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Alltel Corp. (NYSE: AT - news) was up 1.91% to $57.71 Tuesday on news of an agreement calling for Norstan to develop a plan to unify Alltel's contact center operations. Under the terms of the contract, Norstan will both build and implement Alltel's new system. Alltel said it has more than 10 million communications customers in 24 states and provides information services to telecommunications, financial and mortgage clients in 55 countries and territories.
Sprint PCS (NYSE: PCS - news) was up 1.56% to $26.00 Tuesday following news on Sept. 25th that for the third year in a row it has been ranked number one in the Telecom Industry and in the top 10 overall in the Information Week Top 500 IT Innovators. Each year the magazine features the ``best of the best'' innovators of information technology (IT) companies overall, and by industry.
But where can the smaller investor make money in this industry now? Our next recommendation, Cirus Telecom, Inc. (OTCBB: CTLE - news), could be our best pick this year. (CTLE) was up 9.51% Tuesday, after news last week that its calling centers were experiencing a 50% increased demand.
The OTC Investor's Edge (www.otcinvestorsedge.com) has compiled impressive stats with this year's recommendations. Our last pick, New Millennium International, increased over 163%. Our prior pick, Global Seafood Tech, increased 251%.
For the past month our analyst has been tracking (CTLE), and when disaster hit on Tuesday (CTLE) was upgraded to our top recommendation. (CTLE) is rated strong buy.
Proprietary analysis shows (CTLE) is at the beginning of a major advance - it has successfully tested the 50-day moving average twice.
The stock has made a textbook 50% retracement and is now returning to an upward trend. (CTLE) will resume its advance to new highs, continuing to the $2.83-$3.08 level, but if the short-term directional indicator remains strong it will go higher.
The Company
Cirus Telecom, provides telecom-switching services to distributors of telephone cards, domestic and international. What sets (CTLE) apart from similar telecoms are its numerous multiservice telecom centers. These centers provide communication stations where calls are made to any domestic or global destination using Cirus Telecom's Switching Platforms. These telecom centers use approximately 2 million-plus minutes per location, and charge approximately $.20-$.55 per minute depending on destination.
Recent Events
Due to the World Trade Center (WTC) tragedy, the telecom industry has been overwhelmed. Several telecoms were located directly in the WTC, or in the vicinity of the fallout. (CTLE) was fortunate to have its facilities split between two locations, and neither was affected. The Cirus network is fully functional and intact. The other carriers that were down were automatically overridden and calls were detoured to alternate systems such as the Cirus network.
The phone card industry has been tremendously affected as well. Many card carriers still cannot provide service, and this is expected to continue for some time. Suddenly, new, profitable markets have opened for (CTLE), because Cirus calling cards were unaffected.
Additionally, there has also been a flight to Cirus calling centers, making up for the shortcoming of other phone card companies and the cellular telecom infrastructure in general.
Throughout last week, the Cirus Calling Center traffic increased by 50%.
Updated Projections
According to management, gross margins are as high as 58%, with net margins of approximately 26%. This is significantly higher than competitors that do not own and operate their own switching facilities, and also significantly higher than the larger telecom companies that do own their own switching facilities yet sell minutes on a wholesale basis only.
To date, (CTLE) has existing contracts totaling $41 million, and has targeted 200 locations which meet the demographic qualifications for its multiservice calling centers. Each calling center should average approximately 2 million minutes per location. Although with the recent events usage is averaging approximately 2.5 million minutes per location. At an average retail charge of $.38 per minute, call center revenues will total approximately $170-plus million. At a 26% net margin, pre-tax income will be $44.2 million. This does not include the revenues from leasing its transmission facilities, or the revenues from its retail and wholesale, prepaid sector. Overall, we are projecting revenues to exceed $200 million per year by early 2003.
Revised Valuations
If (CTLE) only capitalizes on its projected revenues from calling centers and existing contracts, revenues for early 2003 will be approximately $211 million. At a 26% net margin for the centers and a 6% net margin for leasing transmission facilities - and its wholesale, prepaid business - pre-tax earnings would come in at approximately $46.3 million and after-tax earnings would be approximately $33.3 million or $0.53/share. At a moderate 30 P/E, the stock would be worth $15.90/share.
Symbol CTLE
Shares Outstanding 61,960,890
Float (est.) 2,000,000
52 Week High/Low $2.44-0.25
5 Month Target $6.93
OTC Investors Edge (OTCIE) publishes reports providing information on selected companies that OTCIE believes have investment potential. Subscriptions are $639.00 per year. Call for a free trial. OTCIE is not a registered investment advisor or broker-dealer. This report is provided as an information service only, and the statements and opinions in this report should not be construed as an offer or solicitation to buy or sell any security. OTCIE accepts no liability for any loss arising from an investor's reliance on or use of this report. An investment in CTLE is considered to be highly speculative. OTCIE's analyst is contracted to receive 20,000 shares of CTLE restricted common shares as a research fee. OTCIE's analyst cannot sell the CTLE common shares for one year. But, OTCIE's analyst may from time to time buy shares of CTLE stock in the open market. This report contains forward-looking statements, which involve risks, and uncertainties that may cause actual results to differ materially from those set forth in the forward-looking statements. For further details concerning these risks and uncertainties, see the SEC filings of CTLE including the company's most recent annual and quarterly reports. Copyright Copyright 2001 OTCIE. All rights reserved.
Paul Spray 813-258-2922
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