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Harris L. Berenholz, CFA
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I like analyzing stocks, especially small caps and micro caps. My firm, Carpe Diem Advisors, LLC provides investment ideas, research and analytical services. Before establishing my firm I was (for 18 years) a Managing Director of Invemed Associates LLC, a New York Stock Exchange member firm,... More
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  • I Think Altigen ($ATGN) Is A Mispriced Stock.

    The equity now sells somewhat higher than cash per share and at a market valuation that is less than half of sales. I own the stock because of the large potential for each of the two new products/services and the operating profit leverage as the new replaces the old. When the company begins to report profitable quarters (I'm assuming next quarter) I can see the stock heading back up dramatically as the estimated $0.10-.15 /sh earnings -and recognition of accelerating growth-bring the stock a higher valuation. If revenues turn out to be much higher so will earnings and price target:

    Software for the Microsoft Unified Communications

    As communications industry started shifting from proprietary, hardware-centric IP PBX systems to open, software-based solutions, AltiGen 's management (who saw this trend coming) gradually converted from its traditional equipment legacy to become a software provider . AltiGen is partnered with Microsoft for whom it created a complete, software-based solution that seamlessly integrates with Microsoft software. Software and direct sales to large customers (5,000 users) are replacing product sales to VARs and small customers (400 users). AltiGen, working closely with Microsoft, now is in a much better business and competitive position.

    iFusion SmartStation for iPhone

    At the Macworld 2011 conference last year, the company introduced (to rave reviews) the iFusion SmartStation, a revolutionary new docking station for the iPhone. This docking station will facilitate (and accelerate) smart phones' replacement of desktop phones in that the smart phone can now function as the single converged communications device, will save companies money, and will provide users greater flexibility in where and how they work. Given that there are some 350 million iPhones in the world, the potential market for the product appears to be enormous.

    Over the last year Altigen announced distributor and Partner agreements that, in my view set the stage for significant sales growth. Recently, Hammacher Schlemmer, America's longest running catalog has become an authorized Retailer. Of even greater consequence, in my opinion, is that both Apple and VoIP Supply are now selling the iFushion SmartStation on their online webstores. VoIP Supply has 100,000 customers worldwide.

    The company's breakeven December quarter (after many years of losses) demonstrates the twin effects of rising revenues and a shift in revenue mix. Last fiscal year (ended 9/30) the company's software and service support plans (that have nearly 100% gross margins) again increased their relative importance to 38% of the total from 36% the year earlier. I think that they may account for 40% of the $19 million in revenues I estimate for this year and 43% of next year's estimated $22 million in sales. Under these assumptions, earnings (untaxed) will be a few cents a share this year and reach the low teens next.

    Harris L. Berenholz, CFA

    Disclosure: I am long OTCQX:ATGN.

    Mar 02 11:53 AM | Link | Comment!
  • International Fuel Technology($IFUE) Continues To Predict A 25-Fold Increase In Revenues Next Year

    The company, which began serious commercialization efforts for its breakthrough DiesoLiFT10 diesel engine fuel additive early last year, reports that over 20 rail operators around the world are either buying, testing or planning field testing of the product.

    Its success in the railway industry is a testament to management's strategy to build a top-quality international distribution network that includes such highly-regarded partners as Unipart (http://www.unipart.co.uk) (U.K. and Australia), Nordmann Rassmann (http://www.nordmann-rassmann.com) (Central and Eastern Europe) and Logerail (http://www.logerail.com/) (Africa and the Middle East). These relationships have allowed IFT to leverage its resources and capitalize on the credibility of its partners and their ability to call on a large number of prospective customers in each of their respective markets.

    The growth that IFT is now experiencing in the rail industry is built on many years of worldwide independent laboratory and field testing that have consistently demonstrated fuel efficiency improvements of 3% to 6% (on average) and associated cost and environmental benefits resulting from use of the product. No diesel fuel additive now on the rail market can make and support these claims.

    IFT recently completed four rounds of testing at mi Technology (www.ltc.ltd.uk), a prominent independent test facility in the U.K. In one test against four competing additives in a B-20 bio-diesel fuel blend, DiesoLiFTTM 10 was the only additive that demonstrated fuel economy improvement as well as recovery of the lost fuel economy that results from the use of bio-diesel fuel.

    "We have passed the tipping point of credibility with DiesoLiFTTM 10," said Gary Kirk, IFT's Director of Sales and Marketing. "The marketplace now recognizes that we have a unique technology that truly performs as advertised to improve fuel efficiency in diesel engine powered trains. We expect our worldwide sales to the rail industry from this product to be at a $5 million annual run rate by year-end."

    The company is working with most of the passenger rail operators in the U.K. One existing customer who at one of its divisions plans to begin field testing in its two other divisions. More than 10 other freight and passenger operators will begin field testing over the next 6 months. There is a high level of field validation activity either in progress or planned in Belgium, Romania, Poland, Czech Republic, Netherlands, France, Spain and Germany.

    IFT recently added a new distributor in Africa;one major rail operator will begin testing by year-end.

    In the U.S., a new distributor has been added and discussions are underway with two major rail operators to start field testing.

    Discussions with operators are well underway in Brazil, the South Pacific and India.

    How successful an investment IFUE turns out to be depends on how fast sales build and to what level they grow.The current environment of rising fuel prices should be a positive for the company's cost-saving products.

    In our view, incremental profits and profitability could be substantial. For example, I estimate that $10 million a year in revenues should mean some $1.5 million (or more) in pretax income.Higher revenues should yield a widening in gross profit margins on a smaller percentage growth in SG&A.

    This operating profit outlook compares to the current $18 million market cap. International Fuel also has a $42 million tax loss carry forward. The weak link is the balance sheet but, in my opinion, a relatively modest capital raise will carry the company until the sales come in.

    Harris L. Berenholz, CFA

    Disclosure: I own IFUE shares and have been retained by the company as an independent consultant

    Disclosure: I am long OTCPK:IFUE.

    Feb 28 9:17 PM | Link | Comment!
  • Update On The Drinks Americas' ($DKAM-$0.69) Turnaround Story

    Recently I wrote about how the company has risen Phoenix-like from the ashes of its past to become a lean, focused national importer and distributor of a line of unique premium alcoholic and non-alcoholic beverages that includes KAH Tequila, the market's fastest growing premium tequila. KAH Tequila is sold in an iconic skull-shaped bottle decorated as the famous God of the Dead and recently has won platinum and gold industry awards. The word KAH means "life" in the ancient Mayan language. Every bottle is an individual, hand-crafted work of art; no two bottles are the same.

    Growth will be driven by the success of the KAH brand in the tequila market. Worldwide sales of tequila were up about 2% in 2011, similar to the performance in 2010. In the U.S., however, total volume grew by double that rate (4%) fueled by increased promotional activity and popularity among Hispanics, the country's fastest growing ethnic group. High End and Super premium brands outperformed, increasing 9.5% and 11.3%, respectively, last year. Drinks Americas' $2 million marketing drive now underway (paid for by the distillery) backs KAH Tequila's national launch in the United States. Distribution of its Tequila and Beer brands is expanding into the Asia Pacific markets. Entry into the larger Latin America markets likely will follow in the next year or two.

    The company has cleaned up its balance sheet; is reducing debt and payables and is starting to see a ramp up in sales. Since September, all of the company's distributors have re-ordered at least three times, some as many as six. Quarterly sales should reach $6 million late this year, up from the $1.27 million reported for the quarter ended October 31, 2011.

    In view of these recent sales trends and ordering patterns, I now estimate that Drinks Americas can earn more than $0.20 a share (untaxed) on its upward revised $20+ million sales run rate.

    DKAM has a $44 million tax loss carry forward (over $2/sh). There are about 21 million shares outstanding, of which management owns 35%.

    Harris L. Berenholz, CFA

    Disclosure: I am long OTCPK:DKAM.

    Feb 12 4:27 PM | Link | Comment!
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