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SISM
Research & Investment Services
Industry: Internet Technology Nevtah, Inc.
New Strong Buy Recommendation
Price: US$0.61 Ticker: NASDAQ OTC:BB: NTAH
Analyst: Ernst Schlotter November 1999
Nevtah, Inc. (NASD OTC: BB: NTAH) is a U.S holding company that acquired 50% of Pamco in March 1998 and will be fully reporting to the SEC by December 1999. In April 1999, Nevtah and Pamco formed a new subsidiary called Cybersensor.com. Cybersensor.com was formed to develop and market a Web-based technology, called CyberVip?, which allows users access to remote locations via a direct satellite link by logging in to the Internet at www.cybersensor.com. Cybersensor's technology will target the demand for an efficient yet cost-effective method of controlling and monitoring field equipment from remote locations via satellite around the world as well as the tracking and monitoring of trucks and trailers, conveyor belts, vending machines, gas and flow meters, pump jacks, etc. In short, if something needs to be measured, Cybersensor's technology can do it. The wide application of this technology is expected to create a far-reaching demand with a high profit potential. The Company is initially targeting the oil and gas market in conjunction with Pamco's patented technology, the Wellminder?. The Wellminder? will replace the traditional pump jack by lifting oil to the surface of the ground via compressed air or gas. Remote control and monitoring are achieved through Cybersensor technology. Cybersensor's applications are almost endless. Several large manufacturers of meters in the United States have shown tremendous interest in Cybersensor's technology. They are especially excited about Cybersensor's applications regarding household gas, sewer and water meter telemetry as well as the monitoring of remote pumping stations. One of the largest computer engineering firms in the world is interested in forming an alliance with Cybersensor in order to develop new applications. The U.S. National Weather Service, together with other government agencies and Noaa, have set up a pilot program to evaluate Cybersensor's technology regarding the measurement of water levels in U.S. rivers, thus alerting them to potentially dangerous flood conditions. In May 1999, Cybersensor formed an alliance with ORBCOMM Global L.P., the world's largest low-earth orbit (LEO) satellite company. This alliance permits Cybersensor to become a Value-Added Reseller (VAR) and to market its technology to ORBCOMM users on Cybersensor's Web site. ORBCOMM has invited Cybersensor to share a booth at the Petrosat Trade Show for the Oil and Gas Industry on November 16th & 17th in Houston, Texas. This show will introduce new technology, software and communications equipment targeted to the oil and gas industry. Cybersensor will be the primary solution for remote monitoring and control, together with the ORBCOMM satellite system. At the conclusion of the show, Cybersensor and ORBCOMM will meet with several multi-national oil companies. Additionally, Cybersensor has entered into a strategic alliance with Stellar Satellite Communications. Stellar's data communicators are designed to work with the ORBCOMM network of LEO satellites. Stellar will supply the subscriber communicators that will act as both the field satellite link and the controller for the Cybersensor system. Cybersensor has placed an initial order for 11,300 Stellar data communicators in anticipation of its services during the coming year. Cybersensor has been granted an international patent for CyberVip? and will begin to market its technology in Europe in April or May of 2000. Nevtah will be responsible for the hiring of qualified persons in Europe to interface with Cybersensor.com and to develop its own customer base. Since the Cybersensor technology is being developed and tested in the United States, the Company's only job in Europe will be the recruiting of customers. ORBCOMM has made a commitment to Nevtah and Cybersensor to provide introductions to potential customers and to provide any needed support. We feel the Cybersensor technology should prove to be as needed and wanted in Europe as it is in the United States. The combination of good contacts, superior marketing and ORBCOMM support should result in the generation of significant business.
Selected Financial Data
US$ in million 1999E 2000E 2001E 2002E 2003E
Revenues 0.023 9,786 31,210 57,710 77,975
EPS $(0.03) $0.13 $0.52 0.98 1.43
P/E N/A 4.7 x 1.2 x 0.6 x 0.4 x
Cybersensor's Internet based technology is highly unique, patented and suitable for application in many industries, both domestically and in Europe. Several large U.S. metric manufacturers as well as the U.S. National Weather Service have shown tremendous interest in the Cybersensor technology.
Strategic alliances with ORBCOMM and Stellar Satellite Communications will further enhance Nevtah's market presence. Cybersensor.com will market its technology to ORBCOMM users as a Value Added Reseller (VAR).
Cybersensor.com has ordered 11,300 Stellar communicator devices in expectation of the demand for Cybersensor technology. The customer base is expected to reach over 15,000 by the end of the year 2000. Profit is initially realized by selling the Stellar communicator devices, which have a high profit margin. The second revenue stream is derived from a one time hook up fee and the third, when Cybersensor charges each user a minimum fee per month, which entitles him to a certain amount of free monitoring time. The average customer is expected to have an online monitoring bill of approximately US$50 per month.
Based on our very conservative evaluation, the fair market value for NTAH is US$2.50 with a one year price target of US$7.50, a 57 times multiple of our forecasted 2000 EBIT of US$0.13 or a marketcap of four times sales, which is a fair valuation based on an average annual growth rate of approximately 100% over the next five years. We expect to raise our estimates in the first/second quarter of 2000 due to increased demand for Cybersensor services.
Investors Facts
Company: Nevtah Capital Management Corporation
Subsidiary: Cybersensor.com
Headquarters: Florida, USA
Incorporation: USA
Outstanding Shares: 14,794,508
Estimated Free Float: 4,000,000
Exchange Traded: OTC Bulletin Board
Ticker Symbol: NTAH
Management
Nevtah, Inc.
Daniel Kesonen--President, Nevtah
Mr. Kesonen is Managing Director of RLK International Group. Previous positions include President of PLC Systems, Inc., Vice President of Shearson Lehman Brothers, Vice President of E.F. Hutton and Vice President of A.G. Edwards and Sons. He has extensive knowledge in investment banking and as a money manager.
Laurence C. Jones--Board Member, Nevtah
Mr. Jones has had an extensive career in the London financial markets and is a former Chairman and Managing Director of Barclays Metals Limited. His is also a current Director of the London Metal Exchange Ltd. In addition to his service to the Company, he is also currently a consultant to the financial company, Chiltern Group Plc.
Michael MacDonald?Secretary and Board Member
Mr. MacDonald has more than thirty years of investment experience in corporate finance and public accounting. He spent twenty years as the founder of Business Advisory Group Inc., a Florida firm specializing in consulting to the private investment community, and is currently the Managing Director.
Cybersensor.com
Edward Corlew--CEO
Mr. Corlew has more than twenty-five years experience in business administration and management, covering several areas. He is one of the original founders of Pamco and in addition to his duties there, he also serves as President and Majority Shareholder of Air Pulse Oil Pump, Inc. Additionally, he is the owner of Corlew & Associates/Corlew Construction, Inc.
Henry "Buddy" Steen III--President
Mr. Steen is the co-inventor of the CyberVip? technology and is an expert in many areas of computer programming and software. His experience includes several university programs as well as involvement with the Department of Energy's Energy Related Investor's Program, serving as an electrical engineering consultant since 1990. From 1988 to the present, he has worked with Buckman Oil and Gas Exploration of Bowling Green, Kentucky as an electrical engineering and computer consultant. He has also participated in several publications and is the inventor of two additional patented technologies.
R. Laken Mitchell--Secretary and Board Member
Mr. Mitchell is a practicing attorney in Nashville, Tennessee and the owner of Sovereign-American Securities, Inc., a NASD member firm. He has structured and funded more than 100 projects and has acted as legal counsel for each project. He has also provided legal counsel to several corporations regarding corporate law, securities, finance, management, franchising and business operations.
Frank Ryan--Chief Financial Officer and Board Member
Mr. Ryan is a Certified Public Accountant with twenty-five years experience. He is currently president of Ryan & Associates P.C. Certified Public Accountants, located in Nashville, Tennessee. During his career, he has acted as a general partner in more than thirty real estate investment programs. His experience also extends to oil and gas and restaurant franchising. The investment programs Mr. Ryan has been involved in represent a total capital investment of more than US$100 million.
Duke Martin--Systems Engineer
Mr. Martin is also a co-inventor of the CyberVip? technology and is currently working with the Company on a full-time basis as a systems engineer. He will be responsible for communications and software design. Mr. Martin holds a B.S. in Electrical Engineering Technology from the University of Western Kentucky. He was a top graduate in this field and was hand-selected by Mr. Steen to work with the Company.
Cybersensor Technology
Cybersensor's flagship product is CyberVip?. CyberVip? is the first proprietary Web-based software system offering a direct satellite link to equipment operating at a remote location. Its software will allow a customer to access data quickly and conveniently, using any Internet browser. No special training, expensive field equipment, interfacing or additional systems are needed. CyberVip? is presently the only universal Internet connection offering a direct satellite link and two-way communication capability in one process. CyberVip? was originally developed for use with the Pamco Wellminder?. The Wellminder? is the only satellite-ready pump system that is economically feasible and has been proven to reduce operating costs by 50-80% on stripper wells and increase production by 25-100%. In June 1999, Nevtah finalized arrangements with Equitable Resource Inc. (NYSE: EQT) to install fifteen beta test units on their oil and gas wells in Virginia. Equitable, an integrated oil and gas firm with revenues of more than US$1 billion, has more than 4500 wells that can utilize the Wellminder? equipped with Cybersensor telemetry. Equitable has also expressed interest in using Cybersensor technology to monitor and control other business activities, including gas distribution and the monitoring of off-shore facilities, gathering systems and international locations. Equitable has now proposed to order several hundred new units in the near future. This will involve expanding into the field equipment, gas flow meters and production metering. An additional client in Kentucky has installed Cybersensor technology on its own wells. As of this writing, all systems installed at Equitable in Virginia, as well as those in Kentucky, are working perfectly as designed. Cybersensor has also received interest from foreign companies to distribute its technology in Asia. An agreement was recently signed that gives Cybersensor the right to sell and market the CyberVip? technology to the major oil companies operating in Malaysia, the Philippines, Brunei, and Vietnam. Although originally developed for the oil and gas industry, the Company has found CyberVip's? applications, both domestically and in Europe, to be almost endless.
CyberVip's? strength lies in its simplicity and versatility. At the present time CyberVip? can provide users with "data bursts" of information regarding: (1) Monitoring--pressures, meters, temperatures, flow rates, timers and gauging; (2) Controlling--valves, timers, meters, motors, on and off operations; and (3) Service--collecting data, reporting, tracking, recording and file formats. Users of CyberVip software can connect through the Company's Web site at www.cybersensor.com to monitor and control remote locations via Stellar data communicator and ORBCOMM satellite. When a customer accesses Cybersensor's Web site, he will find information on the Company, product and service as well as simple instructions to install and use the CyberVip? system. The user will fill out an application online, and, by paying a set-up fee, will be given access to his own company site.
After setting up the account, the Company will deliver the Stellar data communicator to the user with instructions on how to use it. The simple "plug and play" approach for the low-end user is designed to limit the need for applications development and avoid the need for special training or computer-skilled persons. However, at the user's expense, he can expand the applications and interfacing ability with other systems and equipment.
To access needed information, the user simply clicks to his company site. Then following a location map, he will click to a specific state, county, city, field or street and/or specific equipment. He will have the ability to immediately receive information on an instrument panel where he can then set and change the parameters and feature list. The user will be able to incorporate six sensor inputs on the basic set-up at only one subscriber location. Satellite access is billed on a ?time used? basis, with the average monthly bill expected to be approximately US$50. CyberVip? is economical because it takes up less satellite time and space by using data reports and user commands. The Company has initially limited the scope of CyberVip? in order to both maximize the benefits of the ORBCOMM network and reduce incremental and start-up costs.
The Company's system can also be used by other VARs and communications solution or computer interfacing companies. They will sell and set up the user account and installations, then achieve satellite access through CyberVip?. This will allow the Company to open many opportunities currently unavailable due to pricing or complexity. The Cybersensor system will ultimately have two modes of operation. At the current time, the data snapshot mode (CyberVip? mode) is the available method of remote telemetry and control. The data snapshot mode functions with data reports and user commands to transmit information via ORBCOMM. The second mode--data logging--is still in the development stage and will allow users to collect much larger amounts of data. Cybersensor is now planning expansion of the present system which includes the following upgrades:
Allow for alarm signal messaging through direct digital paging system
Incorporate Global Positioning System (GPS) and resource management
Expand data acquisition capabilities to include data and event logging
Provide near real-time access to data via other satellite technology
Benefits of Cybersensor Technology
The present benefits of using Cybersensor.com include the following:
Web-based software to monitor and control remote equipment
Ability to integrate two emerging communication technologies--the Internet and satellites
No software installation or user training required
No software upgrade or support cost
Minimum hardware cost for communication--all field sensors are "plug and play"
Low monthly rate with flexible pricing for industry use
User may adjust, control and reset up to 100 remote parameters
Immediate access via the Internet from any location to any remote site
Flexible design and affordable price for specific applications or industry use
Remote sensor acquisition system can be solar-powered
User Web-page configuration plus programmable field subscriber unit
Strategic Partners
ORBCOMM Global L.P.
ORBCOMM provides two-way monitoring, tracking and messaging services through the world's first Low Earth Orbit (LEO) satellite-based data communications system. ORBCOMM applications include: tracking of mobile assets such as trailers, containers, rail cars, heavy equipment, fishing vessels, barges and government assets; monitoring of fixed assets such as electric utility meters, oil and gas storage tanks, wells and pipelines and environmental projects; and messaging services for consumers and commercial and government agencies. ORBCOMM is a partnership owned by Orbital Sciences Corporation (NYSE: ORB) and Teleglobe, Inc. of Canada (NYSE:TGO). Orbital is a space technology company that designs, manufactures and markets a broad range of space products and satellite-based services. Orbital's experience includes carrying out more than 275 satellite, rocket and space payload missions during the past fifteen years. Teleglobe, Inc. is recognized as a world leader in global telecommunications. The Teleglobe network links North America with more than 240 countries and territories. ORBCOMM is the world's first commercial provider of global LEO satellite data and messaging services. The ORBCOMM system enables businesses to track remote and mobile assets and stay in touch with workers in remote locations.
Stellar Satellite Communications
In mid-May 1999, Cybersensor formed a strategic joint development alliance with Stellar Satellite Communications. Stellar data communicators are designed to work with the ORBCOMM network of LEO satellites. In 1999, Stellar's parent company, Elisra, formed a strategic alliance with ORBCOMM to provide global communications services. Stellar's data communicators are extremely durable and have been manufactured to operate in even the harshest of environments while still maintaining a lightweight, compact design. Stellar data communicators can be used in conjunction with: (1) Asset Tracking; (2) Two-Way Messaging; (3) Monitoring and Controlling; and (4) Environmental Monitoring.
Future Alliances and Upgrades
The Company has recently signed a joint development agreement with Solarcraft to develop a solar panel with a built-in antenna. This will serve to reduce costs and will work with the Company's metering application as well as many other types of applications. The Company is also in the process of creating alliances with meter manufacturers in the United States who are interested in adding Cybersensor technology to their water, gas and sewer meters, thus allowing remote monitoring in both residential and industrial use.
Marketing
The marketing plan for Cybersensor.com is based partly on the philosophy that the services offered will be affordably priced for virtually any customer. Competition will thus be discouraged while the recurring monthly fee will provide attractive profits. The revenue basis of Cybersensor.com will be the minimum monthly fee per sensor site. A company will be able to have multiple user accounts but each account will be identified with particular Cybersensor sites.
The target market for Cybersensor.com's technology will be small information systems where the user will only need to operate a simple valve, monitor a sensor or change a small setting or operating parameter. The following markets will initially be targeted:
Oil and gas producers, distributors and transportation operations. There are more than 600,000 pump jacks in the U.S. alone that can use Cybersensor technology.
Utility districts such as gas, water, electric and sewer;
Various industry and manufacturing equipment such as robotic sorters, conveyor systems, tanks, meters, valving, etc.; and
Any company having components and/or equipment operated by others which the user must service or maintain, with access to integral working components for recording, regulating and monitoring its operations.
Satellite systems using the emerging broadband arena of transmitting digital data and video at high speed can reach remote or sparsely populated regions and send broadband data from one point to many users. One independent consultant estimates that satellite services will comprise approximately 12% of the global broadband market worth US$26 billion by the year 2003. This creates a tremendous marketing opportunity for Cybersensor's unique technology.
Competition?Cybersensor.com
Cybersensor and CyberVip? are currently the only universal Internet link for satellites that include patented, Web-based software. Furthermore, Cybersensor.com is the only firm able to program the field subscriber unit. This gives Cybersensor the ability to expand the communications link and the software to interface the field unit that can operate, monitor, control, store information and data, then loop local functions. Because of its low cost and user-friendly remote monitoring and control, the technology offered by Cybersensor.com is unique and not currently available from any other source. And because of the international patent protection the Company has received, coupled with its long lead time, we can foresee no effective competition for at least two years and perhaps even longer.
Financials
Consolidated financial
projections FY 2000 - 2003
In million US$ FY 1999E Mar. 2000E June 2000E Sept.2000E Dec. 2000E FY2000E FY 2001E FY 2002E FY 2003E
Revenues 0,023 1,273 2,049 2,809 3,654 9,786 31,210 57,710 77,975
Cost of sales SG&A 0,517 1,051 1,642 2,199 2,810 7,770 21,885 38,120 46,600
Net profit (loss) (0,493) 0,222 0,407 609 843 2,082 9,325 19,590 31,375
Outstanding shares* 14,800 14,800 15,500 16,000 16,500 15,700 18,000 20,000 22,000
EPS $(0.03) 0.02 0.03 0.04 0.05 0.13 0.52 0.98 1.43
* fully diluted
Our financial projections are based on the Company?s business plan, extensive discussions with the management and our independent market research. We feel very comfortable that the Company can reach these numbers, as our numbers are very conservative and may need revision in the second quarter of the year 2000. The Company has five revenue streams: Cybersensor; the sale of Stellar data communicators; the hook-up fee for each customer; the monthly minimum fee (any usage over the minimum will be billed additionally); and Pamco?s Wellminder? revenues. On October 22 1999, the Company announced a purchase order for 11,300 Stellar data communicators to ensure an adequate equipment supply for its marketing program during the first half of the year 2000. When installed, each Stellar data communicator will generate a US$50 hook-up fee and an average of US$50 per month in revenues per customer. Initially, Cybersensor will target the oil and gas industry, but the Company has recently formed alliances, joint developments and marketing agreements with several companies for monitoring, controlling and reading meter equipment in the water, gas, oil and utility industries. Nevtah has the right to market Cybersensor in Europe and will start its marketing campaign in early 2000. No estimate has been made in our consolidated financial projections for European business opportunities.
Opportunities
The Company's CyberVip? technology is the first patented, Web-based, remote monitoring software available. The market for such a technology is enormous. The European market offers additional exciting marketing opportunities.
The CyberVip? technology is backed by ORBCOMM, the largest LEO satellite company in the world and Stellar Satellite Communications.
The technology is affordably priced, even for the low-end user. Configuration of CyberVip? is simple, requiring no special skill, however custom needs can also be easily met by the Company's expert engineering staff.
Beta tests with Equitable Resources, Inc., a highly reputable company, have proven very successful. The technology will soon be marketed through Value-Added Reseller (VAR) partnerships.
Risks
Although the Company's technology is proprietary and internationally patent protected, it is possible that a competitor could develop a superior technology. At the present time, however, this seems highly unlikely.
The Company is dependent upon the continued services of key management and personnel.
Additional financing may be required in the future in order to fund business plans and goals.
Shares of the Company's stock are traded on the Over the Counter Bulletin Board. Therefore, market liquidity could present a problem.
Conclusion
Nevtah, through its interest in Cybersensor.com, has the potential to penetrate several market segments which would greatly benefit from advanced monitoring technology. The Company?s patented software can now offer numerous advantages to several industries where, until now, distance monitoring was difficult or impossible. With the use of the Internet and Low Earth Orbit (LEO) satellite communication, the Company?s distance monitoring and controlling services can offer several cost-saving advantages. This new technology for the next millenium was developed and tested successfully during 1999 and is now ready for marketing. Cybersensor has placed an initial order for 11,300 Stellar data communicators in anticipation of demand for its services in 2000. The Company will initially target the oil and gas industry and then move to other industries, building strong alliances with well-known partners. Cybersensor customers can monitor stripper wells, pump jacks, compressors, water pumps and other equipment in the water and oil & gas industries, as well as remote monitoring and meter reading in the utility industry. The system is simple to install and operate, and can increase Cybersensor?s customers? profit and operation capacity. There are some 600,000 oil wells, 170,000 gas wells and thousands upon thousands of remote gas and water meters that can benefit from this service. With monthly recurring revenues of service fees and strong expected gains in the customer base, Nevtah is ready to start realizing the success of the proven CyberVip? technology.
The huge potential of Cybersensor services is not currently recognized by investors and therefore not reflected in the stock price. When the huge potential of the Company is finally acknowledged, we expect the stock price to increase dramatically. As of today, an investment in Nevtah is speculative and reflects the low marketcap of the Company until the Company begins to generate revenues. We expect this to occur within the next 60 days. With its strong partnerships and its order for 11,300 Stellar data communicators in anticipation of the strong demand for its services, we believe Nevtah will enjoy a very successful business. Based on these conservative expectations, and the extremely low valuation of microcaps currently, we recommend the stock of NTAH as a strong buy for long-term, risk-tolerant capital-gains investors
Disclaimer
This memorandum is for informative purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy any security. While the information contained herein has been obtained from sources believed to be reliable, we do not represent that it is accurate or complete and it should not be relied upon as such. This firm may from time to time perform investment banking or other services for, or solicit investment banking or other business from any company mentioned in this report. ? 1999 SISM Research & Investment Services. All rights reserved.
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