dang, have been buying NHC.TO for a week and wasn't quite done hoping to add a little more on Monday <g>, but since you guys let the cat out of the bag and i already own a LOT, might as well jump in here as well with a copy of an email I sent yesterday to some friends who are institutional guys at Goldman and Robbie:
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fyi - Turnstone just raised their offering price to $23-25. They will have 30MM shares outstanding for a IPO pricing market cap of ~$750MM, and as the hottest deal of the week, it's expected to at LEAST double to $1.5B.
TSTN is widely thought to have virtually no current competition to their specific DSL matrix switching product (CX-100) which remotely provisions, line qualifies and switches DSL services. In fact, TSTN doesn't even mention NHC Communications (a small canadian company which trades on the *Toronto* exchange with the ticker (variously, depending on quoting service): NHCMF or NHC&T or NHC.TO or NHC-TC -- but careful *not* NHC - National Health Care - trading on AMEX) in their red herring.
In fact NHC ( nhc.com ) has a product which matches and exceeds Turnstone's CX100 in functionality (NHC's switch is currently doing multiple service types such as ISDN and IDSL, as well as xDSL, and also offers a larger switch matrix)
NHC is unfollowed here (and I think even in Canada) and has been on a tear the last two weeks - rising ~6x from a market cap of ~US$11M to ~US$68MM - quite a nice move (which i caught some of) but still ridiculously far from the anticipated market cap of the #1 player in this current 2 player field.
In fact, NHC had 2 announcements recently:
nhc.com
biz.yahoo.com
NHC actually recently "stole" this new business from Turnstone. The 250 co-locations ("colos") that NHC announced compares with ~1000 that TSTN has.
So, the street will soon give the leader of an explosive emerging field a market cap of probably between US$1B-$2B. Do you think there is a comp sympathy play with a company with an expected 1/4 the colos as the leader, who is stealing the leader's business with an arguably better product, and has a current market cap of only US$70 (in spite of the recent explosive runup)? Do you think NHC Comm will be free standing in a year? TSTN uses LU as an OEM - will Nortel or CSCO step aside from this explosive business, and do you think NHC would sell for less than say 20% of TSTN? (only 20% of TSTN with a market cap of say US$1.5B [at US$50/share] would be NHC Comm at US$300MM [~US$18/share or ~C$26/share] - a 4.5x from friday's closing price)
Just thought this might be of interest.
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btw, i definitely think market leader TSTN deserves a larger market cap than NHC.TO, but not a 20x. |
