Focus Company: Axesstel, Inc. (AFT)
By: Bill Mathews - The CHEAP Investor - Date: October 26, 2007
Introduction
Axesstel is a leader in the design and development of fixed wireless voice and broadband data products. Its product portfolio includes wireless web computers, broadband modems, 3G gateways, fixed wireless desktop phones, and public call office phones for access to online computing, high-speed data and voice calling services. The company delivers innovative fixed wireless solutions to leading telecommunications operators and distributors worldwide. Axesstel is headquartered in San Diego, California with a research and development center in Seoul, South Korea.
The Company recently launched its ground-breaking iAxess Series of Wireless Web Computers. iAxess Wireless Web Computers provide Internet access for online computing, emailing and web browsing. The computers also provide wireless operators with an ultra low-cost internet computing solution designed to accelerate wireless broadband data penetration in underserved markets where cost is an issue.
One of Axesstel's products: the tri-band MU430 (850/1900/2100 MHz) HSUPA Gateway is a mobile hotspot that enables access to email, the Internet and corporate databases as well as graphic and data intensive attachments, photos, and multi-media streaming at speeds up to 7.2 Mbps. |
In February 2005, Axesstel was trading for $5. Since then the stock has spiralled downward due to poor financial results. However, the Company has returned to profitability. Insiders own less than 1% of the 22.8 million total shares outstanding and 23 institutions own 45% of the float (shares in public hands). The Company has a fair balance sheet with about $3 million in cash ($0.13 per share), a book value of $0.38 per share and $6.8 million in debt. We are assuming that Axesstel has turned the corner and will continue to post profits.
Recent Developments
A few weeks ago, Axesstel and PT Smart Telecom signed a two year supply agreement valued at $68 million. The agreement encompasses joint marketing and volume commitments for Axesstel phones and wireless broadband USB modems. An option to purchase Axesstel enhanced feature phones and 3G gateways is also included in the agreement. Shipments of the phones and USB modems are scheduled to begin this month and continue over the next two years.
PT Smart Telecom will use Axesstel's phone and USB modem to launch its new CDMA2000 1xEV-DO 1900 MHz band network within PT Smart Telecom's licensed area nationwide across Indonesia. The Axesstel phone will provide consumers and small businesses with voice calling services from the home or office.
"This supply agreement is a testament to the quality of our products, continued demand for our phones and growing demand for our broadband data devices. Securing a long-term agreement with an innovative new operator like PT Smart Telecom is a significant win for us as we continue to build on our existing customer base in Asia and increase our market penetration in one of the fastest growing wireless markets in the world," said Marv Tseu, CEO of Axesstel.
Furthermore Axesstel expanded its reach in Eastern Europe with a purchase order from Mobilkom in the Czech Republic for PX310L Fixed Wireless Desktop Phones. The Company was selected as an approved vendor to provide fixed and mobile, voice and broadband devices to the Africa CDMA Forum's 12 operator members across Africa. And it also provided D800 EV-DO Wireless Broadband Modems as part of QUALCOMM's Wireless Reach initiative in southern Thailand to enable email and Internet access for education and communication.
Financials
The Company's improved second quarter and six month sales and earnings for the period ended June 30 are shown below.
| Second Quarter 2007 | Second Quarter 2006 | Six Months 2007 | Six Months 2006 | |
| Revenues | 28,025,951 | 22,792,911 | 53,215,727 | 33,303,299 |
| Earnings (loss) | 272,834 | (3,586,354) | (976,101) | (7,000,528) |
| Earnings/Share (loss) | 0.01 | (0.16) | (0.04) | (0.31) |
| Shares_Outstanding | 22.9 million | |||
"Our record data revenue of $11.9 million this quarter delivered record gross margins and profitability," said Marv Tseu. "During the quarter, we executed on our goal of continued expansion of our customer base. Orders from Mobilkom in the Czech Republic and Zapp in Romania fueled an increase in sales from Eastern Europe to 16% of total revenue, up from 2% in the same quarter last year. Additionally, we continue to move up the technology stack by announcing the iAxess Series of Wireless Web Computers, an innovative low cost online computing solution."
The company expects annual revenue to be approximately $110 million. Annual data product sales are expected to reach approximately $40 million, up from $25.8 million in 2006, representing a 55% year-over-year increase. Gross margins continue to be a factor of product mix, and management currently expects annual gross margins as a percentage of revenue to range between the high teens and low twenties. The company continues to expect profitability for the full year. Buy Recommendation.
Conclusion
If Axesstel meets its projection of $110 million in revenues and profitability for the year (versus a large loss last year), we think the stock has the potential to double over the next year or so. BUY recommendation.
General information
| Market | AMEX |
| Symbol | AFT |
| Price | $0.95 |
| Contact: | 6815 Flanders Drive, Suite 210 - San Diego, CA 92121 |
| Telephone | 858-625-2100 |
| Website | www.axesstel.com |
© Bill Mathews - The CHEAP Investor
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