Hello Readers,
Remember, in the last Newsletter, when we said that the markets weren’t right, and to expect a sell off that would be scary and short-lived. Gee, it really happened. However, we never thought that that the catalyst would be the Shanghai index, aka the Chinese markets. Well, it’s been ugly, and we all know the carnage has spilled over into our own Current Portfolio; it is of no comfort that we have a lot of company. What’s next? We think a market rebound should occur, real soon. Of concern, of course, are the usual suspects, i.e. terrorism, spikes in oil, etc. Now, add another one: the mechanical problem that the NYSE experienced on February 27, the day of the 500 point slide, may not be quite fixed. If that is the case, we’re in trouble.
Here are the headlines since the last Newsletter about companies in our Current Portfolio. Dates in parentheses are when we first recommended them.
Endologix (ELGX) (1/20/07). End-of-year numbers look pretty good; as does balance sheet. Guidance for 2007 seems eye-popping, but, who knows?
Etrials (ELGX) (1/20/07). End-of-year numbers and 4th QT show good revenue growth and nice paring of losses; balance sheet still looks pretty good.
DeltaThree (DDDC) (1/5/07). Teams with UBIUS to enhance Korea Train Express family card program with calling capabilities. Slates earnings call for March 1, the day we post this Newsletter.
Neose Technology (NTEC) (12/20/06). Gets Swiss approval for Phase II trail for NE-180, a potential treatment for anemia associated with various cancers.
CardioTech (CRTX) (1/5/07). Selling Gish Biomedical unit.
Lantronix (LTRX) (12/5/06). Launches what is says is the first programmable device server to automate remote equipment with real-time event management and reporting.
WJ Communications (WJCI) (12/5/06). Appoints new distributor in Japan for its FP and RFID solutions. FY2006 numbers look good as a whole, but 4th QT was disappointing; balance sheet still looks okay. Sees current quarter’s revenue below analyst’ forecast.
Terabeam (TRBM) (11/5/06). FY and quarterly numbers a mixed bag; balance sheet still appears to be okay.
Immunogen (IMGN) (10/20/06). To present at investment confab on March 1, the day we post this Newsletter.
HealthStream (HSTM) (10/20/06). FY2006 numbers pretty upbeat; balance sheet still looks good. Gets an upbeat notice at the Motley Fool.
TVI Corp (TVIN) (9/5/06). Earnings to be released March 1, the day we post this Newsletter.
Advanced Life Sciences (ADLS) (7/20/06). To present at Susquehanna investment confab on March 1, the day we post this Newsletter.
NTN Buzztime (NTN) (7/5/06). Launches Text2TV Service that it says brings a new level of interactivity to Buzztime sites. Revises corporate bylaws.
Spherix (SPEX) (6/20/06). Adds golf package to its ReserveWorld business line.
02Diesel (OTD) (5/20/06). Enters into $10 million common stock purchase agreement with Fusion Capital, which may not be good for stock price.
Tri-S Security (TRIS) (5/5/06). Subsidiary awarded Miami-Dade contract extension.
Pharmos (PARS) (4/20/06). Names new CEO.
Cytogen (CYTO) (3/20/06). Initiates Phase I trial for radiolabeled antibody for treating hormone-refractory prostate cancer. Presents new clinical data for Prostascint and Quadramet in prostate cancer. Post record product revenue for FY but 4th QT loss was a stinker; balance sheet still looks very healthy.
Adherex (ADH) (2/20/06). Completes $25 million equity funding. Yes, this seems to have hit the bottom of the barrel, but we have always been reluctant to give up on it so long as it can keep raising money. Our main concern, right now, would be a reverse stock split.
Gateway (GTW) (2/5/06). The usual dozen or so news items in which GTW is mentioned.
MIND C.T.I. (MNDO) (2/5/06). FY2006 numbers show nice revenue growth over 2005, but profits slip; balance sheet still looks pretty good. Declares a cash dividend of 20¢ with a record date of March 14.
8×8 (EGHT) (1/20/06). Stock upgraded by Merriman Curhan Ford. CEO to speak at investor conference on March 13.
Castelle (CSTL) (1/5/06). FY2006 revenue slightly down and net income slightly up; balance sheet still looks good.
Digital Angel (DOC) (12/20/05). Signs new multi-year pact with Schering-Plough. To announce FY2006 numbers on March 5.
Westell (WSTL) (10/20/05). To present at Raymond James investor confab on March 5. Stanford Research gives the stock a “buy” rating.
RAE Systems (RAE) (10/5/05). Annual revenue grows by 13%, but losses could be a drag; balance sheet still looks very good.
Zi Corp (ZICA) (8/5/05). Plans $10 million private placement. Settles with Lancer Funds’ receiver.
Innodata (INOD) (7/5/05). Sets earnings call for March 8.
Lime Energy (ELCY.BB) (7/5/05). Several releases; this one is on the “Endangered List”.
Vion Pharma (VION) (5/20/05). Completes $60 million notes offering.
Applied Micro Circuits (AMCC) (11/20/04). To present at Morgan Stanley confab on March 5-8.
Nova Measuring (NVMI) (11/5/04). End-of-year numbers show 60% revenue growth and nice paring of losses; balance sheet still seems okay.
Aviza (AVZA) (10/5/04). Prices secondary offering. Ships Sigma fxP PVD system for bulk acoustic wave manufacturing.
Chordiant (CHRD) (9/20/04). Shareholders ok reverse split.
Management Network (TMNG) (4/20/04). Kaufman Brothers gives the stock a “buy” rating.
Palatin Technologies (PTN) (4/5/04). Presents clinical study with King Pharma. Completes $27.5 million offering.
Socket Communications (SCKT) (3/20/04). Year-end numbers weaken year-over-year; balance sheet cash position seems okay. This is on the “Endangered List”.
OpenTV (OPTV) (3/20/04). Philippines’ Mojo Media Works licenses OPTV Participate System. Company selected by France’s largest cable operator for advanced digital television services.
Our picks for this month are two more Israeli companies trading on the NASDAQ; one is an Internet service provider and the other is a business software supplier.
COMMTOUCH SOFTWARE LTD. (NASDAQ: CTCH) – $1.36. Twelve-month hi-low has been $1.64 – 69 cents. Located in Netanya, Israel, with about 35 employees, this Internet service provider has 71.2 million shares outstanding, $10.77 million in total current assets, $11.99 million in total assets, little debt, and $1.25 million in total liabilities. Institutional ownership is negligible. www.commtouch.com
Yes, and yet, another Israeli company, but when we first looked at CommTouch Software, LTD., we almost turned the page, because, for the last six years, it’s chart has virtually been a flatline, and so was its revenue growth. However, in FY2006, CTCH had a 84% jump in revenues with minor losses, and expects a 60% boost this year with some profits; and, of course, the company has a nice looking balance sheet.
Founded in 1991, and public since 1999, CommTouch develops and provides email anti-spam and Zero-Hour virus outbreak protection for 50 million users in 130 countries. Its solutions consist of Enterprise Gateway and Detection Center. Enterprise Gateway filters messages at the customer organization’s entry point before being distributed to recipients, with added user-level control and secure spam detection services. The Detection Center collects information from multiple sources about new spam attacks; analyzes the input with its patented technology; identifies and detects spam; classifies the data and matches its stored information against queries from spam detection from Enterprise Gateways; and replies to Enterprise Gateways.
CommTouch also offers a solution development kit (SDK) that provides spam identification and spam classification services from the Detection Center to the third-party vendor. This SDK includes anti-virus applications, content filtering solutions, firewall systems, security servers, and other network appliances. The Zero-Hour, mentioned above, is a virus outbreak detection service that blocks malware, including email transmitted viruses. The company has 57 OEM licensing agreements, eight of which were added during the last quarter alone.
In January, CommTouch inked a pact to provide Zero-Hour virus protection to The Electric Mail Company.
For FY2006, ending 12/31/06, revenues were $7.23 million with $190,000 in losses compared to FY2005 revenues of $3.92 million and $4.44 million in losses. For the current FY, the company is forecasting $11.2 million to $12.5 million in revenues and a EPS of 3 to 4 cents per diluted share.
CommTouch seems to have finally found the magic touch on the P&L.
Our 24-month target for the stock is $2.50 to $3.00.
For more information, contact CTCH’s Ron Ela at 650-864-2291; IR@commtouch.com
TTI TEAM TELECOM INT’L LTD. (NASDAQ: TTIL) – $2.55. Twelve-month hi-low has been $5.50 – $2.36. Based in Petach Tikva, Israel, with about 370 employees, this business software provider has 16 million shares outstanding, $42.53 million in total current assets, $53.58 million in total assets, little debt, and $23.1 million in total liabilities. Institutional ownership is around 32%. One analyst gives the stock a “strong buy”. www.tti-telecom.com
And so our penchant for Israeli companies continues, as we add TTI Team Telecom Int’l, LTD. to the Current Portfolio. Not only does it have a decent balance sheet, the company has also been showing good revenue growth for the last three years, while paring its losses.
Founded in 1992, and public since 1996, TTI designs and develops operation support systems (OSS) and business support systems (BSS) for telecommunication service providers. The company claims that its solutions allow service providers to improve quality of present services, offer new services over complex heterogeneous networks, and streamline operations. It provides what it calls Netrac Solutions for both OSS and BSS products. The Netrac products perform and manage various functions, including fault management, which monitors equipment performance to detect and analyze any failures; performance management, which provides traffic analysis and quality of statistics service; configuration management, which manages physical and logical connectivity within the network; and security management, which controls and protects access to data and applications.
TTI’s Netrac products also provide service assurance, service fulfillment, and revenue assurance capabilities. In addition, the company provides site management services, including system management, configuration changes, failure recovery, performance tuning, database and communications administration support, and preventive maintenance activities.
The company has strategic relationships with the likes of IBM, Sun Microsystems, Nortel, Radcom, ECI Telecom, VocalTec, Sybase, and LogicaCMG.
In February, TTI streamlined OSS integration so that its API Gateway incorporates all industry standards, while retaining the option for traditional customized interface. Also, that month, it received a $1.5 million follow-on order from a North American Wireless operator.
For FY2006, ending 12/31/06, revenue was $46.11 million with $3.8 million in losses versus 2005 revenues of $43.22 million and $9.06 million in losses.
TTI has shown some nice improvement to both the top and bottom lines, and we can’t help but think that its stock price could go much higher.
Our 24-month target for the stock is $4.25 to $5.00.
For more information, contact TTIL’s Sanjay Hurry at 201-795-3883; ext. 220; sanjay@tti-telecom.com
Look for the March 20, 2007, Newsletter to be posted on March 16 or March 19.
Thank you,
George