Firing on all cylindersI have been writing about Glentel for a while and have been a bull in every posting. The shares have been a home run for investors in this difficult and challenging year. Glentel is becoming the business school case study right before our very eyes as this company is executing flawlessly. Let's examine what's going on here in the calendar fourth quarter – Glentel’s historically best quarter of year.
The stock has ranged these past 12 months from a low of $6.75 to a high of $12. Currently Glentel is at $11.04 and this may be your last chance to buy it below $12. Glentel finished its third quarter with incredible numbers, margins, and more importantly, momentum, entering the last quarter. The new and improved Wireless Wave, Telephone Booth, Wireless Etc. has taken market share and will continue to. The new big box system, retail division, is enjoying rave reviews and quite frankly has the competition nervous. It should. Glentel has 240 corporate locations in the quarter ending in September, and the December quarter will only see upside of 22 to that number as per their third quarter report on sedar.
The revolutionary retail model is exactly that revolutionary. It is now the one stop wireless location of choice from teenagers to the elderly. My children are only asking for one thing this Christmas -- the new latest and greatest handset. With the price point down, a whole new generation of buyers has emerged and demand is already high. Glentel is immediately recognizing the wireless revenues and will be reaping a portion of new spectrum subscription revenue in near future. Glentel is fast becoming the master of the razor-razor blade business model. Customers buy the handset, and the revenue stream for Glentel just gets started and contribute high margin, ongoing revenues as carriers compete for Christmas business . Glentel is fast approaching its 200 million a year sale -- that's 200 million!
The retail wireless is still a monster for Glentel. With new models having been released these past six months, many buyers are return customers purchasing their second or third units and the enetration rate surface has been barely scratched. The addressable audience for the new handsets is north of a 20 million potential users. It's still in the second or third inning of a ten-inning game. Glentel is still taking batting practice.
A great observer and investor I know, Rob, who lives in South Toronto, called me last week and was jumping for joy about the wireless wave store. He sat and watched as the Wireless wave store at the mall was packed -- this is the day before Remembrance day -- with buyers. The lines at the kiosk cash registers were six deep. What stunned Rob was the Telus store next door, even larger than the Wireless Wave store in square footage, was empty.
Glentel analyst has endorsed a 184 million revenue line for this December quarter and $1.04 in earnings per share. I believe this number will be exceeded as Glentel has all cylinders operating in sync. Also, one important point often overlooked in the Glentel story is its Business Centers. It has maintained good margins through terrestrial, broadband, satellite and AVL sectors. First Emergency respondents would love to have Glentel as a vendor. Due to its sheer size and organic growth Glentel has and can continue to squeeze its carrier suppliers, thus enhancing its own margins. It will take 5-6 years and cost new entrant 1 billion dollars to install towers and network from coast to coast. Please see link https://www.financialpost.com/story.html?id=127773&p=2
Glentel has ready 340 towers and number of corporate locations from coast to coast with skilled manpower, cash of 14.5 million and no debt. Also 240 retail locations to roll out product and market cap of only 115 million dollars. Question is who will swim when boat is readily available, who will build when whole company is trading for fraction of cost of building a new network. If not right now then forbearance rules are not far behind.
I estimate Glentel will earn $1.25 per share in fiscal 2008 and $1.75 for fiscal year 2009. I also believe these numbers will be revised upwards several times before we see the end of fiscal year 2009. My own price target on Glentel is $30 ... and yes, this will likely go up as well.