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One of the companies I hold in my portfolio tracked by "Globes" is located in an area of Israel that was hit by missiles in January. However, overall, operation "Cast Lead" did provide financial opportunities for RRsat Global Communications Network (Nasdaq:RRST).

RRsat's main facilities are near Re'em junction near Kiryat Malachi, and it has offices in the southern town of Omer, near Beersheva. Someone who watched any of the many hours of television coverage during the Israel Defense Forces battle against Hamas would have been able to see, behind the journalists standing near the border, trucks with RRsat mobile satellite units on them. The mobile satellite units were leased to foreign press networks in order to provide live coverage.

The satellite news gathering [SNG] service, through RRsat's fleet of 11 such trucks, is a small and relatively insignificant part of its operations, but its profit margin is high compared with RRsat's primary operations, and therefore it will contribute something to an improved bottom line in the first quarter, just as the unit contributed to quarterly results in the summer of 2006 during the Second Lebanon War.

On Thursday, the company reported excellent results, which can explain the 15% gain in the share price since the beginning of the year, while Nasdaq fell 6%. In my opinion, new investors are joining this company who believe in its unique business - and who also believe in its dividend yield of over 4%, which will apparently remain unharmed in the near term.

RRsat is essentially an outsourcing company which provides television transmission services for tens of companies across the world. As of today, it broadcasts over 500 channels, mainly through satellite communications networks, in which it leases long term transmission services, in advance.

The conference call with RRsat founder and CEO David Rivel gave me the impression that not only wars provide revenue for the company, but also the recession which has hit us hard. Like with other outsourcing firms, customers are turning to it - because to maintain employees, facilities, and satellite transmission volumes is too great a luxury in a recession, and what could be easier than to pass on the entire project to companies such as RRsat.

The company signed 60 new contracts in 2008 and it expects that it will keep a similar pace this year as well.

Its backlog of signed agreements reached $186 million, with $79 million just for 2009. With guidance for over $100 million annual revenue, it is the only company in the world that I know of which already has 80% of its forecast revenue already in hand. Remember, this is a year of such a sharp recession, that in conference calls with nearly every company, large or small, managers claim temporary blindness when it comes to full year guidance, and politely move on to the next question.

Oppenheimer rates the stock a "Buy", with a target price of $16. They expect earnings per share of at least $0.95, and of $1.10 in 2010, compared with $0.77 reached in 2008.

The company is valued at $230 million today, with $47 million in cash, after paying $10 million in dividends in 2008, and after investing $20 million in two new teleport sites. One site, in Hawley, Pennsylvania, will allow it to increase its U.S. sales, which represented 24% of the total in 2008. The second, much larger, site, is the former Bezeq facility in the Elah Valley, which will allow the company to grow significantly with an expected rise in demand.

Disclosure: Author holds RRSat shares as part of his portfolio tracked by "Globes".

Published originally by Globes [online], Israel business news - www.globes.co.il

© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on SeekingAlpha with full permission.

Source: RRSat: Wars and Recession Increase Revenue