ADX on the TSE...seems we're gonna see some upward action real soon.. :)
March 20, 2000
StockHouse News Desk
By Keri Korteling (kkorteling@stockhouse.com),
StockHouse Columnist
Advantex's Portal Targets Gold-Card Shoppers; Global Plans, NASDAQ Eyed
Fewer than 75 days remain before the unveiling of a chunk of cyber real estate built exclusively for one of the most desirable demographic groups in Canada. But, Advantex Marketing isn't telling which tenants will occupy its Aerogold Advantex Shopping Network. The 17-year-old marketing services firm has seen its stock value increase four-fold since mid-January, as investors realize the potential inherent in the niche Advantex has developed via its CIBC Aerogold program. The company has plans to expand internationally, and recently dropped a coy hint about a NASDAQ filing. Meantime, CEO G. Randall Munger promises that Advantex will continue to build the infrastructure and management to support his business.
Vancouver, BC, March 20 /SHfn/ -- Advantex Marketing [T.ADX] announced March 7 it would initiate a program to expand its customer loyalty marketing business outside of Canada. The press release proudly stated that Greg O'Hara, a former vice president of electronic travel information services giant, SABRE Holdings [TSG], would steer the global initiative. Though this new direction with its impressive chief seemed good news, the stock continued to consolidate in a range below $4 after it reached a new 52-week high of $4.90 on February 7. Groome Capital analysts Chris Bonnet and Clarence Rebeiro are bullish on the company, as its demographic is so ideally suited for the upcoming launch of its premier online shopping portal, the CIBC [T.CM] Aerogold Advantex Shopping Network.
The firm divides its business into three units, serving a customer list that includes the venerable New York Times and the Canadian Imperial Bank of Commerce. Samplex Systems, a distributor of themed sampling packs and newspaper promotions, became Advantex Marketing in 1989 and added offline, or bricks and mortar customer loyalty programs. The company most recently launched its e-Vantex group, an umbrella for online loyalty programs.
Advantex garners most recognition for its CIBC Aerogold program. Cardholders who agree to pay an annual fee are entitled to one Air Canada [T.AC] Aeroplan Mile for every dollar they charge to the card, and double or triple air miles from particular merchant partners. ADX earns a commission from every sale to a CIBC Aerogold cardholder. From those commission earnings, the company underwrites the cost of marketing the merchant partner to the cardholder and awards air miles purchased from the airline or from the bank.
"For the cardholder, the program "promises people just a little bit of a dream come true. It's free travel."
>From the merchant's perspective, this arrangement is payment for advertising that works. For the cardholder, the program "promises people just a little bit of a dream come true. It's free travel." And, for Advantex, the rewards have lately become apparent. February 2, the firm announced revenues of $16,826,000 for the period ended December 31, 1999, its Q2 of fiscal year 2000. For the third consecutive quarter the business could claim income before amortization and interest. Net income was $141,000, in contrast to the net loss of $819,000 posted by the company in the comparable quarter for the year prior.
The CIBC Aerogold cardholder loyalty program was recognized as the major contributor to the company's improved net income results. Munger rattles off an amazing series of statistics about the company's targeted demographic. CIBC Aerogold plan members number about 500,000, and spend approximately 10% of the total dollars billed to debit and credit cards in Canada. Fifty cents of every dollar charged to gold cards in Canada is spent on that card.
The Groome analysts reserve much of their enthusiasm for this CIBC Aeroplan demographic. The proposed May launch of the Aerogold Shopping Network will set the blueprint for an Internet business that can be replicated as the Advantex expansion plans take off. According to Rebeiro, every Internet company wishes to target users with a high propensity to use the Internet and to shop online. "The demographics of that group of individuals would probably be those that fit very well the Aerogold cardholder demographics in terms of high net worth, higher levels of education. And therefore, if you were a portal with that kind of stickiness and that kind of client subscriber base, what kind of valuation would you attach to that, and we feel that you'd attach a premium valuation."
Bonnet chimes in, saying, "their strength is in forming these affinity groups that then service very very powerful client bases for an Internet model. In our opinion that's an extremely strong and powerful competitive advantage in setting up an Internet portal." A major concern for Internet firms, says Bonnet, is ownership of the customer. Advantex, he says, already clearly owns the right to market to the 500,000 plus Aerogold cardholder members and the 3.8 million Air Canada Aeroplan members.
"[Air Canada and Advantex] have agreed to " launch an online shopping portal, through which the more than 3.8 million Air Canada Aeroplan members can earn Aeroplan Miles on their online purchase from participating e-merchants."
Advantex signed a letter of intent with Air Canada in February. According to the company, the particulars are still in development, but the press release says [Air Canada and Advantex] have agreed to " launch an online shopping portal, through which the more than 3.8 million Air Canada Aeroplan members can earn Aeroplan Miles on their online purchase from participating e-merchants."
The marketing firm has developed technology providing Aeroplan card members with the most effortless route to claiming what the CEO terms their "shopping benefit." He says, "You do not have to go through our portal to earn the benefit. You can go direct to the merchant. Once you register with us and download our e-bar you will be able to shop directly with merchants."
The company revealed March 7 that former SABRE Holdings vice president Greg O'Hara had joined ADX to pilot global initiatives for the company. O'Hara brings Advantex his lengthy contact list, as well as new investment capital, having participated in the company's recent financing. Munger emphasizes that "you could not have found a better person to lead this initiative worldwide." O'Hara's airline contacts could help ADX duplicate the online model it is readying to launch in May.
Advantex stock surged 40% to a 52-week closing high of $4.90 February 7, several trading days after the release of the aforementioned positive quarterly results, and two days before the company announced a deal with Bell Mobility [T.BCE]. Munger says, "The Bell Mobility deal is not so much a revenue generator as it enhances and improves upon the existing program, and it will ultimately save us money."
The agreement provides for CIBC Aerogold cardholders to wirelessly access Internet listings of participating Advantex restaurants, golf courses, inns and hotels via using their Bell Mobility PCS digital phones. Acknowledging that this technology will not be applicable to every user, Munger asserts, "It's a new thing today, but it won't be new 18 months to 2 years from now." The company plans to broaden this online catalogue of participating merchants by inking similar agreements with ClearNet [T.NET.A] / [CLNTF] and Rogers Cantel [T.RCM.B] / [RCN], the other two major Canadian cellular providers.
A March 2 news release hints that the company will consider filing for a NASDAQ listing. Though both Groome analysts realize the US valuation potential for a company with a strong traditional business and a new Internet unit, ADX has been unable as yet to string together 21 consecutive days with a closing share price north of $4.
Bonnet and Rebeiro are currently prohibited by securities regulations from publishing a research report, though they promise to write something in the next month. ADX recently completed a Special Warrant Private Placement with Groome Capital, raising net proceeds of $9.3 million, which will be allocated largely to debt repayment. "We now have the capital necessary to grow the business both domestically and worldwide," Munger stated during a recent interview with StockHouse. In addition he said that he was very pleased with the offering. "We opened it, started the marketing at 4 o'clock and it was oversubscribed by the close of business the next day. I consider that great." |
