Special Report
March, 19 1999 - ZiaSun Technologies Inc. (ZSUN)
Inner Circle Special Report, March, 1999
ZiaSun Technologies Inc.(ZSUN) NASD OTC BB
Shares Out 10 million
Shares in the Float 2.5 million
Cash $2.5 million
Ziasun Technologies Inc.(ZSUN) is an internet holding company specializing in acquiring leading edge technology companies and specialized internet niche service companies. What makes Ziasun unique is that it has acquired a diversified portfolio of established companies which have established profitable businesses with excellent growth potential.
Many internet related companies such as Netscape, Yahoo, E*Trade, or America On Line have had extraordinary share price growth for investors however despite the meteoric share values of internet stocks, most of these high flyers have yet to make a profit.
Case in point, Amazon's share price is about $126 and the company's EPS is a negative . In fact, over two thirds of the internet companies which are publicly traded have negative earnings.The valuations of these stocks are driven by intense demand for stock ownership due to the blue sky potential for this industry. It's amazing to me that many of these companies which have posted losses quarter after quarter have shown continued share price appreciation.
Ziasun on the other hand, expects to earn 11 cents per share this year with profits of $1,114,000 and in 1999, profits of $2,928,000 with an EPS of 29 cents.
Ziasun's strategy is to acquire undiscovered high potential companies who found success in a competitive market. Typically, these companies started out as small private firms who have been quietly developing leading edge technology or specialized niche market services.
The firms considered must meet Ziasun's strict criteria before they are acquired. These companies must be producing a consistent revenue, exhibit high growth potential, and are highly service oriented which will set them apart from their competitors, and have potential for a merger or acquisition from another firm.
The Internet Industry
The internet is the fastest growing form of communication that the world has ever seen. Forecasters estimate half the population of the U.S. will be on line by 2001. Worldwide, usage will jump from 90 million today to 320 million by 2001. An estimated128 million people will buy goods and services on line by 2001 which represents $400 billion in e-commerce sales.
In the future, the internet will provide information on what is going on in your town or neighborhood much like the city or district newspapers do. In fact, many local news papers and community businesses are providing information online in various communities around the world already. These neighborhood web sites will become more prevalent as statistics show that most people tend to spend money in the areas where they live.
Your local shops and services will therefore be looking for cheap and easy ways to get your attention on line. One prediction is that just over 50% of local businesses will advertise on the web in just a few years time.
ZiaSun's Acquisitions
Aside form your neighborhood merchants advertising on the web, larger corporations will also be in a position to sell more of their goods to a growing international audience.
This brings me to ZiaSun's first two acquisitions which are Asian internet companies that provide a geographic niche market opportunity.
Momentum Internet Inc.(MII) offers a number of products and services which include, online stock trading designed for European and Asian investors who what to trade on U.S. exchanges, a premium e-mail service, international banner advertising, a European/Asian financial website, and a Asian search engine.
Momentum Asia Inc.(MAI) provides a wide range of compatible graphic design, writing, printing, database management, and internet customer service. This company is operating in the low cost incentive rich, free port zones in the Philippines. Consequently, they can offer their services for considerably less money than U.S. internet companies.
America On Line (AOL) established its own internet customer service center in MAI's offices. Together these two companies developed the infrastructure to make the two services work together. AOL is expanding and will eventually have over 40 workers at this location thus saving AOL U.S. $15 million per year.
MAI will provide the technical assistance, software, and staff to handle the huge volume of traffic which AOL will generate. MAI is also negotiating with other high traffic web site providers.
Ziasun will integrate the services of MII and MIA which will enhance each company's ability to service its clients more fully while, at the same time, providing each company added business potential. Momentum Asia will provide help generate design and copy content for Momentum Internet sites. Momentum Internet will offer its clients service packages which Momentum Asia can provide.
Ziasun receives a substantial amount of its revenue from advertising and, since the projected growth rates for advertising expenditures on the web is expected to sky rocket, particularly in Europe and Asia, Ziasun is in a good position to capitalize on this trend.
Outside of the U.S, Europe will spend the most money on internet advertising growing from $105 million this year to a projected $2.8 billion by 2003. Despite Asia's economic owes, ad spending is still projected to be rather healthy at $1.25 Billion in 2003.
The Asian internet market is still in its infancy compared to the U.S. and Canada. The fact that Momentum Asia and Momentum Internet have established themselves as premier site and service providers will attract new clients who are looking for an easy way to set up an Asian sales presence.
Foreign corporations who want to expand their business in Asia will be looking for a internet site which the local population uses and identifies with culturally. The Foreign corporations will also be looking for all the necessary services needed to maintain their sales and marketing ie. e-commerce, order processing, customer service.
Acquisitions under Momentum Internet
There are five other independently operated internet companies which Ziasun has acquired which fall under Momentum Internet's umbrella. These companies offer services and information in niche markets which are large enough to accommodate various competitors due to the enormous size of the market.
Ziasun's IR department has done an interesting snapshot comparison of these companies compared to market leaders in each category:
Market category: Ad Network
ZIASUN owned: www.mediahits.com
Mediahits is a banner network which is supported by Momentum's priority software. This is quickly becoming a powerful marketing tool which can be used to direct visitors to any website for sales ad brand building. Mediahits now has 6,200 hosts and exceeds 10 million impressions per month. It is one of the fastest growing banner networks on the World Wide Web with impressions growing at over 25% per month.
Industry Leader: 24/7 (TFSM) currently trades at about $12 with a negative EPS of
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Market category: Finance Network
ZIASUN owned:www.mfinance.com
This is an on-line financial publication providing comprehensive data on U.S., Asian, and European stock markets. Information on finance and investments is also provided and is geared toward European and Asian investors. Momentum finance is being upgraded and is rapidly becoming a world class resource for financial and investment information. Their revenue is derived from subscriptions and advertising. Regular advertisers include Barclay's International Funds and the Far Eastern Economic Review.
Industry Leader: Wall Street City which is estimated to be worth $30 million.
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Market category: Navigation Services
ZIASUN owned:www.search dragon.com
This is a search engine and business directory specifically designed for the Asian market covering Hong Kong, Indonesia, Macau, Malaysia, the Philippines ,Singapore,Taiwan, and Tailand. This is an ideal medium for advertising aimed at the Asian market.
Industry Leader: Yahoo which currently trades in the $130 range with a negative EPS of . Yahoo's stock price has increased 560% in the last 12 months.
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Market category: Web Stock Trades
ZIASUN owned:www.swiftrade.com
This is an on-line stock trading system for overseas investors who want to access U.S. stock markets.
Industry Leader: E*Trade which recently sold about 27% of the company to Softbank for a reported $400 million. E*Trade's share price is about $18 with an EPS of 12 cents.
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Market category: E-mail Service
ZIASUN owned:www.pinmail.com
This is a web based premium e-mail service which is ideally suited for the frequent business traveler or users who want their e-mail in a easy to access central location.
Industry Leader: Hotmail which was recently purchased by Microsoft for $400 million.
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Conclusion
Market watchers are of the opinion that the Asian internet market will be growing at a faster pace than the North American market's phenomenal growth rate. Larger North American internet companies will be looking at designing their portal sites for this growing Asian and European markets.
Consequently, modifications will have to be made to their sites to adapt to the local language and culture. Alliances with established internet companies will allow for a smooth transition into these markets thus allowing for language translation and cultural identification.
Yahoo has already launched 12 unique versions of their site around the world. As more large internet companies expand into foreign markets, the greater potential for acquisitions or lucrative partnerships such as Momentum has made with AOL.
Ziasun is well positioned to take advantage of not only an expanding internet market but also the potential for its subsidiaries to be acquired.
With Ziasun's positive EPS projected at 11 cents this year and 29 cents for 1999, I would say the potential for the share price increasing concurrently with earnings seems logical.
Technicals:
ZiaSun seems to be breaking out and establishing a new high price above $5.25. I would suspect the stock will soon resettle and form a new base next month. In the mean time, call the company for their investor package and to get on their mailing list.
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