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Now on to this month's Profile...
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June 1998 Profile: Long Distance Direct Holdings, Inc. (OTC BB: LDDI)
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Our featured company this month provides a service we all use. And, it's a service that has been growing at astronomical rates. Long Distance Direct Holdings, Inc (OTC BB: LDDI) is a reseller of long distance service.
You can find all the corporate due diligence information on the Company by visiting their financial public relations web-site located at 1stnettech.com
There is an international explosion of demand for telecommunications services. Growth rates for companies like World Com, MCI, and numerous other long distance providers are staggering. Consider your own personal use of phone time. Fifteen years ago you had two phones: home and office. You paid your monthly phone bill to AT&T.
Then along came the break up of the AT&T monopoly, and the first real competition for long distance customers arrived with MCI. MCI traded as low as $3 per share (adjusted for splits) in the mid 1980's. Today the stock trades in the $50 range, very close to its all-time high. People bought their long distance service, and investors made money on their stock.
Today most people consume prolific amounts of phone service as compared to 10 years ago. Today we have cellular phones, digital phones, and pagers. Our computers all have modems. We can use them in our laps on airplanes. We all have fax machines. We can use the phone to pay our bills and check our bank and credit card balances. We have conference calls with hundreds of people listening, and video conferencing is here to stay. All this technology arrives over phone lines.
As we stated above, Long Distance Direct Holdings, Inc (OTC BB: LDDI) is a reseller of long distance service. They buy time from MCI, and then resell that time to consumers with a mark-up. The management team has come up with some very creative ways to obtain customers. As a result, their growth rate over the last year has been very impressive.
We have had extensive discussions with senior management over the last several weeks. They have provided us with the following rough estimates of the current growth rate of the Company. Investors should recognize that these are only rough estimates. Accurate numbers will be released in future filings and press releases.
In May 1997 LDDI had revenues of approximately $400,000.
In May 1998 LDDI had revenues of approximately $2,000,000.
( That's a 400% growth rate year-over-year )
In May 1997 LDDI billed 8,000 accounts.
In May 1998 LDDI billed 50,000 accounts.
( That's a 625% growth rate year-over-year )
Here's the most exciting part:
In May 1997 LDDI's stock traded in the $3.00 to $4.00 range.
Today LDDI's stock trades in the $2.00 range.
In summary, as compared to one year ago, revenues are up 400%, customers are up 625%, and the stock is down 50%. Why? We feel the stock is simply underexposed to the investing public.
LDDI employs some of the most unique marketing strategies we have ever encountered. In 1997 they started advertising their long distance services through infomercials. People watching the infomercial on TV could go out and solicit others to use LDDI. They then receive a small percentage of all the future phone bills of their recruits.
This year they have received a substantial increase in business from an alliance with a "Psychic Hotline". Customers are offered 1,000 free minutes of service that includes psychic consultation, long distance time, voice mail, and pager service. They are required to transfer their long distance service to LDDI as part of the package.
As we release this profile, LDDI is launching their newest marketing program: a nationwide sweepstakes with a $1 million prize. You enter the sweepstakes by switching to their long distance service. The sweepstakes will be managed by Ventura, one of the largest Sweepstakes Management Companies in the US, and will be advertised on TV.
Robin Leach, host of the popular television series "Lifestyles of the Rich and Famous", is hosting the commercials which introduce the sweepstakes. The Company certainly anticipates another mass influx of new customers from this campaign.
LDDI also has a key strategic alliance with NBC/ICRS, a company in alliance Deloitte & Touche, LLP. Deloitte & Touche is one of the largest accounting firms in the world. NBC/ICRS devises cost cutting strategies for clients of Deloitte & Touche. NBC/ICRS recommends LDDI as their preferred long distance carrier.
In spite of these things we just covered, the single largest source of future business for LDDI could come as a result of an entirely new business alliance they have formed.
LDDI recently announced an agreement with IDT Corporation (OTC NMS: IDTC) to market IDT's Internet services. IDT is a major provider of Internet Services with over 450 POP's worldwide. To learn more about IDT, a $400 million market cap company, go to biz.yahoo.com. This alliance with IDT is evidence that larger players in this industry are starting to recognize that LDDI, with its soaring customer base built through creative marketing concepts, brings a lot to the table.
Now that you have a picture of LDDI's business, let's move on to the 'Big Six'
Management (Four ****)
LDDI is led by its two founders, Steven Lampert and Michael Preston.
Steven Lampert, the President and CEO, has twenty-five (25) years of direct involvement in the telecommunications industry. His resume includes work with NBC, Bell Operating Companies, Metpath, and Comtec.
Michael Preston is the Company's Chief Financial Officer. Mr. Preston has served as a Director of a number of publicly traded companies in the UK including, Sterling Publishing Group, Broad Street Group, Frank Usher Holdings, and Cadiz Land Corporation.
Both men are seasoned, experienced, and astute businessmen that has done an excellent job engineering this company's growth.
For complete biographies on the management team visit 1stnettech.com.
Financial Strength and Growth Potential (Three ***)
In the area of growth, LDDI is very strong. As previously mentioned, revenues and subscribers are growing at a tremendous clip and Wall Street loves that. However, the Company has been consistently losing money, and is approaching a break-even point. Their balance sheet is weak. Over the last several years, they have invested enormous amounts of capital in building their client base, but, for accounting purposes, they don't consider their customer base to be an asset. Consequently, the company has more debt than equity on their balance sheet. There is no question that additional financing will be required to continue at their current break-neck growth rate.
Market Capitalization (Five *****)
There are currently 9 Million shares issued and outstanding on LDDI. On a fully diluted basis there would be about 12M shares outstanding. Based on current share price of about $2.00, this puts LDDI's market capitalization at $18,000,000. That's roughly $6,000,000 UNDER expected annual revenues. You don't see that kind of market valuation too often in this day and time, especially from a growing company in a growth industry.
As an investor, one has to always ask if and when will the stock market assign a value much higher than the current one that is quite obviously undervalued. When it comes to telecommunications providers, Wall Street has tended to look primarily at the size of the company's customer base, not trailing earnings. Wall Street knows that there are high costs associated with originally obtaining those customers. Profits come in the future when the customers have been there for a period of time.
With their customer base growing at over 600% per year, and their revenue growth at over 400% per year, it is easy to visualize a $50 million market capitalization for this Company in the future. This could conservatively put the Company's stock in the $5.00 range.
Corporate Exposure (Two **)
Management has committed very little of its attention to exposure to investors. To date, all efforts have been concentrated on the growth of the core business. Discussions with management leads us to believe that an effort will be made in this area from here forward. Their growth over the last year makes for a very compelling story.
Sex Appeal (Four ****)
Wall Street tends to love this industry. Telecommunications has been very sexy on the street once the Company establishes themselves as a force to be reckoned with. With LDDI's tremendous revenue burst and customer growth over the past year we feel they are beginning to garner that respect. If LDDI continues to grow at their current staggering pace, we believe Wall Street should eventually fall in love with this one too, or they could get courted by one of the major consolidation players in the industry. Either way, the investors at these levels should be in an extremely nice position.
Public Float (Three ***)
There are currently 4.5 million shares in the public float. In comparison to an MCI, this is miniscule. However, in the micro cap world, this is a manageable number, but not so small that the stock will trade with a very high degree of volatility.
Conclusion
Nothing more really needs to be said, this Company speaks for itself. It is not often that you find a GROWING, established company the size of LDDI whose stock is trading at such an obvious discount. Now, we all know the various reasons why this happens, but the point is that when we uncover these types of opportunities they deserve a serious look. We certainly hope that our valued subscribers take a serious look at LDDI.
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A Special Offer to all SSP subscribers from LDDI
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We have negotiated a special long distance rate exclusively for our Privileged E-Mail Subscribers. If you would like to transfer your long distance service to LDDI, you will receive long distance at $.10 per minute, 24 hours per day, 7 days a week. There is a $4.95 per month access fee that will be added to your bill. We have also arranged for a special bonus. If you transfer your long distance service to LDDI and identify yourself as an SSP subscriber, you will receive 300 free minutes of long distance time on your 4th month's billing. This is a $40 value for free. Simply go to lddi.com to enroll for service. Remember to check the box as an SSP subscriber. If you would prefer to call the company to begin service, dial 1-800-USE-LDDI (873-5334) to establish service.
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DISCLAIMER
SuperStockPick is an independent newsletter committed to providing our readers with factual information on certain public companies. Companies are chosen on the basis of selected financial analysis and other pertinent criteria with a view toward maximizing the upside potential for investors while minimizing the downside risk, whenever possible. All statements and expressions are the sole opinions of the editors of SuperStockPick and are subject to change without notice. This profile is neither an offer nor solicitation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. The editor, members of the editor's family, and/or entities with which they are affiliated, own stock in and have other financial dealings with Long Distance Direct Holdings, Inc. SSP Management Corp. has received compensation in the form of two-hundred thousand common shares for the dissemination of this profile. This profile contains forward-looking statements relating to the expected capabilities of the Company mentioned herein.
THE READER SHOULD VERIFY ALL CLAIMS AND DO THEIR OWN DUE DILIGENCE BEFORE INVESTING IN ANY SECURITIES MENTIONED. INVESTING IN THE SECURITIES MENTIONED HEREIN IS SPECULATIVE AND CARRIES A HIGH DEGREE OF RISK. THE INFORMATION FOUND IN THIS PROFILE IS PROTECTED BY THE COPYRIGHT LAWS OF THE UNITED STATES AND MAY NOT BE COPIED, OR REPRODUCED IN ANY WAY WITHOUT THE EXPRESSED, WRITTEN CONSENT OF SSP MANAGEMENT, INC.
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