Good Article on Technology Sector: The Technology sector continues to be an exciting and profitable
market for
investors. Soaring profits and share prices make technology the
strongest
area in the markets, and what is technology without the hardware and
components that it comes alive on? The communications equipment
industry
has seen some major winners within this sector and continues to grow
by
leaps and bounds. Companies such as Lucent, Motorola and Nokia have
grown
into huge global corporations by making the equipment that makes
technology
work. Out of 102 industries on the market, Communications equipment
ranks
fifth for revenue growth and share equity and is the leader among all
technology sectors. So where is the next LU?
Our feature company, MicroTel International (OTCBB:MCTL) offers a
tremendous opportunity to accumulate shares of a fundamentally sound
company with a strong global presence at dirt cheap prices. The real
turn
around for MCTL should come early in 2000 as management has eliminated
and
cut costs substantially. MCTL reported a third quarter loss of .18c
per
share but this was due mostly to non-recurring charges. When you
dissect
the 10Q and remove the fat that loss is cut in half. The farther you
dig
the more exciting the numbers become. Through a restructuring of the
CXR
subsidiary and infrastructure cost reductions at XIT, MCTL eliminates
$ 1.5
million in annualized expenses for 2000. More fat-cutting through
completed
cash payments, rent reductions and the reduction of cash outlays save
MCTL
$93,000 a month - a cool $1.1 million annually - making profitability
a
reality. Using conservative estimates based on contracts already
secured
and in effect along with past performance of their subsidiaries, it is
safe
to estimate profits at approximately $3 million. Using a logical P/E
of 20
and an estimated EPS of .16 we establish a sound a target price of
$3.20.
MCTL, designs, manufactures and distributes a wide range of
electronics
hardware products and data telecommunications equipment, and provides
related services primarily to the telecommunication industry. Through
its
three wholly-owned operating subsidiaries, MCTL provides electronic
test
equipment and instrumentation, components and subsystems and circuits
predominantly for the telecommunications industry and also for
industrial,
medical and aerospace and military customers. With a global span
reaching
France, Japan, UK and the US, MCTL provides its clients with
specialized
telecommunications products, and information technology products for
industrial, medical and aerospace and military applications.
A major advantage for MCTL is their pre-approved products that are
standard
equipment for companies such as AT&T, French Telecom, the regional
Bells
and others. This gives their products strong name recognition within
the
industry for its test instruments, transmission products, display and
input
devices and microelectronic circuits. MCTL features products that are
ISO
9000 certified and meet Bell Core, military and other domestic and
foreign
certifications. MCTL has established a global presence with the
world's
major telecoms and is expanding that presence with new products and
acquisitions. In a three and a half year period, the company has
completed
two divestments and seven acquisitions, totaling $39 million in
annualized
revenues.
MCTL's three wholly owned subsidiaries - CXR Telecom Corp., CXR, S.A.
in
Paris and XIT Corporation in Ontario, along with its 37% owned
affiliate
company Digital Transmission Systems, Inc., - offers an impressive
array of
name-brand, industry respected, quality products:
Instrumentation and Test Equipment - Through its CXR Telcom USA and
CXR
S.A., France subsidiaries, MCTL provides test instruments,
transmission
products and networking products under the brand name CXR Halcyon
Anderson/Jacobson to the International Telecoms market, private
networks,
banks, brokerage firms and government agencies.
Components and Subsystems - Through its Digitran Division USA, XIT
Corporation USA, XCEL Corp. UK, XCEL Japan, and XCEL Power Systems UK
subsidiaries, MCTL provides digital switches, CRT and flat panel
displays,
keyboards, key pads, subsystem display and input panels and power
supplies
to the International Telecoms, industrial, medical, military/aerospace
markets under the brand names Digitran XCEL-Lite (Displays) and XCEL.
Circuits - Through its HyComp, Inc. and XCEL Etch Tek subsidiaries,
MCTL
provides Hybrid and Flip Chip Micro-Electronic Circuits and Printed
Circuits to the International Telecommunications, Industrial, Medical
and
Military/Aerospace markets under the brand names HyComp and XCEL
Circuits.
The revenue potential is tremendous and recent announcements only
solidify
the company's future developments and growth. Unlike the many "myths"
of
institutional investing in BB stocks, the future potential of MCTL was
validated on Nov. 10th, when it was announced that Orbit II Partners,
L.P.
of New York bought a 5.4% beneficial ownership interest in the common
stock
of MCTL as of Oct. 21, 1999. This kind of faith by big money investors
should come as no suprise as MCTL has secured excellent revenue
contracts
including:
- The delivery of new voice mail systems - featuring the Anderson
Jacobson
brand modem - to SBC Corporation by MCTL's CXR Telecom Subsidiary. The
contract revenue is expected to exceed $2 million over the next year.
This
helps solidify CXR's position as the dominant supplier in their
marketplace.
- A multi-year contract with GT&E Corp. to provide MCTL's CXR Telecom
subsidiary's new 704A-400 innovative hand-held, integrated
analog/digital
test instruments. The new units are lightweight, hand-held instruments
that
perform the same tasks that previously required several different
instruments. The contract is expected to generate more than $ 3
million
over thye 3 years.
- MCTL's U.K. XCEL Power Systems Subsidiary was awarded the contract
to
provide power supplies to GEC Marconi Aviaonics Tornado Upgrade
Program.
The contract is expected to generate $ 1.2 million in revenue and
establishes XCEL's ability to contribute strong profitability well
into
2000.
MCTL has completed a major bottom over the past 6 months, below the
3/8
level. The momentum indicators have been neutral for a couple of
months,
while the company has been getting its house in order, but there was a
remarkable volume pick-up in November and the saucer bottom is ready
to
turn up dramatically. With the stochastics already very positive, a
little
added volume will easily take the stock back up to 3/8, but there is
no
meaningful supply before 50c. However, with the fundamentals being as
attractive as they are, a move to $1 is very much a possibility in the
first quarter of 2000.
We rate this stock a strong buy with a target price of $3.20.
In order to be in full compliance with the Securities Act of 1933,
Section
17(b), The Insider,Inc. received no compensation for its efforts in
research, presenting, and disseminating this information.
Until next week, good trading!!
Pat Comer
The Insider, Inc.
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