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Re: nelson1234 post# 224

Monday, 01/15/2007 3:11:01 PM

Monday, January 15, 2007 3:11:01 PM

Post# of 585
TRNT is a small IT services company based in New Jersey. It has a market cap of $5.45 million w/approx 4.9 mil shares outstanding - last trade = $1.13. Keep in mind that is FY end is June 30.

TRNT main strength lies in its balance sheet. It has $8.45 million in tangible book value (about $1.73/share). Since 93% if assets are cash or accounts receivable (and no debt)the quality of assets is also very strong. It's market cap is also below its trailing twelve months gross profits - a low price/gross profits is another measure I find useful in evaluating the potential of a stock.

I've found that when you have a balance sheet as strong as this, the downside is limited, but one real good quarter can send the stock price flying. The question is, when will TRNT have a .04+ cent quarter?

And the answer is, I don't know, but I believe there's a chance for it to happen this year.

The June quarter was a disaster where they lost a bunch, followed by a mediocre at best Sept qtr where they barely made a profit. The explanation for the drop-off is that a very large percentage of their biz is with New Jersey public schools, and there was a shut-down in Jersey governmental expenditures during the summer during a state budget battle: <<Our results for the fiscal year (2005) were negatively
impacted by a significant reduction during the fourth quarter in revenues generated from business with various New Jersey state entities, local municipalities, and school districts. As a result of the State of New Jersey budgetary crisis, we were impacted by a slowdown anticipating the shutdown of
the State, as well as the shutdown itself, which stopped funds to government services and related projects. Further, due to the changes of governing administrations within the state, various other projects were placed on hold pending reviews.>>

If this biz returns, there should be a big bump in revenues and earnings. The CEO in the Sept qtr seemed pretty optimistic: "We are pleased to report that we have "open quotes" in place to existing and prospective clients for approximately $11,000,000 products and services, and we are confident in our ability to secure these awards and believe that a significant amount of these new quotes will result in additional revenue and profits for TransNet in 2007. In addition, once awarded, many of these open quotes will provide a multi-year revenue stream of both products and services."

In addition, TRNT has established an office in Pennsylvania and sees near term positive impact: <<We are confident that our new sales office in Philadelphia will help us generate more than $3,000,000 in additional revenue by the end of the fiscal year. Eastern Pennsylvania is rich with commercial businesses and institutions of higher learning. We believe these two areas will contribute to our growth and success in the future.>>

Perhaps another avenue of optimism is that "Key Equities", the largest institutional holder of TRNT continues to purchase more stock, and has slowly built up a position of about 500,000 shares.

Anyway, I hold a lot of stocks like this, dinky-caps with
great balance sheets, and a decent probability of a turnaround (or at least one good qtr). I don't know if
TRNT's chances are much better than the others I hold, but the recent upgrades in the IT service sector by some large brokers prompted me to select TRNT.

In any case, I believe its a low-risk stock with a lot of upside potential.

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