InvestorsHub Logo
Boards
News
Market Data
Markets
Discover
Discover
Subscribe Login/Register
S&P 500
5,099.96
(
1.02%
)
US TECH 100
17,244.00
(
1.57%
)
Dow Jones
38,239.66
(
0.40%
)
Brent Oil
88.17
(
0.00%
)
Bitcoin
62,939.62
(
-1.25%
)
Post# of 585
Next 10
Reply Private New
Public Reply Private Reply New Post
Keep Last Read
Keep Next 10 Report Keyboard Shortcuts
Next 10 Prev Next

DigiTech

Send PM Follow Ignore
Followers 63
Posts 2685
Boards Moderated 1
Alias Born 02/13/2005

DigiTech

Re: None

Friday, 01/12/2007 2:44:25 PM

Friday, January 12, 2007 2:44:25 PM

Post# of 585
My pick is NMKT

Here is the DD:

NMKT is a very interesting company with an innovative business plan.
A simple explanation of their strategy goes something like this:

They have a very successful network VAR / system integrator business in 2 major areas China and South America. They have increased their penetration in the US. That business has created a powerful distribution channel and they want to leverage it. Other people have done the same thing and they offer other related products coming from different vendors to their customer base. This is usually a low margin business and sales effort can be rapidly diluted.
Here is the NMKT twist:

Identify new incubating companies.
Take a participation in the company.
Present a "voice of the customer" to the R&D team.
Launch the product(s) in their existing customer base.
Use the principals of the small company as the sales force.
Once successful, take the company public using a shell with a majority stake and an anti dilution clause when possible.

At the present time 50% of the revenue comes from the network business and 50% from the products offered by the incubated companies.

The part they have not quite worked out is the mechanism of the distribution of shares to the NMKT shareholders. Here is the problem: if they distribute the common then they loose control and they loose the anti dilution clause. It also gets very messy with the preferred.

The first spin off was the Chinese company and it is pretty much on schedule. The company is public with the symbol IICP. That symbol; will be changed shortly. Distribution of New Market China shares is up in the air. The shares are trading at 22c up from 9c.

I do not think the non-distribution is a problem. I view this one as a long term investment. If NEW Market China does well then NMTK shareholder equity will go way up. It is not a problem if I get the new shares only next year. I much prefer that they do it slow and right verses fast and wrong.

Recently they announced 2 more spin off. They signed 2 LOI for the acquisition of PGNF to create New Market Latin America and DMOI to create a WIFI / VOIP business with 22 patents in Gaming business.

The forecast for 2007 is very aggressive with $120M from $70M in 2006.

This includes China going from 20 in 2006 to 40M in 2007.


Here are the financial results:


Revenue for 3rd quarter 2006 up 34% from 3rd quarter 2005 ($19.0m v. $14.2m)
Revenue for first 9 months 2006 up 53% from first 9 months of 2005 ($53.2m v. $34.8m)
Gross profit for 3rd quarter 2006 up 18% from 3rd quarter 2005 ($5.5m v. $4.6m)
Gross profit for first 9 months 2006 up 14% from first 9 months 2005 ($15.0m v. $13.2m)
Net income (before currency translation) for 3rd quarter 2006 up 12% from 3rd quarter 2005 ($1.4m v. $1.2m)
Net income (before currency translation) for first nine months 2006 up 57% over first nine months 2005 ($2.3m v. $1.6m)
Net income (after currency translation) for 3rd quarter 2006 up 13% from 3rd quarter 2005 ($1.1m v. $964k)
Net income (after currency translation) for first nine months 2006 up 127% over first nine months 2005 ($2.7m v. $1.2m)


The CEO of the company has been criticized for making some wild forecast in the past and for producing a deluge of PR. He has also been criticized for growing the company by diluting the stock. However shareholder equity has been up every quarter since Q1 04 going from $5M to $38M despite the dilution.

In conclusion: I feel quite good about the company. The growth has been very good: 2003 $2.5M , 2004 $25M, 2005 $50M. 2006 $ 70M to $75M. All of it showing a profit. I am convinced that they will do the $120M+ in 2007. This stock should be $1 to $1.5 at year end 2007 plus the value of the subs.


BG
Public Reply Private Reply New Post
Keep Last Read
Keep Last Read Next 10 Report Keyboard Shortcuts
Next 10 Prev Next

Join the InvestorsHub Community

Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.

Sign Up