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Newsletter
August 26, 2003
Volume VI, Issue 84
Email : [email protected]
URL : http://www.otcjournal.com

To OTC Journal Members:
 

Trading Alert- Titan General Holdings (OTC BB: TTGH)

On August 2nd I published a Trading Alert on Network Installation (OTC BB: NWIS). The stock was a virtual unknown at the time. In fact, in the text of the presentation I stated: "The readers of the OTC Journal are the first to learn of it and the first to receive any information on this exciting situation." 

Those of you who followed the situation know the stock closed at $.80 that day, opened at $2 the next, and hit a high of $6 within two trading days. What a ride- far beyond my expectations.

The idea was so much fun that I decided to look for other undiscovered situations with real fundamentals that we could pounce on before the rest of the market picked up on the story.

I have found another similar situation which I believe is poised for market recognition. Today, just after the market closed, the company reported a significant fundamental change which positions this company to be a powerhouse in its industry. No one knows about this dramatic change. We are getting the first look. 

I'm not bold enough to predict a three fold move on this stock in two days, but I believe the stock is poised for appreciation.
 

The Time Sensitive Prototype PCB Fabrication Market

You are looking at a picture of three Printed Circuit Boards. They're in nearly every electronic device. It is estimated $35.3 billion will be spent worldwide on PCB's this year, up from $33.3 billion last year. Most of them will be mass produced in China, Japan, and Taiwan.

This is a commoditized market with intense competition and low margins. Not an arena in which small companies can compete. 

In studying the business model of Titan, I was amazed to learn there is a huge cottage industry associated with Printed Circuit Boards. When the engineers at Textron, Lockheed, or Motorola design a new electronic device, they must build prototypes long before manufacturing. They don't build the PCBs themselves. They send the specs to a shop which specializes in fabricating PCBs and turning around a finished product rapidly. 

Titan does this high margin work. PCB designs are received and a finished prototype is turned around in as little as 48 hours. The service costs a substantial amount of money, and has very high margins. 

Titan turned in the best quarter in its history in June, with sales hitting $3.27 million for the quarter, up 42% from the March quarter. They're customer base includes some of the following high profile names:

  • Motorola
  • Broadcom
  • Textron
  • Lockheed
  • Analog Devices
  • Raytheon
  • Flextronics
Titan has two major fabrication facilities. Their west coast operation in Fremont, California, which is the subject of today's news release, specializes in high volume, quick turn around for standard consumer electronics products. PCB prototypes can be turned around in about 48 hours, and may cost anywhere from $25,000 to $100,000.

Their east coast facility in Amesbury, Massachusetts specializes in more custom PCB's generally associated with military or very high tech solutions. At this facility, Titan provides input on the design. They can also fabricate PCBs in HVR (High Volume Rigid Flex). This specialized design costs a lot more, and is the kind of custom PCB you would find fitted into a tiny slot in the cockpit of an F-14 fighter jet or the Space Shuttle. Margins at this facility run upwards of 40%.
 

Completed Consolidation Chops $1 Million off Annual Overhead

Today, just after the market closed, Titan General announced it had completed a consolidation of two west coast facilities. Titan shut down their Santa Clara operation, and consolidated the two into one state-of-the-art facility. 

More importantly, the company announced it anticipated the consolidation would yield at least $1 million in annual cost savings. This is very important to Titan, because it positions the company to move into profitability in coming quarters.

Moreover, there is another important fact the press release does not tell you. I learned this from interviewing President Andrew Glashow. The Fremont California tech center of Titan is so well optimized that it is currently only operating at 30% of capacity with much improved margins. Therefore, as additional business flows in, it will be accompanied by even greater efficiencies which should result in higher margins as the current fixed expenses are already being absorbed. 

The new facility has now been approved by several major electronics companies including manufacturing behemoth Flextronics ($13.5 billion in annual sales), which should lead to major new business wins.

There are 14.5 million shares issued and outstanding. Based on the $1.20 closing price, this yields a market value of $16 million. Annual revenues are running at about $13 million, and growing rapidly. Cost cutting from the consolidation should turn Titan profitable, and revenues should grow. Assuming the company achieves positive cash flow, this stock would not be overvalued at two to three times sales, instead of the current 1.2 times annual sales, suggesting significant upside.

As you can see from the chart, no one knows about this situation yet. This is an undiscovered gem, just like Network Installation was on August 2nd. The stock has drifted down from the $2.25 level in April and rarely trades over 25,000 shares per day. The profit picture for the company's future changed with today's news. 

Here are my thoughts for today's trading alert:

  • Buy up to $1.40- This gives you room to make 40% if the stock performs the way I think it will
  • Price Target- $2 short term (next 60 days)- higher longer term
  • Stop Loss- Reevaluate if the stock trades below $1- I don't think it will, but you never know. 
Unless something earth shattering comes up, this will probably be the last edition I publish until after the Labor Day holiday. I intend to publish several follow up editions on Titan. Also, next week threatens to be very busy, as several of the companies I cover are promising substantive corporate events which will be worth reporting. 

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

TTGH Announces Successful Consolidation of West Coast Manufacturing Operations

Tuesday August 26, 4:07 pm ET 

State-of-the-Art Tech Center Anticipated to Generate Material Savings; Benefits May Exceed $1 Million Annually

FREMONT, Calif.--(BUSINESS WIRE)--Aug. 26, 2003-- Ventures-National Incorporated, dba Titan General Holdings, Inc. (OTC BB: TTGH), an innovative fabrication services company committed to setting the next generation standard in high margin, time sensitive PCB manufacturing, announced today the successful execution of the consolidation of its West Coast manufacturing operations. The Company noted that consolidation, which merged Titan's Santa Clara, California operation into its Fremont, California tech center, has created a state-of-the-art facility which will unleash significant synergies including a substantial increase in margin -- as well as improved productivity and efficiency, resulting in a highly competitive world-class high technology company. 

"Under the stewardship of our chairman and CEO, Bob Ciri, the consolidation was executed ahead of schedule and below budget," stated Andrew Glashow, president of Titan. "The estimated cost of the consolidation was less than $350,000 and is generating significant benefits from day one. Based on Titan's internally prepared estimates, the consolidation is anticipated to generate up to $1 million or more annually in positive benefits through, among other things, the elimination and consolidation of an operating facility, termination of duplicative staff, and operational efficiencies related to the location of the complete manufacturing process in one facility. In addition, Mr. Ciri, with the support of the operational consolidation team lead by General Manager Curtis Okumura, was able to successfully complete the move and consolidation in a 45-day time frame -- without missing a single day of manufacturing or any delays in customer delivery resulting from the move. Numerous industry 'experts' previously estimated a six-month timeframe and $1 million+ budget with a temporary shutdown of manufacturing." 

Curtis Okumura, the Titan PCB West Inc. General Manager said, "Consolidation of the manufacturing operations into our state-of-the-art Fremont tech center creates operational synergies that will allow us to improve the value and service to our customers." 

Robert Ciri, the TTGH CEO noted, "The importance of the consolidation cannot be overemphasized. Our West Coast Tech Center is now a state-of-the-art facility. This well-orchestrated event is a clear demonstration of the dedication of the Titan employees and their ability to deliver a quality solution." Mr. Ciri went on to say, "We are developing a world class team on both coasts to fully exploit what we believe to be enormous opportunities in the high margin prototype, time-sensitive PCB business. Titan is committed to significant growth, both organically and through select acquisitions. The combination of our management team, technology and process are positioned to deliver on that commitment." 

Conference call 

Robert Ciri, chairman, and Andrew Glashow, president, will discuss the consolidation as well as other aspects of the Company's operations during a conference call and webcast scheduled for Wednesday, August 27th at 12 pm Eastern and will be available to answer questions. Participants may ask questions during the Q&A segment of the call. Investors may access the call by dialing 800.289.0496 or from an international location by calling 913.981.5519. Participants should identify the call as "Titan's Conference Call." 

A replay will be available on August 27th at 3:00 pm Eastern through September 3rd at 11:00 pm Eastern. The replay telephone numbers: 719.457.0820 and 888.203.1112 with the replay passcode: 739070. 

About Titan General Holdings, Inc. 

TTGH is an innovative fabrication services company producing time sensitive, technologically complex prototype, and high margin printed circuit boards. The Company was established through the acquisition of SVPC Partners, LLC in August of 2002 and Eastern Manufacturing Corporation in February of 2003. The management and board of directors of TTGH are focused on significant growth and shareholder value. TTGH operates two tech centers, one in Amesbury, Massachusetts and the other in Fremont, California, which is the Company's corporate headquarters. TTGH is committed to Enhanced Execution of PCB solutions to Exceed customer and shareholder value Expectations. For additional information on the Company, please contact Bernadette Cusack, Trilogy Capital Partners, [email protected] Investors who are interested in learning more about TTGH are encouraged to visit the company's website at www.titanpcb.com. The company's site contains current information on the company, its operations, management and board of directors. 

Cautionary Statement Regarding Forward-Looking Statements 

Statements made in this news release, other than those concerning historical information, should be considered forward-looking and subject to various risks and uncertainties. Such forward- looking statements are made based on management's belief as well as assumptions made by, and information currently available to, management pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Titan General Holdings, Inc.'s actual results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors, including those identified in Titan's annual report on Form 10-KSB for the fiscal year ended August 31, 2002 and its quarterly reports on Form 10-QSB filed with the Securities and Exchange Commission. 

-------------------------------------------------------------------------------- 
Contact: 
     Trilogy Capital Partners 
     Bernadette Cusack, 800-330-6540 
    [email protected]

-------------------------------------------------------------------------------- 
Source: Titan General Holdings, Inc.



 


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