Espial (ESP.T 45 cents)
I came across ESP a while back but have been unable to discuss the company because it is one of the thinnest traded stocks you will find. If you bring up a chart you will see a stock that almost trades by appointment only. Under normal circumstances I cannot write something like this up because of the incredibly poor liquidity. The risk is that you buy it, and then cannot sell it for a fair price if you need the cash.
So be forewarned, unless you can tuck this away longer term into 2013, I wouldn't touch it. This note today is only because someone has a block of stock for sale at 45 cents AND they released another very positive news release today. However, because of the liquidity issue the past several years, few ever want to touch it - regardless of the news releases.
Currently there is 145,000 shares for sale at 45 cents. This creates very much needed liquidity. Over time maybe the liquidity will improve, but right now this is a stock you would buy and tuck away longer term - literally waiting for a takeover.
With only 14 million shares out, the market cap at 45 cents is $6 million. They are currently on track for $16 million in annualized revenue. However, their technology and software for Televisions appears to be one of the best in the world and today another major partnered with them - Panasonic Semiconductor.
Espial has been in business since 1997 but for the past few years they have been way ahead of the curve with intelligent television or display technology - their browser technology is used in televisions, mobile devices, and automobiles.
So far they have 2.5 million licenses in use for their patented technology but there are several major manufacturers preparing to roll out new devices that will incorporate Espial technology. This provides a long term (and very stable) revenue stream that should keep growing.
Given the strength of the technology and the future growth potential when working with so many majors, this stock should trade as a minimum near 1 times current annual revenue. In theory that is $16 million / 14 million shares outstanding = $1.14 per share. Even trading 2 times annual revenue or $32 million / 14 million outstanding = $2.28 per share.
Fair Value right now should be in the range of $1 to $2 per share.
Those valuations assume no significant growth in licensing revenue - yet they have a LOT in the pipeline over the next year or two as major TV manufacturers start rolling out interactive televisions that incorporate Espial browser technology.
The partnership announced today with Panasonic Semiconductor validates them as the industry leader in this space. And it isn't just Panasonic they work with, but several of the biggest names in the industry.
FROM LAST FINANCIALS....
$13.5 million cash and receivables
$3.7 million current debt / $3 million long term debt
net = $6.8 million
annualized revenue approx. $16 million
$3.8 million last qtr / positive earnings approx. $200k for qtr
With only 14 million shares out, the stock price at 45 cents provides a market cap of $6 million. This is also the same as their net cash value as shown above.
This means that (at 45 cents) a person can buy the company for net cash value and let the underlying technology, licenses, and growth potential for nothing. If they keep growing they should eventually attract some outside analyst coverage but otherwise a person would want to tuck it away and hope for a takeover by a major semiconductor company.
There is rarely a block of stock available so this selling at 45 cents appears an important event. In theory more could show up once this is gone - but it's impossible to tell.
Just don't forget that once this paper goes, a person will be holding a very tightly held stock that will require a LOT of patience. It appears that this valuation is incredibly low and in theory the long term gain potential is very strong. However, it will require locking the money up - that is the trade off.
Founded in 1997, Espial Group Inc. is a leading provider of on-demand TV software and software services including programming and technical support to telco, cable and hospitality operators as well as to consumer electronics manufacturers.
Espial's intelligent and open standards software is used across the world by cable operators (MSO), telco IPTV operators, hospitality operators and consumer electronic manufacturers. Its middleware, browser and video-on-demand solutions provide superior service delivery, advanced service innovation tools and the ability to serve a wide range of market segments - including over-the-top, IPTV, hybrid IP, multi-dwelling unit and enterprise.
With over 2.5 million licenses of its patented technology in use, Espial is a leading supplier of TV software. Its browser products are also deployed in automobiles, mobile devices, TVs and a wide range of other devices.