QIS Update #16 2015 - December 17th 2015
Included in this update:
- NTG Clarity announces largest ever contract of $11 million
- Quattro Exploration & Production acquires technology company
As this might be the final QIS Update of 2015, we would like to take this opportunity to wish all of our readers a very Merry Christmas and a Happy and Prosperous New Year!
In what has been a brutal 2015, we’d like to take a look at some of our comments from exactly one year ago from a QIS Update sent on Dec. 17, 2014. In that update we reported:
“On Friday, the TSX Venture Index broke below 650 points for the first time since late 1999 – marking a fresh 15-year low!! Weak oil prices have led to a lot of selling in both O&G producers as well as many O&G service companies. Since September 1, the TSX Venture had fallen by more than 380 points or 38%.”
While we would have loved for 2015 to be a bounce back year, the weakness in crude oil prices continued throughout this year. Combined with a severe decline in natural gas prices and a pullback in gold and many other metals, the resource weighted TSX Venture Index took it on the chin again in 2015, especially in the second half of the year. To date in 2015, the TSX Venture has declined from 695.53 points to about 499 points, shedding another 28%.
December is typically a quieter month for company news and financial reports. It should be noted that the final day for tax loss selling in 2015 is December 24th. For US stocks, the final day to trade with a 2015 settlement date is December 28th.
Please feel free to email us anytime at firstname.lastname@example.org or call us at (250) 377-1182. We look forward to your comments, questions, and feedback.
NTG Clarity Networks Inc. (NCI:TSX-V)
Current Price: $0.245 (coverage commenced Feb. 4/10 - $0.045)
NTG Clarity Networks Inc. has announced that the company has signed its largest ever contract estimated at CDN$11 million over a three-year period. The contract has been signed with Mobile Telecommunications Company (Zain Kuwait), Zain Group’s flagship operation, to support the country’s leading telecommunications provider with enhancing its operation efficiency. NTG will provide technical professional resources and services to support various Technology Operations within the company.
NTG will provide both on site and off shore services and resources over the next three years. These services will start in January 2016 and approximately one-third of the contract scope is expected to be completed in 2016.
NTG had started business development in Kuwait in the first quarter of 2015 and it represented a small percentage of the company’s total revenues during the first 9 months of 2015. This contract will significantly increase Kuwait’s contribution to NTG’s corporate revenues going forward, with the opportunity to leverage additional add-on work in the immediate area.
“We are pleased to sign this contract with NTG, where we leverage on NTG’s proven in-depth Telecom experience. This agreement will support Zain Kuwait to add value to its operational efficiency”, said Eaman Al Roudhan, Zain Kuwait’s Chief Executive Officer.
“We are very proud to be chosen by Zain to provide this important service. This increased presence in Kuwait will enable NTG to expand our service offerings in Kuwait and further increase our customer base.” said Kristine Lewis, NTG Clarity’s President.
NTG Clarity Networks Inc. has announced that the company has a signed a Frame Agreement for Turn Key assignments with a Global Specialist in Mobile Broadband in the Gulf area. Under the agreement, NTG will provide turn key services for the build, installation, and commissioning of telecom sites and telecom equipment.
NTG has received the first work orders under this agreement. The value of the current orders is approximately $200,000 and will be completed by mid-December 2015. NTG expects to receive subsequent orders in early December and anticipates increasing volume with this customer in 2016.
“During 2015, we have been working hard to diversify and expand our customer base and to establish NTG as a leading provider of quality telecom software products and services in the Gulf region. The signing of this frame agreement with this prestigious global customer, and the signing of the frame agreement with the telecom service provider announced last week, continues to expand our revenue base and reflects the increasing satisfaction and confidence of our customers with regards to our extensive experience in the telecom industry” said Ashraf Zaghloul, NTG Clarity’s Chairman and CEO.
QIS Capital: The latest record contract announcement has at least sparked some investor interest for NTG Clarity and has erased some of the losses over the last few months. This is an exciting contract for NTG Clarity as it represents a significant foothold with a large and reputable telecom provider in Kuwait with the opportunity to leverage additional work in the immediate area.
Despite the modest recovery in share price, NTG Clarity is trading at just 6 times annualized earnings and at just 1.5 times earnings when adjusted for net working capital. The company is on pace to do about $16 million in revenues this year and over $20 million in 2016. NTG Clarity’s market capitalization is currently only $8.9 million.
Quattro Exploration and Production Ltd. (QXP:TSX-V)
Current Price: $0.17 (coverage commenced Sep. 3/15 - $0.18)
Quattro Exploration and Production Ltd. has announced that it has signed a binding Letter of Intent to purchase all the shares of SRD Innovations Inc., an Alberta-based wireless technology company focused on the collection of real-time seismic imaging for exploration, reservoir engineering, and micro-seismic for hydraulic fracture monitoring, mapping and analysis, including all contracts, licensing revenues, patents, technologies, and ongoing research.
Quattro intends to purchase all of the shares of SRD through the issuance of 35,008, Class C, Series 3 preferred shares of Quattro valued @ $100 per share. The shareholders of SRD, by way of a share exchange, shall receive 1 Preferred Share in exchange for 69.6563 Class A common shares of SRD, valuing SRD's Class A common shares at $1.42 per share (subject to revision on closing). Closing of the purchase is scheduled on or before December 28, 2015 and is subject to a number of customary conditions including, but not limited to, approval of the TSX Venture Exchange.
Further to the share exchange, and independent of the benefits associated with the Preferred Shares, SRD shareholders, on a pro-rata basis, shall be individually entitled to a Quarterly distribution of 75% (net of taxes but before expenses) of all future licensing revenues associated with the wireless technology developed by SRD as a wholly owned subsidiary of Quattro including future software revisions and developments.
The Preferred Shares are priced @ $100 per share, paying an annual preferred dividend of $3.50 per share. The holder will have the right on the anniversary of the 2nd year of issuance to convert the Preferred Shares into Class A common shares at a ratio of 40 Class A shares for each Preferred Share converted, valuing the Class A common shares at a deemed price $2.50 per share. Closing is subject to final TSX Venture Exchange approval.
“The acquisition of SRD Innovations Inc. remains consistent with Quattro's Mission Statement, of being a competitive, environmentally responsible supplier of energy,” said Leonard Van Betuw, President and CEO of Quattro. “SRD has been a known asset to Quattro for many years. A powerhouse of intellectual personal and capacity, recognized by a far reaching array of their peers including the IEEE Standards Association, the National Science and Engineering Research Council and the Alberta Research Council. Quattro's interest in SRD has been as a passive supporter for the past 5 years. Their skills as innovators are boundless, ranging from the foundations of cellular wireless standards and Wi-Fi in the 1990's to development of the stable power systems required for what is now commonly known as the MIR.”
“Quattro's interest in SRD Innovations developed into over two years ago, as SRD's patent portfolio and research resulted in their first commercialized application; the hyMesh™ wireless solution, developed for the collection of real-time seismic imaging for exploration, reservoir engineering, and micro-seismic for hydraulic fracture monitoring, mapping and analysis. This innovative solution is now quickly migrating, as all proven technologies do, into a vast arena of needs, including wireless communications, voice and video. Applications range from private and secure wireless communications and data networks, to collecting data from remote industrial work sites, to monitoring pipelines, to wireless video monitoring,” said Mr. Van Betuw.
“Quattro commenced negotiations with SRD Innovations Inc. in 2014 for the application of SRD's technologies in the areas of focus Quattro thought were a priority, only to realize that we were competing with a growing monster. Just a few competing industries were; Wireless Communication Networks, Agri-Tech, Industrial Asset Management, Autonomous Equipment Control and Video Data streaming.”
“After 18 months of contract negotiations, and the development of a strong appreciation of SRD's technological applications, potential and challenges it became apparent that buying the company, participating in the growing licensing revenues and gaining control over the SRD's technology in the areas of resources exploration and development was not only the best solution for the low cost implementation and the continuing application of the technology for Quattro's needs but it had the potential to be a very accretive investment opportunity.”
QIS Capital: While outside of a conventional oil and gas asset purchase, Quattro stands to save considerable money on expenditures with this acquisition while also providing additional revenues and earnings. The acquisition is structured without divesting of the all important working capital and is not immediately dilutive to existing basic shareholders. The fallout in oil and gas prices will continue to have a significant impact on oil and gas producers but Quattro remains a very low cost producer and it is great to see a management team still focused on the bottom line even when it seems the sky is falling all around them.
Disclaimer: This article is for informational purposes only. The information contained within this article should not be construed as offering investment advice. Those seeking direct investment advice should consult a qualified, registered, investment professional. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The company profiled assumes no liability for the information presented. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock. The author(s) owns directly or indirectly 1,108,000 shares and 100,000 options of NTG Clarity Networks Inc. and 149,500 shares of Quattro Exploration and Production Ltd. QIS Capital may have a financial relationship with these companies and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright © 2003 - 2015 QIS Capital Corporation.