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Pardon my ignorance but if it is such a good company why would 2
directors sell 4.5 million shares in the last month?
-------Original
Message-------
Date: Wednesday, 31
March 2004 11:55:46 a.m.
Subject: [sharechat]
MUL - MULTIEMEDIA PROFILE AS AT MARCH 31, 2004
Good morning to all,
Re: MUL - Multiemedia Profile as at March 31,
2004
I was recently asked for information on MUL. There
was quite a bit of work involved so it makes sense to share
with all.
To-date MUL has been viewed as a
short-term 'trade' rather than an investment, causing
price fluctuations, however; MUL's profile is rapidly evolving to
that of a longer term high growth investment as time
progresses and achievements are consistently notched up.
In February 2004, MUL announced plans to
acquire IP Access International, then abandoned plans as their direct
relationships with International satellite vendors were growing stronger
and their need for external assistance was diminishing with
employees gaining increased skills - or in other words, the
value equation for this acquisition tipped to more
favourable outcomes from non-acquisition. Note none of the
summary points below was dependent upon an MUL acquisition and
therefore; has no bearing on the profile as presented.
Also in February 2004, MUL secured sponsorship
from Bank of New York to establish a Level 1 American
Depository Receipt (ADR) Program with the ultimate intention of
trading on the NASNZQ exchange.
In March 2004, Standard & Poors added
Multiemedia to their ASX300 listing, no doubt because this company
is set to do extremely well this year and beyond. Standard and Poors
listings are utilised by Investment Fund Managers so now is a
good time to review MUL's profile as they begin to attract
interest from longer term holders (which will
increasingly stabilize the SP).
It is no secret that there is some higher
risk associated with MUL's high total share volume but, in
consideration of this; MUL is managing the current market situation
far better than most others with far lower share volumes,
and this is a great omen for its future SP growth. For a stock
with this type of potential, it is not uncommon for demand to outstrip
supply, resulting in a climbing SP. As a comparative example;
Oxiana's issued share capital is 1,184,509,930. Similar to Oxiana (SP growth >350% over 2
years); the share capital will be of decreasing concern as
MUL's potential is realised (which in view of their
profile, is likely to occur much faster than with
OXR).
I have extracted info from
Findlay & Co Stockbrokers Limited -
Corporate Research Report - August 2003 which can be viewed in its
entirety on Multiemedia's website. Parts of this report, eg;
sales contracts; have been updated with ASX announcements to-date, and
I have included some of my own notes*.
I think you will agree,
the report presents compelling reasons to view MUL as a longer term
high growth potential investment.
1) Forecast Earnings & Yield
2004-2006
a) NPAT A$m
2003 - $1.3m - yield o%
2004 - $34.0m - yield 13.3%
2005 - $82.0m - yield 32.2%
2006 - $139.0m - yield 54.5%
b) Multiemedia
commenced commercial satellite operations on October 1, 2003 with a
5-year contract to increase from 1 to 3 transponders. Each transponder
generates A$100m in revenues at current prices. In FY2004 the rapid
deal flow from Multiemedia’s superiority is expected to generate
operating revenues of A$100m including 70% from space & end user
equipment.
c) We
value Multiemedia @ 10-15x FY2004 earnings forecast at A$34m implying a
valuation of A$340-510m representing 37-56c per share using current
issued capital of 910m securities. We have assumed a dividend payout
ratio of 25% if the business plan is
realized.
d) Multiemedia achieved pre-launch letters of intent
revenues of A$22m after 45 days in FY2004 implying an annual revenue
achievement in FY2004 of A$183m.
e) We forecast a transponder would take 1 year to sell
such that by FY2006, Multiemedia could have fully sold its 3
transponders of capacity.
f) *Initially,
costs incurred in establishment of infrastructure for this type of
service are very high, however; costs will decline and profit
margins will continually improve.
g) Additional
Revenue Sources: MS SPLA Licensing Program, Tracstar
Antennaes
h) MUL -
Multiemedia - Overview of Half Year Report to 31 Dec - released to
market Friday, 27Feb,
2004
Negatives:
- Revenue $8,202,000 (down from same 6mth period
Jul-Dec 2002 - $14,505,000)
- Net Loss $4,558,000 (up from same 6mth period Jul-Dec
2002 - $518,000) - Loss in in line with the Board's expectation of
loss for this period Jul-Dec 2003.
- Cash burn rate - associated with sales and
development work in progress
Positives:
- Current Assets UP since June'03: $14,923,000
($4,101,000 - June 2003) ------------ *NB Revenue Genrating
- Non-current Assets UP since June'03: $3,651,000
($2,026,000 - June 2003)
- Curent Liabilities DOWN since June'03:
$3,833,000 ($6,893,000 - June 2003)
- Non-current Liabilities DOWN since June'03: $296,000
($369,000 - 2002)
- Board is confident work in progress will see a
substantial turnaround by June 30th. (NB Refer positive
announcements since 31 December.)
- 1,376% increase in assets over liabilities.
- Cash at bank (as at Dec03) - $11,000,000
- Disposal of non-core businesses has been
finalized.
Supporting Info:
- Businesses: Both of the following synergistic
businesses have been branded for global recognition in conunction
with independent marketing and advertising agencies.:
High speed satellite broadband: NEWSAT -
Newcastle based teleport being developed into a world class facility
with the capacity to initially provide hi-speed broadband connectivity
to 60% of the world's population. Customers secured in Aust, PNG, Timor,
Iraq, Iran, Bahrain, Saudi Arabia, Lebanon to-date.
Technology Distribution: MTD - For the
Jul-Dec'03 period, this segment contributed the majority of
revenue.
h) Sales Contracts and Licensing
Fees:
$ Transcom ISP in UK for A$15m over 3 years for 1,000
sites
$
SP Telecom in Australia (not
disclosed)
$
Australian Private Networks for A$1m
$
Microsoft SPLA Licence worldwide with sales potential of A$150-$200M on
a 2-3 year time horizon
$
People Telecom in Australia (not disclosed) with 16,000
customers
$ US Military
- US Agency for International Development - A$5M (to possible
A$40M)
$ WaveCall, the world's leading provider of Maritime Satellite
Voice and Data Services selected Multimedia's NewSat services to
exclusively deliver broadband to ships at sea within Aust coastal waters
utilizing SeaTel's state of the art antenna system. Service available
during first quarter 2004
$ Airworks -
significant contract signed with Airworks on behalf of major Airworks
client, Woolworths - based on satellite broadband to 700 Woolies stores
- includes additional hardware sales
opportunites
$
MS Licensing - $ unknown - a typical 1st Tier MS distributor in
Aust records sales of A$150-A$200m in annual revenues and can be
sub-licensed to resellers ..... NB MUL's SPLA licence is
worldwide.
2) Key Points - Market, Market Share,
Forecast Growth & Earnings:
a) Data &
Internet Solutions in Australia including ISDN have an estimated market
of A$6 billion.
b) The
bandwidth capacity in Australia provided by cable and satellite combined
is estimated to have increased by +655% to 2,100 Gbits/s during
2000-2003.
c) Revenue
forecasts for the period 2004-2006 for Multiemedia
reflect market shares of 2% - 8% with 1 satellite transponder in 2004
rising to 3 transponders in 2006.
d) Additional
Market Growth Factors: Sadly, terrorism is good for MUL's business and
there is a definite 'pull market' factor as evidenced by the US Military
deal in Iraq (see Item 3g below)
e) Related
Products: MS Licensing - The SPLA program of Microsoft is a new
application software licensing agreement allowing the licenceholder to
licence Microsoft's products on a monthly subscription basis to end
users. The end customer may choose to allow the SPLA Program
licenceholder (Multiemedia) to become the licensee of the MS software by
acquiring licences through the Program. (In 2003 Microsoft won
a 6-year US$471m software supply contract for the US Army's 494,000 PCs
involving software reseller Softmart, a key endorsement for its efforts
to improve the security of its software. The US Government are upgrading
IT systems throughout the security services as part of its 'war against
terrorism' and the increased focus on national
security.)
f) Related
Products: Tracstar Systems partnership (America's leading developer of
auto self-deploying antennaes) to rebrand (rebranded to NewSat) and sell
its products in the 60 countries covered by the NSS6 beam.
Mobile broadband is an emerging giant worldwide and Tracstar technology
is deployed in organisations such as US Dept of Defence, CBS, Homeland
Security and EMS Services. Tracstar's antennaes are utilised
in Broadcast, Emergency Services, Security, Defence, and
Telemedicine industries. NewSat customers will have the ability to
deliver internet, VoIP (voice over IP), and other broadband related
services into regions which until recently were unable to
utilise these communication mediums. Mobile broadband will be
possible in any area capable of sustaining a 4WD vehicle, eg; medical
emergency in jungles of Indonesia, filming in remote locations, etc.
NewSat technology will therefore be capable of delivering instant
communications via notebook to any country in the
world.
3)
Operational/Competitive Advantages:
a) Comparative
Downlink speeds:
Multiemedia - 60,000 kbps (100%
coverage)
Optus - C1 - 35,000 kbps (100%
coverage)
iPStar 1 - 8,000 kbps (70%
coverage)
ADSL - 256 kbps (70%
coverage)
Cable 256-2000 kbps (30%
coverage)
ISDN - 1,920 kbps (96%
coverage)
Videoconferencing
requires up to 784 kbps.
ADSL
only within 3.5 kms of telephone exchange.
b) Technology: Multiemedia claim a
superior VSAT terminal infrastructure for 2-way communication using PCMA
(paired carrier multiple access) reducing bandwidth by 50% on the
downlink space segment cost for the service. (The satellite hub
& terminal equipment infrastructure will be provided by USA-based
ViaSat to Multiemedia. ViaSat are up to 5x faster @ 1,650 kbps compared
with competitors Hughes @ 250 kbps and Gilat @ 300 kbps.)
c) Technology: The characteristics of NSS6 provide Multiemedia with a
competitive advantage over all other satellite broadband service
providers because Optus, Telstra, Telecom NZ all use Optus’ satellites
with access to only one spot beam for 2-way uplink/downlink bandwidth
speed - compared with 6 by
New Skies’ Inc’s (Multiemedia’s) satellite
NSS6.
d) Technology: For Optus, Telstra,
Telecom NZ to compete with Multiemedia’s satellite broadband hub and
infrastructure equipment will need to be upgraded at the service
providers’ cost.
e) *Footprint: Footprint is a term
used to describe satellite area coverage. Multiemedia's
'footprint' through NSS6 covers the Asia region with connectivity
to Europe & USA. 15 transponders have been allocated to each market;
MIddle East, Indian sub-continent, S-E Asia, Australia, China, N-E
Asia. 6 spot uplink beams, per transponder (each covering 650
klms) target metropolitan cities in coverage areas:
China: Bejing, Tianjin, Hong Kong, Shanghai,
Wuhan
Japan: Tokyo, Osaka
Korea: Korean Peninsula
Taiwan: Taiwan
Australia: Sydney, Melbourne,
Adelaide
India: Delhi, Mumbai, Chennai,
Bangalore
*Now that's a footprint!!!
Satellite broadband is also well-suited
to Australia's (indeed the world's) vast regional areas where cable and
ADSL are either not available or too slow. Consider in terms of the
percentage of regional businesses (mining, etc), public services
(schools, medical, etc), that have been underserviced and
overlooked for far too long. (For example; SP Telecom has
already established a hub and terminal agreement with MUL to
service customers seeking high speed broadband internet in regional
NSW.) Then of course there is the
potential for worldwide applications, such as MUL's
deal with the United States Agency for International Development
- initially worth $5 million to Multiemedia, it could be
worth up to $40 million as the group intends to roll out
additional sites across Iraq as part of its post-war enforcement and
governance program.
f) Technology: C and Ku band frequencies are
relatively congested providing Ka band with an advantage of bandwidth
and speed. Ka band offers smallers terminals than Ku band. Importantly
for Optus' newest satellite, C1 launched in 2003, Loral have entered
Chapter 11 in the USA for financial restructuring, and for AsiaSat's
satellites 3 & 4 launched in 1999 ad 2003 Boeing have decided to
withdraw from the manufacture of commercial satellites to focus on
military applications. This implies New Skies have the youngest fleet
with the best technology and configurations for the future with the
satellite industry analogous to the airline industry from a fleet
perspective.
g) Market: Re US Military multi-million
dollar deal - Tuesday, 11
November 2003 - While the deal is initially worth $5 million to
Multiemedia, it could be worth up to $40 million as the United States
Agency for International Development intends to roll out additional
sites across Iraq as part of its post-war enforcement and governance
program. Multiemedia Chief Executive Adrian Ballintine
said the wireless two-satellite service would allow the US military to
communicate from anywhere in the Middle East. “There is only one service provider in the region providing
any form of satellite service, and that is quite old. The US military
will now be able to set up sites across Iraq and simply, by pointing
their dish in the right direction, will have Internet and communication
service equivalent to anywhere in the world,’’ he said. ... ' + more
promising news - view complete media release on website.
' ... Mr Ballintine said
Multiemedia had not planned to activate the satellite beam over the
Middle East/Africa until next year because of the cost involved.
“However, with the US military and other customers we signed in Dubai,
we have brought it forward 12 months earlier than anticipated.’’ ... '
The significance of this statement is in the
'pull market' factor (as opposed to a 'push market' factor), that is;
this scenario is indicative of a large untapped market
demand that caused Multiemedia to bring forward plans by 12
months. A 'pull market' factor is extremely rare and therefore; highly
significant.
h) Product: The Tracstar partnership
(antennaes) was prompted by an influx of enquiries from end-uers - CFA,
Police Departments, Ambulance Services, local news broadcasters,
and numerous other internationally based support services.
This NewSat initiative is the first commercial <$30K, immediately
available mobile solution.
i) Product: Through the addition of
products/services, eg; MS SPLA Program, Tracstar; Multiemedia has
added another dimension to their business and appear to
be progressing toward a 'full service' business, or if you
like, a 'one stop shop'.
h) And finally, MUL have new staff on
board with skills to drive both businesses.
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