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 (E-Business Services) 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.
Regards, F. Goelo + + + |
