the continued expansion of Titan's telecommunications and technology portfolio of companies, through both internal growth and growth achieved through the already consummated Oblio Telecom Inc. acquisition, but excluding prospective acquisitions.

"We're extremely excited to provide this revenue and EBITDA guidance for fiscal 2007, which we believe is another strong indicator of the value and strength of our business units and the talent and vision of our management team," said Bryan Chance, President and Chief Executive Officer of Titan. "Based on the achieved historical performance of our flagship telecommunications division, as well as the acceleration of operations in our Electronics and Homeland Security division, we anticipate continued growth in fiscal 2007 above an already strong fiscal 2006."

Telecommunications Division

Oblio Telecom, Inc. ("Oblio"), Titan's principal telecommunications industry subsidiary, generated $89 million in revenues in 2006. This division is expected to generate approximately $100 million in fiscal 2007 revenue, accounting for over 70 percent of Titan's forecasted revenues.

Oblio, the second largest publicly-owned international telecommunications company focused on the prepaid space, leverages strategic agreements with Tier 1 telecommunications leaders Sprint and Level3. Oblio continues to expand its already strong nationwide distribution channels, and sells an estimated annual 35 million of its brand-name calling cards and wireless services at more than 60,000 retail outlets around the country.

"We expect Oblio to achieve double-digit growth in fiscal 2007," said Kurt Jensen, President and Chief Executive Officer of Oblio Telecom, Inc. "We anticipate that growth to come from our increasing market share in international prepaid products, which is one of the fastest-growing segments of the global telecommunications industry.

Titan Wireless Communications, Inc. ("T Wireless"), Titan's recently formed prepaid wireless communications subsidiary, is expected to generate approximately $15 million in fiscal 2007 revenue excluding new product offerings and roll-up type acquisitions.

T Wireless is a Mobile Virtual Network Operator ("MVNO"). The Yankee Group, a prominent market research firm, projects that the number of subscribers through MVNO's will exceed 30 million by 2010. Many MVNO providers are incurring substantial losses to acquire subscribers creating an opportunity to consolidate the MVNO marketplace.

"Our prudent approach to growth in the prepaid wireless sector will continue. While many MVNO competitors continue to accumulate significant losses to obtain subscribers, we will continue to focus on profitable growth," stated Mr. Jensen. "Shareholders can expect us to roll out additional high-growth potential MVNO product launches and to increase margins due to economies of scale, cost cutting, and more efficient cost structures from our Tier 1 telecommunications providers. Additionally, T Wireless will seek opportunities to consolidate subscribers as other MVNO providers exit the space."

Electronics and Homeland Security Division

Titan's Electronics and Homeland Security division generated a record $20 million in revenues in 2006. This division is expected to generate approximately $25 million in fiscal 2007 revenue excluding significant new product developments and acquisitions.

Titan's Electronics and Homeland Security division specializes in advanced manufacturing processes to provide quick-turn delivery of printed circuit board prototypes for high-margin markets including Homeland Security and leading high-tech clients. Additionally, Titan PCB East is Military 31032/55110 Certified, providing critical top certification for Homeland Security and military developers and contractors. This division was EBITDA and cash flow positive in Q3 2006 and Q4 2006 with record bookings in September 2006, the first month of Titan's fiscal 2007.

"Revenues from our Electronics and Homeland Security division grew to a record-setting $20 million in 2006, a 25 percent increased from 2005," said Curtis Okumura, President and Chief Executive Officer of Titan's Electronics and Homeland Security Division. "We anticipate carrying that momentum into fiscal 2007, as we continue to discover new ways to increase operating efficiencies and to reduce costs in both our facilities."

Corporate Summary

"Our highly proactive and seasoned management team has an overriding commitment to shareholder value," said David Marks, Chairman of Titan. "We remain focused on expanding revenue and EBITDA through organic growth and acquisitions that represent and deliver a clear value proposition for our shareholders."

"Our team is focused on delivering value in each Titan division fiscal year 2007," stated Bryan Chance, President and Chief Executive Officer of Titan Global Holdings, Inc. "Our guidance does not include the revenue and earnings impact from the one time recovery of FET and USF fees."

About Titan Global Holdings

Titan Global Holdings, Inc. ("Titan") (OTCBB: TTGL - News) is a high-growth diversified holding company with a dynamic portfolio of companies engaged in emerging telecommunications markets and advanced technologies. In its last fiscal year Titan generated in excess of $110 million in revenues on a consolidated basis.

Titan's Oblio Telecom Inc. ("Oblio") telecommunications subsidiary, based in Richardson, Texas, is a market leader in prepaid telecommunications products and the second largest publicly-owned international telecommunications company focused on the prepaid space. Oblio leverages strategic agreements with Tier 1 telecommunications leaders Sprint and Level3 to supply its brand-name prepaid calling cards. Annually Oblio sells an estimated 35 million of its brand-name prepaid calling cards through its established distribution channels estimated at more than 60,000 retail outlets.

Titan Wireless, Inc. ("T Wireless") is Titan's wireless subsidiary and is a mobile virtual network operator ("MVNO"). T Wireless sells its MVNO prepaid wireless products and wireless services through Oblio's established distribution channels.

Titan's Electronics and Homeland Security division specializes in advanced manufacturing processes to provide commercial production runs and quick-turn delivery of printed circuit board prototypes for high-margin markets including Homeland Security and high-tech clients.

For more information, please visit: www.titanglobalholdings.com. For investor-specific information and resources, visit http://www.trilogy-capital.com/tcp/titan/. To view current stock quotes and news, visit http://www.trilogy-capital.com/tcp/titan/quote.html. To view an investor fact sheet about the company, visit http://www.trilogy-capital.com/tcp/titan/factsheet.html.

Forward Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Act of 1995 -- With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. The actual future results of TTGL could differ significantly from those statements. Factors that could cause actual results to differ materially include risks and uncertainties such as the inability to finance the company's operations or expansion, inability to hire and retain qualified personnel, changes in the general economic climate, including rising interest rate and unanticipated events such as terrorist activities. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. These statements are only predictions. Although we believe that the expectations reflected in the forward-looking statements are reasonable, such statements should not be regarded as a representation by the Company, or any other person, that such forward-looking statements will be achieved. We undertake no duty to update any of the forward-looking statements, whether as a result of new information, future events or otherwise. In light of the foregoing, readers are cautioned not to place undue reliance on such forward-looking statements. For further risk factors see the risk factors associated with our Company, review our SEC filings.

Contact:

Investor Relations:
Trilogy Capital Partners
Paul Karon, Toll-free: 800-592-6067
www.trilogy-capital.com

Source: Titan Global Holdings, Inc.

 
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