The Jailhouse

[MONEYMADE]

(FHAL) Report: THE FRONTHAUL GROUP INC. (FHAL – OTC BB)
http://www.otclive.com/FHAL_Initiation_Report.pdf
Michael Grobler, CFA
[e-mail]
[phone]
Main Headquarters
The Fronthaul Group, Inc
2233 Ridge Road, Suite 102
Rockwall, TX 75087
Unites States of America Tel: [phone]
TACTICAL SOLUTION PARTNERS
(all figures in Millions)
52 Wk Hi/Lo 0.04 / 1.01
Shares Out 67.1
Float n/a
Share price 0.12
Market Cap 7.89
Avrg Vol (3 mon) 655,000
Insider Ownshp NA
12/31/06 12/7
FY2006 E * FY 07 **
(EPS) 0.02 0.08
(P/E) 6 1.6
Avd (P/E) 10 13
FY2006 E FY 07
Total Revenue 28.5 43.00
Cost of Sales 18.600 28.900
Gross Profit/Loss 3.400 14.100
Oper
expenditures 2.200 9.000
Net Income 1.200 5.100
* , ** analyst’s estimates for
2006, and 2007 operational activity
Company Overview
The Fronthaul Group Inc., through its subsidiaries, provides truck brokerage, logistics, and intermodal
transportation services in the United States. It operates an Internet-based business-to-business
information exchange, which provides a centralized database of freight load information accessible by
wireless device or through the Internet. The company also operates as a motor carrier that moves its
contracted shipper's loads with leased trucks and trailers.
The Fronthaul Group, Inc expects to grow their business specifically in the areas of
3rd party logistics, Transportation Brokerage, and Motor Carrier services. The
Fronthaul Organization is the only referral based marketing transportation logistics
brokerage and currently has over 4000 members.
The company has embarked on a plan to bring shippers and drivers together in a forum on
the internet to change the way business is done in the transportation industry, and in the process make
a lot of money. The gimmick Fronthaul is sporting: “How would you like to make money on loads
moved by others?”
• On Apr 11,2006 The Fronthaul Group, Inc announced it has signed a letter of intent to acquire
100% of the total assets of a local trucking company in the Dallas Fort Worth area. This
acquisition will add an additional 18 trucks to the Fronthaul Group family of logistic companies.
The anticipated increase in first year revenues to the Fronthaul Group Organization should be
approximately $12.8 million dollars.
• On Mar 27, 2006 , The Fronthaul Group,Inc announced that it signed a letter of intent to
acquire 100% of the total assets of Little Trucking, Inc. This acquisition will add an
additional 12 trucks to the Load source Logistics, LLC. Fleet. The anticipated
increase in first year revenues to The Fronthaul Group, Inc should be approximately
$9.5 million dollars increasing revenues to approximately $28.5 million dollars
and increasing the fleet to approximately 54 Semi-tractors in 2 years..
• On Mar 6, 2006 , Fronthaul announced that it has added additional equipment to its fleet
under Load source Logistics, LLC., a wholly owned subsidiary of the Fronthaul
Organization. This development is expected to increase gross annualized revenue
at today's prices to approximately $1,600,000, resulting in self-sustainability for
Fronthaul and expected overall profitability going forward.
We expect the company to exceed its current projection revenue goal from $28.5m to our new target of
$34m for FY 2006 as the addition of 2 acquisitions and new model shift towards logistics. We believe the
company is moving in the right direction, as the trend towards acquisitions is constant and proves to be
profitable as expansion is the biggest key for growth and more demand. The shares are attractive given
the valuation model, the company is trading at 0.4 times sales, which we believe compared to its peers is
much undervalued. Over the next six months, the company will continue to focus on more acquisition
and adding more trucks to the load source for more revenue recognition. This will be the main driver for
company’s asset appreciation. With our estimate of $1.2m EBITDA for 2006, the company is trading at
6x earnings. But given the growth of the product, acquisitions, the company expects to produce $43m for
2007 with $5.1m EBITDA which represents roughly a P/E of 1.6x earnings, and trading at today’s price
the growth is not reflected in the price of the stock. Therefore we believe the stock is undervalued at
these levels.
See Appendix A-1 for Analyst Certification and Important Disclosures.
Recent Price: $0.12
6 month Target Price: $0.40
SPECULATIVE BUY RATING
Website: http://www.fronthaul.com
Exchange: US-OTC Bulletin Board
Contact: Investor Relations 1-972-722-9999