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Six Catalysts To Move IDT

|Includes: IDT Corporation (IDT)

IDT is a telecom service provider providing calling card services. IDT has a number of other businesses which are not currently reflected in the stock price and that may provide catalysts in 2013.

IDT bids for Vivaro. IDT recently took out a $25mm bank loan, despite over $150mm of unencumbered cash on the balance sheet. In all likelihood, this loan was secured to purchase the assets of Vivaro, a competitor that recently entered bankruptcy. Additional assets and revenues from Vivaro could provide substantial margin and market share expansion. Announcement of the Vivaro sale process will likely occur next week (I have no information that IDT will be bidding; that is simply speculation).

Fabrix Systems sold. Fabrix is a provider of cloud services to the cable industry, including Cablevision. Fabrix is roughy 66% owned by IDT, and the most recent proxy statement listed selling Fabrix as a key goal for 2013. It's hard to say how much Fabrix is worth, but Dell, Cisco and IBM are possible suitors. I would estimate proceeds at between $1 and $5 per share - again, it's hard to say what Fabrix is worth.

Zedge builds on momentum. Zedge is the largest site for trading free ringtones and wallpapaer, and recently added an app for the Apple iPhone. Revenues are growing at 20% sequentially and profits are already rolling in, despite just $5mm of run-rate revenues. A recent transaction put Zedge at a value of roughly $4 per share. Depending on the success of the recent initiative to offer personalized mobile game recommendations, the potential opportunity is large and not reflected in the stock.

520 Broad St. IDT owns an empty office building in Newark with approximately 500,000 ft. of office space. Reports have leaked that Goldman Sachs and real estate developers plan to turn the empty building into student housing. Hard to say what the value of the building would be, but potential upside is $1 to $2. Simply getting the mortgage off the balance sheet (it is non-recourse to IDT) would be a positive.

Mobile remittances. Offering remittance services via mobile phone is a natural extension of IDT's international callling-card business. With a large installed base of US users who currently have an IDT internet account (via the Boss Revolution pinless calling service), IDT is a natural to provide remittances services to immigrants sending cash back home. The technology is there, and IDT currently operates a bank in Gibraltar to smooth the regulatory approvals. This is a large opportunity and the incumbents (Western Union, Moneygram) are fat targets.

Returns cash. With nearly $5 per share of unencumbered cash, IDT will likely reinstitute a dividend or return cash via buybacks. In addition, the cash is a call option on new opportunities (see Vivaro buyout above).

There are many ways to win with IDT in 2013. If IDT catches some breaks, a double is not out of the question.

Disclosure: I am long IDT.