Value Microcaps Table Pounders

[cleverrox]

ZAGG DD. - Make clear, military grade scratch proof covers for 2500 phones, laptops, cameras, etc.

Highlights: IMO you will see over $5M revenue from ZAGG this quarter and possibly as high as $7.5M. EPS of $0.03 to $0.07 for 3Q reporting mid-November.

As indicated in link #1 iPhone 3G sales in the U.S. are estimated to be 3M this quarter. ZAGG sold 100,000 iShields for the first 1,000,000 iPhones. If the penetration rate drops from 10% to 8% on 3M that will be 240,000 iShields. At $20 a pop that is $4.8M revenue on the iPhone 3G alone. Best Buy according to anecdotes is selling about 5 a day iShields at each of their 300 stores carrying it. That is another 135,000 iShields a quarter for $10 a piece for another $1.1M revenue. Add in another $2M revenue for the rest of their product line and you could hit around $7M. I won't even figure in sales from the mall kiosks - but I think those could be even bigger than Best Buy. I especially like them because they solve a big product problem - ease of application. I would gladly pay someone $10 to apply the thing professionally.

I roughly estimate they could earn $0.03 to $0.07 EPS fully taxed on $5M to $7.5M revenue this quarter. Give it a FW P/E of 20 like ZYNX and you get maybe $2.40 to $5.60 a share. I would argue this company is "sexy" and could get a P/E premium.

I have studied the products of competitors and the biggest competitor is Clearshield. Their product is glossier for smoother finger movements across the iPhone. However it tends to come off easier than the iShield which is probably why they ship 3 packs. Some people have said Clearshield's newer shields are not of the quality they were a year ago - like the formulation has changed.

The criticisms of iShield are that it is hard to apply properly and can leave enough space at the edges for lint to accumulate on the edges. It is also pricey - though I think compared to replacement cost of say an iPhone it is a no-brainer.

To me what is very exciting is the next two quarters are almost certainly going to be huge. The CEO predicts between $8M - $10M revenue the next two quarters with a good possibility of upside. I've heard they have been very conservative on projections so I'm going to say they will almost certainly hit $5M revenue each of the next two quarters.

My big concern is whether they can lower SG&A percentage as revenue ramps up. I expect they can. If they can't control costs - EPS will be abysmal even with higher revenue.

The CEO owns 38% of outstanding shares. They are now cash flow positive so I expect few additional shares to be issued. I couldn't find any unconverted outstanding debt - though I haven't been thorough. I have an enquiry with the CFO outstanding. They seem to file on time with the SEC.

An AMEX listing should boost visibility and fund ownership. I think it will happen as soon as they meet the qualifications. Probably would need $2.50 share to make it happen.

Link #1: http://money.cnn.com/news/newsfeeds/articles/apwire/148fa85a98767e861feceda1164a231c.htm