August 13, 2004
SpeculatingStocks.com Stock Pick: NewMarket Technology, Inc. (NMKT)
Stock Price: $0.49 (long-term strong buy)
NewMarket Technology, Inc. is in the business of continuously launching emerging communication technologies in the telecommunications, homeland security, and healthcare industries. They create economies of scale across these various industries through their robust service, support, and integration organization known as NewMarket Strategic Sourcing.
First and foremost, this company is on the verge of becoming the premier emerging powerhouse in the new market, new technology space. With this comes an expectation of substantial profitable growth and strong financial community support. With substantial profitable growth and influx of investment for new technologies and markets comes an amazing opportunity for shareholders.
As if this company was not exciting enough, Q204 results brought the OTC BB market a shocker. NewMarket reported revenue of $7.6 million up an astounding 1,250% from $562,000 in Q203, one year ago. Q204 revenue increased 280% compared to Q104 revenue of $2.6 million. The drop in the stock as of late could be blamed on a $500,000 loss last quarter; however, this was due to the cost of acquisitions that led to such substantial revenue growth this quarter. Investors who sold did not see the big picture. Q204 loss was $73,529 or less than 1% of revenue and reduced by over 88% from Q104. Q3 and Q4 are setting up to be profitable quarters, which will allow the company to meet its goal of full year profitability.
NewMarket has decided to introduce an innovative micro-cap strategy. The OTC BB is optimal for emerging companies to test their products on a smaller scale while still having access to the public markets. NewMarket's plan is to acquire small, innovative startup companies that have the opportunity to bear a high rate of return. Basically, many of the best technologies come out of garages, not necessarily established companies.
NewMarket is close to proving this strategy on a grand scale with the spin-out of Xiptel, a VoIP firm that has proven their viability in a test market using small investments to form a complete ready-to-launch nationwide service. NewMarket shareholders will receive an equity dividend (stock) in Xiptel, which has its IPO planned by the end of this year. NMKT shareholders will continue to benefit from NewMarket retaining the services and support contract with Xiptel.
In the past year, NewMarket has acquired controlling stakes in seven companies and a 25% stake in another. In the business world, many companies acquire, but not all synergize. Aggressive growth through acquisition and synergy is how WorldCom at one point gained so much market power. It is clear that NewMarket management is unique in its ability to acquire in fair terms and quickly create cross-selling opportunities. NewMarket is not showing any signs of becoming less aggressive. Most recently, LOGICORP was acquired, a systems integration firm with $20 million in annualized sales.
NewMarket has met or exceeded expectations virtually every time they have set a goal.
So, here are the projections:
• $50 million profitable revenue run rate by year end 2004.
• $20 million in booked revenue for 2004.
• Profitability for full year 2004.
• Xiptel IPO by end of the year.
• NewMarket China listed on US exchange by year end.
• New Market Latin America listed on US exchange by year end.
• $100 million in profitable annualized revenue by summer 2005.
• 500% revenue growth between Q1 and Q4, 2005.
Chairman and CEO Phillip Verges
A true visionary. Mr. Verges is a 1988 graduate of the United States Military Academy at West Point where honor and discipline is not an option, it is required. After his career in the military, Mr. Verges gained extensive systems integration and business start-up experience at Electronic Data Systems (EDS). Soon enough, he started up his own systems integration firm known as VergeTech, Inc., which was later acquired by IPVoice Communications, Inc., most recently renamed to NewMarket Technology, Inc. Mr. Verges owns a substantial position in NewMarket.
To say that he keeps his investors informed would be an understatement. In the case of Mr. Verges, it is clear that he is a CEO, who genuinely cares about NewMarket's shareholders, employees, customers, and top management. A man of greater integrity would be hard to find.
SpeculatingStocks.com Target Price: By Summer 2006, we expect NMKT shares to have exceeded $5. High-end expectations of $10-$15. This does not factor in the benefit of spin-off shares in subsidiary companies.