Article on TOM
ASK THE EXPERT
TS Telecom
Thu, Oct. 5, 2000 06:44
By Nicole Lampa, Canada-iNvest.com
Click here to pose a question.
A reader asked, What can you tell me about TS Telecom and its potential?
In today’s technology-laden world there may be one place where the high-tech communications industry remains untapped: China. That’s why CDNX listed companies like TS Telecom Ltd. (TOM) and also Concept Wireless Inc. (CEU) are trying to bring successful North American telecommunications technology to China. But while such companies may be on to something that has tremendous growth, investors don’t appear too keen on such stocks.
TS Telecom is a Markham, Ontario-based company that basically makes and distributes equipment for telecommunication companies in China. The company was incorporated in 1984 and went public in 1994. Its subsidiary, TS Telecom Technologies was incorporated in Hong Kong in 1999 and went public on the Growth Enterprise Exchange.
In the last year, the company has tried to take advantage of China’s restructuring telecommunication industry. At the beginning of TS Telecom’s 2000 fiscal year, the company opened up sales offices throughout China in order to sell its products like advanced monitory systems and software for mobile phone base stations and fibre optics networks, and digital access equipment.
Concept Wireless is headquartered in Burnaby, B.C. The company went public in 1987 when it was originally incorporated under the name of Leisuretech Sports Corp. It then changed its name in 1994 to Concept Industries. Earlier this year, Concept Industries became known as Concept Wireless. Since 1992, however, the company has been focused on the development of the telecommunications industry in China.
While both companies have been around for just over a decade, they have not drawn much of a following from investors. TS Telecom, for example, currently trades at about 90 cents a share on light volume of about 8,000 shares. Concept Wireless, moreover, is hovering about 90 cents a share as well, but only on a volume of 2,500 shares.
“Investors are often times confused about companies like TS Telecom and Concept Wireless are,” explains Dean Kim, an analyst for Acumen Capital Partners. “And it’s up to the companies to spread the word, and to concisely explain what their strategies are, and what they are trying to achieve.”
In order for investors to fully understand what these companies have to offer, Kim suggests that there are two things that companies like these two need to do.
“First the company has to build on their investor relations because the company has to keep investors aware of their ongoing business process,” says Kim. “And the second thing is that when you talk about a telecommunications company in a developing country, not everyone knows what is happening in that part of the world. So a company has to inform its investors on that front.”
Another reason why investors have shied away from such companies is because of their financial performances in the last few years. TS Telecom posted a weak first quarter on August 28th. The company said it had a gross revenue of $1.3 million for the three months ended on June 30, 2000, compared to a gross revenue of $1.6 million for the same period last year. Moreover, TS Telecom had a net loss of $0.6 million for its Q1, compared to last year’s Q1 loss of $0.9 million. The company says the net loss was attributed to the seasonally weak first quarter sales.
Despite both companies weak financial performance, Kim says that they have an opportunity to take advantage of the lack of telecommunications technology.
“There’s a tremendous upside in China. If you look at the populations growth and the market itself, it’s fairly large,” says Kim. “A lot of these companies see an opportunity, and they are taking North American technology and business know how into a place like China that has tremendous market potential and very little technological skills.”
However, in order for these companies to appeal to investors, Kim suggests that they do a few things.
“These companies need to do a better job in terms of explaining to investors what China is like, and exactly how their revenue models work,” adds Kim. “They need to step up the investor relation type of activities to say ‘hey we are going after this huge opportunity in Asia. Here is what we are. Here is our technological background. And here is our management skills.’”
Furthermore, Kim advises investors to take the precautions when looking at these sort of stocks.
“Personally, I am not comfortable with the business rules in China. But I would tell any investor to do their homework. Just like I would do myself when commenting on whether or not I would buy stocks in those companies, I would have to look at the business strategy, management, track record, and financial performance.” |
