RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Does LTE have a moat?hilario wrote: Norwood, you claim, "I don't hold a position in this company - neither short nor long."
We do not believe you, because you have no credibility. We give our time in the life to things in which we have an interest. We follow companies we have an interest in, either long or short, because we have our hard earned money on the table. We don't create a profile on a message board and for two years make post after post about a company, and only one company, in which we have no financial stake. It would be like hanging around your ex wifes house for two years after a divorce, lurking, it is creepy. So we don't believe your claim that you have no financial interest, or, we believe you are not right in the head. Either way you have lost all credibility with us.....
Actually, Norwood does have credibility, at least with me. His numbers are spot on, fundamentally. He has taken known numbers from the past, and attributed them on a go forward basis. And the honest truth is that at 3.75, with all the public numbers available this was grossly over valued. I've argued this point many times with many people since it was a buck. And this stock was shorted for about 400 000 shares in January/Febuary, but has since been cut back by about half by April 17th.
And I've been a buyer for a year and a half. Mostly because I interpret the fundamentals of the company, look at the industry they are in, give it a wide berth for growth and size, and see a 5 dollar company in a years time.
Where Norwood and I differ are as follows:
Revenue Growth: I think going forward, there is 40 -50 million dollars on the table by end of 2018. While not fundamental evidence, I think the pictures displayed via twitter, the recent news releases identifying Actavo, old forgotten news releases regarding South Africa (ongoing high margin product sales), recent Canadian budget indicating 3.2 billion for indiginous infrastructure (Haida G'wai still needs the other half done), and developing partnerships like South America, Virgin et al, indicate large revenue growth going forward. But be advised, these are from tangible, as Norwood has indicated. I'm betting otherwise.
Valuation: I have heard a forward valuation of 20x PE multiple times. I disagree. Norwood gives it a 6-8 PE. I disagree. If my revenue projections are valid, I would give it a 12x PE, based on the contracts that I'm betting they get will be ongoing and long term. Yes, they are ditch diggers. I've said so in closed company many times. But they are VERY GOOD ditch diggers. They are COST EFFECTIVE ditch diggers. They aren't ripping up phone lines, closing roads, inadvertantly cutting power or damging water mains. Just google GOOGLE FIBRE...all sorts of problems. These guys are quick and light. Adaptable. Just look at Haida G'wai....one crew, 2 months and 10 -12 million dollars. You can't really put a price on that.
Institutional Ownership: Irrelevant. They are doing it on their own. I peg insider ownership, around 37%. Take Toyoda out of the equation, and nobody has sold a single share. And the 4 top guys don't get paid until the share price EXCEEDS 3,72. And Norwood is correct, when he says that Cormark is distributing the shares to retail. I wouldn't exactly call them suckers though. Cormark has to KEEP their investors with perfomance, and publicly putting up 20 million dollars at 2,25, and selling them outright at 3bucks or 3.70 to your retail investors just isn't good buisiness. I believe Cormark did their due diligence.
Margin: I've heard 40 % margin at times. Maybe on product sales. But overall, I think 20% Gross margin is valid. Net Margin, in my eyes isnt nearly as important, since the company is in growth mode, and expenses will fluctuate with that growth on an as needed basis. One large contract at the wrong time in the calendar can really throw things out of whack.
Moat: I believe the saw blades are the the only real thing they own that is proprietary. But they have perfected that air blown fibre. And they are fast. And on the projects they have been involved in, they execute extremely well. No cost over runs. And they are small enough that they can step in and work on small city set-ups quiickly and efficiently. A lot of cities, towns, and buisiness are tired of Telus, Rogers, BCEs poor customer relations, and just want to setup their own network and in turn hook that up to a main hub. See Chilliwack,Nevada, New West etc. I think that is your real moat. And If you believe they are that effective, the fact that they can take buisiness away from the big contractors (as listed my Norwood) I would argue that therein lies your real moat...and value.
Communication: This is a hard one. But at least they aren't making immaterial news releases every week. And they haven't been wrong yet. I do know that in the 'Big Boy World" of telecomunications, that NDA's are a big deal. Getting status as prime contractor is a big deal. It's not favorable by any means, but the fact is that if they were working on big contracts, as yet unsigned, they are not going to be writing out details. The old adage of having patience plays a role here. It's a piss off, but no less true.
But all these details are irrelevent in the face of revenue, and what they plan to grow out of the 20 million cash injection. This is a bet on revenue over the next 6-12 months. As revenue grows so will the stock price. And for that you have to be willing to wait. And that is the RISK that I think Norwood finds unfavorable. But it is a valid risk assessment regardless.
Also take into account that there are quite a few holders of a ten bagger here as well since it went public. And when the overall big boards are giving you 8 -10 percent historically (no inflation), and the market over all is at all time highs, it would be pretty gross not to ask the questions that Norwood is asking and NOT take profit don't you think? And if you aren't asking the questions that Norwood is asking, I would suggest that you not invest at all LOL!
Long LTE