Accretive acquisition pays off
Tiny float, Substantial Revenue Growth with New Contracts being Announced
Over $20M EBITDA at a 10x is $200M and current market cap only $100M, while they are sitting on a $400M backlog? Can you say undervalued?
Good day everyone,
Welcome to our many new members!
Initiating coverage on FTE Networks, Inc. (NYSE MKT: FTNW) for round two.We initiated coverage on FTNW on the 15th of February 2018 and the company’s shares moved from $17.90 to $25.43 for a potential gain of 40% for our members. The company recently released H2 2017 operating results and they were impressive. We believe FTNW shares could have significant gains ahead based on the H2 2017 numbers.
Estimated share structure: 5.6M outstanding, 1.17M in float. 55% of the outstanding shares are held by insiders.
In Q2 2017, FTNW acquired Benchmark Builders and in December 2017, the company up-listed to the NYSE.
FTNW has only been NYSE listed for four months, they are still gaining investor awareness.
Why all the buzz about FTE Networks? Benchmark Builders is one of the top construction companies in New York and FTNW has introduced its Crosslayer Technology Platform. This means the company can now provide their Fortune 100/500 and top-ranking REIT customers with adaptive and efficient smart network connectivity platforms, infrastructure and buildings.
The company is in a high growth mode
FTE Networks operates eight lines of business, including Data Center Infrastructure, Fiber Optics, Wireless Integration, Network Engineering, Internet Service Provider, General Contracting Management, and General Contracting.
Backlog at December 31, 2017 was $433M. FTNW has booked an additional $133M in contracts during 2018. The newly acquired customer project portfolio includes companies in the communications, technology, REIT, and hedge fund industries.
Some FTNW Customers (there are many more):
NYSE – Morgan Stanley – Fox Studios – FINRA – Bloomberg – AIG
Dow Jones – Credit Suisse – Ralph Lauren – ESPN – McGraw Hill
Highlights for H2 2017 (after the Benchmark acquisition):
Revenue $190M
Net Income (adjusted) $9.6M
Adjusted diluted earnings per share $1.73
Value analysis: (Why FTE Networks shares may still be undervalued)
Current price - $19.30 / share
Price to sales ratio:
FTNW reported revenue of $190M in H2 2017 (annualized at $380M).
Considering these revenue and backlog data, it should be reasonable to estimate 2018 FTNW revenues at $300-$400 million. Remember, FTNW only has 5.6 million shares outstanding. If we apply the conservative side of the price/sales ratio (analysts consider 1-2 as a favorable range) we can see a share price around $67. If we look at the higher end of the range, we can see a share price in the range of $134.
Price to earnings ratio
FTNW had H2, 2017 income of $1.73 (annualized at $3.46)
Based upon the industries that FTNW participates in, we find an average price/earnings ratio of about 28 and the major indices run about 24. If we apply a P/E of 24 we arrive at a share price of $83.
We believe FTNW shares may show significant gains in the near to mid-term. This is a rapidly growing company that is being awarded multi-million-dollar projects by multi-billion-dollar enterprises.
FTNW shares are slightly below their 50 DMA of $20.54 and over their 200 DMA of $13.69. The trend line and share volumes are both indicating growth.
Stay tuned for our follow-up report coming soon,
The Team
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Above is from an email I got today from SmallCapTraders. Thanks to whoever mentioned these guys here previously.
