The Doppler Report
Initiates Investment Coverage With A Buy Recommendation for:
Triden Telecom, Inc. (?TRIT? ? OTC:BB)
613 Chase Drive, Tyler, Texas 75701
Phone: (903) 581 - 2040 Fax: (903) 581 - 2272
Website: tridentelecom.com
A publicly-traded telecommunications company focused on acquiring profitable private firms that will be spun off as fully-reporting, well-financed OTC-BB companies in which TRIT retains voting control
Triden Telecom is recommended for aggressive investors seeking both dividends (from TRIT subsidiaries spun off as public companies) and potentially-significant capital appreciation resulting from its telecom businesses over the longer term
TRIDEN TELECOM IS AN ACQUISITION-ORIENTED TELECOMMUICATIONS COMPANY BUILDING A PORTFOLIO OF PUBLICLY-TRADED SUBSIDIARIES
As an emerging telecommunications company, Triden Telecom?s (OTC-BB: TRIT) mission is to identify and acquire privately-owned telecom companies, and create a portfolio of publicly-traded business subsidiaries. The company is unique in its goal of wanting to have all of its assets (subsidiaries) tradable in the public equity markets.
What TRIT specializes in is assisting the privately-owned businesses it acquires in raising capital, facilitating public listings and providing each business entity with a full range of centralized, cost-effective management services; in return, Triden Telecom receives on-going management fees and a significant equity stake in each subsidiary.
Triden Telecom?s management is firmly committed to paying a 5% stock dividend to its shareholders as each subsidiary is spun off as a fully-reporting OTC-BB company. The first dividend (in shares of the soon-to-be listed Z-Com, Inc.) is expected to be paid out this spring.
TRIT IS THE ONLY TELECOM COMPANY THAT IS CURRENTLY SERVING AS AN ?INCUBATOR? FOR PRIVATE COMPANIES WANTING TO GO PUBLIC IN TIMELY AND COST-EFFECTIVE MANNER
Triden Telecom?s business strategy is based on the belief that in the United States and other countries that there are numerous privately-owned telecommunications companies that have stagnated due to the lack of adequate expansion capital. Typically, bankers are hesitant to loan money to these companies because of their size; similarly, private equity capital is scarce because of the lack of liquidity, even though the companies TRIT is targeting have competent, entrepreneurial management, strong balance sheets and substantial growth potential.
How Triden Telecom?s business plan works is that TRIT will acquire a telecom business (although the Company will diversify into other areas when greatly-undervalued situations present themselves), and roll it into a newly-created subsidiary of Triden Telecom, with TRIT retaining 51% of the sub, and the original business owners / investors, 49%. TRIT then nurtures and incubates the newly-acquired business as it transitions to becoming a public company. In return for fees, TRIT provides centralized management and administrative services (financing, legal, accounting, etc.) while also preparing the subsidiary to go public (audited financials, SEC filings, etc.) through an RTO into a fully-reporting OTC-BB vehicle. Triden Telecom also assists its subsidiaries with 504 offerings prior to going public, as well as subsequent financings (SB-2, Reg. A, etc.)
This is truly a win-win approach for everyone! Private companies that join the TRIT team are assured of adequate equity financing for expansion of their business, as well as a successful public listing. For Triden Telecom, every company that it acquires is essentially a future IPO, and by dividending part of each spin-off to TRIT shareholders, not only do TRIT?s shareholders get a piece of the action, but the subsidiary is assured of having enough shareholders of record to facilitate the full OTC-BB listing.
The beauty of this system is that it can work equally well in a bull or a bear market. Once the TRIT system is proven (which should be the case once Z-Com goes public in the next month or so), there is no reason why Triden Telecom cannot be doing three or four deals a year, each potentially adding US$0.25 to US$0.50 per share in net asset value. On a stand-alone basis, this may not seem like a lot in a market dominated by .com deals, but if TRIT can add US$1 to US$2 per share in net asset value each year, this added value should definitely be reflected in Triden Telecom?s share price.
The driving force behind Triden Telecom is Robert S. Hardy, the Company?s President & CEO. Mr. Hardy is a skilled entrepreneur with an excellent reputation as a ?rainmaker? in the small-cap public company market place. His ability to identify, analyze and properly structure mergers and acquisitions within public companies will be critical to the continuing success of Triden Telecom.
SOME BIG, PROFITABLE TELECOM ACQUISITIONS ARE IN THE WORKS, AND NEWS ON THESE DEALS IS EXPECTED TO BE ANNOUNCED OVER THE NEXT FEW WEEKS
Triden Telecom?s management has confirmed that TRIT is close to completing the acquisition of three profitable, privately-owned, U.S. telecommunications operations, and that announcements regarding these acquisitions are expected within the next 30 days. Collectively, these three telecom companies are reportedly generating about US$8 million in revenues, and roughly US$2.5 million in pre-tax earnings.
TRIT plans to acquire the largest telecom company for about US$6 million in cash (Triden Telecom?s investment bankers just about have the financing for this deal wrapped up); the other two deals will be done on a stock-swap basis.
The first telecom deal, announced on March 23rd, involves the merger of Total Telecommunications Partners LLC into a new subsidiary of TRIT, which Triden Telecom will retain 75% ownership of.
Total Telecom is a telecommunications management company with agreements in place to provide services to the property portfolio of U.S. RealTel Co. (OTC-BB: USRT) using the technology of Sphere Communications (http://www.SphereCom.com/). Closing of the merger is expected within 90 days. We understand that news is expected shortly concerning a major financing to fund the series of telecom deals that TRIT has in the works.
We believe that dilution to current TRIT shareholders from these three deals should be fairly minimal, and that once completed, the three telecom businesses can be expected to generate significant earnings that the broader markets will recognize, and eventually value TRIT shares accordingly (based on comparable multiples for telecom businesses).
MANAGEMENT EXPECTS TO ACHIEVE FULLY-REPORTING STATUS BY MERGING TRIDEN TELECOM WITH ANOTHER OTC-BB LISTED COMPANY
Triden Telecom?s filing deadline is in April, and to achieve fully-reporting status in a timely manner, we understand that management plans a reverse merger of TRIT with another OTC-BB company that is fully-reporting. Management expects to make an announcement within the next few weeks regarding the merger and re-structuring.
Once TRIT has become fully-reporting, the company?s new website will be brought on line, and the complete audited financials will be available for review.
A LITTLE BACKGROUND ON Z-COM, INC. ? TRIT?s FIRST DEAL?.
In June 1999, Triden Telecom acquired Marfitech Ltd., a Montreal-based Internet start-up company that was developing an on-line travel portal. In business since 1975, Marfitech has a long track record of international business consulting, helping clients doing business in developing countries, as well as undertaking feasibility studies for various international agencies such as the World Bank.
A shift in business focus into multimedia production services (and its desire to capitalize on 25 years of working in exotic, far-away countries) led Marfitech to develop a subscription-based, on-line travel portal that, once completed, should be the most complete source of information for the travel industry, covering all hotels, restaurants, activities, local contacts, history, geography, culture, local customs and more.
In November 1999, Triden Telecom completed the acquisition of Virtual Enterprise, Inc., a company that owns and operates the Virtual Island on-line casino ( virtualislandcasino.com ). TRIT then created a new 51%-owned subsidiary (with Virtual Enterprise shareholders owning the remaining 49%) called ?Z-Com, Inc.? that holds the Marfitech and Virtual Enterprise assets.
TRIT?s 51% STAKE IN THE VIRTUAL ISLAND CASINO IS A SIGNIFICANTLY UNDERVALUED ASSET THAT IS ABOUT TO BE SPUN OFF INTO A NEW PUBLIC VEHICLE
Right now, Z-Com?s Virtual Island Casino offers players eight different casino games (roulette, keno, blackjack, slots, etc.) in four different languages (English, French, German & Spanish), and is the only on-line casino in the world that offers 24 / 7 on-line support. Other unique attributes of the Virtual Island Casino are a blackjack table where you can play three hands simultaneously, and payout rates that are the best on the Internet, and well above conventional casinos.
Besides the fully-licensed casino operation, Virtual Enterprise owns a collection of proprietary, cutting-edge, on-line gambling technology (in at least 9 different games) that has been developed in-house. We have been told that Z-Com is working on second-generation gaming software that will surpass anything on the market today ? for example, a multi-player blackjack table, where gamblers can play with friends or people from around the world.
What sets Virtual Enterprise / Z-Com apart from most other Internet gambling companies is that they have the capacity to license out their technology or develop other on-line casinos on a turnkey basis (the going price for these is about US$1 million). Presently, Z-Com is in serious negotiations with two companies interested in such arrangements, and news could be forthcoming in the next several weeks.
Z-COM & THE VIRTUAL ISLAND CASINO SHOULD GO PUBLIC IN THE NEXT 30 TO 60 DAYS
Where things will really start to get interesting for TRIT shareholders is going to be when Z-Com becomes a publicly-trading company on the OTC-BB.
First of all, TRIT shareholders of record (the date has yet to be set) will receive shares in Z-Com as a dividend. We understand that 5% of TRIT?s 51% stake in Z-Com will be dividend out.
TRIT will retain a 48.45% ownership position in Z-Com; based on Z-Com?s estimated 15.75 million shares outstanding at the time it goes public, and a US$1 / share initial trading price, TRIT?s equity stake in Z-Com will be worth about US$7.6 million, or about US$0.33 per TRIT share (based on 23 million TRIT shares outstanding).
Between the 504 offering in progress, and a planned SB-2 registration and financing later this year, Z-Com expects to raise sufficient new capital to aggressively market the 2nd generation Virtual Island Casino. Z-Com?s management believes that enough money will also be raised for the company to complete development and marketing of the travel website (which, longer-term, could be just as profitable as the on-line casino).
HOW MIGHT THE EQUITY MARKETS VALUE Z-COM ONCE IT BEGINS TRADING ??
Aside from the big telecommunications deals that TRIT is about to close on, the big question in everyone?s mind is ?what is Z-Com worth??
Well, because TRIT and Z-Com are currently in an SEC-mandated ?quiet period? prior to the IPO, there is not a whole lot of direct information available for estimating a fair market value for Z-Com. However, if we look at some comparable Internet gambling companies, we can get a rough idea of what Z-Com, with a fully-operational on-line casino and proprietary gambling technology, might be worth (and this method attaches zero value to either the travel website or the Marfitech assets, both of which offer significant upside over the longer term).
We believe that the average market capitalization for Z-Com?s peer companies is on the order of about US$70 million. However, of all these comparable companies, only three firms (SNMM, MNTG & ISWI) are similar to Z-Com in that they also possess proprietary technology; the average market cap for these three companies is about US$100 million. For the newly-listed Z-Com, we believe that ISWI and MNTG are probably more comparable.
Points in favor of a higher valuation for Z-Com include the fact that most Internet gambling companies are in the development stage, and have yet to turn a profit, whereas Z-Com?s Virtual Island Casino is up and running, and just about at break-even in its current beta state (with no marketing efforts to date). Also, Virtual Island?s competitors typically run uni-language sites (English only), whereas Z-Com?s site is multi-lingual (4 languages) and has a much larger potential audience.
Based on this, we think one could reasonably say that Z-Com, as investor awareness increases, could eventually justify a market cap on the order of US$40 to US$60 million, on par with other companies owning proprietary gambling technology and operating on-line casinos. However, given the US$1 / share price for the 504 Offering now in progress, Z-Com will have a market cap of less than US$16 million once it is public, based on 15.75 million shares outstanding.
In terms of Z-Com?s potential impact in TRIT?s share price and asset value, lets assume that over the course of the year, Z-Com shares move into a comparable valuation range as ISWI and MNTG (US$40 ? US$60 million). At a US$40 million market cap for Z-Com, TRIT?s 48% stake would be worth over US$19 million or about US$0.84 per share.
Therefore, at current prices, TRIT would be valued at only a modest premium over the fair market value of its Z-Com holdings. This would be real, substantiated value, and not smoke and mirrors. The Virtual Island Casino site is out there for everyone to see, and Z-Com?s audited financials will be available once the company begins trading. Bottom line for TRIT, the Z-Com spin-off / IPO will generate about US$0.33 / share in net asset value once the stock goes public, with the potential to increase by several orders of magnitude as investors and the equity markets become more informed about Z-Com.
WITH MANY, MANY DEALS BEING EVALUATED, THE FUTURE LOOKS VERY BRIGHT FOR TRIT
Steve Hardy, Triden Telecom?s CEO & President, tells us that TRIT has about 50 deals currently being reviewed, representing exciting business opportunities in the United States, Canada, Europe and Latin America. TRIT?s management also has access to seven clean, fully-reporting OTC-BB shells that these privately-owned businesses could be spun off into.
Following the telecom deal, there are two other potential opportunities that Triden Telecom is taking a very close look at. One deal involves a privately-owned mortgage company, with a US$50+ million loan portfolio and offices coast-to-coast. The other deal involves a profitable chain of hotels scattered around the country. Subject to due diligence and financing, we believe that there is an excellent chance that the telecom ventures and at least one of these other new deals will close before years-end.
We are very comfortable with the core competencies and track records of Triden Telecom?s management team, and are comfortable that this group can execute their business plan. TRIT?s performance during 1999 demonstrated that the company is able to perform ? two tangible deals (Marfitech & Virtual Enterprises) were announced and closed - no delays, just results.
Lastly, we believe that TRIT has an excellent business plan, and that at today?s prices, the company is undervalued based just on the imminent spin-off of Z-Com. Should Triden Telecom be able to conclude the three telecom deals on favorable terms, then the stock price will likely appreciate significantly from current levels.
TRIDEN TELECOM?s SHARE STRUCTURE & RECENT TRADING RANGE
Total Shares Outstanding: Est?d @ 23 million
Public Float: ~ 4.6 million shares
52-week Trading Range: US$0.01 (low) by US$1.63 (high)
Last Trade (March 23, 2000): US$1.19
Triden?s officers, directors and insiders collectively own / control about 80% of the stock. Management estimates that several thousand individual investors and a few small institutional investors own and trade the estimated 4.6 million shares in the public float. Presently, TRIT has minimal debt, and close to US$400,000+ in working capital.
For investors seeking additional information on the Company, TRIT?s discussion threads on Raging Bull and SI can be accessed at ragingbull.com and Subject 29173, respectively.
For more information, please contact:
Steve Hardy, President & CEO
Phone: (903) 581 - 2040
E-mail: triden@iamerica.net
DISCLAIMER ? PLEASE READ
The Doppler Report (the ?Publisher?) is not a Registered Investment Advisor or a Broker / Dealer. Readers are advised that this report is issued solely for information purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy. The Publisher?s full disclaimer may be viewed at: dopplerreport.com
The Publisher has independently prepared this report, drawing upon a range of public news and information sources, as well as data and opinions provided by Triden Telecom, Inc. (?TRIT? or ?the Company?). Prior to publication of this report, the Company reviewed and approved the contents hereof and unless otherwise noted, the Publisher has not independently verified the Company?s representations. Any opinions expressed in this report are statements of judgment as of the date of publication (23 March 2000) and are subject to change without further notice.
The Publisher cautions readers that this report may contain forward-looking statements made pursuant to the ?Safe Harbor? provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risk and uncertainties, including, without limitation, continued acceptance of the Company?s products, subscriber growth, product demand, competition, and other risks and uncertainties.
The Publisher has not received any compensation from the Company for its efforts in researching, writing and presenting the information contained herein. The Publisher, its owners, employees and consultants may profit in the event the shares of the Company increase in value; these positions may be liquidated from time to time even after Publisher, its owners, employees and consultants have made positive comments regarding the Company.
TRIT is not a fully-reporting company with the SEC. At such time as the Company has filed a registration statement with the SEC, readers would be able to review Triden Telecom?s SEC filings at freeedgar.com and searching the EDGAR database.
¸ 2000 The Doppler Report |
