I AM A PESSIMIST...When investing in stocks in general. I don' t go short by any means, but I tend to look at things that can go wrong, base my expectations on those factors and as each one goes away, I will incrementally increase my valuations going forward. This "little " bit of news is a huge subtraction from the negative collumn.
-31 million shares outstanding (a few more in the treasury, and a few options)
-Averages out to a dollar per share in Revenue.
-26% EBITDA margin last quarter (to quote the CEO)...probably improve.
-300 000 shares traded today....that is a really good base here, given the trading history of this stock in the last 3 months. 96000 at 1.66 alone, and it didnt last long. Stock held at 1.50 multiple times in the past months and only dropped from highs on low volume.
-As of yet, no institutional buyers...anybody know anything? LOL!
-If technology wasn't yet proven, this acceptance by Vodaphone is a huge validation. No bones about it. Google Project Spring. It was a huge capital outlay, in multiple countries, and continents, and will total over a billion dollars. South Africa is key to this project.
-Plotnikopf (sp?) pretty much said that from here on out regular news and expansion is to be expected.
-Patented technology, with integrated future revenues in the design. Basically, if the customer put fibre in without enough capacity, they can pull it out and put more in. No more ditches. No more waiting for large capital spends. This allows them to expand not only by large contracts, but continuously generate revenue on the lateral, FTTH pipeline subdivision by subdivision.
It goes on and on, But the biggest take away from this contract is that unless it is the only contract they do for the next 3 years, and based on historical purchase patterns this stock has found it's bottom within 10-20 c. Yes, a dump could happen, but I doubt it. The shares are too tight. And again, there are no significant institutional buyers that I know of at this time.
Each fund has it's rules, but if you were one that was allowed to, would you rather buy some Telus (which I own btw) with limited albeit steady growth, 4 % dividend and waiting to spend money on installing fibre...OR....buy a little 2$ stock that has almost no debt, 30 % margins that can increase with scale and product, and delivers the proprietary non invasive adaptable technology that TELUS, VERIZON, GOOGLE, ROGERS, ATandT, Vodaphone et al, REQUIRE to compete with each other?
Negatives: -Given who their large customer base is, it will take time to iron out contracts. Stock could drop on no news due to negotiations and blackout periods
- No more contracts in the next 6 months...is that possible?
-South Africa could indeed take up to 5 years instead of 3
-Dilution doesn't seem to be an issue, but there could be pressure from the big guys to increase liquidity. Always a hazard.
-Their fibre supplier burns down LOL
-Possible Legal issues...I don't know what, but they have the Telco's by the short hairs.
-Black swan market event.
I seem to be running out of fundamental reasons not to invest, and am relegated to bland market risk, statements and generalities. Anybody have anything to offer up?
I have been building a position since January. I can't buy anymore. Will only sell if the story changes or my portfolio requires it.