PA,
DCTC is a very different company than it was a year ago and I tend not to be too concerned about the year over year, quarter to quarter comparisons, as it really is an "apples to oranges" analysis. Initially, start-up costs usually outpace revenues when new businesses are added, so costs will look higher until the revenues start to pick up. As DCTC becomes more focused on its telecommunications business (divesting out of things like Alpha products, R&D Scientific and the W.H Smith Contract), I think these year over year comparisons will become more pertinent. Right now I am more interested in the Sept. 97 to Dec. 97 comparisons. What concerned me most last Sept. was the loss of $718,382 from continuing operations. I was very happy to see that the loss from continuing operations was only $8,245; an improvement of over $700,000. To me this was the most positive thing I saw in the income statement along with the fact that gross margins in Dec. were 34% vs. only 8% in Sept (DCTC grossed $641,758 on $1,887,598 in sales 3rd Q vs. only $167,411 on $2,057,892 in sales during 2nd Q). DCTC is divesting out of its low margin businesses and focusing on its more profitable areas.
The balance sheet also improved somewhat with a total asset/total liability ratio of 2.61 vs 2.19 in Sept. The assets for December have valued the SMTK shares at $8 million. They are presently worth a little more than that. Overall, the balance sheet is a little stronger. Shareholder equity was about the same from Sept. to Dec., but book value per share has dropped from $1.08 to $.94/sh due to the additional shares outstanding. The share dilution is a concern and what one is banking on is that DCTC is buying businesses that are undervalued and/or can have a synergistic effect such that revenue and earnings growth outpace share dilution. This of course takes time to materialize as start-up costs will initially outpace revenues. The most recent WPC deal and JV appear to fit well with what DCTC has claimed it wants to do and synergies between businesses have already been noted on this board.
Overall, from a revenue/earnings standpoint DCTC appears to be turning the corner and I am hoping for positive earnings from continued operations next quarter (which ends in about five weeks) when the Cyberfax revenues start to kick in. I also hope revenues from DCI UK will start becoming significant as well. I believe some on this board have already eluded to the fact that 4th quarter should yield positive earnings from continued operations. The trend is definitely there, so lets hope for the best.
I'm sure many are probably disappointed in the stock price. I tend to ignore stock price and look at the business. Is DCTC heading in the right direction and are they doing the right things to grow the company? I believe so and I also believe that, over time, the stock price will catch up with the value of the company. This is the essence of being a long term investor.
Good investing!!
JJ
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