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Wednesday, March 20, 2013

MTSL Dip Is A Buying Opportunity

MER Telemanagement Solutions Ltd. (NASDAQ Capital Market: MTSL), a global provider of Mobile Virtual Network Enabler (MVNE), Mobile Money and telecommunications expense management (TEM) solutions and services, yesterday announced its financial results for the fourth quarter and the year ended December 31, 2012.

For the quarter MTSL did $0.20 EPS for the quarter. This represents a run rate of $0.80 EPS on an annualized basis. The Company has grown operating income 410% in 2012 over 2011.

The also announced that their largest customer will not renew in 2014. The market, in my opinion, greatly over-reacted to this fact. While this represents a material amount of revenue at approximately 25%, there are several mitigating factors. If MTSL were not to grow revenues at all in 2013, they would have an EPS run rate of $0.80. If nothing changed then in 2014 they would have an EPS run rate of $0.60. However they have told us in the press release that they are diligently working to take advantage of new opportunities and sign new contracts. MTSL has all of 2013 to replace the lost revenue from this contract.

They are entering into new growth areas like Mobile banking. They are the leader in servicing the growing mobile virtual network industry. This is a cloud based software company that provides ROI to the users of their software. All of these areas typcially generate P/E's of 10+.

Two similar companies are Tangoe Inc. (TNGO) and Veramark Technologies Inc. (VERA). VERA just reported $0.07 EPS for the year and trades at a 10 PE. TNGO will do approxiamtely $0.70 EPS for the year and trades at a PE of 17.

So at a minimum, if you took an unrealistic conservative approach and did not think MTSL will grow anymore, than at a 10 PE on the $0.60 2014 EPS this should be a $6 stock. As MTSL signs new business and replaces the lost revenue, they will grow EPS back to the $0.80+ range and deserve an even higher valuation. I believe this stock will bounce back to the $4-$6 range as these facts are realized and short sellers cover.

The markets over-reaction to the MTSL announcement presents an opportunity to participate in the rebound once these numbers are realized and as MTSL coninues to sign new contracts.

Monday, March 11, 2013

Why Ikonics IKNX Belongs In The 3D Group

Stocks in the 3d printing and manufacturing sector have been some of the strongest stocks of the last 12 monhts. This list includes 3d Systems (DDD), Stratasys (SSYS), and Proto Labs (PRLB).

Ikonics (IKNX) is a Company that belongs in this group because of their unique and as they call it "revolutionary" Digital Texturing and Micro-Machining technologies. Rapid prototyping with Digital Texturing allows for the direct transfer of a image onto a part or work piece to create an actual prototype of a textured item. 3-D texture with domed edges and actual prototypical look, shape, feel are easily accomplished.See website

Digital Texturing IS inherently printing in 3d. This is an excerpt from Stratasys/Objet discussion of digital texture printing:Read Article

Direct Texturing (DT) is the manufacturing process that produces forms, prototypes and series-production parts with defined texturing or "scarred" surfaces (e.g. car dashboards and other leather-look parts). Molds used for embossing can be manufactured with a textured surface using DT, thereby reducing the number of production steps and eliminating the need for cylinders and silicone molds.'

Compare that with the video where Ikonics discusses their revolutionary technology. Video.

In February of 2012 Ikonics and ExactFlat partnered to apply decorative textures to 3d Molds. "This partnership and reseller agreement will allow IKONICS to provide advanced features that drive meaningful competitive advantage for our customers," said Karl Shaw, Director of New Technologies at IKONICS. "The ability to place images onto 3D surfaces with a higher level of accuracy, bend patterns along contours, align features with greater precision and extend imaging capabilities to all product lines at considerably lower cost will redefine what was possible in 3D decorative textures."Link text

Digital texturing is a way of printing very fine, repeatable surface textures on any object in 3d. This is what IKNX proprietary DTXjet inkjet printer does. IKNX owns the patents for the process. Therefore it is my opinion that any industry interested in printing surfaces of objects in 3d must consider IKNX tech for the job.

ProtoLabs Inc. has been one of the strongest stocks in the 3d group with a current P/E of 50. They are into rapid prototyping. Ikonics is also in the business of rapid prototyping. Link text.

IKNX recently posted earnings doubling net income for the same quarter last year of $0.14 v $0.07. In the earnings release the CEO briefly mentions new business with Boeing and Airbus:Link text

"In addition to ongoing business related to the Boeing 747-8, we have received a blanket order associated with the Airbus A350, which we expect to grow as the A350 is placed into production. We also have orders beginning early in 2013 for acoustic liners from a major jet engine manufacturer; I anticipate that this product line will grow during the year," Bill Ulland, IKONICS CEO said.

"Consequently, we are expanding our manufacturing capability, adding both equipment and people. I believe that these exciting developments not only portend a profitable business for Ikonics but also are a validation of our unique technology by a very sophisticated industry." Bill Ulland, IKONICS CEO said.

I believe Ikonics will soon be recognized as a key Company with patented technologies that will go hand in hand with the 3d Printing group and will eventually receive a much higher valuation. That group enjoy P/E ratios of 30-50+. If IKNX is operating at a $.56 EPS run rate, and does not account for growth that the latest press release mentions, then I believe this could eventually be a $20-$50 stock.

IKNX has only 2 million shares outstanding and a float of 900,000.

Potential risks - As with any small cap technology company, potential risks include delays in orders and rolling out of technology. A stock with this small a float should not be chased and in my opinion is not for large positions.

Disclosure: I am long IKNX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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