<Small cap surge should last and carry TIII up>
For value small caps, this rotation is certainly further wind to our back.
Currently there is one analyst following TIII - Vince Glinski of Rodman & Renshaw. He has a current model which looks for .39 for FY97 (.48 for Cal97) and .68 for FY98 (.78 for Cal98).
On April 29th, with the stock at 4 5/8, he initiated coverage with a buy and a 12 month price target of $10, which represented a conservative 9.6x Cal97.
Revenues were estimated at $50.5M (FY97) and $58M (FY98), and margins are estimated, at an aggregate across all product types, at ~26%.
Purportedly to be announced this week, is a 4 year contract worth approx. $75M, spread over the 4 years with Nynex. At 26%, this would add approx .57 to the current estimates, so that Cal97 goes to 1.06 and Cal98 goes to 1.35. This is a projected growth rate of 30%. Applied to 97 estimates, even at significant discount, has this stock certainly well into the teens. Vince has increased his 12 month price target to a conservative 15.
On the horizon are the coax surge protectors that TII recently patented, which are not included in the current earnings model. This due to the current lack of regulatory requirement to have surge protectors at the cable cos., a 'temporary' condition that with 65M US cable connections, is suggested will become a $1 billion market in 5-6 years. These numbers are expected to impact TIII's earnings going into 1999.
Further high profile telco contracts are rumored to be in the near future, and the likelihood of additional firms initiating research coverage, especially with the current focus on small caps, seems to bode well for TIII in the near term.
(fwiw, I own from several months back in the high 5s to as recently as today in the low 8s. I anticipate double digits within a week or so.)
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