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Titan Global
Holdings (OTC BB: TTGL): Numbers Can Be Sexy |
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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:
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Printed
Circuit Boards (PCBs) |
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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.
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Pre-Paid
International Calling Cards |
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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.
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A
Change is Gonna Come |
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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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