News:Ludlow Capital Upgrades China Wireless (CWLC) Rating
Staff Reporter
Feb. 15, 2006 - 9:31AM EST
NEW YORK--Feb. 15, 2006--Ludlow China, a wholly owned subsidiary of Ludlow Capital, raised China Wireless (OTC: CWLC) rating from B- to a current rating of B.
NEW BUSINESS DIRECTION
China Wireless (CWLC) original goal was to build out a wireless network in a few local regions in China, but discovered this to be much easier on paper then actually implementing in real life. Competition and bureaucratic barriers from such giants as China Telecom and the Communist Chinese government made entry into this market much more difficult for CWLC, a US based company.
Also, building out a network of regional mobile equipment and towers in China would have also produced intense capital pressures and dilution for a stock trading below $1.00 a share to say the least.
So, the company's new focus is for smaller and more frequent contracts, which may present China Wireless with a more realistic business model as opposed to going out and trying to score the 'gold ring' in one or two big contracts. Since China Wireless new change in direction in late 2005 the company has been announcing albeit smaller, but more frequent contracts for wireless network enterprises.
Some of the companies smaller enterprises contracts now target such clients as shipping ports, universities, research centers, financial networks, and smaller municipal arenas in the Tianjin region in Northeast China.
Tianjin's shipping port is geographically the second largest harbor in China. The city houses 31 universities and not only is the industrial capital, headquarters for Motorola Corporation of China, but also the financial capital of northern China. Tianjin has been selected to host the 2008 Olympic Games Football (Soccer) contests.
ACQUISITION TARGET
Down the road, building these smaller network enterprises through out a specific region in China may make China Wireless an acquisition target for any telecom company looking to establish themselves or even expand their current telecommunication network coverage into the Tianjin region of China. Some telecom companies may ask themselves, "why build and spend capital on a whole new wireless system when you can just acquire China Wireless network already in place".
The key now is can China Wireless continue closing on these smaller network enterprise contracts within the Tianjin region, and possible move to open additional contracts preferably in a neighboring region, such as in Beijing. (see map above)
RECURRING REVENUES
Although China Wireless new contracts may be smaller in nature, many of them may also provide the company with follow through revenues from maintenance and technical consulting fees. Their technical fees may not be substantial per contract, but put together with a group of additional small contracts, and China Wireless may begin to generate regular cash flow within the company.
The rate and size of any follow up revenues is currently unknown. The company announced a conference call for Feb. 23, 2006 which will hopefully provide additional information on some recent contract sizes, and any follow up revenue fees the company may be obtaining.
FAIR VALUATION
Ludlow Capital believes a fair market cap for a company with only 83 million shares outstanding, no convertible debentures, and ever more frequent contracts in Tianjin, one of China's fastest growing shipping ports, should reflect a 'fair' market cap value of $8 to $10 million. Giving the current shares outstanding of 83 million we believe a fair market price for CWLC to be in the range of $0.10 to $0.12 a share. So, with a current price of only $0.04 a share, or a market cap of only $3.4 million, we have raised China Wireless rating from a B- to a current rating of B.
Any increase in shares would lower the above price target as the market cap would have to adjust lower with additional shares. But for what ever the shares outstanding may be for CWLC we are giving a current 'fair' market cap valuation for China Wireless of around $8 to $10 million.
Ludlow China
Headquartered in Manhattan, Ludlow Capital, Inc. is a full service investment banking firm which serves the needs of both private and public companies. Our simple approach is to provide customized financial solutions for virtually any of our clients needs. ludlowcapital.com
Other publicly traded chinese stocks to watch: Sina.com (SINA), Bidu.com (BIDU), Netease.com (NTES), Suntech Power (STP), Along Mobile (AGMB) |
