fyi, Excerpts from Al Frank Asset Management
"Better than Expected Earnings - NTOP & HRB Back on Buy List
Double dose of bad news - dropping MYG
About a year ago this time, comfort footwear maker R.G. Barry (RGB - $1.90) offered to the New York Stock Exchange an 18-month plan for bringing the company into conformity with the exchange's listing requirements. On Tuesday, R.G. Barry alerted investors that it was not able to meet the financial requirements it laid out in that plan, and that the NYSE would delist its shares starting Monday, June 14.
Originally recommended in October, 1987, R.G Barry sells its wares under the brand family name Dearfoams. Our negativity towards the stock had been growing based mostly on the declining quality of R.G. Barry's balance sheet and an increasingly competitive marketplace. The news of the delisting proved the final straw and we chose to cut our losses by selling all of our RGB shares on Wednesday at $1.91, even though the current price to sales ratio of 0.15 is very inexpensive. The stock is slated to begin trading on the Over the Counter Bulletin Board on Monday.
Voice-over-Internet Protocol (VoIP) pioneer Net2Phone (NTOP - $4.36) announced fiscal third quarter results ended April 30 that showed sequential revenue growth both in its core retail international VoIP phone services and in its cable telephony divisions. Sales were up 8% over the fiscal second quarter to $21.5 million, though they fell 10% from the year prior period as the company continued its focus on lower-revenue, higher-margin businesses. Net2Phone lost an adjusted $0.07 per share during the quarter.
NTOP was one of the first companies to offer voice services that took advantage of cheaper delivery over Internet networks. It's taken about eight years, but VoIP technologies are finally beginning to see some real traction. To take advantage of that foothold, NTOP is aggressively marketing its experience and technology to cable operators, which can then offer VoIP solutions to their own customers. The push generated its first real revenue last quarter, comprised primarily of Liberty Cablevision of Puerto Rico's purchase of cable telephony infrastructure. (Of course, the sale was helped by the fact that the cable operator is owned by communications and entertainment conglomerate Liberty Media, which together with communication services provider IDT maintain 47.9% of the outstanding capital stock and 64.7% of the aggregate voting power of NTOP's capital stock.) Further, the company now also offers hosted VoIP communications services to small businesses.
We'd be remiss if we didn't mention that the space is chock full of technology- and service-based competition. Still, there are a few aspects that make Net2Phone's story just a bit more attractive. First, the company has been in the VoIP business for a very long time. That experience and early technology lead must offer it a leg up on its peers. Second, the company completed a $63 million secondary offering late last year that has left it with a sizeable cash position ($137 million) to fund the cable telephony and hosted communications initiatives. Finally, both of the above (but more so the first) make NTOP an attractive target for purchase, especially as the company inks additional agreements with cable operators.
It is important to note, however, that investors will focus in the near-term on NTOP's ability to solidify such agreements – especially with providers beyond Liberty. Outside top line contributions from equipment sales related to the agreements, which as in the latest quarter will be lumpy, actual cable telephony-related revenue growth will lag the announcements as the operators ramp up the service and sign on new customers. The shares may therefore prove volatile and new announcements draw investors in, while any lags in further announcements and slow improvement in revenue will force impatient shareholders to the exits.
In response to hints of a solid foundation developing in the cable telephony space, we upped our FG price to $9 on the shares, which now trade very near our buy limit of $4.38. NTOP trades for a relatively inexpensive 2.3 times tangible book value and 4 times revenues. |
