Mr Clouseau, UPDATE on KYOM, based on e-mails received from Management...
The final receipt of promised documents, consisting mainly of the resumes of the Company officers and an outline of what they plan to do, have put to rest some serious concerns I had. Since I post on my own thread and have made some recent successful recommendations in the field of Internet Asia, I have become more acutely aware of my responsibilities to potential investors.
When researching Companies just past their embryonic stages, many important aspects remain unclear, entailing a lot of guess work. So, I have to be careful not to sound too pessimistic and cost investors some potential profits or too enthusiastic and be the indirect cause of some monetary loss. When in doubt, I will rather err on the side of prudence, as I have done so far in this case.
1) Management:
The quality and integrity of Management is the key to the success of most Companies, more so when they are small and don't swim in cash. Mr Bruce Ransom, the CEO, has extensive experience in the financial and administrative services industry and has been a Director on the Board of several related Companies. I spoke to him on the phone a few time and he made a good impression.
He is assisted by Brian Ransom with extensive experience in similar industries, Mr Yu Ning Wang who is the Business development officer and Marketing manager, Ed Lee, project manager in Guangzhou and Firoz Lakhani, manager on the Canada side.
2) Strategic partners: chengdunet.com
This ISP has been established for 2 years, has 28 employees and is just reaching the profitable stage. It is managed by Mr Owen Li and sports a number of apparently well qualified personnel.
3) Strong points:
+ KYOM has been granted a License by Government to operate a Lottery in the Chengdu/Sichuan province that comprises some 100 Millions people. Chinese are not as used to playing Lottery as their American counterparts, however, as their disposable income increases steadily, it is likely they will be drawn to play in larger numbers. Revenue should grow rapidly, as KYOM receives 6% of the gross proceeds.
+ Financing is in place to purchase 200 Lottery kiosks.
+ KYOM plans to develop quality EBS and ISP services and expand in other cities: Beijing, Shanghai and Guangzhou.
4) EPS and valuation analysis:
The CEO predicts EPS of 8 to 12 cents for 1999. Let's say an average of 10 cents. Such a Company in its earlier stages of development could reasonably command a PE ratio of between 30 and 50, giving us a potential price range of between $3.00 and $5.00.
Until we get more tangible news, I would assume that $5.00 would fully value the Company. Anything more than that would be pure speculation.
5) Risks:
There are the usual risks attached to developing OTC-BB listed Companies. I do not believe some information I have seen floating around, such as a $40 Millions equity or financing package, which doesn't appear necessary at this early stage; the float size which should safely be assumed to be around one third the total outstanding and the statement that the Company is already profitable, as it cannot possibly be at this stage. People might be confused with Chengdunet which is just past break-even point.
6) Conclusion:
While there are definite risks in this investment, certainly more than for XNET, there are also some potential rewards. I have taken a sizeable initial position, as reported in a post on Internet Asia and have since increased it by one third.
Disclaimer: Being long KYOM, my opinion is therefore biased and for my sole use. Anyone considering establishing a position should carry out extensive Due Diligence and only invest what they can afford to loose.<i/>
Regards, F. Goelo + + +
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